Saturday, August 11, 2012

“It’s a misnomer that organized retail will have a negative impact”

S. Viraraghavan, Director, Sales and Marketing, Cargill India shares nitty gritties in an exclusive interview to B&E

Cargill India is an active player in food, agricultural sourcing and commodities trading in India. S. Viraraghavan, Director, Sales & Marketing, Cargill India has some unique yet significant points to make about the sector’s present and future



B&E: How do you think the government should deal with a fragmented supply chain which escalates costs of food processing in India by 15-30%?

SV: The biggest challenge is to build overall supply chain infrastructure, namely, augmentation of warehousing & storage capacity (especially, cold storage), reduction of wastages due to multi-point manual handling and inadequate primary & secondary packaging of basic food grains, better transport infrastructure and seamless linkages between farm and retail.

B&E: With different policies, high excise duties and lack of coherence in doing trade between various states in India in processed food, how does Cargill India deal with the situation and how can it be improved?

SV: We’re part of food processing business at a mass level with major participation in the cooking & refined oils business. We have been able to, more or less, nullify the impact of different taxes & duties by operating at standard operating prices for consumers and to a great extent for trade as well. Situation can be further stabilized by having a common VAT structure across the country. GST would be a significant step in improving business environment here.

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Friday, August 10, 2012

SHEILA DIKSHIT, CM, DELHI

“Delhi suffers from multiplicity of authority”

Runner-up in the TSI-C Voter survey, Delhi chief minister Sheila Dikshit speaks to Khurram Raza

In a nationwide survey conducted by TSI, Narendra Modi has emerged as the best chief minister. Any comments?

No doubt he is a good administrator but I don’t agree the he is the best chief minister. A chief minister should be good in totality. He is kind of an autocrat. What he did to Gujarat, psychologically and sociologically, can’t be forgiven. I am not saying this because I have come second. In my opinion, Nitish Kumar is doing very good work in Bihar. You can’t see it right now but theway he is managing things is amazing.

You have been voted the second best CM. Don’t you think you deserve the first position?

How can I say that? I can’t have a perception. I can’t perceive what others may feel about me. Someday, we will be placed in the third position, someday we will be on the top and who knows, may be even the tenth position.

What is your opinion about governance in Delhi?

Delhi faces a peculiar constraint, that of land. Other states can spread their cities out and we can’t. In spite of that, we have invented ways to grow the city and given it a facelift as well.

There is a view that the government is not as efficient as it was during the first two terms. What you have to say about it?

Basically, efficiency is not a question. The government is working efficiently because it now knows how to get work done smoothly and quickly. Expectations of the people have increased. Apart from this, several key issues directly related to common people like the power situation have been resolved. Another factor is that the government is focussed on the upcoming Commonwealth Games this year.

Questions are being raised over the BRT corridor and CWG projects are running late.
Other states are emulating our BRT project. And all CWG projects are now in place and we will manage well before time.

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Thursday, August 9, 2012

Sutanu Guru gives 5 reasons why india cannot afford his ideology, politics, economics and legacy

Party & ideology over nation

Most will remember the visceral and unflinching manner in which Prakash Karat and his fellow comrades opposed the nuclear deal between India and the United States. During the official visit of George Bush to India, they even forgot courtesy while abusing and heckling him (one wonders how many people would have been killed in police firing if demonstrators had abused and heckled Chinse Supremo Hu Jintao during a hypothetical state visit to Kolkata?) But not many will remember that Marxists like Basu always blamed India more than China for the 1962 debacle. Just consider this: The CPI, mentored by the Soviet Union, supported the Emergency because Indira’s India was a Soviet ally; the CPI(M) opposed it vehemently because China was not very fond of Indira’s India. Of course, both supported the Soviet invasion of Afghanistan in 1979 and kept quiet on the Chinese invasion of fellow Marxist state Vietnam in 1979. Under Jyoti Basu, West Bengal always gave more importance to ideology over public interest. Anything that the United States did was wrong, sinful, imperialistic and evil. Anything that the former Soviet Union and China did was far above criticism. This was all right till the ‘ideology over national and public interest’ line was largely symbolic. But, it had terrible consequences for the state when dogma invaded realpolitik and started affecting the lives and livelihoods of millions of citizens. Mercifully for India, voters now seem far less swayed by ideology and identity politics than they were in the recent past; that perhaps was the biggest message sent out by voters during the 2009 general elections when both the CPI(M) and the BJP were humiliated and humbled.

Intolerance & authoritarianism

Strange as it may sound, this is a trait that Marxists seem to share with Fascists. And like the Fascists, the Marxists have an uncanny way to ruthlessly weed out dissent and free speech even within their own ranks. Many of you know how Prakash Karat and comrades expelled fellow Marxist Somnath Chatterjee for behaving like the Speaker of the Lok Sabha and refusing to vote against the Manmohan Singh government. But much before Somnath Chatterjee became a victim of such classic Marxist intolerance, comrades like Jyoti Basu had set wonderful precedents.

Senior Marxist leader Benoy Choudhury was ruthlessly sidelined during the hey days of Basu when he criticised the government for encouraging traders and businessmen at the expense of the poor. He died a forgotten man. Another Marxist leader and former MP Manoranjan Hazra had to leave the party after accusing fellow comrades of promoting “promoter Raj”. His daughter - despite several High Court orders - simply failed to get even a school teacher’s job in Basu’s Bengal. Some of you might have heard of Nripen Chakraborty, a Marxist who became the chief minister of Tripura. He was perpetually sidelined after publicly criticising Basu’s policies.

If Basu and his acolytes could treat ‘family members’ so ruthlessly, imagine the fate of citizens and activists who were not Marxists. Police firings, custody deaths and ‘raids’ organised by party workers were actually the order of the day in Basu’s Bengal. One of the worst is the Marichjhapi massacre where more than 3,000 Dalit protestors were killed. It is only during the Singur and the Nandigram agitations that the sheer ruthlessness of the Marxists and their police machinery came to light and became the staple for media. But it was perfected during Basu’s regime when any villager daring to vote against the Marxists automatically became a target for the Marxist goons. That kind of authoritarianism is now coming back to haunt the successors of Basu. And ask yourself honestly: with so many grievances, injustices and inequity, will India survive if the State displays such authoritarianism?

Murder of Entrepreneurship

Till the late 1960s, Bengal was one of the most industrialised states of India. Many prominent Marwari business families who found their early fortunes during the British Raj had made Calcutta their home. One of the most respected of the lot is B.K. Birla, almost 90-years-old, and a man who personally witnessed interactions between his father G.D. Birla and Mahatma Gandhi. Of course, he has also witnessed the destruction of West Bengal as an industrial hub. He says, half in sorrow and half in mockery, “What can businessmen expect but unions, strikes, threats and God knows what else. Tell me, which businessman will invest there. You know, when they are out of Bengal, the people are the most hard working, industrious and enterprising. But inside the state…you can see what happened to Bengal over the last 40 years. I don’t need to elaborate. Of course, I have always considered Calcutta my home and always will. But frankly, I don’t see a bright future for the state.”

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Wednesday, August 8, 2012

BARACK OBAMA

Obama’s mysterious Asian policies seem more conspiratorial than what meets the eye. Is his current silence an omen? Managing Editor Sutanu Guru investigates expected future US policies towards Asia in this issue of B&E

Till the later part of the 20th century, America tacitly stifled democracy in much of Asia because it did not want anti-American Communist regimes to come to power. In this day and age, it is stifling democracy because it does not want anti-American Islamic regimes to come to power. But by doing that, it is actually encouraging the culture of jihad to flourish because citizens have not much else to look forward to.

The defining moment and test for Obama will not be economic engagement and managing the rise of China and India. It will be his and his administration’s willingness to let Iraqis vote freely in an election that could end up electing a regime that is not pro-American. If he can do that, Obama will surely be remembered in history as the agent of change. If not, the dynamics of Asia will drown his poetic rhetoric.


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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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