Tuesday, July 31, 2012

A saga of ‘lost & not found’ sensitivity

A number of companies that dropped out of the Sensex in 1991 are still showing shaky fundamentals. But then again, there are those who have at least mastered the art of survival

When any listed company talks about its risk factors in its annual report, one feels that every attempt is made to be as comprehensive as possible. It only goes to show how even the best of organizations can feel overwhelmed by a multitude of factors, right from customer mix/perceptions to sectoral disruptions and volatility, political uncertainty, employee retention challenges, environmental challenges, activism related challenges & unfriendly regulation.

In particular, a sudden change in the environment can lead to a dramatic reorganization in the pecking order and leave us with a list of winners and losers. Only 61 companies from the original Fortune 500 list in 1955 are still there. From 1999 to 2009 itself, 262 companies exited the list. And in line with Nicholas Taleb’s Black Swan Theory, experts can only put things into perspective once the entire change process is behind us.

Twenty one constituents have moved out of the Sensex since liberalisation. And an analysis of a few important cases reveals that a number of them are still shaky in their financial fundamentals. The liberalization at large was a watershed moment that sounded the death knell for many Indian firms and a fall from grace for some others. The family angle made a valuable contribution to the fall of some of these businesses, or at least exposed chinks in their armour. For instance, Century Textiles, Indian Rayon, Hindustan Motors & Grasim were all part of the extended Birla empire that split up acrimoniously among family members after the 1980s and barring Hindalco & Grasim, none of the other companies could truly keep up with the pace of the liberalisation era. The Thapar group that owned BILT industries saw a lot of bad blood between the family members for around 38 years before the group eventually split in 2000.

When we look at those who dropped out in terms of sectors, textiles is one area that appears prominently. Century Textiles, Bombay Dyeing & Indian Rayon Industries were all part of the Sensex in 1991. While the lifting of quotas did provide a lot of opportunities to the textile industry, liberalization also brought more FDI ($80 million between 1991 and 2005 as per CCI) and much more competition. Century from the B.K. Birla Group couldn’t stay with the Sensex, but managed to survive thanks to its diversification into cement, shipping, pulp & paper, et al. In fact cement accounted for 59% of its revenues in FY 2009-10. Revenue is growing at a CAGR of 10.96% over the past 4 years to reach Rs.47.65 billion in FY 2010-11. Bombay Dyeing just couldn’t cope with a fleet footed entrepreneurial economy that emerged post 1991 and saw a drastic fall in fortunes. That was in tune with the story of the Wadia group in fact, which missed important opportunities to then competitor Reliance. To its credit, its revenues in FY 2010-11 were Rs.19.5 billion, and it is growing at an impressive CAGR of 40.6% yoy, but profitability at Rs.213 million is still a concern, down by 40.46% from its value in FY 2006-07. This compares unfavourably to a peer like Sutlej Textiles that posted sales of Rs.16.02 billion in the financial year 2010-11 but profits were at Rs.1.14 billion.


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Monday, July 30, 2012

It took Just one Report to...

The Furore over The Report on Illegal mining in Karnataka, compiled by Lokayukta Santosh Hegde has already compelled Chief Minister B. S. Yeddyurappa to step down from his post; there is more to come.

The recent report submitted to the Karnataka government by Lokayukta Santosh Hegde has translated into the end of Chief Minister B. S. Yeddyurappa’s stint at the coveted post. The voluminous report probing the illegal mining scam in the state, which has charged the CM and Tourism minister G. Janardhana Reddy, goes on to recommend the initiation of criminal proceedings against Yeddyurappa. “I consider it necessary to recommend to the competent authority to take appropriate steps to initiate criminal proceedings against the Chief Minister and such other persons who are involved in the said transaction,” the report states, further calling for the removal of G. Janardhana Reddy from the Cabinet in view of his ‘misconduct’.

The latest development comes with the Supreme Court (SC) suspending all mining activities in Bellary. The 25,228-page report of the Karnataka Lokayukta detailed a web of deceit, including violation of mining and environmental laws, tax evasion and money laundering in international tax havens by the powerful brothers – Tourism Minister G. Janardhan Reddy, Revenue Minister G. Karunakara Reddy and Karnataka Milk Federation Chairman Somashekhar Reddy.

The report compiled by Hegde is based on the investigation report submitted by Chief Conservator of Forests and Head of the Lokayukta investigating team related to illegal mining, Uday Veer Singh, who has made an extensive study and submitted very elaborate report supported by documentary evidence. It is pertinent to note here that Singh, who is also the ex-officio CEO of the Bangalore Lake Development Authority, was attacked in the course of investigation. In an exclusive conversation with B&E just before he demitted office, Justice Hegde pointed out that the element of threat existed, perhaps more than ever. “With the SC having suspended mining in questionable areas, there is still threat and we have enhanced provisions for our security,” Hegde told B&E.

The bigger administrative challenge in Karnataka, however, will be to ensure how the revelations in the Lokayukta report are translated into reforms. “I think reforms are distant. It is because the state government alone cannot make the desired amendments. Much also needs to be done by the Centre,” says Hegde. “Moreover, the current mess of rampant corruption in mining in the state is not because policies are flawed, it is because the existing rules and regulations were given no heed,” Hegde explains, adding, “if the rules would have been followed, 70% of the illegal mining and allied activities would never have taken place.”

As per the report, 29.86 million MT of illicit iron ore, valued at Rs.122.28 billion, was exported between 2006-07 and 2010. The report details the complete breakdown of democratic governance in the Bellary area and uncovers the “zero risk system”, a protection and extortion racket, allegedly masterminded by G. Janardhana Reddy. The report describes the illegal money transfers to foreign companies and tax shelters by mining entities such as Obulapuram Mining Company, Associated Mining Company, GLA Trading and GJR Holdings owned by the Reddy Brothers. Even banks and public sector companies allegedly participated in the loot. NMDC, Adani Enterprise and JSW Steel are some major names in the list. Charges against these companies range from illegal movement of iron ore from mining yard without permits and without paying royalties, forest encroachment, mining lease violations, overloading of trucks and sandry violation, et al.

The extent of the scam is reflected in the findings that iron ore was illegally exported even to China through ports of southern India and payments were made through more than 4,000 banks account. The damage excessive mining has done to the environment has also been huge. The report says there have been severe ecological changes due to illegal mining.

For around five years, the Reddy brothers controlled the administration in impoverished Bellary, even flattened state boundary markers to excavate iron ore, all the way insisting they had no mining interests in Karnataka. Now, the reign of the rulers of the “Republic of Bellary” appears to be at an end. For the BJP though, the bigger challenge will be to keep them as far away from the government as possible.

With inputs from Sahana Attur (Bengaluru)


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Saturday, July 28, 2012

Marchionne’s Final Frontier!

Losses are Accumulating and Troubles are Increasing with every passing day... But still Fiat has to give more than 100% to save its JV with Tata Motors. Because its failure may just end Fiat’s journey on The Indian Soil.

When Ratan Tata, Chairman, Tata Motors and Sergio Marchionne, CEO, Fiat S.p.A. came together on one dais on July 26, 2006 in Mumbai to announce the Tata-Fiat JV, the world took a back seat and listened carefully to understand the dynamics and the potential of the deal. As per the announced agreement, India’s largest home-grown automobile company planned to handle the sales & marketing functions for Fiat, while the Italian auto major agreed to support Tata Motors on the manufacturing front. At that point of time, the deal seemed a win-win for all – Fiat, Tata Motors and the consumer.

The JV was the need of the hour for both the parties. While a struggling Fiat needed a strong support at the ground level to make inroads to the Indian market, Tata Motors needed engineering know-how to infuse new life into its passenger car business as its ace model Indica needed a new power train to compete with the newer models from competitors, and also to comply with newer environmental rules (which, as per market estimates, would have attracted an investment of Rs.150 billion and at least three to four years for Tata Motors to come up with a new engine plant).

But as of where the JV stands today, the expectations have so far failed massively to turn into realities, more so for Fiat India. Talking in terms of hard numbers, total losses of the Tata Motors-Fiat JV increased by 39% in FY2009-10 to Rs.9.2 billion from Rs.6.98 billion in the previous fiscal. And going by analysts, figures for FY2010-11 will also indicate similar losses despite the Indian auto industry growing at a superb 25%. Going deep into details, Fiat India sales declined by 15% in FY’10 to 21,066 units against 24,727 units sold in FY’09. Even as per the most recent data, unit sales of Fiat India bottomed to 1,506 units in June this year as against 2,137 units sold in the same period last year.


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Friday, July 27, 2012

Onkar Pandey tries to find out where is HUL Going Wrong

From #22 in 2009 to #30 in 2010 and now #35 in B&E POwer 100 list. Onkar Pandey tries to find out where is HUL Going Wrong

Obviously it’s big base – HUL has grown from annual sales of Rs.113.92 billion in 2001 to a company with annual sales of over Rs.190 billion today – can be blamed for low growth rates, but that’s no excuse as the real problem is that most of the growth has been happening only in volume terms.

Nevertheless, satisfied with the company’s Q4 FY2011 performance (overall business grew by 14%, with personal care business growing by 16.2%, and homecare business by 13.6%), Harish Manwani, Chairman, HUL, said, “Our performance has been strong and consistent through the year. Input costs remain high, while the competitive environment has further intensified...” But then, the company has understood the very fact that there are challenges that it needs to take care of soon. And the as said by Manwani, the company has decided to focus on innovations and strong cost efficiency programmes to deliver long-term competitive, profitable and sustainable growth. However, the food business worries need to be addressed very diligently and immediately. The business that once contributed as much as 37% of the company sales (in 2001), after increased focus on home and personal care businesses lost sight and now contributes only 20%. Certainly ignoring the food division, considering that now the sector is growing at a faster clip now, really sounds like a bad strategy on HUL’s part. Anand Ramanathan, Manager, KPMG Advisory, says, “It’s definitely a cause for concern – the overall food market has out paced personal care and hence it is counter-intuitive for players such as HUL to not reflect this overall movement within the market.”

There is no doubt that after operating for so many years in India, HUL has the required bandwidth and management capability to come out of a slump like this. But for that, the company has to stabilise its top positions and of course, strategies. After all, neither can any CEO deliver overnight, nor can any strategy show sustainable developments in a jiffy; they both need time to fructify. At the same time, the company has to re-access its growth opportunities and focus on ongoing trends. The competition from hereon will only intensify to new degrees. So if HUL misses to build on the base that it has already created, then it might face the risk of losing the glorious India plot.



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Thursday, July 26, 2012

Arindam Chaudhuri On Internet Hooliganism

“Web logs are the prized platform of an online lynch mob spouting liberty but spewing lies, libel and invective. Their potent allies in this pursuit include Google and Yahoo.” So wrote Daniel Lyons some years back, in a classic Forbes cover story titled ‘Attack of the Blogs’. As the Senior Editor of Forbes then, Dan was simply expressing his extreme frustration at the utter nastiness of the Internet community, which seemed to have a super-majority of calumnious commentators, who thrived on the faceless protection that the net provided in order to leave shamefully slanderous and defamatory comments left, right and centre.

Cut to the present, and the situation has sickeningly worsened. Not just globally, but perhaps more so in the Indian perspective. Take a quick ‘surf’ across various pages of the Internet and it would not be hard for one to realise that every fourth or fifth page is filled up with some or the other pejoratively aberrant content against respectable individuals and companies posted by untraceable, incognito and spiteful writers. From four-letter words, to bigoted slanders, to sexist comments, to racist attacks, to clearly inflammatory and libelous material, the Internet is now so completely full of criminally damnable statements that one starts wondering why the authorities haven’t woken up to act on this issue with the greatest speed. In case of profiles of meritorious organisations or individuals, this ratio of deprecating content put up by abusive users often shoots up to almost every second page. Internet hooliganism, as I describe it, is the most contemptible character of the modern technology era, where it doesn’t matter how respectable you are or what your organisation is, or how you sincerely worked throughout the past many decades – irrespective of all that, you will be attacked anonymously with false statements that will make you cringe for a lifetime and with almost no hope for any recourse.

The question is, why is all this not controllable? When a person talks negatively and falsely about you in public, the law provides for such a person to be immediately pulled up by both law enforcement and judicial authorities. Then why cannot the same rules be applied over the Internet, when someone posts flagitious and gutter comments about you or your corporation? Because of three reasons, which go hand in hand.

First, as I mentioned earlier, is the wicked anonymity that the web provides to Internet posters, which gives them protection from being identified and prosecuted. Second is the hand-in-hand conspiratorial connivance of Internet companies like search engines, social networking sites, blog site hosts and even ISPs (intermediaries, in summary) that refuse to delete or block out the execrable comments and links and also refuse to confirm the identities of the anon-posters. Google, Wikipedia, Twitter... all of them fall within the same indecent category of companies. Third has been the unfortunate legal protection given till now to such intermediaries, who apparently could not be held responsible for material that others were posting on their websites (for example, in the US, Section 230 of the Communications Decency Act has protected intermediaries from liability for defamatory content posted on their sites, even if they allowed the content to remain despite having been notified about the same).

In all this, the search engine giant Google clearly comes off as one of the worst offenders of them all. Being the search engine that a huge majority of net users employ across the world, Google has played its cards on an extremely unethical front and could well now be called the biggest slander supporting media house in the world by its refusal to instantly recognise and remove perfidious and malicious content and to bring the irresponsible posters and commentators to task. It’s no secret now that Google marketing heads vying for advertising budgets of various corporations go to these same corporations calling themselves the “new media”. At the same time, they conveniently forget that ‘media’ ought to be responsible and should not hide behind falsely promoted aspects of freedom of speech. Then too, freedom of speech has never meant freedom to slander others through the public media. But for Google, the charm of attracting more users to its search engine by allowing them limitless access – and thereby to earn more money through advertising from its clients – is clearly more than the morality of going beyond the call of the law and removing objectionable content on their own rather than waiting for court cases to take their course.

That means that whether you find child porn links on Google or you find links that trash products, companies or individuals, Google can still continue to claim to be the high-ground innocent party that, like Alice in Wonderland, has no idea that such stuff is being archived in their search engine links.

A well-known cardiologist of Jaslok Hospital, Mumbai, Dr. Ashwin Mehta, took Google to court, after he discovered that there were over 20 defamatory blogs on its website that accused him of professional misconduct, which greatly damaged his reputation and work. He sought Rs.1 million in damage. When summoned after an investigation by the Cyber Cell of the Mumbai Police, Google India’s lawyers filed an affidavit in the Bombay High Court on June 23, 2009, claiming fantastically that Google India had no connection with Google Inc., USA, and that they worked separately. And because user agreements for the company’s blogging service (Blogger) was signed by Google USA, the Indian arm could not be held responsible for any harm caused to any party through the company’s Blogger service. Also, the company said that a blog-hosting company cannot all the time keep track of all the blogs posted on the site. In other words, it was a case of posting content in the name of freedom of expression, without accountability. Such saneness-testing arguments have not been something new for Google. Even as recently as on August 19, 2008 (the very year when Dr. Mehta had first filed his complaint), the Mumbai High Court had ordered the company to reveal the identity of a blogger who went by the pen-name “Toxic Writer”. The blogger had criticised a Mumbai-based construction company called Gremach Infrastructure Equipments & Projects Ltd., in a blog dated February 26, 2008. The court’s final verdict was that defamation (going by the article posted) was apparent and that Google should reveal the name of the real person within four weeks of the order. Google’s excuse was the same as in the case of Dr. Mehta’s case. It declined to reveal the blogger’s name, though it immediately removed the blog titled ‘Toxic Fumes’. The blogger’s identity remains unknown till date. There are quite a number of other cases related to postings on Google’s sites that have been lodged in courts across India, with plaintiffs ranging from companies to individuals.


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Wednesday, July 25, 2012

Poor ‘Tomb Raiders’

Salaries of Income Tax Officers and Judges Should be Decided by an Independent Panel and should be made at par with Other Nations

Imagine the moral dilemma a person has to go through who is in-charge of assets worth many millions and earns just a few thousands per month. This is a nightmare come true for personnel in the income tax department. Income tax officials in India are those government officials whose job profile allows them to access and scrutinise cash and related assets that are to the tune of millions. In the same light, there have been so many cases of these IT officials accepting bribes to either reduce tax fines or allow offenders to go scot-free!

The incentive to take bribe becomes much greater for our tax officials since their salaries are much lower than those of their counterparts in the rest of the world. ‘Clients’ can offer them bribes that can go up to hundred times their monthly take away salary. Talking in numbers, Indian IT officers at the highest level (at CCIT/DGIT level) draw around Rs.24,500 per month. An Income Tax officer normally manages to settle for Rs.12,000 and an Income Tax inspector merely gets a salary of Rs.10,500 per month. Contrast this with Japan where a tax compliance officer receives $31,000 a month. Similarly, a tax officer in US gets $48,100 (according to Bureau of Labour Statistics 2010-2011), in UK he/she gets £30,000 ($47,639) and a Singaporean tax officer draws $30,600-$39,720 (according to Inland Revenue Authority of Singapore). Even at PPP levels, these figures are more than for Indians.

The same goes for judges in India. A recent bill passed by the Parliament had increased the salary of the Chief Justice of India (CJI) from Rs.33,000 to Rs.1 lakh month (equivalent to $2200), while for apex court judges, the salary has been increased to Rs.90,000 (equivalent to $2000) per month. However, a US district judge gets nothing less than $174,000 (as of 2009). The current salary for the Chief Justice in US is $18,625 per month, while the Associate Justices each make $17,825 per month. On an average, an American counterpart earns 8-9 times what an India judge earns!


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Tuesday, July 24, 2012

60 lakh Killing 10 lakh Annually!

The ban on Plastic Packaging is a good start; but what is The Reasoning that The Courts and The Government are not going against Tobacco Usage

A few months back, the Supreme Court banned the use of plastic as the packaging material for gutkal, realizing the menace caused by plastic pouches (Not only do they litter the environment but they are toxic too). The court had extended this by announcing a blanket ban on plastic manufacturing too. The ban on plastic has not only brought a big relief for environmentalists, but it has also hit the bottom line of gutka and tobacco companies. As most of these products come in plastic pouches, this ban had made it costlier for the companies to package their products.

While the government is bumbling along to implement the plastic packaging ban, it’s supremely rib tickling that nobody is thinking of banning gutka itself, or for that matter cigarettes and other tobacco products. Innumerable researches across nations have proved that cigarettes and gutkas contain a number of compounds that can cause cancer. Gutka is said to be the prime cause of oral cancer, as 90% of oral cancer cases are due to chewing tobacco. Tobacco products are said to cause close to 10,00,000 deaths every year. The National Institute of Public Health revealed that 24% of school-going children were addicted to tobacco and 5 million children under the age of 15 years are addicted to this poison.

What was required now was for the government to ban manufacturing of all tobacco products. And why haven’t they done that? Apparently, the gutka and pan masala industry is worth Rs.100 billion in India. Add the industry size of cigarettes (Rs. 220 billion), and you have a humongous sector giving employment to more than 60 lakh Indians; one reason why the government shamelessly mentions that “Tobacco is a principal cash crop of National importance.”


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Friday, July 20, 2012

Don’t Invite Another Hindu Backlash

One of my colleagues in our sister magazine The Sunday Indian, Saurabh Kumar Shahi, has done something remarkable. He and some of his friends financially helped out the families of four youngsters accused of the Godhra carnage, where 59 passengers were burnt inside a train coach. He is very happy now because all four have been acquitted by the court. Saurabh is also one of the first in our edit meetings to object ferociously when someone tries to paint the entire Muslim community as anti-national or as sympathetic towards ‘Islamic’ terror.

The reason I mention Saurabh is because of many recent incidents and public utterances of some political leaders. One who comes to mind right away is senior Congress leader Digvijay Singh, arguably one of the smartest politicians in the country. Let me remind readers that when he lost the assembly elections in Madhya Pradesh very badly to BJP leader Uma Bharti back in 2003, Digvijay Singh had publicly proclaimed that he will not hold any government or ministerial post for 10 years. To his credit, he has stuck to his promise; in itself a remarkable feat in a nation full of opportunistic politicians who are convinced that voters and citizens have short memories. Even his die hard critics will agree that his commitment to the Congress is unquestionable.

And yet, he has been saying things – almost certainly because it is part of some Congress strategy – that are disturbing. The latest is his war of words with the yoga guru Baba Ramdev who has announced that he is about to enter the murky waters of politics. Of course, Baba Ramdev must understand that when he enters politics and targets a party, he is going to get it back. So, Digvijay Singh is perfectly right as a Congressman to hit back. Then again, I recall his remarks about how he got a telephone call from the martyred cop Hemant Karkare complaining about death threats from Hindu fanatics, some time before he was killed during 26/11. Then again, I recall his remarks calling the RSS a fascist organization. And of course, I also recall his seeming endorsement of a book that makes the fantastic claim that 26/11 was a Hindu right wing conspiracy to malign the Muslims.

My request to Digvijay Singh is two fold: first, what he is saying might be good for the Congress, but not for the nation at a time of frayed nerves. Second, it might not even be a smart move for the Congress to target ‘Hindu’ groups in such a manner. As a seasoned and well read politician, he must be aware of how the Shah Bano case opened the flood gates for the BJP to storm to power in Delhi. There is something called the ‘Hindu’ backlash, which he and the Congress can ignore at their own peril.


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Thursday, July 19, 2012

Over a Century of Futility?

Even way back in 1909, World Leaders had Gathered and Resolved to counter The Illegal drug trade. Unfortunately, The Evil still persists, and Interestingly has Everything to do with Affluence

Against persistentent global efforts to control the illegal drug trade, both production and consumption of dangerous narcotics like marijuana, cocaine, ecstasy and heroin are ever increasing. Though the issue has captured substantial space in the global media and celluloid, it has been particularly tough to combat. With global trade estimated between $400-600 billion, drug intake is a high turnover global phenomenon. However, there isn’t much change in the pecking order. Afghanistan remained the world’s largest supplier of opium/heroin with over 85% in 2009 (79% in 1999).

Around 4.8% (some 200 million) of the people around the world are drug addicts as per United Nations Office on Drugs & Crime (UNODC). UN projects that around 25 million of these are serious drug users. While earlier, drug use was permeating all sections of society, now, given rising prices, drug consumption has a significant correlation with economic well-being of individuals. The major drug consuming regions are North America, Western Europe and some rich parts of Asia. North America tops the list in cocaine consumption followed by Western Europe and Asia. Africa, being the poorest, expectably ranks the lowest.

Opiate, however, is highly in use in underdeveloped and developing nations, as it is quite cheaply available. Cannabis, which can be grown and refined even in one’s backyard, happens to be popular across the globe irrespective of income levels.


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Wednesday, July 18, 2012

India has become a net Importer of Steel

Over the last two years, India has become a net Importer of Steel. As steel makers respond with Brownfield and Greenfield capacity addition Plans and a Slew of asset Acquisition Strategies, B&E analyses what These Players are Exactly up Against!  
According to a report by the Indian Chamber of Commerce and PwC, raw material cost is 70% of price for steel players without captive resources as opposed to 45% for players with captive resources. On the other hand, cost of mining has also gone up by around $10 per ton in 2009, as per ICC-PwC. Despite productivity enhancements through better mine design, cost cutting, et al, global mining companies saw revenues rise by around 23% and costs by 27%, leading to lower profits.

At the moment, Indian firms have two possible types of destinations to acquire iron ore – destinations like Australia with stability and world class systems and destinations like Africa, which suffer from issues like political instability, poverty, et al. Naturally, mining assets in places like Australia are expensive, therefore a cost benefit analysis needs to be done. The fact that more or less the same players are chasing the same assets is pushing up asset prices rather illogically. The way forward should involve mining and steel makers bidding together, as a consortium, so that they increase their financial muscle.

We should perhaps, in reality, be looking closer home for assets. The steel industry has been representing to the government that the companies setting up greenfield steel plants should be allocated iron ore mines – that’s an urgent point relevant to ponder. Indeed, the availability of quality iron ore in India (ranks 3rd after Australia & Brazil) is a key element of its attractiveness to global steel players.

The government has now proactively started increasing export duties on iron ore lumps and fines to make more raw material available to the domestic players. But more than raw material, the failing in India, as Prasoon Majumdar, Head, Global Strategy and Investment Consulting (GSIC), says is with respect to “setting up and implementing large steel projects; which of course, is also due to the constraints like land acquisition. Once those happen, Indian steel makers have the wherewithal to compete without captive mines.” Till the 2016-17 period, major steel makers are expected to absorb price increase into their steel prices; considering the projected surplus. The key, as Fitch Ratings accepts, is to see demand when the Government removes its stimulus.

The last, but not the least issue that steel companies are growingly, and rightly, worried about is the state of the very infrastructure (including power) that they are playing a major role in building. According to Rao of PricewaterhouseCoopers, “Infrastructure is indeed a key challenge and early actions are needed given the long lead time to develop needed facilities, and the multiple issues to be addressed viz. roads and rail, locos and rolling stock, ports, handling facilities.” One can imagine the scenario by considering how, for every tonne of steel being produced and going to the customer, 4-5 tonnes of raw material has to come from the back end.

As per the ICC-PwC report, achieving the targeted steel capacity implies generating additional annual cargo traffic of around 150 million tonnes by 2011-12 and around 320 million tonnes by 2019-20. Around 75% of raw materials and 25% of finished goods are transported by rail today. So they will have to take up most of the additional load. For the 11th plan, it means planning is required in several areas.

Firstly, we would need an additional 1800 electric and diesel locomotives each, besides the need to improve yard capacities for faster loading, multiple access lines to relieve congestion and availability of better unloading equipment & route management. The road network is important as well, since roads are heavily used by the smaller players. But the fact is that road infrastructure in resource rich states like Orissa is poor. Highways representing only 2% of the overall road network carry a whopping 40% of the load. Similarly, port traffic has also increased.

For Marmugao and Paradip, the iron ore traffic went up by a high 12% per annum over the past two years; in absolute terms, to over 48 million tonnes. If Indian companies are to develop surplus capacities for exports soon, this has to be addressed too. Iron ore handling capacity at all major ports is around 62.8 million tonnes per annum, but Indian iron ore exports are expected to cross that figure very soon.

As the Union Steel Minister projects, the Indian steel industry faces an extremely critical point in its history. If all stakeholders handle it well, the sector has the potential to act as a catalyst for other widespread and desirable changes in the Indian economy and to growth. Conversely, the costs of missing the bus will be too great to bear.


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