Most lucrative business

Sourcehttp://www.thehindubusinessline.com/2010/10/28/stories/2010102851210800.htm

Government, a lucrative business

VIVEK KULKARNI

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A government the size of Karnataka should yield Rs 3,000 crore a year, through kickbacks. The cost of purchasing legislators being about the same, the payback is swift and fabulous. No wonder, politicians are lethal businessmen.

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The recent events in Karnataka showed how easy it is to take over or destabilise a government. MLAs are available for sale for Rs 25 crore each. They are ever willing to travel with you anywhere, as long it is a five-star resort. Have they visited their constituency lately?

Having seen the government as an IAS officer and worked on three State budgets quite closely, I have worked out how profitable the Government can be for any investor.

While the Tata-Corus deal was over Rs 36,000 crore, they could have acquired the Government of Karnataka for just Rs 2,825 crore by buying 113 MLAs. Another Rs 1,000 crore might have had to be doled out to mid-term dissidents and other contingency expenses. For such investment, the returns from bribes are fabulous. Even Warren Buffet cannot match it.

How do politicians make money? Most States usually spend substantial portion of their budgets on irrigation, power and roads. Table 1 summarises the budget for major departments in Karnataka. They release crores to the district and village level panchayats for schemes such as the National Rural Employment Guarantee Scheme (NREGS). Finally, the real goldmine is the slew of government positions that are almost auctioned in a transfer game.

Table 2 summarises the sitting ducks that can be targeted for transfer. How else can you explain the fact that the Chief Minister of Karnataka retains most of the transfer powers, instead of delegating them to the respective heads of department?

IRRIGATION AND POWER

Consider irrigation projects. On the one hand, politicians get all the accolades for rural development. They also get to collect 15-25 per cent on all capital works. Most contractors are happy to shell out speed money. Most of these projects usually do not attract any undue press coverage, like the Commonwealth Games did.

Roads are yet another treasure-chest. The smaller village roads can sometimes yield 90 per cent margins. Some village roads are not really built at all — rather, some red soil is spread around to close a few potholes, with the hope that the rains won't wash them away till inspection. If you really lay the road properly, the material cost goes up. Politicians are lucky that NGOs and self-styled activists at the Central level prescribe almost zero material costs and a higher proportion of labour.

Power sector subsidies often equal the State's fiscal deficits. The subsidies are actually meant for poor farmers, who seldom get electricity for more than six hours a day. But power theft by politicians' favourites is often included in the farm sector's T&D losses.

Next, the purchase of substandard transformers and replacing them is a money spinner. The vendors often co-operate to show false replacement. Transformer replacement in Karnataka is remarkably high. Most power purchase files often go up all the way to the Minister, even though the Department has several talented officers.

LAND DEALS

Politicians love land. The Bangalore Development Authority has notified land acquisitions for thousands of acres over the last two decades. It could have paid the market price and taken possession. However, it did not have the money and has abandoned all those projects.

The area is now well-developed and worth crores. The land-owners cannot sell it without de-notification.

When the government found that some were selling, they came out with the Karnataka Land Transfer Restriction Act, 1991, to declare such sales a criminal offence. No wonder that, for the last many years, while all the cities in the State have been with one minister, Bangalore always stays with the Chief Minister.

Construction permits and land registration are yet another big source of money. About 12 million sq ft of new concrete is built in Bangalore alone, every year. Karnataka has over 18 cities where real estate is booming.

While the stamp duty and registration charges could be 7.5 per cent, the bribes can be at least 1 per cent. The Government collects over Rs 3,500 crore in official revenues. This implies that bribes could be close to Rs 500 crore.

Politicians often use the local language excuse and stipulate the vernacular medium of instruction for all new schools. At the same time, they allow the managements to run English medium schools, which most parents demand. The threat of disqualification after inspections means endless money every year from private school managements.

The Gandhian philosophy on prohibition comes in handy to ban new bar licences. Those who want licences can only get it from the old licencees at a huge premium. Of course, they must share a bit with the Excise Department.

This technique is not unique to Karnataka. Many European countries, such as Greece, are better at it in other sectors.

TRANSFER GAMES

Transfer of officials is a big business. Some, like teachers, are a low-margin-high-volume game. Over a third of three lakh teachers can be transferred every year, but cannot fetch more than Rs 10,000 each. Just a few forest officials in the Bellary mining area can yield a crore. PWD engineers and commercial tax officials are all-time favourites and can also fetch sums in crores.

A lowly, yet very powerful official in the government, is the accounts superintendent, who writes government cheques and earns just Rs 15,000 a month, but whose transfer is usually worth a crore. Many of them manage recommendations from five to eight MLAs at the time of transfer.

Food for the poor is money for politicians. Even though the Planning Commission claims that just 30 per cent of the population is below the poverty line, many States show more than 100 per cent. More cards mean more ration money that can be swindled. Ration-shops are doled out to village level political functionaries. I am not sure if the UID program will make any dent in these practices.

The problem with our poverty schemes is not technology, nor the problem of identifying the poor, but the lack of political will to tackle corruption. The Right to Food programme will mean more money available for illegal distribution.

Conservative estimates show that, if all possibilities are implemented, a State government the size of Karnataka should yield Rs 3,000 crore per year. Compared to the investment, the payback is just above one year. Considering five-year cash flows, and one mid-term destabilisation costing Rs 1,000 crore, the IRR works out to 175 per cent. Politicians have become lethal businessmen.

Getting inside the brain

Getting inside the Indian entrepreneur's brain
http://www.thehindubusinessline.com/catalyst/2010/10/28/stories/2010102850110400.htm

Cognitive neurology has some answers to why the owners of Nirma and Jyothy Labs ignored convention in their advertising.. The repetition of stimuli is key to strengthening any memory. This has been understood very well by organised religion and political parties, the real masters of mass persuasion.


Biju Dominic

The Indian entrepreneur brings a large dose of intuitive wisdom to his business decisions. His decisions look very different from those discussed in business schools, but deliver tremendous results in the market place.
Business school educated professionals rarely grasp the greatness of those decisions at the outset. Nor are they able to unravel the science behind those intuitive decisions. So they are incapable of effectively countering those decisions.
When Karsanbhai Patel launched Nirma washing powder in the Seventies, the launch television commercial was seen as bizarre. Even today, an unwritten norm of the advertising industry is that the brand name should appear just once, that too during the last few frames of the TVC.
In the Nirma launch commercial pack shots, brand usage shots and brand benefit shots and the brand name “Nirma” were repeated many times. The whiz kids of the advertising industry thought the commercial would be the first fall of a small-time Indian entrepreneur who was just learning the tricks of the trade.
When M. P. Ramachandran of Jyothy Laboratories launched Ujala liquid whitener to take on a large established MNC brand, he did not splurge on glitzy television commercials. The launch ad of Ujala in local magazines asked people to send in a short poem using the words ‘Ujala', ‘clothes' and ‘whiteness'. Instead of using the best copywriters from the best advertising agencies to write eulogies about the brand, ideally in English, here was an Indian entrepreneur who was asking the consumers to write something about the brand and its benefits, that too in their mother tongue.
While the innovative business ideas of Nirma and Ujala have been replicated, the communication ideas during the launch of these two brands have never been fully understood.
With the emergence of Cognitive Neurology as a fundamental science to explain all aspects of human behaviour, we are in a better position to decipher the science behind even the most intuitive decisions of the Indian entrepreneur.
A memory is formed in our brain thanks to connections between millions of neurons and the electrochemical stimuli that pass between them. Any memory in turn is connected to several other associated memories. The strength of a memory depends on the strength of its neural connections. All marketing activities aim to strengthen the neural connections between a particular brand and the benefit it caters to.
How do we strengthen the brain's neural connections? If electrochemical stimuli pass between a set of neural connections repeatedly, the neural connections become stronger and stronger. So the repetition of stimuli is key to strengthening any memory. This has been understood very well by organised religion and political parties, the real masters of mass persuasion. Repetition of prayers, chants and slogans are an integral part of their daily rituals. So when Karsanbhai Patel repeated the brand name and brand images multiple times in Nirma's launch commercial, he was intuitively following a memory strengthening exercise that has been happening in the churches, temples and the streets of this country for centuries.
After the Korean War, many of the American soldiers who were captured as prisoners of war came back from Chinese prisons as strong believers in communist philosophy. American psychologists who wanted to find out how this brainwashing happened were surprised to find that no violent methods were inflicted on these prisoners to alter their belief systems. Chinese authorities just got these American prisoners to write down what they wanted them to believe in.
Yes, getting your consumers to write down their liking for your brand dramatically increases their loyalty towards your brand. Jyothy Laboratories received thousands of poems written by the consumers. There would have been ten thousand others who wrote a few lines on a sheet of paper or at least thought of a few lines of a poem in their brains. In the brains of all these amateur poets, millions of neurons related to ‘clothes' and ‘whiteness' would have formed a very strong connection with brand Ujala.
There are many great marketing ideas that are lying unused because no one has discovered their true worth. To know their true worth we need to polish them using the science of cognitive neurology. So the next time you need to insert the line ‘I love XYZ brand because …' at the end of the brand contest form, would you consider it a legal requirement or as one of the most powerful ways to build strong loyalty for your brand?

Rural banking

SBI mulling transaction based fee for no-frills accounts

MUMBAI: In order to make the operation of no-frills accounts opened
under the financial inclusion plan of the government feasible, State
Bank of India (SBI) is considering the imposition of a charge on every
transaction by account holders.
The bank is confident that a nominal charge, which can be either a
percentage of the amount transacted or a fixed amount, will not
dissuade people from operating no-frills accounts, a senior SBI
official involved in the state run lender's financial inclu sion
initiative said here on strict condition of anonymity.
"The question on our minds is — how do we make the operations of the
model feasible? We can recover the Rs 20,000 required for setting up
infrastructure in a village through a kiosk or palm-held device by
opening around 100 accounts and charging Rs 200 a s account opening
fees," the official said.
Paying a small amount like Rs 3 for a transaction would be preferable
to travelling 20 kilometres to reach a branch, he said, clarifying
that the bank, however, has not finalised any plan yet.
"You cannot have a model under which the financial inclusion roll-out
is subsidised, it needs to be sustainable," he added.
The bank has to take care of recurring expenses like maintaining
back-end systems and paying the business correspondent (BC) operating
on its behalf at the village level, he said. - PTI

Pasted from <http://www.thehindubusinessline.com/businessline/blnus/17241706.htm>

Wikipedia justice (Mint, 23 Oct 2010, Page 1)

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Wikipedia justice

Mint
23 Oct 2010

In its verdict on live-in relationships, the Supreme Court briefly explained “palimony” and “common law marriages”, but urged readers to look up further details on Google. This is, perhaps, practical—only a little different from references to previous judgements. Courts have enough to do without delving into every concept within a verdict.

But in the same judgment, the Supreme Court cited Wikipedia; a search of the database Indiankanoon.org shows that, since May, at least 70 judgements have done likewise. Wikipedia is mutable, easily changed by its users; the Wikipedia page seen by judges when preparing a verdict can be different from that seen by readers 10 minutes or six months or seven years hence. A court that can quote Flaubert and Tolstoy should surely be able to call up more lasting, reliable resources than Wikipedia.

India's trade deficit is world's third largest

India's trade deficit is world's third largest

Harish Damodaran
Arun S.
New Delhi, Oct. 21


India has the world's third largest merchandise trade deficit after the US and the UK, according to data from the World Trade Organisation's just-released International Trade Statistics 2010.
In 2009, the country's trade deficit – arising from its import of goods being more than its exports – amounted to $87 billion, against $549 billion for the US and $129 billion for the UK.
The Commerce Ministry has projected India's trade gap to touch $135 billion during 2010-11, though this figure pertains to the fiscal year ended March 31, 2011, whereas the WTO data is based on calendar year.
If the $135 billion projection holds for the calendar year as well and there is no change to the UK's $129 billion number – both not wholly unrealistic assumptions – India's trade deficit would end up being next only to the US.
The country's $87-billion deficit in 2009 is, incidentally, lower than the record $126 billion for the previous calendar year. That year saw India occupying the No. 4 position, behind the US ($882 billion), the UK ($173 billion) and Spain ($139 billion). But since then, India has overtaken Spain, which registered a much bigger contraction in foreign trade on account of the global economic downturn.
The impact of the downturn can be seen from the accompanying table, with every major economy experiencing a decline in both exports and imports in 2009.
The end-result has been a reduction in trade surpluses (of countries such as China, Germany, Saudi Arabia and Russia) as well as trade deficits (of the US, the UK, Spain and India).
In 2009, India ranked 21st among the world's exporters of goods, while being 14 {+t} {+h} in imports. The picture was, however, different in services, where the country was placed at No. 12 in exports. At $87.43 billion, its exports were higher than imports of $79.77 billion, thereby translating into a $7.66 billion surplus on this account.
Moreover, the WTO's $87.43 billion estimate covers only ‘commercial services'. They do not include private remittances, which stood at $53.90 billion for the fiscal ended March 31, 2009. If this figure – representing export of ‘manpower' – is added, India's services exports would cross $140 billion. That would push it closer to the US ($474 billion), the UK ($233 billion), Germany ($227 billion) and France ($143 billion), though these, it may be noted, exclude private transfers.
Pasted from <http://www.thehindubusinessline.com/2010/10/22/stories/2010102253260400.htm>

International tax loopholes

Google 2.4% Rate Shows How $60 Billion Lost to Tax Loopholes

y Jesse Drucker - Oct 21, 2010 3:30 PM GMT+0530

Google Inc. cut its taxes by $3.1 billion in the last three years using a technique that moves most of its foreign profits through Ireland and the Netherlands to Bermuda.

Google’s income shifting -- involving strategies known to lawyers as the “Double Irish” and the “Dutch Sandwich” -- helped reduce its overseas tax rate to 2.4 percent, the lowest of the top five U.S. technology companies by market capitalization, according to regulatory filings in six countries.

“It’s remarkable that Google’s effective rate is that low,” said Martin A. Sullivan, a tax economist who formerly worked for the U.S. Treasury Department. “We know this company operates throughout the world mostly in high-tax countries where the average corporate rate is well over 20 percent.”

The U.S. corporate income-tax rate is 35 percent. In the U.K., Google’s second-biggest market by revenue, it’s 28 percent.

Google, the owner of the world’s most popular search engine, uses a strategy that has gained favor among such companies as Facebook Inc. and Microsoft Corp. The method takes advantage of Irish tax law to legally shuttle profits into and out of subsidiaries there, largely escaping the country’s 12.5 percent income tax. (See an interactive graphic on Google’s tax strategyhere.)

The earnings wind up in island havens that levy no corporate income taxes at all. Companies that use the Double Irish arrangement avoid taxes at home and abroad as the U.S. government struggles to close a projected $1.4 trillion budget gap and European Union countries face a collective projected deficit of 868 billion euros.

Countless Companies

Google, the third-largest U.S. technology company by market capitalization, hasn’t been accused of breaking tax laws. “Google’s practices are very similar to those at countless other global companies operating across a wide range of industries,” said Jane Penner, a spokeswoman for the Mountain View, California-based company. Penner declined to address the particulars of its tax strategies.

Facebook, the world’s biggest social network, is preparing a structure similar to Google’s that will send earnings from Ireland to the Cayman Islands, according to the company’s filings in Ireland and the Caymans and to a person familiar with its plans. A spokesman for the Palo Alto, California-based company declined to comment.

Transfer Pricing

The tactics of Google and Facebook depend on “transfer pricing,” paper transactions among corporate subsidiaries that allow for allocating income to tax havens while attributing expenses to higher-tax countries. Such income shifting costs the U.S. government as much as $60 billion in annual revenue, according to Kimberly A. Clausing, an economics professor at Reed College in Portland, Oregon.

U.S. Representative Dave Camp of Michigan, the ranking Republican on the House Ways and Means Committee, and other politicians say the 35 percent U.S. statutory rate is too high relative to foreign countries. International income-shifting, which helped cut Google’s overall effective tax rate to 22.2 percent last year, shows one way that loopholes undermine that top U.S. rate.

Two thousand U.S. companies paid a median effective cash rate of 28.3 percent in federal, state and foreign income taxes in a 2005 study by academics at the University of Michigan and the University of North Carolina. The combined national-local statutory rate is 34.4 percent in France, 30.2 percent in Germany and 39.5 percent in Japan, according to the Paris-based Organization for Economic Cooperation and Development.

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Read Full article at http://www.bloomberg.com/news/2010-10-21/google-2-4-rate-shows-how-60-billion-u-s-revenue-lost-to-tax-loopholes.html

Steel to be sold online

Essar Hypermart to sell steel online, up its marts in India

Press Trust of India / Chandigarh October 21, 2010, 17:14 IST

In sync with plans to deepen its penetration in retail space, conglomerate Essar Group's retail arm Essar Hypermart today said it would sell steel online by current fiscal-end, which will contribute 10-15 per cent of its total sales.

Besides, the company may hive off its retail operations after the implementation of Goods and Services Tax (GST).

"We will introduce our online sales module for selling steel products primarily to small and medium enterprises (SMEs) by the end of current fiscal and business through online is expected to contribute 10 to 15 per cent of our total sales," Essar Hypermart CEO Girish Rao told reporters here today.

Essar Hypermart is eyeing sales of Rs 4,200 crore through its retail network by end of current fiscal, against sales of Rs 3,600 crore achieved in last fiscal.

"Under the online sales, we will be booking steel orders from our customers and we will also introduce payment gateway enabling customers to make payment online for their convenience," he said.

The company is currently running online sales operations on trial basis in Gujarat and Maharashtra.

Aiming to supply steel at customers' doorstep throughout the country, Essar Hypermart, with a customer base of 10,000, has plans to start direct delivery system through inducting a fleet of vehicles.

"We plan to have a fleet of 150 vehicles which will supply steel to customers at their doorstep. This direct delivery system is currently running in Rajasthan and Gujarat," he said.

When asked about having separate operations, Rao said the retail operations can be hived off once the GST comes into operations. "We may hive off our retail operations only after GST implementation, as it (GST) will resolve several taxation issues," he said.

As part of its plans to expand its network throughout the country, Essar Hypermart has decided to increase the strength of Hypermart and Expressmarts to 126 and 650, respectively by opening more outlets in several parts of the country, including Punjab, Jammu and Kashmir etc.

Currently, the company has 100 hypermarts and 410 expressmarts. Hypertmarts are operated by company itself while Expressmarts are run by franchise.

Essar Hypermart plans to sell 1.5 million tonne of steel by end of current fiscal, against 1.1 million tonne sold in last fiscal. The sales from Essar Hypermart has 25 per cent share in Essar Steel's revenue.

Source:

http://www.business-standard.com/india/news/essar-hypermart-to-sell-steel-onlineits-marts-in-india/113032/on

MFI crisis

Caution, the watchword for any action on MFIs

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Many MFIs which started off as service-oriented NGOs to provide succour to the downtrodden and the neglected sections of the rural population have assumed commercial complexion, working for profits.

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M. Sitarama Murty

In the recent weeks some ripples have surfaced in the hither to calm waters of micro finance.
It is sad that several precious lives are lost reportedly because of the high indebtedness and strong arm methods of the lenders. Not so faraway in the past, farmers committed suicide burdened with debt compounded by crop failures, poor harvests or un-remunerative prices. The debt waiver scheme brought some relief. This time around it is a case of rural poor engaged in a variety of small enterprises besides agriculture, who have availed themselves of credit for consumption expenses, marriages, healthcare and funerals.
Beneficiaries, social groups, political parties and administrators have reacted on predictable lines. There were arrests, raids on offices of the MFIs, demands for regulation of MFI activities and an announcement by a State Government of an Ordinance to discipline them. The significant role of the MFIs in the rural areas and their size of operations do not warrant any knee jerk reactions, which can, besides directly affecting the MFIs, trigger avoidable upheavals in the financial sector. Caution is the watchword for any action.
Causative factors
Before offering prescriptions it is necessary to look at the causative factors that led to the present scenario. There is no gain saying the fact that many MFIs which started off as service-oriented NGOs to provide succour to the downtrodden and the neglected sections of the rural population have assumed commercial complexion, working for profits.
Eyeing their success, huge business potential, profit margins and relatively easy availability of resources, many big players, including some international institutions, investors and commercial banks, took active interest in micro credit and MFIs. There has been a mushroom growth and huge flow of funds in to this sector. And not all of them can claim that service to the poor is their sole motto.
Banks' support
The support extended by the commercial banks has been a critical factor. Their reluctance as well as inability to lend to the rural and urban poor prompted them to choose the easy option of supporting the MFIs for achieving twin objectives.
Perceiving the risk as low with MFIs reporting near cent per cent recovery performance, banks lent support to the MFIs in a big way to secure volumes and more importantly to achieve the benchmarks of 40 per cent and 18 per cent lending to priority sector and agriculture respectively.
It is not new to the foreign and private sector banks to participate or buyout a portion of the priority sector advances of other banks before the year-end. They are saved from the hassles of canvassing, servicing and recovering the numerous small loans and also ward off criticism of the Government and the RBI.
It is a different story now that the public sector banks too have joined the queue for lending to or buying out priority sector loans from the MFIs, making it much more easy for the MFIs to raise resources at low rates. While loans to MFIs would count as priority sector advances, buyout of agricultural advances with credit risk would help achieve the benchmark for agricultural lending.
Reminiscent of the sub-prime lending in the US, the easy access to resources tempted some of the banks and MFIs to go in for the ‘desi' securitisation and rapid expansion. Quality suffered as seen from the shortcomings that surfaced in the recent events. Relatively large amounts, unrelated to the repaying capacity have been granted, distorting the concept of micro credit, dragging the borrowers into a debt trap, which proved counter productive.
Easy access to credit and speedy delivery have been the two plus points of micro credit. But assessment of credit needs has not been a virtue. The net result seems to be that the family's entire savings go just for servicing the debt. Growth and competition also resulted in duplicate and multiple financing, leading not only to over financing but distorting the recovery performance too, fresh loans being raised for refinancing existing debt or servicing it, giving a false comfort of recoveries.
Training recruits
The other crucial area which needs more attention is the training of the large number of fresh recruits handling the sensitive area of loan disbursals and recoveries. Lack of appreciation of the larger issues such as financial inclusion, employment creation, income generation, repaying capacity and proper credit appraisal seem to have contributed in ignoring the means for achieving the goals of business growth and recovery performance.
The rural background with a local feel was expected to make them more pragmatic, with better understanding of the ground realities. But the business pressures have impacted their approach in acting as mere agents than managers.
The oft repeated argument that easy access to credit and speed are more important appears to have been stretched beyond a point in resorting to high rates of interest.
The banking industry charges 7 to 12 per cent for small loans to weaker sections. Because of wage structure and low operative costs, even after allowing for higher funding costs, the MFIs should be able to earn profits and still peg down the interest rate below 18 per cent.
With the recoveries at ideal levels of 95 to 100 per cent and the risk of NPAs being low, which is not the case with banks and cooperatives, MFIs can't aim at higher rewards either. The situation warrants intervention of the government or the RBI. After a careful evaluation of the costs, earnings and profitability of their operations, a view on the interest rate structure can be taken.
Voluntary guidelines
To avoid unhealthy competition, demarcation of areas/villages may not be desirable or acceptable but it is feasible to adhere to some discipline with the aid of technology. MFIs can also evolve some voluntary guidelines on the lending and exposure norms.
Government agencies, in their anxiety to protect the interest of the borrowers, should avoid any drastic measures to give an impression of ‘ sarkari' intervention leading to another round of debt waiver. This can vitiate the repayment culture in the SHGs, many of which are doing a good job, and in turn, could destroy the micro finance system.
Government functionaries raiding and/or seizing records smacks of excessive reaction and amounts to barking up the wrong tree. It may send wrong signals to the market and precipitate our own backyard sub-prime crisis.

Read Full article at:

http://www.thehindubusinessline.com/2010/10/18/stories/2010101850831000.htm

Indian Coke "Pepsi"

Coca-Cola Can't Speak Its Name in India as Pepsi Enters Hindi

By Mehul Srivastava - Sep 9, 2010 4:31 AM GMT+0530

Coca-Cola needs growth in overseas markets to offset at least four years of declining sales volumes for its soft drinks in the U.S. Photographer: Prashanth Vishwanathan/Bloomberg

Coca-Cola Co. offered to buy Rajesh Yadav a refrigerator for his New Delhi store if he would sell only the company’s drinks.

He kept his part of the bargain and lines of Coke and Diet Coke cans glisten behind the glass screens of the fridge. A red- and-white banner, with Bollywood film star Aishwarya Rai chugging a bottle of the cola, adorns his store front. Yet Yadav doesn’t mention his partner when he describes his shop.

“I sell Pepsi and cigarettes,” said Yadav in Hindi, elongating the first syllable to pronounce the word “Pay- psee.”

Read full article at

http://www.bloomberg.com/news/2010-09-08/coke-is-the-soda-that-can-t-speak-its-name-in-india-as-pepsi-enters-hindi.html

To contact the reporters on this story: Mehul Srivastava in New Delhi atmsrivastava6@bloomberg.net;

Electricity in India- dark realities

Indicus Analytics: India's dark realities

India will remain a power-deficit country for many many years

Indicus Analytics /  October 14, 2010, 0:13 IST

Electricity, or rather the lack of it, is one of the biggest constraints on India’s growth. To begin with, connectivity continues to be an issue in rural areas. As of August 2010, more than 90,000 villages (around 15 per cent of the total) remain un-electrified; there are still two years to go for universal rural electrification according to the target set by the Rajiv Gandhi Grameen Vidyutikaran Yojna launched in 2005. Twelve states have 100 per cent rural electrification — Andhra Pradesh, Delhi, Goa, Haryana, Kerala, Punjab, Tamil Nadu, Chandigarh, Dadra & Nagar Haveli, Daman and Diu, Lakshadweep and Puducherry, and in nine states, more than 90 per cent of the villages have been electrified. An outlier is Jharkhand, the only state with less than 50 per cent rural coverage. Currently hit by a multi-crore scam in its rural electrification project, it’s unlikely that this state will get its act together soon. While more than 20,000 villages remain un-electrified in Jharkhand, states with more than 10,000 villages to be covered are Orissa, Bihar, Rajasthan and Uttar Pradesh.

Having a connection, however, is not the end of the story. Urban and rural India reel under power cuts all year round, which are severe particularly during the summer months. Latest data for the period April-August 2010 reveal a deficit of close to 14 per cent of the peak demand; in six states — Jammu and Kashmir, Bihar, Meghalaya, Uttarakhand, Maharashtra and Madhya Pradesh — the deficit of peak demand exceeded 20 per cent. The problems, of course, lie in both generation of sufficient power and the distribution systems. Capacity has lagged demand for long; during the last three plans, barely half of the targeted capacity was installed and with two years to go for the current plan to end, the government has already scaled down its power generation target to 62,000 megawatts (Mw) from 78,700 Mw. Since the 2003 Electricity Act, there have been many reforms opening the sector to private players. Though private sector interest has been high, hurdles remain in the form of land acquisition, red tape, power equipment shortages, the monopoly of Bharat Heavy Electricals Ltd., fuel linkages and so on.

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Read full article at....

http://www.business-standard.com/india/news/indicus-analytics-india/s-dark-realities/411402/

Inflation: Some facts

Inflation: Don't worry, be happy 
DEEPAK MOHANTY

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Notwithstanding episodes of double-digit inflation, India has been a moderate-inflation country and the average inflation has come down over the last 15 years.

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The new series on WPI is of particular importance. Considering the data for the past five years, 2005-06 to 2009-10, it is seen that there is not much difference in average inflation rate between the new series and the old series which is about 5.5 per cent (see Table).
Going by the current experience of 5-6 months of double digit inflation, one can trace nine such episodes in the last 56 years. Of these nine episodes, double digit inflation lasting beyond a year occurred on five occasions.
The most prolonged one lasted for 30 months during October 1972 to March 1975. The last such high inflation was in the mid-1990s which lasted 15 months between March 1994 and May 1995. The Reserve Bank responded to the phases of high inflation through available policy instruments.
Notwithstanding these episodes of double digit inflation, it is important to recognise that India has been a moderate inflation country and the average inflation has come down over the last 15 years.


For the 56-year period from 1953-54 to 2009-10, the monthly annual average inflation is around 6.7 per cent. There has particularly been a perceptible drop in the average WPI inflation to about 5.1 per cent in the last decade during 2001-02 to 2009-10.
Inflation has strayed from its long-term path from time to time. The upward spikes in inflation from its trend are explained by significant supply shocks.
Generally, high inflation periods were coincident with episodes of oil price surge and drought conditions.
The following major conclusions may be drawn from our experience with inflation over the last 60 years.
First, the new series of WPI inflation marks a major change in terms of scope and coverage of commodities and is more representative of the underlying economic structure.
As per the new series, the manufactured products inflation is lower than what was seen on the basis of the old series.
The food price inflation, on the other hand, is higher than what was seen on the basis of the old series.
Food prices
The high level of food prices is indeed a matter of concern as the prices of protein-based items, which have a higher share in the consumption basket, are showing larger increases.
Moreover, there is continuing shortage of food items such as pulses and edible oils. If the supply response doesn't improve, there is a risk that food price inflation could acquire a structural character.
Second, historical data show that India is a moderate inflation country. But there have been phases of sharp spikes in inflation emanating from war, drought and commodity price shocks.
Supply shocks when accompanied by demand pressures further amplified inflationary pressures. But the inflation rate has reverted to its trend following policy response and improved supply conditions.
In the periods of high inflation, monetary policy responded with a combination of available policy instruments through changes in policy interest rates, cash reserve ratio (CRR), statutory liquidity ratio (SLR), and in the earlier regime through increases in administered interest rates and credit control.
Reduced volatility
Third, the volatility as well as incidence and duration of double digit inflation has reduced over time.
Inflation control since the mid-1990s has been particularly successful which can be attributed to wide ranging reforms which have improved the macro-policy framework and eased supply constraints.
Fourth, the long-run inflation trend is determined by non-agricultural GDP and money supply. Increase in money supply unaccompanied by a commensurate increase in non-agricultural GDP is potentially inflationary.
Finally, with the reduction in average inflation and inflation volatility, since the mid-1990s, tolerance for high inflation has come down. The moderation of inflation trend has had several beneficial effects in terms of lower nominal interest rate and high GDP growth rate.
Given the remarkable stability in the inflation rate since the mid-1990s, it is important to persevere with appropriate policy responses so that the high inflation seen in the recent months does not get entrenched.
Even if the trigger for inflation is from supply side, its persistence necessitates monetary policy responses to bring the inflation rate back to its trend and anchor inflationary expectations.
(The author is Executive Director, RBI. The assistance provided by O. P. Mall, Abhiman Das and Binod B. Bhoi is acknowledged.)

Source:
http://www.thehindubusinessline.com/2010/10/06/stories/2010100650820900.htm

Ambush marketing at CWG

Ambush marketing at CWG

Asha N Basu /  October 7, 2010, 1:03 IST

Till the XIX Commonwealth Games (CWG) began, many companies were wary of letting their brand ride on the Games. Hence, official corporate sponsorships were limited to begin with. Having been launched successfully, the Games now find many riding the wave. Ambush marketing has taken over!

The surreptitious entry of non-sponsor brands into the Games Village and the eleventh hour tangential entry of companies have made non-sponsor brands ubiquitous.

Ambush marketing is not new to sports events. At the 1996 Summer Olympics in Atlanta, Nike saved $50 million by shying away from official sponsorship but mounted a marketing campaign plastering billboards around the city, handing out free banners to spectators and erecting an enormous Nike centre overlooking the stadium.

The tactics devastated the International Olympic Committee’s credibility and spooked other organizations such as FIFA into adopting more assertive anti-ambushing strategies. That explains why sporting bodies, including the CWG organizing committee (OC) are alarmed by the phenomenon, more so because ambush marketing is not illegal. Just unethical.

When Jerry Welsh coined the term ‘ambush marketing’ in the early ’90s, while at American Express, it was seen more as an act of subversion against expensive and often ill-conceived sponsorships. Today, however, the expression has acquired a negative overtone. It’s more like commercial theft. Sports bodies across the globe are not only familiar with the phenomenon, but have learnt to fear it.

Narrowly viewed, ambush marketing refers to the direct efforts of a party to weaken or attack a rival’s official association with an event acquired through the payment of sponsorship fees. More broadly, rather than direct misrepresentation or infringement, ambush marketing refers to a company’s attempt to capitalize on the goodwill, reputation, and popularity of an event by creating an association without the authorization or consent of the necessary parties. It is believed to be the biggest risk for advertisers seeking sponsorships at sporting events.

Ambush marketers simply develop a creative advertising campaign around the event, never use the event logo, trademark, and capitalize by association with the event without paying for “official sponsor” status. The Pepsi hot air balloon flying above Sharjah, on the day of the Coca-Cola Cup final, is one such example. And closer home, the straight fight between Hero Honda, a global sponsor of the Champions Trophy taking place in Sri Lanka, and its rival TVS. TVS has, according to industry experts, paid Rs 12 crore to rope in cricketer Sachin Tendulkar as its brand ambassador for three years.

In most legal systems it would be very difficult to argue that a parody is illegal or a copyright infringement as most often it is protected free speech and a form of permissible cultural criticism. But imagine if it makes better sense to ambush than to be an official sponsor, they would soon be left with nobody to foot the bill!

Since a major chunk of any Games budget comes from corporate marketing sponsors, broadcast rights fees, and royalties from official merchandise licensees. Event organizers should educate the public about the basics of intellectual property and ambush marketing in its battle against trademark infringement.

In India, existing law does not provide the “ambushed” entity or the event organiser a ready remedy. In the 2003 case of ICC vs Arvee Enterprises and Philips, the Delhi High Court, while recognising the alleged act as ambush marketing observed that such acts were not in fact prohibited under the Indian law. As a result, the contractual restraints are (for various technical reasons) of very limited use in curbing ambush marketing by opportunistic players.

It would be interesting to see how the CWG OC will deal with ambush marketing at the Games. Given the event’s ultimate success, after all that bad press, there may be more attempts on the closing day!

(The writer is partner S Jalan & Co, Attorneys, New Delhi, and Advisor, Communication, Sponsorship & Legacy, CWG 2010)

Source:

http://www.business-standard.com/india/news/ambush-marketing-at-cwg/410398/