AAPI: May 2017

LISBON, 20th April 2017

Index of this Newsletter

INDIA

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LISBON, 20th May 2017

NEWSLETTER, 20-V-2017

INDIA

– GENERAL POLICY, INFRASTRUCTURES, COUNTRY FINANCES, ETC.

1.1. New CII chief sees India growing at 10% in 3 years

BusinessLine, 4 May 2017

Healthcare major Apollo Group’s Shobhana Kamineni has all her hopes set on the Indian economy and has predicted a 10 per cent growth in gross domestic product (GDP) in three years.

On Thursday, Kamineni, Executive Vice-Chairperson of the Apollo Group, took charge as the President of the industry body Confederation of Indian Industries (CII) for 2017-18.

Addressing mediapersons, Kamineni, who is the first woman President of CII, said she expected GDP growth to touch 8 per cent in the ongoing fiscal based on “normal monsoon, good global climate and strong macro-economic fundamentals of the country.”

The CII’s new head was also in favour of bringing the agricultural economy under the tax net. She said CII was “broadly in favour of widening the tax base” and felt that “non-farm rural income” and those where the income was over the tax limit could be included in the tax net.

The issue had recently raised a furore when Bibek Debroy, Member of the NITI Aayog, said farmers should be liable to pay taxes.

Finance Minister Arun Jaitley, however, was quick to deny any plans to bring agriculture under the tax net. A move to bring agricultural income, while economically sound, has political ramifications. Kamineni said reforms, such as the Goods and Services Tax, expected to be implemented in July, along with high investments in infrastructure projects and greater women’s participation in the workforce, would be the significant drivers of the economy.

“Our conservative forecast is that based on these projects, (such as ₹30 lakh crore investment in Railways, 20,000 km highway construction, and Sagarmala port development) India’s GDP could increase by as much as 50 per cent over the next five years. Similar increases in job creation can also be expected,” she added.

1.2. Why India should tax agricultural income

Livemint, 2 May 2017

In 1925, the Indian taxation enquiry committee noted, “There is no historical or theoretical justification for the continued exemption from the income tax of income derived from agriculture. There are, however, administrative and political objections to the removal of the exemption at the present time.” Almost a century later, both parts of that observation still hold true.

NITI Aayog member Bibek Debroy’s suggestion last week that agricultural income above a certain threshold should be taxed is a case in point. The political reaction was swift and predictable, from both the government and the opposition. But Debroy’s stand—backed by chief economic adviser Arvind Subramanian—is no heterodoxy. Six states currently have agricultural tax legislation on the books—Tamil Nadu, Kerala, Assam, Bihar, Odisha and West Bengal—even if implementation varies substantially, from taxes not being levied at all to being levied only upon income from plantations.

A number of other states such as Uttar Pradesh and Rajasthan have flip-flopped on the issue over the decades, introducing and then rolling back agricultural tax.

The economic and governance necessity of such a tax has always been apparent. Yoginder K. Alagh’s 1961 analysis of agricultural tax yields, Case For An Agricultural Income Tax, in The Economic Weekly—now The Economic And Political Weekly—is illuminating, showing a substantial rise in revenue over the previous decade, vital for a young nation state. Concurrently, the Planning Commission’s sample study of cooperative farms showed the onset of tax avoidance as mechanized farms with hired labour took advantage of the exemptions provided to cooperative farms. That evasion has grown over the decades into an administrative swamp. In assessment year 2014-15, for instance, nine of the top 10 claimants for tax exemption of agricultural income were corporations; the 10th was a state government department. And an RTI (right to information) query by Vijay Sharma, former income-tax chief commissioner, turned up massive irregularities in agricultural income in 2011-12 and 2012-13.

This goes beyond foregone revenue. As the 2014 Tax Administration Reform Commission report points out, “Agricultural income of non-agriculturists is being increasingly used as a conduit to avoid tax and for laundering funds, resulting in leakage to the tune of crores in revenue annually.” Nor can this government or its predecessors hide behind the fig leaf of honest—if unwise—populism. According to the National Sample Survey’s 70th round, over 86% of agricultural households have land holdings of less than 2 hectares. Low-income farmers—the constituency state legislatures are ostensibly protecting—would thus fall outside the ambit of any sensible tax regime. The reality of political opposition is more sordid: pressure brought to bear by the rural elite that can deliver votes and funds and would fall under the tax net.

Little wonder there is a robust history of policy reform attempts. The 1972 Raj committee on taxation of agricultural wealth and income report is perhaps the most comprehensive. The Vijay Kelkar committee in 2002 had also addressed the issue, noting that states should be persuaded to pass a resolution authorizing the Centre to pass a tax on agricultural income that would then be assigned to the respective states. The reform attempts stretch as far back as 1947—when the report of the expert committee on financial provisions to the Constituent Assembly suggested consulting with the states to address the issue swiftly—and are as recent as Prime Minister Narendra Modi’s conference with tax administrators in June last year when the latter brought up the issue of taxing agricultural income.

Given the extent of the informality that still exists in the agricultural sector, implementation of an agricultural tax would admittedly not be easy. In a 2004 World Bank paper, Taxing Agriculture In A Developing Country: A Possible Approach, Indira Rajaraman has analysed data from 70 developing countries to show how the twin problems of payments in cash or kind and a lack of standard account-keeping throw up barriers. But there is, demonstrably, a wealth of work done in this area to draw upon.

For instance, Rajaraman herself suggests a crop-specific levy on land rather than on self-declared output, assessed and implemented at the panchayat level for accuracy and flexibility—with the added incentive of tax yields being ploughed back into agricultural sector infrastructure.

However, to engage with such policy debates, the political establishment must first move beyond a reflexive rejection of the very concept of agricultural tax. Given the optics created by decades of grandstanding, this will perhaps be as difficult as actually implementing a tax. But with the Modi government’s push for a less-cash economy and the proscription of cash transactions of over Rs2 lakh, both making money laundering via the agricultural sector more difficult, this is as good a time as any.

It would be a pity if the logic of the colonial administration continued to dictate tax administration in India nine decades later.

2.1. Modi @ 3: A year of big-bang action

BusinessLine, Richa Mishra, 15 May 2017

A year ago, when the Narendra Modi government completed two years in office, even its diehard supporters were pawing the ground with impatience over the glacial pace of change in economic policymaking. Why, they wondered, was a government that was determined to break away from the past, and which had the strength of numbers in the Lok Sabha, shying away from big-bang reforms?
As the Modi government completes its third year today, these voices of scepticism, and much of the taunts from the Opposition, have effectively been silenced by the spate of high-decibel action in the year gone by. On a number of policy fronts, the NDA government unleashed a barrage of bold actions, which did away with the perceived sense of drift; they also allowed it to seize control of the economic and political narrative, particularly after the BJP expanded its political footprint across India, winning emphatically in many State elections, most significantly in Uttar Pradesh.

Winds of change

Not all of these big-bang actions count as reforms, and the jury is still out on the long-term impact of some of these moves – such as the November 8, 2016 demonetisation of high-value currency notes. But even the government’s critics concede that the past year has been transformative, particularly in the manner in which the government is changing the landscape of the financial sector.

Apart from demonetisation, which the government hard-sold as a pillar in its war on corruption and black money, the NDA formalised arguably the most sweeping reforms of indirect taxes by sewing together the Goods and Service Tax (GST) regime in consultation with the States. It also scored on the legislative front with key initiatives such as the Insolvency and Bankruptcy Code and amendments to the SARFAESI and Debt Recovery Acts, and, in recent weeks, put in place an institutional mechanism to tackle the mountain of bad loans that public sector banks are saddled with.

Two other efforts that signalled a decisive break with the past were the advancing of the Budget date (to enable better utilisation of funds for public welfare) and the merger of the Railway Budget with the Union Budget, which promises to do away with the politics of railway budgeting.

A government seemingly on overdrive has in the past year also propelled its financial inclusion initiative, complete with direct benefit transfer and Aadhaar seeding to plug leakages in subsidy payouts.

India Inc endorsement

Captains of industry have welcomed these efforts. “The highlight of Prime Minister Modi’s leadership has been clarity of purpose, transformational thinking and the ability to take bold decisions,” says Bharti Enterprises Chairman Sunil Bharti Mittal. “From Digital India, Make in India to GST, demonetisation and Swachch Bharat, the government has taken a visionary approach to taking India to the next level.”

Over the past three years, Mittal added, the sentiment around India has become “much more positive” despite a challenging global environment.

Much of the policy action in the third year was made possible by the spirit of “consensus-building and cooperative federalism” that characterises the Modi government, says Union Minister for Law and Justice and Minister for Information Technology Ravi Shankar Prasad.

And not shy of trumpeting its “achievements”, the government is rolling out a campaign, monitored by the Prime Minister’s Office, to project an image of itself: the campaign will portray the government as “decisive and bold”; “ honest and incorruptible”; as one that “empowers Gaav and Garib (villages and poor)”; as one that “cares”; and as a government “For the People, Of the People and By the People.”

A critical element of the campaign will be for the BJP to claim the political mantle of the movement to combat corruption and black money by framing its initiatives on various fronts – for instance, demonetisation, benami property crackdown, tax treaties with foreign jurisdictions to plug loopholes and prevent round-tripping of black money, and the tightening of money laundering provisions – in that context.

‘UPA schemes repackaged’

Opposition leaders, however, question the government’s claims. Senior Congress leader M Veerappa Moily, who heads the Standing Committee on Finance, points out that much of the legislative efforts that the NDA claims credit for, such as GST and mineral development, were initiated by UPA governments. Noting that Modi had opposed GST when he was Gujarat Chief Minister, Moily adds that the GST regime as currently framed has many flaws. In any case, he says, “economic reforms are incomplete without also changing direct tax laws”. If anything, he notes, the measures to empower income-tax officers to search and raid are regressive. And demonetisation has failed to achieve any of its objectives, he claims.

Congress’s Deputy Leader in the Rajya Sabha, Anand Sharma, is critical of the state of law and order across the country and alleges that “criminal and anti-social elements have been let loose” on citizens. “There cannot be growth or development without peace and social stability,” Sharma added.

CPI (M) general secretary Sitaram Yechury draws attention to the rise in unemployment over the past three years and the fact that bank credit growth is at a low. “For all the spin, job losses and a shrinking economy is what Indians experience,” he adds. The Centre, he claims had “let big-fish bank-loan defaulters off” and “ruined” India’s informal economy, which employs more than two-thirds of Indians and accounts for more than half the country’s GDP.

Dismissing such criticism, BJP national spokesperson Narendra Taneja points to FDI inflows and private investments in telecom, infrastructure, energy and power as indicative of a change in business sentiments. “Look at MSMEs: there is a revolution happening in that sector,” he says.

Looking ahead to the next two years, which will lead up to general elections in 2019, even those who acknowledge the frenetic pace of policy actions of the past year wonder if they will be sustained.

In response, Ravi Shankar Prasad points to recent political history as a guide. “Remember we did demonetisation, when crucial State elections were around the corner.” That is the nearest thing to an indication that the government will not shy away from taking strong decisions.

(With inputs from KR Srivats, Surabhi, AM Jigeesh and Amiti Sen)

2.2. India to grow over 3-fold to US$ 7.25 trillion by 2030: NITI Aayog
IBEF, Apr. 25, 2017

New Delhi: The Indian economy is expected to grow by 8 per cent on an average over the next 15 years and its gross domestic product (GDP) will expand three-fold to reach US$ 7.25 trillion by 2030, as per Mr Arvind Panagariya, Vice Chairman, Niti Aayog. In FY 1999-2000, India's GDP stood at Rs 46 lakh crore (US$ 713.45 billion) at 2015-16 prices, which increased to Rs 137 lakh crore (US$ 2.1 trillion) by FY 2015-16. Mr Panagariya also stated that India's current per capita GDP is Rs 106,589 (US$ 1,653.17), which will increase to Rs 314,776 (US$ 4,882.09) by 2031-32. The Central and state governments expenditure which stood at Rs 38 lakh crore (US$ 589.37 billion) in FY 2015-16, will increase to Rs 130 lakh crore (US$ 2.01 trillion) by 2031-32.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.

3.1. Global pension funds scouting for deals in India's solar power sector

Reuters, 30 Apr. 2017

Some of the world's biggest pension funds, seeking long-term returns on green investments, are scouting for deals in India's solar power sector, where Prime Minister Narendra Modi is targeting $100 billion in investment in the next five years.

Power demand in Asia's third-largest economy is set to surge as the economy grows and more people move into the cities. India estimates peak electricity demand will more than quadruple in the next two decades to 690 gigawatt (GW), which would require rapid growth in generation and transmission capacity.

That potential, helped by cheaper solar material costs and government efforts to curb pollution, is drawing global investors, including Canada's top pension fund managers - Canada Pension Plan Investment Board (CPPIB), Caisse de dşpŬt et placement du Quşbec (CDPQ), and Ontario Teacher's Pension Plan (OTPP).

Power generation

Investors' focus is primarily on solar power generation, funding large-scale solar parks.

CDPQ, which has C$270.7 billion ($199 billion) in net assets, says it plans to invest in India's solar sector with Azure Power, a New York-listed firm with about 1 GW of solar capacity under various stages of development.

“We plan to do more with them. Our approach is really to pick the right partner and then build a platform that can be sustained over several years,” said Anita George, CDPQ's South Asia head, adding she wouldn't rule out investing in other solar ventures in future.

Other international investors have already entered India's renewable energy sector, such as Dutch fund manager APG, Canada's Brookfield Asset Management, the private equity arms of Goldman Sachs, JPMorgan and Morgan Stanley, and European utilities EDF, Engie and Enel.

APG Asset Management, which last year agreed to jointly invest $132 million with India's Piramal Enterprises into solar power, is looking for more deals.

“We expect to be able to announce another investment in the Indian renewable energy sector in the coming months,” said Hans-Martin Aerts, APG's infrastructure head for Asia Pacific.

Alok Verma, an executive director at Kotak Investment Banking, which has advised companies on renewable deals, said he expects at least 5 GW of solar power to be added from next year, most of it supported by overseas funds.

Aiming high

Solar power generation capacity in India has more than tripled in less than three years to over 12 GW, helped by lower module prices and borrowing costs, and a government drive - but that is still only around 4 per cent of total power capacity of about 315 GW.

China, the world's biggest solar producer, more than doubled its capacity last year, to 77.42 GW.

Suyi Kim, Asia Pacific head at CPPIB, Canada's largest pension manager, said solar appears more attractive in India than wind power. “In India, my impression is that solar seems to be more attractive. But it's case by case,” she said.

India typically logs more than 300 days of sunshine a year.

Kim declined to comment on any specific investment plans, but two people with knowledge of developments said CPPIB was scouting for deals.

Funding and M&A in India's solar sector amounted to around $1.6 billion in January-March, says research firm Mercom.

While deal sizes have been relatively small, some companies such as Japan's SoftBank, along with partners, have pledged to invest $20 billion in Indian solar power generation projects.

SoftBank said the timeline for investments would depend on state and central governments. “We remain committed to building a GW-scale portfolio of solar projects in India,” said Raman Nanda, CEO of SB Energy, a joint venture of SoftBank, Foxconn Technology Group and Bharti Enterprises. “We will do this through strategic partnerships.”

Not all sunshine

None of this comes without risk, of course.

Investors could face payment delays from India's heavily-indebted power distribution firms, and some experts note that the bidding for projects in government auctions is too aggressive, with per unit prices slumping more than 70 percent since 2010.

“Getting returns on investments ... and getting paid by distribution companies are the major risks being assessed by foreign investors,” said Sumant Sinha, CEO at ReNew Power, a renewable energy firm backed by Goldman.

Intermittency - power is only produced under bright sunlight - is another issue, as there are additional costs for using inverters or diesel generators to use solar power at night.

“Based on current market conditions and policies, I see a path to 65-70 GW (solar capacity) by 2022, but not more,” said Mercom CEO Raj Prabhu.

That's still some way short of the government pledge for 100 GW by 2022.

“To reach 100 GW by 2022, distribution company finances need to improve drastically, power demand has to increase quickly, and transmission infrastructure needs to keep up,” Prabhu said.

3.2. Sun shines on $300-billion global fund for clean energy

BusinessLine, Twesh Mishra, 1 May, 2017

The International Solar Alliance, launched by Prime Minister Narendra Modi and French President Francoise Hollande in November 2015, will channel $300 billion in 10 years to promote renewable energy projects under a global mega fund for clean energy.

The ISA was instituted to connect nearly 121 solar-resource-rich nations for research, low-cost financing and rapid deployment of clean energy.

However, any progress in the ISA can come about only after it attains the status of a legal body under international law. For this, 15 countries need to ratify the framework agreement, making the ISA an inter-governmental body registered under the UN charter.

“France and India have ratified the alliance. Now, 13 more countries have to ratify it. Both governments are working towards achieving that magic number. The treaty will come into force a month after that,” ISA Interim Director-General Upendra Tripathy told BusinessLine.

As a legal body, the ISA will be able to spend funds. As the host country, India has promised ₹100 crore for setting up the ISA secretariat. This corpus will be parked in a bank and will yield around 7 per cent interest annually.

Funding mechanism

“We are in touch with the Green Climate Fund and the World Bank to create a global mega fund where financial instruments can be taken up,” Tripathy said, adding that there would be no need for countries to write a cheque or deposit currency to this fund, which will be administered by the World Bank.

Tripathy said, “The World Bank only has to mobilise a commitment for $30 billion per year over 10 years. This fund will act as a credit guarantee mechanism for different countries and projects to assure loans of up to $300 billion from the private sector.”

The payment guarantee from the World Bank-mobilised fund can be used for credit enchantment or hedging to lower foreign exchange risk, among others. According to the declaration, when the ISA was launched, one of the commitments was to mobilise $1 trillion of investments that are needed by 2030 to deploy affordable solar energy.

“A third of this amount will come from the World Bank-administered fund and another third can come from a notional commitment from the Green Climate Fund. The rest can come from the overseas development assistance budget of ISA members,” Tripathy said.

The ISA is looking to boost the corpus through contributions from corporate institutions. “We are planning to bring out a scheme to seek contribution from Fortune 1000 companies that can contribute $1 million each. This will go to the corpus and will yield an interest of around 8 per cent interest per annum.

“The corpus will never be spent and acts as a permanent endowment to the ISA. All that can be spent is the interest on the corpus,” Tripathy said.

This will be similar to initial contributions by the Indian Renewable Energy Development Agency and the Solar Energy Corporation of India to the ISA.

4.1. Group generated US$ 1-bn revenue from innovations: Tatas
Business Standard, May 12, 2017

Mumbai: The Tata group garnered $1 billion in annual revenue from 30 innovations that were showcased at Tata Innovista - an annual programme of the group to encourage, recognise and showcase innovations — in the past three years.
The new business from innovations is set to accelerate with microbiome-based biomarkers, invented by Tata Consultancy Services (TCS) to diagnose preterm birth and colorectal cancer. “It is a tip of the iceberg,” said Gopichand Katragadda, group chief technology officer.

Microbiome is the collection of microorganisms in a part of the body. Microbiome-based diagnostics can help in asymptomatic diseases which have atypical condition showing no apparent symptoms. Currently, such diseases are diagnosed very late, affecting a lot of people.

TCS’ biomarkers are low-cost, non-invasive early stage diagnostic solutions. “This is the most promising innovation in the last three years as each disease has potential market of a couple billion dollars,” said Katragadda.
The firm has already filed over 40 patent applications for this and got grant for 12. These biomarkers have got the Tata Innovista award under the piloted technology category.
Tata companies showcased over 3,300 'implemented innovations' in its annual programme this year, representing a growth of 110% in two years. A significant number of these incorporate digital technologies, particularly in the areas of industrial automation, customer experience enhancement, and advanced engineering simulations. Implemented innovations include new products, new services, core processes, support processes, and design.

“Our industries are in the midst of tectonic shifts driven by the democratisation of digital, automation of decisions, and a focus on the environment. The Tata group has continued to lead in intellectual property generation from artificial intelligence to microbiomics and from driver-assist technologies to new 2D materials,” said Katragadda.
Implemented innovations are those that have been successfully implemented and have accrued benefits to the businesses. Piloted Technologies are at various stages of development and promise to deliver significant benefits after implementation.
The 'Dare to Try' category comprises courageous attempts that did not achieve the desired results but have potential for success. The Design Honour category are innovations focusing on design thinking. A total of 52 Tata companies across 22 countries submitted their projects in Tata Innovista 2017.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.

4.2. We want to scale up innovation culture at Tata group: CTO Gopichand Katragadda

Livemint, Shally Seth Mohile, 15 May 2017

Tata Sons chief technology officer Gopichand Katragadda on facilitating the creation of tech road maps to sharpen focus on consumers through digitization.

Mumbai: Led by Tata Sons Ltd group chief technology officer Gopichand Katragadda, Tata group companies have kick-started as many as 70 internal projects to achieve breakthrough innovation. Of these, 40 are in the pilot stage. On successful completion of the pilots, they will be integrated into the business process. Katragadda and his team are also facilitating the creation of technology road maps for some group firms and helping them sharpen focus on consumers through digitization. In an interview, Katragadda and Rajiv Narvekar, practice leader, technology and innovation management, at Tata Sons, touch upon some of them.

Edited excerpts:

You complete three years in Tata group’s technology and innovation office in August. Can you offer a peek into the activities undertaken by the office since you took charge?
Katragadda: The priority was to understand what we need to deliver for a conglomerate like Tata group, which has a unique structure. The idea was to ensure we are adding value at the intersection of the companies. We picked a few areas—one being actual technological delivery. We could go either of two ways—be an organization that will be an evangelist which will provide training and guidance to the group companies, but what we chose (was) to bring all companies together and facilitate deliveries, as in technology function, you get outdated very quickly unless you do a hands-on delivery.

We picked areas where we can make very big contributions. We said, within food, energy, wellness, factories and digital consumers, we will pick up those where market size itself is $10 billion, the opportunity for Tata group was about a billion dollar and opportunity to make profit was about a $100 million each year. Over the past three years we have put teams in place by hiring systems engineers, chief engineers as well as group company deputed folks who came together and tapped into what existed in the company and built upon that. We have a couple of programmes which are market-ready and some in the pilot stage. From a technology standpoint, we are ready in the areas of eye wearable and drone-based pesticides.

How are you facilitating innovation at individual company level?

Katragadda: We have identified ways by way of which individual companies could become more innovative. We have done some level of facilitation by creating group-level university connect (through tie-ups with several foreign universities) at a strategic level. We have built up several new programmes, one among them is Innovation Edge. This is for CEOs and her direct staff. The goal is to identify breakthrough opportunities for the company. In the process, we might also identify some important process improvement. For programmes that require technology intervention, we support with a technology road map. We also ran and built on the IP (intellectual property) programme that we run at the group level. We also added elements such as the knowledge expo where we bring the best of faculty from across the globe. We also run the chief technology forum with the intent to bring all group companies on the topic of technology so that they know what’s happening in each other’s companies and cross-leverage. There are also chief information officer forums. In the digital forum, the idea is to use digital as a method of innovation. It’s an iterative approach where the customer is at the centre.

Which are the companies that are part of Innovation Edge?

Katragadda: The companies which are part of the project include Tata Motors, Tata Steel Ltd, Tata Teleservices Ltd and Indian Hotels Co. Ltd. Cumulatively, there are some 70-odd projects of which 40 are in pilot stage. There are a portfolio of projects covering various aspects, including enhancing revenue, reducing cost of production, etc.

Narvekar: It began in April 2015 with Tata Motors’s passenger vehicle business. Ten ideas were identified after a three-day workshop. These were filtered from 50-odd ideas that got generated to ensure that could lead to meaningful programmes for the PV (passenger vehicles) business. Most of the ideas generated were consumer-facing. We used analytics and artificial intelligence which one of our partners has created and then identified pain points that customers experienced in the entire value chain. Some action plans were identified and presented to the head of PV business. Over the past few quarters, these were piloted and integrated in the business process of the company.

With Indian Hotels, the idea was to enhance customer journey through digital journey. We worked on digitization of the check-in and check-out as that was one of the biggest frustrations of the guests—they found it cumbersome and time-taking. This wasn’t happening as there were changes done after the reservation—rooms were upgraded, etc. This led to delay in checking in and out. We identified a vendor who created a proof of concept for one of our prime properties and now it would be deployed in other properties.

With Tata Teleservices, four programmes were identified. One was—office telephone on your mobile. Many times, you call the desk phone and you get to hear so and so has stepped out and not on the desk. We have developed an app that ports the call from the landline to the mobile phones. In Tata Teleservices’ case, we went straight into the road-mapping exercise; with others, we used AI (artificial intelligence)-based tools to look at social media feeds and understand the frustration. We are also working on a project for on of Tata Steel’s plants.

Are there any tangible targets for these?

Katragadda: There are some results already in terms of increasing market share, margins, enhancing quality of the product. There are some internal benefits like productivity enhancement. For each of the disruptive programme we have targeted a four times improvement in performance, and profitability. There are also other continuous improvement programmes. Most of these will deliver the results in up to three years. We are trying to change something which is difficult to change in a short while—it’s the culture. There’s an innovation culture we want to scale up further by identifying and developing lateral thinkers.

4.3. Incubators, accelerators grow 40% in 2016, aiding start-up landscape: Nasscom
Livemint, May 08, 2017

New Delhi: Incubators and accelerators continue to play an important role in the growth of the Indian start-up ecosystem. The number of incubators and accelerators have grown by 40%,with more than 40 new ones added in 2016, according to a new report by Nasscom, titled ‘Incubators/Accelerators (I/As) Driving the Growth of Indian Start-up Ecosystem–2017’, which throws light on the critical role of I/As in the start-up landscape. India has more than 140 I/As at present split across corporate (9%), independent (32%), academic (51%) and government supported (8%) categories. While incubators provide support across the start-up life cycle, accelerators are focussed on the growth and acceleration stage. According to the report, tier II and tier III cities are also seeing traction with 66% new incubators established in 2016. Also, more than 30 new academic incubators have been established in 2016, and corporate accelerators are growing 35% year-on-year with Bengaluru, NCR area and Mumbai the leading hubs. Most of the I/As have a technology (cloud, big data/analysis, and machine learning/artificial intelligence) focus.

The report claims that the two most important trends in the Indian incubator and accelerator ecosystem are partnership-driven and sector-specific incubators and accelerators. Academia, industries and the government are coming together to set up sector-specific accelerators and incubators. For example,GE’s global healthcare accelerator, Pfizer and IIT-D’s incubation accelerator for healthcare start-ups, and SBI and IIT-B’s incubator for fintech start-ups. Given the impetus by academia, government and corporates, the Indian incubator and accelerator ecosystem is expected to grow manifold over the next few years.

Initiatives by the Central and state governments will trigger the growth of incubators and accelerators in tier II and III cities, and with corporates eyeing start-ups for innovation, more and more sector-specific incubators and accelerators will emerge in the future. The report also highlight the challenges faced by I/As like limited time period for Incubation/Acceleration.
Three to four months to incubate/accelerate is not sufficient for a start-up to scale operations. Besides, the volume of start-up applications is quite high in India, making the process tedious and time consuming as compared to the US where benchmarks are well defined.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.

5. Arun Jaitley, launches Operation Clean Portal; Will enable citizen engagement for creating a tax compliant society and transparent tax administration

Press Information Bureau, May 17, 2017

New Delhi: Operation Clean Money Phase I: 18 lakh persons identified; More than 9.72 lakh taxpayers submitted online responses for 13.33 lakh accounts involving cash deposits of around Rs 2.89 lakh crore

5.68 lakh new cases identified for e-verification process

The Union Minister of Finance, Shri Arun Jaitley, officially launched the Portal of Operation Clean Money (https://www.cleanmoney.gov.in) in New Delhi today in the presence of senior officers of the Ministry of Finance, Department of Revenue and the Central Board of Direct Taxes.

The Operation Clean Money was initiated by the Income Tax Department (ITD) on the 31st January, 2017 with the launch of e-verification of large cash deposits made during 9th November to 30th December 2016. In the first phase, around 18 lakh persons were identified in whose case, cash transactions did not appear in line with the tax payer’s profile. There has been an encouraging response to the online verification process and more than 9.72 lakh taxpayers submitted their response without visiting Income tax office up to 12th May, 2017. These taxpayers have provided response for 13.33 lakh accounts involving cash deposits of around Rs. 2.89 lakh crore. The online responses have been assessed and no further action will be taken in cases of satisfactory explanation.

The salient features of the Operation Clean Money Portal launched today are:

Providing comprehensive information at one place consisting of Step by Step Guides, Frequently asked Questions, User Guides, Quick Reference Guides and Training Toolkits related to verification process and other issues.
Enabling Citizen Engagement for creating a tax compliant society where every Indian takes pride in paying taxes. Citizens would be able to support the Operation Clean Money by taking pledge, contribute by engaging and educating fellow citizens, and share their experiences and provide feedback.
Enabling Transparent Tax Administration by sharing status reports (including sanitized cases and explanation of verification issues) and thematic analysis reports (e.g. taxpayer segment analysis of cash deposit data).

The ITD on-boarded two specialised data analytics agencies and a business process management agency to augment departmental capability in analyzing large volumes of cash deposit data, track the compliance status of taxpayers and reporting entities.

In Phase II of Operation Clean Money, the high risk cases will be handled by selecting appropriate enforcement action (verification, search, survey, scrutiny). A targeted campaign will be initiated in cases with identified risk issues. The key components of the targeted campaign are:

Providing detailed explanation to create environment of transparency
Sharing investigation findings for specific segments (e.g. Jewellers, petrol pump, traders, property purchasers etc.)
Centralised monitoring and gradual escalation of inadequate response cases for enforcement action

With the continuous flow of information from various sources including Statement of Financial Transactions (SFT), the ITD is conducting analysis in conjunction with previously available/analysed data. Such incremental data analysis has already led to identification of new cases for e-verification. Furthermore, ITD has also identified 3.71 lakh new accounts relating to 1.58 lakh taxpayers who made partial declaration of accounts/amounts in their earlier responses. In addition to the earlier 18 lakh cases, 5.68 lakh new cases have been identified for e-verification process.

The Income Tax Department urges all taxpayers and citizens to actively participate in Operation Clean Money for a common cause of building a proud nation, which runs on the strength of the honest taxpayers.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.

– AGRCULTURE, FISHING & RURAL DEVELOPMENT

6.1. Govenment targets 273 million tonnes foodgrain output for 2017-18
Livemint, April 26, 2017

New Delhi: Buoyed by forecasts of a normal monsoon, the Centre has targeted a record foodgrain production during the 2017-18 crop year beginning July.
The agriculture ministry has set a production target of 273 million tonnes (mt) of grains and pulses during the year, as it is of 273,4 million tonnes estimated for 2016-17, a record harvest following a normal monsoon last year.
In 2015-16, India’s foodgrain production stood at 252 mt.
“In just one year, farmers managed to grow 5 million tonnes of additional pulses (in 2016-17) and within two to three years India will be self-sufficient in pulses,” agriculture minister Radha Mohan Singh said on Tuesday, addressing state officials at a national conference on the upcoming kharif crop season at which targets were announced.

During 2017-18, the ministry has set a target of producing 23 mt of pulses, higher than the 22 mt produced last year. In 2015-16, a crippling drought cut India’s pulses output to just 16.4 mt, leading to a surge in imports and higher retail prices.
In the event of a normal monsoon and higher production, agricultural growth will likely be around 4% (in 2017-18), agriculture secretary Shobhana Pattanayak said, addressing the conference. This implies consecutive years of robust farm growth-—the sector is forecast to grow at 4.4% in 2016-17, after a poor 0.8% growth in 2015-16 and 0.3% contraction the year before due to back-to-back droughts (in 2014 and 2015). Pattanayak said that the Centre was working on reforming agricultural markets to realize the goal of “one-nation, one-market”, and added that the government would aim to cover 40% of land holdings under the revamped crop insurance scheme.

“The official mindset is that higher production and over 4% growth rate means everything is fine in agriculture,” said Devinder Sharma, a Chandigarh-based farm policy analyst. “In the past year, the growth in production has not kept pace with farmer incomes, which in reality plunged due to lower prices (for pulses and horticultural crops). Despite higher output, farmers are running into losses, leading to indebtedness and suicides,” he added.
According to a background note prepared by the ministry and distributed among state officials at the conference, the Centre has written to all states to work on ways to double farmer incomes by 2022—a goal set by Prime Minister Narendra Modi. “Some states like Chhattisgarh and Madhya Pradesh have already devised suitable strategies in this regard,” the note pointed out.

On the crop insurance scheme, the note said that states should adopt use of smartphones for fast transmission of yield data (in case of crop loss) to aid faster payouts to farmers. The Centre will provide states 50% of costs of technology adoption, the note said, adding, “claims (during 2016-17) need to be settled and states must release their share of subsidy and companies should compute and settle the claims.”

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.

6.2. Establishment of Spices Farmers Producer Companies (SFPCs) in Arunachal Pradesh -Inauguration by Commerce and Industry Minister Smt. Nirmala Sitharaman

Press Information Bureau, Apr. 26, 2017

New Delhi: Commerce and Industry Minister Smt. Nirmala Sitharaman will inaugurate the orientation programme for establishment of SFPCs and buyer seller meet on 26th April 2017 at Itanagar, Arunachal Pradesh, a Government of India’s initiative to benefit the small and marginal spice farmers in the North Eastern States.
In the event, more than 100 spice farmers, NGOs, farmers association, primary processors from Arunachal Pradesh and 35 big exporters from across the country will be coming together for a one day orientation programme and buyer seller meet organized by Spices Board at the Banquet Hall of the city. Officials from the concerned Department/Organizations of the State as well as Central Government will also be a part of the programme.

The objective of the programme is to operationalize SFPC on pilot basis in 3 districts viz. Ziro in Lower Subansiri District for large cardamom and Namsai in Namsai District for ginger in Arunachal Pradesh & West District in Sikkim for large cardamom for empowering the farmers, especially women farmers in the identified spices growing districts, for better price realization through post harvest management, primary processing, value addition, packing, aggregation, organic certification etc.
Each SFPC will have 500 farmers as members in a sub-division or district. The farmers will be identified on cluster basis in a village, taluk or district by forming Farmer Interest Group(FIGs), each consisting of 20 farmers. 25 such FIGs will be formed to establish a SFPC.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.

7.1. This IITian Left His Lucrative Job Abroad to Become a Natural Farmer at a Village Near Kolkata

Manabi Katoch, April 15, 2017, The Better India

Abhishek Singhania could have enjoyed his corporate job, which earned him more than a lakh’s salary every month. Or he could have chosen to stay back at his stately house in Kolkata, joining his parents’s well-established business. But he chose a rather tough path to make a smoother road to success for our farmers.

It was 2010 when Abhishek came across the news about the farmer suicides in the Vidarbha region of Maharashtra, while graduating in metallurgy at IIT Madras.

Once he finished his engineering in 2012, he was placed at PricewaterhouseCoopers Pvt. Ltd. in Mumbai. The company sent him to Saudi Arabia for a project for six months, creating a huge prospect for a bright future and hefty salary for Abhishek. However, Agriculture was always in his mind and he kept thinking about it now more often, he realized that since the farmers are giving up farming, a big gap would be created in the demand-supply of food and he wanted to do his bit to help bridge that gap.

“I started thinking that farming should be inherently profitable. If it won’t be profitable then everyone would stop farming. And if everyone stops farming how will the world survive? So there is something wrong which is actually happening, that needs to be corrected, that needs to be checked,” he said.

In May 2014 while working on a project in Saudi Arabia through his company, Abhishek took a break and visited the farms in Debra, Balichak and Temathani near Kolkata. This was the first time he was visiting a village.

He would reach out to the farmers and ask just two questions – 1. What are you doing? 2. What are the problems you are facing? Abhishek realized that unlike Maharashtra, Bengal had water in abundance and the soil was fertile. But the farmers were misusing the water by growing rice three times in a year.

“And what is the profit they make out of it in a year? Just Rs 30,000! It’s like 2,500 a month. There is no profit. It brings down the price. Lot of rice is getting wasted. What’s the idea? Farmers are just doing paddy the whole year that too with chemicals. The soil has lost its fertility. Input cost is increasing as they need to buy more fertilizers and pesticides every year, which increases the production cost,” he says.

Abhishek learnt four main reasons behind loss in farming through his trip:

Farmers were growing low-value crops.

The yield was decreasing every year.

The input cost was increasing each year.

Soil fertility is decreasing.

After his trip Abhishek visited IIT Kharagpur to find the solutions to these problems. There he was offered work with two professors – Prof. PBS Bhadoria and Prof. DK Swain, working on a similar project. As the project was not yet started, Abhishek went back to Saudi Arabia to continue with his job. In October 2014, he received a confirmation from the professors that ‘The Food Security Project – IIT Kharagpur’ was going to start and Abhishek could be a part of it.

Abhishek immediately put down his papers and in December 2014 he came back to Kolkata. Before he started working at IIT Kharagpur, he met some agricultural startups

“Some were making smart irrigation system, some were making portable farm implements but I realized that I didn’t enjoy inventing something like this staying away from the farm, but being into the farm. I was more interested in growing. I was not an off-the-field person,” he explains.

Abhishek joined the research team at IIT Kharagpur in March 2015 and learnt about paddy farming and a few other crops with high level of farm mechanization for eight months. However, he wanted to know more about diverse farming techniques and so he decided to quit the project and jump into the field.

From October 2015 to May 2016 he travelled extensively throughout India from Meghalaya to Maharashtra and from Himachal to Karnataka. He stayed with the farmers and worked with them.

“I would just book tickets from Kolkata to Delhi and then a return ticket of a month later from Delhi to Kolkata. In between this period, I would just go with the flow, taking lifts, sitting in sleeper compartments and sleeping at the farms.

During this time, Abhishek did a zero-budget natural farming training by Padm Shri Subhash Palekar. He was connected to a lot of natural farmers in this training and he kept visiting them one after the other.

“I was amazed to see this farmer from Bulandshahar who took me on a bicycle for 5 km to reach his farm and still was not tired. He was 65 years old and he and his wife were managing their 5-acre farm all alone without taking help of any labourers. I think this is the difference when you eat healthy. I stayed with them for two days and learnt a lot,” he says.

Abhishek also stayed in a farm run by Pingalwada Charitable Society in Amritsar, Punjab and worked there for a month right from driving a tractor to making fertilizers and pesticides with cow dung and cow urine. There was no work on the farm that was missed by him.

In these eight months Abhishek understood that these natural farmers had gone through loss of about 50% less yield in the first year when they shifted from chemical to natural farming. However, after four to five years the yield is much more than what would get from chemical farming. The input cost was almost zero and hence they would profit significantly more. And of course there was a huge difference in the quality and quantity of the products grown by natural farming methods.

“I visited a sugarcane farm near Muzzafarnagar in Uttar Pradesh. The sugarcanes in this natural farmer’s farm were two to three feet taller than others and also it was the sweetest in the area,” Abhishek says.

To be sure that he knows all aspects of farming, Abhishek undertook training in fishery at CIFE Kolkata, goat rearing at CIRG Mathura and many more short courses related to farming.

“I won’t say that from the first day I was very sure, but I knew I wanted to take a chance. And from the very first day I was so comfortable. I never felt I was out of place,” says 28-year-old Abhishek.

Abhishek bought a 3-acre land on June 24, 2016 at Tona village, in South 24 Parganas district, which is 40 km from Kolkata. He named his farm Echoes, after Abhishek’s favourite song by Pink Floyd, which portrays a revolution.

For the first few months Abhishek would travel everyday to reach his farm from his home at Kolkata. However as he wanted to save the travel time he started living in a small hut made in his farm.

“Once you wake up at a farm in the morning, you will be amazed looking at the beautiful sunrise. You see something grow out of nothing, it is so fantastic feeling and it cannot be matched. The air is so light there that you will actually feel the difference when you come to a city you have to make more efforts to breathe.”

In just 9 months Abhishek has harvested cabbage, cauliflower, capsicum, cucumber, spinach, green gram, mustard etc. Dehradun Basmati was cultivated for the first time in the village. He has also planted four to five varieties of mangoes, two to three varieties of banana, papaya, drumsticks, betel-nut, jackfruit, chiku, orange, lemon, plum, cashew, etc.

When asked about why he has grown almost everything in his farm, he says: “The Idea was to first experiment, what grows and what not and to have a sustainable model which has everything we cannot live without.” Currently we sell health supplements like wheat grass, aloevera, geloy, amla, tulsi etc. grown at Echoes under the brand name Naturista – a Spanish word meaning Naturist –because this defines who I am. In future, they will be used to make juices using cold pressed method, which ensures the nutrition remains intact in the juices,” he informs.

Abhishek uses complete natural farming method and makes his own fertilizers and pesticides using cow urine and cow dung. The best seeds and saplings collected from the farmers that Abhishek visited are used in his farm and hence the input cost is very low and he is satisfied with his yield. Once his model starts gaining profit, Abhishek plans to invite farmers to replicate this model across West Bengal and then across the country.

When we asked this IITian if he regrets his decision when he sees his friends growing faster, he tells us what one of his successful friends told him once:

“My friend who lives abroad and earns lot of money told me this – “We are all in a rat race, we are not living our lives, you are the one who is living your life. If you want to compare the success… people who are driven by money attain success faster, but people who are driven by passion, they might attain success a little later but they live a much happier and content life,” says a happy and content Abhishek from his little hut in his farm.

(You can visit Abhishek’s farm at the following address –Bhangar II Block,Tona Village,South 24 paraganas district. Near Vedic village. Or click here to contact Abhishek Singhania)

7.2. Baba Ramdev's Patanjali eyes two-fold rise in sales at Rs 20,000 crore in FY18
Livemint, May 05, 2017

New Delhi: Patanjali Ayurved Ltd will cross Rs20,000-25,000 crore in sales this financial year, said Baba Ramdev, the yoga guru who founded the fast moving consumer goods (FMCG) firm.
In the year ending 31 March, the company’s overall turnover stood at Rs10,561 crore, of which Patanjali Ayurved alone accounted for Rs9,346 crore and Divya Pharmacy Rs870 crore, said Ramdev. While Patanjali sells products like soaps, toothpaste, hair oil, amla juice, atta, biscuits and noodles, Divya Pharmacy makes and sells Ayurvedic medicines.
In the next one or two years, Patanjali will become India’s largest swadeshi (local) brand, Ramdev claimed. “Turnover figures will force MNCs to go for kapalbhati (a breathing exercise). Let’s end their monopoly...,” he said at a press conference in New Delhi on Thursday. He added Patanjali will give moksh (freedom from the cycle of birth and death) to MNCs in the Indian market in the next five years.

Patanjali has seen a meteoric rise in the last two to three years. From Rs446 crore in 2011-12, its revenue rose to Rs2,006 crore in 2014-15, and around Rs5,000 crore in the year ended 31 March 2016.
While most listed companies are yet to file annual results for the year to 31 March 2017, Nestle India Ltd, which follows the calendar year, reported revenue of Rs9,223.80 crore in year to 31 December 2016. In year to 31 March 2016, Colgate-Palmolive (India) Ltd’s revenue stood at Rs4,162.29 crore while GSK Consumer Healthcare Ltd clocked Rs4,308.72 crore. Hindustan Unilever Ltd saw its revenue touch Rs31,987.17 crore and ITC Ltd stood at Rs36,837.39 crore.
“Prosperity for charity,” the banner behind the yoga guru read, referring to the company’s practice of spending profits for charity. Patanjali has, in the past year, more than doubled its profit, said Ramdev, adding the company will use all the profit for charity.

Ramdev, who has consistently mocked multinational companies, said: “In India, FMCG was synonymous to MNCs so far…..Don’t know when Colgate will have to close its ‘gate’.”
“So far, the CEOs of multinationals were sleeping peacefully considering that the market shares of Patanjali products were small. But that is not true (any longer). We are leaders in categories such as honey and ghee, and others are growing fast,” said Ramdev. The company claimed that its shampoo has a 15% market share, toothpaste 14%, face wash 15%, dish wash 35% and honey 50%.
During the fiscal year, Patanjali ghee had sales of Rs1,467 crore. Its oral care brand Dant Kanti was Rs940 crore, hair care brand Keshkanti Rs825 crore and herbal soap Rs574 crore. It sold honey worth Rs350 crore which it hopes take to Rs500-600 crore next year. Its kachhi ghani mustard oil will cross Rs1,000 crore in sales next year from Rs522 crore this year, Ramdev said.

The company is doubling its manufacturing capacity and will invest about Rs5,000 crore to set up few more factories in India, including in Noida, Nagpur and Indore, which will take its capacity to Rs60,000 crore from the present Rs35,000 crore. “Our Noida facility would have a production capacity of Rs20,000 crore, Nagpur Rs15,000 crore to Rs20,000 crore and Indore Rs5,000 crore,” he added.
Ramdev claimed Patanjali is not a corporate, but a company of 100 crore Indians. “MNCs have looted Indians for so long. It is time to make India MNC-free,” added the yoga guru.
The yoga guru also said India should ban Chinese products and companies as China is not a friend of India. Interestingly, Ramdev’s Patanjali has been looking to export products to China, Mint reported on 16 March. Ramdev said even after him, Patanjali’s successor will be a sanyasi (monk) and the brand will never go into the hands of a businessman. In the last couple of years, Patanjali has become the darling of equity analysts. A 5 January 2016 report by India Infoline Ltd estimated that Patanjali’s revenue could grow to Rs20,000 crore by 2020.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.

8.1. Natural rubber production surges 23% in 2016-17

Business Standard, Apr. 25, 2017

Chennai: Natural rubber (NR) production in India rose 23 per cent to 690,000 tonnes during 2016-17, as against the anticipated 654,000 tonnes. In 2015-16, the production stood at 562,000 tonnes, down 12.5 per cent as compared to 2014-15.

NR production also showed an increase of 66.7 per cent to 55,000 tonnes in March 2017, as against 33,000 tonnes in March last year. Rubber Board officials attributed the increase to the improved market price and initiatives taken by the Board at the field level, including mass contact programmes, to improve production and productivity.

Rubber Board is bringing more untapped areas into production by grouping farmers under ‘Tappers Bank’, which works more like a self-help group. The Board has launched this on a pilot basis, and 60 rubber-producing societies were identified for it.

The Board is seeking to achieve the current rubber demand of around 10 lakh tonnes by producing domestically.

NR exports from the country during the last financial year were 20,010 tonnes, whereas these were only 865 tonnes in the preceding year.

The branding of NR, initiated by the Rubber Board, has helped Indian exporters to claim their market share as the quality assurance helped boost buyers’ confidence, according to the Rubber Board. About 65 per cent of the NR exported was under the brand ‘Indian Natural Rubber’.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.

8.2. Cotton acreage to go up on better returns
Business Standard, May 03, 2017

Mumbai: Comparatively high cotton prices in 2016-17 and continuing in this financial year will encourage farmers to grow more this year. However, the demand for cotton, especially by mills, is also rising which will result in a consistent fall in year-end stocks, says the International Cotton Advisory Committee (CAC). The total area under cotton will go up by five per cent globally to 30.8 million hectares in the 2017-18 cotton year (July-June). On India, it says this is forecast to “increase by seven per cent to 11.3 mn ha in 2017-18, as farmers are encouraged by better returns due to high cotton prices and improved yields in 2016-17. Assuming yield is similar to the five-year average, production could increase to just under six million tonnes”. The government’s textile commissioner estimated yield in 2016-17 at 568.29 kg/ha, better than in previous years.

Prerana Desai, vice-president at Edelweiss Agri Services and Credit, said: “Cotton has seen a unique season. In response to demonetisation, farmers delayed selling their produce and dictated the price through the season. As the seasonal price trough did not play out, the mills were caught unaware and missed out on an opportunity to make purchases at the lower prices. Farmers in Rajasthan played a crucial role this season. Lower crop, along with increased local consumption in Gujarat, increased the raw cotton deficit in Punjab and Haryana, second largest consuming region after Tamil Nadu. Import parity for mills in the north emerged in March itself and these have ended up importing a very large quantity of US cotton this season. This has improved their yarn realisation and US cotton might have earned some loyalty in this traditionally non-importing region of India.”

Production of around six mn tonnes enables India surpass China and US by quite a high margin. China’s production is expected to be higher by one per cent to 4.8 mt, the first increase in five seasons. Farmers in the US are forecast to expand the harvested cotton area by 12 per cent to 4.3 mn ha. Assuming yield of 938 kg/ha, production could grow by eight per cent to four mt, says ICAC.
Another reason, apart from higher cotton prices, for a global increase in sowing is lower realisation from soybean prices. As a result, said an exporter, farmers switched from it to cotton.

In India, despite high prices, imports have seen a sharp rise. According to Prerna Desai, “Year to date imports (October-March) are around 980,000 bales (each 170 kg)vis-à-vis 450,000 bales imported during the same period last time. While mills in the country have been quoted saying that India will import more than three mn bales this season, we are of the view that the pace of import will slow down from here. Softening domestic prices has seen import parity disappear for mills in the south and flatten for mills in the north. India imported around 2.3mn bales in 2015-16 and might end up by importing a similar or slightly lower quantity this season as well.”
Imports by China, now the world’s third largest cotton importer, are expected to increase by three per cent to 987,000 tonnes, as sales from China’s reserves and its stock is falling. India’s exports are projected to decrease by 30 per cent, to 886,000 tonnes.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.

9.1. Government planning ‘one nation, one market’ in agriculture sector

Livemint, Sayantan Bera, 1 May, 2017

The government’s model law for agricultural reforms aims to allow farmers a wider choice of markets beyond the local mandi

New Delhi: The National Democratic Alliance (NDA) government is working on creating a common agricultural market that will improve the lot of farmers and the efficiencies of India’s notoriously inefficient farm-produce markets.

The government put out a model law proposing a fundamental reset in the way agricultural markets operate on 24 April. It proposes to replace existing fragmented and over-regulated markets for agricultural produce and allow farmers a wider choice of markets beyond the local mandi or wholesale markets.

“Our goal is to create a one-nation, one-market model for farmers, similar to what GST (the goods and services tax) is to taxation... a model of creative disruption for an efficient marketing system,” said Ashok Dalwai, additional secretary at the agriculture ministry and head of the committee that drafted the new model law on marketing of agricultural produce.

Agriculture marketing is a state subject and the centre can only propose a blueprint. The eventual rollout will depend on the state governments. A model Agricultural Produce Marketing Committee (APMC) law was first proposed in 2003 but made little progress.

Since last year we have been persuading states to liberalize agricultural trade, which will not only allow farmers to access a wide range of markets but also help them get better prices,” Dalwai said. “The prime minister himself briefed chief ministers on the reforms that are pending, fast-tracking the entire process.”

The process was set in motion after Prime Minister Narendra Modi launched an electronic National Agriculture Market (eNAM) platform in April 2016 and later set an ambitious target of doubling farm incomes by 2022.

This was followed by a model law on land leasing (making it easier for tenant farmers to access credit and insurance) and another on agriculture marketing. A law on contract farming is in the works.

The current thrust on connecting farmers to markets complements the government’s earlier effort to reduce growing risks in agriculture through a revamped crop insurance scheme and massive funding of irrigation projects.

Dalwai added that the reform process beginning in 1991 largely ignored agriculture—a sector involving 140 million families and the largest private enterprise in the country. “We needed a paradigm shift in policy goals, moving beyond production to all aspects of post-production with the objective to raise farmer incomes,” he said.

The goal of the eNAM platform is to connect regional mandis, helping farmers access markets across the country. So far, 417 mandis in 13 states have joined the eNAM platform after amending their APMC Acts to fulfil three requirements—a single statewide licence for traders, a single point of levy of market fees and the launch of online trading.

The new model law on agriculture marketing adds a range of reforms to the required amendments for joining eNAM. These include allowing setting up of private markets, direct sale of produce by farmers to bulk buyers and capping market fees and commission charges payable by a farmer.

Most importantly, it withdraws the power to issue trading licences from the mandis—managed by a board of traders—and vests it with the state’s director of agriculture marketing.

Several states seemed to be willing to sign on. States such as Andhra Pradesh, Chhattisgarh, Gujarat, Karnataka, Maharashtra and West Bengal have amended their APMC laws, allowing the setting up of private market yards and direct sale of produce by farmers.

Similarly, 21 states have allowed a single-point levy of market fees across the state, allowing a trader to purchase produce from a farmer anywhere within that state. And 15 states allowed the delisting of fruits and vegetables from APMCs, making it possible for farmers to sell these outside regulated markets.

An expert said that these legislative changes are yet to change ground realities. “Many states have amended their marketing acts but are yet to notify rules. Maharashtra, for instance, delisted fruits and vegetables a year back but did not notify rules following pressure from the powerful traders’ lobby, while Madhya Pradesh has set an entry barrier of depositing Rs1 crore for a unified state licence,” said Pravesh Sharma, former director of the Small Farmers’ Agribusiness Consortium, a specialized agency under the agriculture ministry, and currently a fellow at the Delhi-based Indian Council for Research on International Economic Relations.

Which is why the centre’s efforts are important, he added.

“The centre can bring in enabling legislation to allow inter-state trade. I hope it will deploy the political capital to overhaul agriculture marketing the way it did for GST.”

9.2. Sale of Khadi products rises 33% to Rs 2,005 crore in FY17
IBEF, May 02, 2017

New Delhi: The sale of khadi products rose 33 per cent year-on-year to Rs 2,005 crore (US$ 312 million) in 2016-17, as against a sale of Rs 1,510 crore (US$ 235.2 million) a year ago. The Khadi and Village Industries Commission (KVIC) expects the sales to exceed its target of Rs 5,000 crore (US$ 779 million) in 2018-19. The KVIC is setting up export cells to promote overseas sales of the products. The overall sales of khadi and village industries grew 24 per cent to around Rs51,996 crore (US$ 8.1 billion) in 2016-17, and the production increased by 23 per cent to Rs 42,506 crore (US$ 6.62 billion) during the year.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.

10.1. India ranks second on EY renewables list
Business Standard, May 17, 2017

India has been placed in the second spot in the renewable energy country attractiveness index by EY. The UK accountancy firm noted the fast pace of growth in Indian renewable energy in the past three years. Over 10 gigawatt (Gw) of solar power was added between 2015 and 2017 and wind energy capacity grew to 5.4 Gw in 2017-18.
“This growth is in the context of the government’s ambitious targets — 175 Gw of renewables by 2022, with 40 per cent installed capacity from renewables by 2030 — and the dramatic price falls in photovoltaic technology. In recent tenders, solar developers have offered to supply power at lower prices than newly built coal plants, effectively blocking new coal capacity,” EY said.

It, however, noted that such low tariffs raised questions over the risks being taken by the project developers. EY said falling bids tracked lower technology costs and cheaper capital, allowing developers to maintain margins. But those margins were already squeezed by competition.
In an auction for a 500 megawatt solar power park in Rajasthan, bids spiralled down to Rs 2.62 per unit. Also, in the first-ever auction of a wind power project, the tariff fell to Rs 3.46 per unit.
“Many developers and their investors are assuming costs will continue to fall. Bids also appear to be predicated on developers achieving scale so as to generate operational efficiencies; it is doubtful that all developers will be able to reach the scale required. In addition, major adverse currency moves or rising interest rates will make equipment and finance more expensive, putting projects at risk,” EY noted.

The falling bids coincide with financial and operational restructuring of state-owned power distribution companies. This will be a challenge for offtake from such low-bid renewable energy projects.
“The availability of capital remains a concern; the government could ease rules for tapping foreign debt,” it added.
In the medium term, as renewable energy penetration increases, the government will also have to ensure the grid can manage intermittent renewable energy. EY said the cost and availability of energy storage technology could dictate how close India would get to its renewables targets.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.

10.2. India and UK to cooperate in urban transport sector
Press Information Bureau, May 15, 2017

New Delhi: India & UK today agreed to sign a memorandum of understanding (MOU) on bilateral cooperation in urban transport policy planning, technology transfer and institutional organization of transport. The decision to enter into a bilateral cooperation arrangement between the Transport For London (TFL) and the Indian Ministry of Road Transport and Highways on a wide range of transport mobility solutions and associated activities in urban environments was taken during the three-day official visit of the Minister of Road Transport & Highways and Shipping Shri Nitin Gadkari to Britain.
During his visit to the headquarters of Transport For London (TFL) , Shri Gadkari was given a presentation on strategy and policy reforms, customer experience and data analysis in respect of London buses and other integrated modes of public transport in Greater London area.

Under the proposed MOU, the TFL will share with the Ministry of Road Transport and Highways its expertise on the mobility and efficiency of transport system and methodologies to facilitate the planning and delivery of mobility solutions including ticketing , passenger information, major project financing, infrastructure maintenance strategies and behavioural change and public transport promotion.
Shri Gadkari later said the signing of the MOU will be done through diplomatic channels shortly. Possibilities of further cooperation on electric buses, bus innovation and capacity augmentation and water transport were also explored during his interaction with the TFL authorities.
The TFL provides world class services that keep the British capital better equipped with public transport. The TFL virtually coordinates all the London transport, including London metro, the bus network, Dockland Light Rail, water transport and cable car.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.

– Industry, Manufacture

11. Nestle looks to bring some global brands to India; to cut dependency on single brand

Press Trust of India, BusinessLine, 30 Apr. 2017

Nestle India is exploring ways to bring some products from its 2,000 global brands to the country and also reduce dependency on a single brand, a top company official has said.

“We have 2,000 brands globally and we will be exploring ways to bring some of them to this market,” Nestle India Chairman and Managing Director Suresh Narayanan said in the company’s annual report.

“We are also looking at reducing the dependency on a single brand by ensuring all categories contribute to the overall growth,” Narayanan said.

With emphasis on innovation and renovation backed by research and development, last year, the focus was on re-energising the existing brands, launching new brands and getting into new categories.

The strong and unrelenting efforts across all parts of the organisation led to an unprecedented over 30 new products and variant launches across almost all categories in a short span of time, Narayanan said.

In the coming years, Nestle hopes to be part of the consumer journey through life, by enhancing the nutrition credentials of its many brands, fortifying those that are relevant and addressing in a small yet significant way the health issues facing the society, he added.

Narayanan said 2016 was challenging, at the same time exciting one, but was also satisfactory.

“The year 2016 will always remain a very important in our history as we bounced back to business after the Maggi noodles incident. But the trust in our brand Maggi noodles enabled us to quickly regain leadership position with 60 per cent market share,” he said.

The company said that its net sales gone up to ₹9,159 crore in 2016 against ₹8,123 crore in 2015.

Net sales increased by 12.8 per cent on a base impacted by Maggi noodles issue. Net domestic sales increased by 13.5 per cent and export sales increased by 3.5 per cent.

Nestle India is strengthening its milk products and nutrition portfolio along with expanding coffee and beverages portfolio in the domestic market.

It is also looking at more offerings in the chocolate and confectionery portfolio.

Despite the pressures in the external environment in 2016, the exports division leveraged the company’s diversified portfolio contributing to the total revenue.

Maggi noodles were welcomed back by shoppers while confectionery opened doors to export to eight markets in West Asia and Ghana, the company said.

Though instant tea remained flat, instant coffee registered growth on account of increase in exports to Romania and Bangladesh. Infant nutrition exports also showed good growth, the company said.

After setting up its first factory in 1961 at Moga in Punjab, Nestle has eight factories across the country, at present.

12.1. Electric cars, buses and metros could help India save US$ 60 billion in 2030: Niti

Aayog report HT Business, May 15, 2017

New Delhi: India could save up to Rs 3.9 lakh crore ($60 billion) in 2030, if the country switches to greener mobility solutions such as public transport, electric vehicles and car-pooling, according to a report by government think tank NITI Aayog.
“India’s current mobility system reflects many of the underlying properties of the emerging mobility paradigm. India could leapfrog the conventional mobility model and achieve a shared, electric and connected mobility future by capitalising on these existing conditions and building on foundational government programmes and policies,” the report “India leaps ahead: Transformative mobility solutions for all” released on Friday said.

The report is based on a workshop convened by NITI Aayog and a US-based think tank Rocky Mountain Institute (RMI) in February when 75 executives from public and private sectors discussed ways to decongest the present public mobility by designing a sustainable model for the next 15 years.
It said India could save 64% energy in 2030 by shifting to shared electric mobility. The subsequent drop in petrol and diesel consumption would be 156 million tonnes of oil equivalent (MTOE) or 1.8 tera watt-hour energy -- enough to power 1,796.3 million homes in the country.
Also, by pursuing a future powered by electric mobility, carbon dioxide emissions would drop by 37% in 2030, the report said. It also suggested ways of reducing carbon footprint by measures such as limiting registrations of petrol and diesel vehicles by incorporating a lottery system; a system prevalent in China.

Power minister Piyush Goyal had already announced in April to have an all-electric car fleet in India by 2030. “The idea is that by 2030, not a single petrol or diesel car should be sold in the country,” he had said.
But the idea of electric vehicles never picked up pace in India, mostly driven by lack of favourable policy and recharging infrastructure, and scepticism about how long would an electric vehicle go on one charge. Inadequate public transportation facilities in major cities has also prompted more and more private vehicles sales in the country. In FY2017, roughly 17.7million bikes and scooters were sold in India, making it the largest two-wheeler market on the planet. That’s over 48,000 vehicles per day.

With cities growing faster than the infrastructural development, more traffic congestion and subsequent pollution has called for urgent measures like car pooling as mentioned in the Niti Aayog - RMI report.
UberPOOL, a ride-sharing service introduced in 2015 by cab-aggregator Uber in Bengaluru, saved over 32 million vehicle-kilometres, 15 lakh litre of fuel and reduced 35 lakh kg CO2 emissions, the report highlights. The service is now available in major cities across.
The study further recommends policy changes such as “mobility-oriented development” of towns and cities by focussed local civic bodies, introduction of zero-emission vehicle credits to incentivise electric and hybrid-energy mobility, setting up a grid for ubiquitous and affordable EV charging, and encourage makers of battery cell technology and electric mobility ancillary industries.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.

12.2. Govt explores buy and lease strategy to boost electric vehicle usage

Livemint, Amrit Raj and Utpal Bhaskar, 1 May 2017

The goernment is exploring a strategy to task an automaker with buying electric vehicels in bulk and lease them to taxi firms, such as Ola

New Delhi: The government is exploring a strategy to task a company with buying electric vehicles (EVs) in bulk and then leasing them to companies such as taxi aggregators, in an attempt to bring down the cost of such vehicles.

The strategy is to encourage more manufacturers to make electric vehicles. The number of electric vehicle purchases may range between 200,000 and 1 million.

The government has been exploring the leasing model for electric vehicles, Mint reported on 15 April.

“There is a lot of interest in this plan. At least two companies each from the private sector and public sector space have evinced interest,” said a person involved with the government’s electric vehicles push. He declined to name the firms.

SoftBank Group Corp. chairman Masayoshi Son said in a statement in December that ANI Technologies Pvt. Ltd, which runs cab-hailing service Ola, in which the Japanese firm is an investor, may introduce a fleet of 1 million electric cars in partnership with an electric vehicle maker and the government.

“Volumes help in reducing costs. We are also looking at improving km per kilowatt hour (kWh) and efficiency of electric vehicles in terms of motor, tyres, aero dynamics and lightweight material,” said the person quoted above.

The National Democratic Alliance (NDA) government is exploring measures ranging from leasing of electric vehicles to transferring technology to firms for commercial production of lithium-ion batteries developed by the Vikram Sarabhai Space Centre for use in automobiles. It is also exploring a strategy that involves reducing the battery size to bring down electric vehicle prices.

According to the business plan for electric autos and buses reviewed by Mint, the battery cost is expected to be Rs18 per km, with the charging cost per km being Rs0.99.

Abdul Majeed, partner and national auto practice leader, PricewaterhouseCoopers, said, “It sounds like a good step aimed in the direction of bringing some momentum to the sales of electric vehicles. It will help build scale. Once scale gets build, rest of the issues such as infrastructure challenges, etc., will be taken care of.”

Shifting to electric vehicles will check pollution and reduce fuel imports. India’s energy import bill is expected to rise from around $150 billion currently to $300 billion by 2030. The centre has set a target of 6 million electric vehicle sales by 2020.

Queries emailed to the spokespersons for NITI Aayog, department of heavy industry; and ministries of road transport and highways, and new and renewable energy on Sunday evening remained unanswered.

The electric vehicle programme is slowly coming together. The Economic Times newspaper on 25 April reported that Indian Institute of Technology-Madras professor Ashok Jhunjhunwala will spearhead the government’s electric vehicle programme.

While Bharat Heavy Electricals Ltd (Bhel), India’s largest power generation equipment maker, wants to manufacture electric vehicles such as buses, cars, two-wheelers and boats, Power Grid Corp. of India Ltd, the power transmission utility responsible for establishing green energy transmission corridors, is considering setting up charging stations for electric vehicles.

13.1. Robots sweep across Maruti Suzuki’s shop floor

Livemint, Amrit Raj, 8 May 2017

For the new Maruti Suzuki Dzire, as many as 104 C-Series high-speed robots are being used for welding. Maruti Suzuki has one robot for every 4 factory workers at its Manesar and Gurgaon car plants, signalling growing automation in India’s manufacturing sector

New Delhi: Signalling the rising tide of automation in India, Maruti Suzuki India Ltd now has at least one robot for every four workers employed at its Manesar and Gurgaon car factories, the country’s largest.

Robots are deployed largely in the weld shop, the paint shop and the press shop, where automobile car bodies are shaped. The three are fully automated. Manual work is now done mostly in car assembly.

India’s largest carmaker is now buying C-series robots, which are smaller in size, take up less space and are 15% faster than their predecessors. Among the suppliers of the robots is the Japanese company Fanuc Robotics. For the company’s upcoming car, the new generation Dzire, as many as 104 C-Series high-speed robots are being used for welding.

More than 2,000 robots work seamlessly at the weld shop in Maruti’s Manesar facility. On one particular car at a particular time, at least 12 robots could be at work, the company said in a presentation to reporters during a visit to the Manesar plant on Friday.

There are around 160 robots in the body paint shop and 65 in the bumper paint shop.

“We have around 2,500 robots at the Manesar facility. In total, including the Gurgaon plant, there must be around 5,000 robots,” said Rajiv Gandhi, executive director (production), Maruti Suzuki, when asked about the total number of robots deployed by the company at its facilities.

Robots are becoming more ubiquitous in factories across the world as employers seek to cut costs, sparking concern about potential job losses.

An estimated 137 million Asian workers could lose their jobs to robots in the next 20 years, according to International Labour Organization numbers released in July last year. In January 2016, the US Census Bureau suggested that robots could take away as many as five million jobs in the US alone by 2020. Adidas’s Ansbach factory in Germany, run almost entirely by robot workers, is due to start production this year.

As of 31 March, Maruti employed as many as 22,000 workers, its chief financial officer Ajay Seth said at a press conference to announce the company’s earnings on 27 April.

Between 2010-11 and 2016-17, the company’s production has increased from 1.27 million units to 1.6 million units.

“As far as total employment in Manesar and Gurgaon is concerned... I think we have more or less reached the maximum employment which is possible, which is about 22,000 people. Two years back, it would have been somewhat lower because at that time demand was not quite this high and workers and the factory depended on volume... but there would be stability in employment now...,” Seth said.

There are still some models, such as the Eeco van, where automation levels are as low as 30%. The company plans to increase that to 50-60%, Gandhi said.

“On all the new models, level of automation will increase. With automation, fit and finish is better,” Gandhi said, adding that robots are deployed in practices where safety risks are high and where they need to play a role to meet efficiency and time requirements.

Technological changes, addition of new features in automobiles, an increase in the number of parts that go into each vehicle and higher production has necessitated automation, he said.

Automakers will have to deploy more robots to meet demand, as the car market expands, experts say.

“Several things are happening. The way you are building vehicles today, precision is very, very important,” said Abdul Majeed, partner and national auto practice leader at PwC. “Electronic components are increasing. You want to make sure that there is no product defect. Safety laws are stringent, people are particular about recalls. Humans can have inconsistencies, but robots won’t.”

13.2. DP World to invest US$ 1 bn in Indian logistics sector
Business Standard, May 05, 2017

New Delhi: The UAE-based DP World has committed $1 billion investment in Indian infrastructure, including logistics and container terminals.
"We have already invested $1 billion and will soon invest another $1 billion," Sultan Ahmed bin Sulayem, chief executive officer, DP World, said at the India Integrated Transport and Logistics Summit 2017. DP World runs marine and inland terminals and offers maritime, logistics, ancillary and technology-driven trade services. It has invested in five international ports in India.
There was also a need to reach internal markets, invest in cold storage facilities and networks, as well as use coastal and inland waterways to increase efficiencies, Sulayem said.

Earlier this year, DP World had hinted at investment opportunities of over $1 billion in Indian ports and logistics. The Dubai-headquartered company now supports over 30% of India's container trade. Transport Minister Nitin Gadkari said investments worth Rs 2 lakh crore were expected during the logistics summit. The three-day summit is being attended by players from Singapore, Hong Kong and Abu Dhabi.

Gadkari said 20 agreements were in advanced stages of finalisation among government agencies like the National Highways Authority of India, CONCOR, Major Port Trusts, Land Ports Authority of India, Central Railside Warehousing Company and state governments. The Centre plans to build 35 multi-modal logistics parks in the country to cater to 50% of freight movement. The parks will lead to a 10% reduction in transportation costs and a 12% reduction in carbon dioxide emissions.

Land parcels have been identified and pre-feasibility studies initiated at six locations. The parks will be developed jointly by the NHAI, National Highways Infrastructure Development Corporation and state governments.
Fifteen such logistics parks will be built in five years and 20 more in the next 10 years. The government is working on a uniform policy for the development of these parks. The transport ministry has sought infrastructure status for these parks.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.

14. Panasonic India will spruce up refrigerator offerings

BusinessLine, K Giriprakash, 8 May 2017

Manish Sharma, President and CEO of Panasonic India & South Asia, is the first Indian to be elevated as an executive officer of the parent company, Panasonic Corporation. In an interview with BusinessLine, Sharma shares the company’s vision for the country.

How does Panasonic India propose to double its sales in the next three years?

The first is to set up a refrigerator factory. We are missing out that space today because we are importing our refrigerators from our overseas factory. This makes this opportunity less attractive as the cost of products is higher because of the duties and supply chain inefficiencies. So, once the factory is operational, we’ll have a wider range of products and a better supply chain, and this will start happening from 2018 onwards.

Secondly, we are looking at customising the product planning. We are opening an overseas, off-shore R&D development centre at Tata Elxsi in Bengaluru. The fundamental purpose of this R&D will be to make customised solutions for appliance products, and also to look at next-generation technology such as connected appliances and IoT (Internet of Things).

The third one would be in the space of mobility — and this would be premature for me to share but, similar capability creation is going to happen in the area of application creation also. I’ll give you an example: recently, we announced a new artificial intelligence [mechanism] called ARBO; it is more of a virtual assistant within a smartphone which tries to understand your usage habits and, using machine learning technology, notifies us accordingly. Thus, the third enabler aims at building an ecosystem of applications which will create a differentiation of the mobile devices for us.

Then, we aim at growing exponentially in the B2B space and have three focus areas: energy storage, security and surveillance, and housing products such as PBX, video door phones and the other devices in the domain of anchor-electricity in India – wiring, switches and electrical devices.

What specific role will you play as an executive officer of Panasonic Corp

My elevation as an executive officer and Vice-President of the appliance company is a great honour for me but also comes with bigger responsibilities. Such an honour has been bestowed on only two overseas people, my counterpart in China being the other. Our strategy is to have an inclusion of regional participation in the growth and in the operations. Therefore, we are trying to create a matrix where participation of people such as me, who are from regions that have an inclusive role in strategy on a larger level. Our role in the strategy building process will involve a lot of dialogue, a lot of review participations and a lot of visits to Japan to discuss the long-term strategy and then align the regional execution and strategy with the global.

What is the typical level of investment that you have annually?

Capex goes into assets, for example, into factories. So, this year, we are looking at ₹115 crore going into the refrigerator factory.

But, on advertising and marketing, we invest approximately ₹420-₹430 crore every year. Advertising spend, which is 2.5 per cent of our revenues, is close to ₹140 crore and the remaining goes into the below-the-line activities, which consists of promotions across shops: in-shop branding, providing consumer finance, etc, because that is a very big enabler in today’s environment.

What are the biggest barriers in the industry?

Barriers are in the form of product line-up. In the case of TVs, we now have a robust line-up, especially over the last two years. We manufacture 95-97% of our TVs in India. Similar is the case of ACs.

Therefore here, we are multiplying our market share by approximately 1.5 -2 % every year which is a significant jump. [In] TVs and ACs, we don’t see a problem, except that we have to reach out to customers, especially in the tier-II towns. Therefore, we are emphasising on the distribution segment. In the case of home appliances, the category needs to be revamped.

Once the fridge factory is up, we will get more thrust in terms of opening up into other markets.

Is it because you are a late entrant?

Yes; if you see our revenue in 2009 was ₹300 crore. We entered India in 2008 and virtually started our operations in 2009 and invested in brand ambassadors, IPL etc. Since then, our revenue has grown 8-9 times.

How has the market dynamics evolved over the years?

The market dynamics have changed due to multiple factors such as economies of scale, the demand-supply gap...the Koreans have changed it.

But before [delving into] that let me give you a sense on margins. Typically, a retailer makes 5-10 per cent on most durables, the distributor makes 6 per cent (3 per cent is his expenses and 2-3 per cent is his margin); and that’s how he plays on the scale.

In the case of distributors, the expenses are higher as the distribution costs are 16 per cent; in the case of larger dealers, it’s 20-21 per cent, depending on the operating channels plus ambiance costs.

Other huge retailers have a channel cost averaging 20-22 per cent to company, and given the nature of competition and discounts of 5-10 per cent and 2-3 per cent at the distribution level. Big dealers make a margin of 10-12 per cent, depending on the nature of the overheads.

A credit of about 30-45 days is given to the sub-dealers by the distributors, which includes warehousing plus people cost, which is close to 3 per cent of the revenue. If you are able to maintain a lean inventory, you will be able to have margins.

Today, the ultimate sale is pushed to the consumer, demand is created and then the inventory; this change has happened in the last six years.

Panasonic is not considered aggressive in the mobile phone space

We entered the market three-four years ago and last year, we sold 2 million devices, which is nearly 2 per cent of market share.

But, the market has faced a lot of challenges — the rupee depreciation and the entry of Chinese players, to name a few. But we are running autonomous operations here, with India as the headquarters. The HQ [in Japan] initially supported us with product development, quality, innovation and IPR support, but today, it is entirely done in India — working capital and everything.

In the last three years, we have been exporting to Sri Lanka, Saudi Arabia and South Africa, clocking 50,000-70,000 units. We manufacture along with our partners – Dixon Technologies. With market stability, we are building an ecosystem on the latest Android [version].

15. The stent divide: MNC business model unviable, not products, say Indian stent makers

BusinessLine, PT Jyothi Datta, 16 May 2017

In the high-pitched debate on cardiac stents and its pricing, one voice is barely audible. That of the Indian stent-maker.

With 13 members on board, the Indian Association of Medical Stents Manufacturers (IAMSM) has not made public its views on the price control slapped on stents by the National Pharmaceutical Pricing Authority (NPPA). Nor have they vocally contested the perception that Indian stents do not make the quality cut, oft heard in medical and industry circles.

Ganesh Sabat is Chief Executive of SMT or Gujarat-based Sahajanand Medical Technologies, touted to be the country’s largest domestic stent maker. Also wearing the hat as IAMSM President, Sabat gives us a rarely seen view from the other side of the stent divide.

Domestic stent makers are not unhappy with the NPPA's decision as the average price realisation to the company (without distributor margins) remains unaffected, says Sabat. Besides, he adds, local manufacturers have always operated on low marketing expenditures.

Supply chain

“The multinationals find it unviable not because of the products but because their business models are not viable,” exclaims Sabat, responding to complaints that price control was making business unviable. Foreign companies do not invest in the supply chain and they depend on distributors, he explains. “We do not supply through distributors and supply directly to the hospital,” says Sabat.

Cardiac stents are wire-like meshes used to unblock clogged blood vessels. And before they were brought under price control, cardiac stents were pushed at exorbitant margins to the distributors and hospitals. And this bulked up the final price that patients had to pay on a stent.

Under price control now, trade margins are pegged at 8 per cent. And stent prices are down to about ₹7,600 on bare metal stents and over ₹30,000 on drug-eluting stents. A steep crash from the ₹25,000 to ₹2 lakh-odd forked out earlier by patients for a stent.

Quality questions

With manufacturers of various hues dabbling in medical devices and imports, the worry for patients is whether indeed ‘all drug-eluting stents are equal’, an observation the Centre made before cracking down on prices.

If a product has been approved by the Drug Controller General of India (DCGI) for sale in the country, the assumption is that it is a safe and quality product, says Sabat. And then again, there is no fool-proof regulatory system, he says, citing the example of foreign-made stents like Cypher that faced patient law suits overseas.

The DCGI needs to consider one year’s follow up data from companies before they launch a stent, he suggests. If there has been no adverse event in that time, then there’s more than 90 per cent chance you have a good product, he says. It will be even better if the DCGI takes three or five years follow up data, he adds.

Countering the quality perception and questions of his company’s lineage in making diamond cutting equipment which critics say is different from the engineering that goes into a stent, Sabat says they have proved the efficacy of their products with long term data in Europe. Taking the battle to the competitor, he says, details from another international trial comparing their product to Abbott's Xience, the market leader, is scheduled to come out in June.

SMT may have stepped up to scientifically establish the credentials of its products, but Sabat agrees there are many stent makers who are not part of the association. And while companies like Vascular Concepts and Opto Circuits may have some visibility in medical circles, there are others who operate below the radar. India-made stents account for 40 per cent of the 6-lakh odd stents sold in the country, says Sabat.

So how will a doctor decide on the stent to use in a patient, if all stents are indeed made equal? “Doctors and patients should look at published scientific data behind the product,” says Sabat, as only peer reviewed data can differentiate authentic companies from fly-by-night ones involved only in the margins game.

– SERVICES (IT, R&D, Tourism, Healthcare, etc.)

16.1. Bharti Airtel to invest $2.5 billion in FY18, with focus on building 4G capacity

Livemint, Amrit Raj, 10 May 2017

Bharti Airtel CEO Gopal Vittal says will invest $2.5 billion in India in FY18, the biggest chunk of which will be used to build 4G capacity, even at the cost of ARPU

New Delhi: India’s largest telecom company Bharti Airtel Ltd will strive to acquire more market share even if this means continuing to take a hit on average revenue per user (ARPU) in the near term, a top executive at the firm said in an investor call on Wednesday.

Airtel will invest $2.5 billion in India in 2017-18, with the biggest chunk of this being used to build the telco’s 4G capacity. Another $500 million will be invested in Airtel’s Africa businesses, the company said.

“In the short-term, we are seeing ARPU compression. In a world of data, what happens is, when a customer gets habituated to data, then moving pricing at a time when there is equilibrium in the market will actually lead to all of that pricing coming back in the form of revenue,” said Gopal Vittal, chief executive of New Delhi-based Bharti Airtel.

“So, in the short term, one of the major metrics that we are tracking is... we are going relentlessly after market share,” Vittal said.

He added that the move has triggered the decline of “value players” or so-called small operators and a merger between Airtel’s old rivals Vodafone India Ltd and Idea Cellular Ltd.

“We feel that there is an opportunity for us to accelerate our market share even as tariffs come down, which is what happened in the quarter, leading to some revenue pressure,” Vittal said.

The merged Idea and Vodafone entity will exceed the 50% subscriber and revenue market limit in at least six licence areas (or circles) and will have to cede share to rivals such as Bharti Airtel to secure regulatory approvals.

Telecom regulations in India that limit maximum market share and overlapping spectrum holdings are among hurdles that Vodafone India, the country’s No. 2 carrier, and No. 3 Idea Cellular will have to deal with as they look to create the country’s largest cellular network with more than 380 million users. The combined market share of the merged entity will be 42%.

Airtel has acquired Telenor India, taking its subscriber base to 307 million and revenue market share to 35.6%.

Airtel reported a 72% drop in quarterly profit on Tuesday, missing analysts’ estimates, as free voice and data services offered by Reliance Jio Infocomm Ltd until 31 March undercut rivals and forced them to slash tariffs.

Its net profit fell to Rs373.4 crore in the three months ended 31 March from Rs1,319.2 crore in the previous year.

Vittal said that India’s smartphone penetration will double in the next three years to up to 700 million.

“That, in effect, has a real big impact on data growth,” he added.

In the call, Airtel continued to blame it on Jio, and said that in the short to medium term, predatory pricing is impacting all stakeholders, including lenders with a debt exposure of over Rs4.5 trillion to the industry, customers and telcos.

It is also hurting the government’s share of revenue of telcos.

Bharti Airtel’s average monthly revenue per user fell sharply to Rs158 in the March quarter from Rs194 in the year ago period. Average data revenue per user declined to Rs162 from Rs196.

Data ARPU fell by 4.5% to Rs185 in the year ended 31 March from Rs194 a year ago. The number of minutes spent on calls on its network, however, grew 13.4% in the full year.

16.2. Top 7 IT firms including Infosys, Wipro to lay off at least 56,000 employees this year

BusinessLine, Varun Sood, 11 May 2017

IT firms in India are in the midst of the industry’s largest retrenchment drive with 7 of the biggest companies including Infosys, Wipro and Cognizant planning to lay off 56,000 engineers this year

Bengaluru: Information technology (IT) companies in India are in the midst of the industry’s largest retrenchment drive, with seven of the biggest IT firms planning to ask at least 56,000 engineers to leave this year.

The number is at least twice the employees laid off by the companies last year, reflecting their under-preparedness in adapting to newer technologies and dealing with the fallout from US President Donald Trump’s protectionist policies.

The companies include both Indian and multinational firms with a large footprint in India.

The seven companies—Infosys Ltd, Wipro Ltd, Tech Mahindra Ltd, HCL Technologies Ltd, US-based Cognizant Technology Solutions Corp. and DXC Technology Co., and France-based Cap Gemini SA—and which together employ 1.24 million people, plan to let go of 4.5% of their workforce in 2017.

PwC India to hire 4,000 people in FY18

Most of them will end the year with fewer employees than they started with, despite continuing to hire young engineers, according to the HR heads at two of the seven companies.

The numbers were collated by Mint after extensive interviews with 22 current and former employees across these seven companies.

Preparing the ground for layoffs, each of these seven companies has already put a higher number of employees on notice by awarding them the lowest ratings. Cognizant has placed more than 15,000 employees in the lowest category (bucket IV), and Infosys has placed more than 3,000 senior managers in the category of employees needing improvement.

DXC Technology is in the midst of a three-year plan to reduce the number of offices in the country from 50 to 26. The company plans to ask 5.9%, or 10,000, of its 170,000 employees to leave this year.

All seven companies are still in denial mode and attribute the planned exits to a “marginal” increase in the number of poor performers on account of a “more rigorous” performance evaluation process.

“Cognizant has not conducted any layoffs,” a spokesman said, adding that the performance-based reviews this year are consistent with past ones.

“Our performance management process provides for a bi-annual assessment of performance,” a spokeswoman for Infosys said, declining to share the number of employees asked to leave in the current quarter. “We do this every year and the numbers could vary every performance cycle”

“Performance appraisal may also lead to the separation of some employees from the company and these numbers vary from year to year,” said a Wipro spokesperson.

Spokespersons for Wipro, Infosys and Capgemini termed the numbers cited in this article, in terms of employees being laid off, speculative. A DXC spokesperson declined comment. A Tech Mahindra spokesperson said the company “has a process of weeding out bottom performers every year and this year is no different”. A spokesperson for HCL said that the company does not have any plans to ask more employees to leave in the current year.

Why some Indian companies are tigers abroad, lambs at home

In the past, between 1% and 1.5% of a large Indian IT firm’s employees would be asked to leave every year on account of poor performance. The number was 3% for foreign companies with large Indian operations. This year, the range is likely to be 2-6% across Indian and foreign companies.

Tata Consultancy Services Ltd (TCS), the largest IT employer with close to 390,000 employees, does not have any plans to ask anyone to leave this year, said a spokeswoman.

At the heart of the problem is the fundamental change in the business model that Indian IT companies are wrestling with. It’s as if the world has become digital, and they haven’t (at least, not enough).

“Digital revenue is still less than a fourth of traditional business. Meanwhile, traditional business is slowing. All of us have to re-look at the existing talent pool to make sure it is aligned to future needs,” one of the HR heads cited above said on condition of anonymity.

As IT companies start working on newer technologies such as cloud computing, they are fast moving from a people-led model, which means they need fewer employees. Meanwhile, many of the IT companies have embraced automation tools to perform the mundane, repeatable tasks that were performed by an army of engineers earlier.

“The entire pyramid structure (organizational structure) is getting disrupted,” the second HR head cited earlier added.

That speaks of a bigger problem, said an expert.

“What required 50 programmers, analysts or accountants 5 years ago can be done by a handful of smart thinkers and much smarter systems,” said Phil Fersht, CEO of US-based HfS Research, an outsourcing-research firm. “If I were Prime Minister Narendra Modi, I would be very concerned that a whole workforce generation needs reorienting to address work activities that are growing in demand.”

Poor growth and pressure on profitability has prompted most companies to save on costs. In the year ended March 2017, for the first time since 2009-10, TCS, Infosys and Wipro grew slower than industry body Nasscom’s 8.6% growth forecast in constant currency terms, even as profitability of all the companies declined.

Trump’s protectionist policies mean more Indian IT companies are asking Indian H-1B Visa holders to return home.

Infosys has already announced that it plans to hire 10,000 US citizens over the next two years. Wipro has hired over 2,800 Americans over the last 18 months and expects half of its total workforce in the US to be locals by the end of June 2017.

Cognizant, Capgemini, Wipro and Tech Mahindra started letting go of employees in February while Infosys, HCL, and DXC are expected to do so later this month. Most employees being asked to leave are engineers with at least six-eight years’ experience.

“IT industry grew on the twin premise of talent and mobility. Now both these are being questioned. Because of protectionist policies across the world, we have to go for more localization. And the business requirements of clients are in newer areas such as data analytics. Traditional maintenance work is getting automated. So we are seeing a more stringent appraisal process and more people being asked to go,” the first HR head cited above said.

17.1. Xiaomi opens its first India store in Bengaluru
Business Standard, May 12, 2017

Bengaluru: Chinese smartphone giant Xiaomi has opened its first offline store 'Mi Home' in India as it looks to reach out to more offline customers and double its revenue to $2 billion in the current fiscal.
Xiaomi recently became the second largest smartphone vendor in terms of sales in India, the fastest growing smartphone market in the world. The company's success here comes at a time when it has slipped to the fifth spot in China, beaten by rival Apple.
The Mi Home store located in Phoenix Market City, an upmarket mall in the Whitefield locality, will be owned and operated by Xiaomi, allowing the company to retain its margins. Xiaomi says its goal is to match the efficiencies of selling devices online with devices sold in its offline stores.

"In everything we do, there are two things which we want - great customer experience and profitability. While we're making significant investments in offline stores, that's not as important as the other two," said Manu Jain, managing director at Xiaomi India.
After Bengaluru, Xiaomi is planning to open Mi Home stores in Delhi, Mumbai, Hyderabad and Chennai in the coming months. The company plans to perfect the model and become profitable in selling devices offline, after which it says it will look to expand to 100 stores in the next two years.
While focusing on growing its own offline presence, Xiaomi says it will not stop partnering with offline retailers to sell its devices. Just as the company has its own e-commerce portal mi.com but still sells on Flipkart, Amazon and Paytm, it will look at a similar hybrid approach when it comes to selling devices offline.
"We will not give mi.com or Mi Home preference just because they are our own properties. But if we see sales through our own platforms growing significantly, we can obviously allocate more stock here. With Mi Home, we're committing that devices will always be in stock, and if it is we will hand customers an f-code to purchase the device on priority online," added Jain.

Xiaomi says all Mi Home stores will have a standard look - grey walls, light wooden table tops and white ceilings, both in India and China. The model is similar to what Apple follows the world over.
The company will also open larger stores where customers will be able to experience products which the company has not yet launched in India.
On his last visit to India in March, Xiaomi founder Lei Jun had said that he was confident that the company would grow its revenues to $2 billion in the fiscal year 2018. While supply continues to remain a constraint, the firm has grown to become the second-largest smartphone vendor in India. Jain says that this shows there is more appetite for Xiaomi devices in India, which is a good sign.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.

17.2. Facebook brings Express WiFi to India, partners with Airtel for 700 hotspots
HT Business, May 05, 2017

New Delhi: Remember the cable guy? Carrying a roll of optical fibre cables on his shoulder that brought satellite TV to your homes before set top box relegated him to history.
He is coming back but only in the form of entrepreneurs who will set up WiFi hotspots courtesy Facebook to provide internet in public places ending India’s poor connectivity problem.
Called Express WiFi, the new programme, which is a follow up of the banned Free Basics platform, ties up with entrepreneurs to help them set up public WiFi hotspots and helping them provide internet to a lot of citizens in poor or no connectivity areas – the “intent” behind Free Basics platform.

“We were working with ISP and operator partners to test Express WiFi with public WiFi deployments in multiple pilot sites,” Munish Seth, head of connectivity solutions at Facebook’s Asia Pacific region, told HT, adding that now customers will be able to purchase fast, reliable and affordable data packs in four states (Uttarakhand, Gujarat, Rajasthan and Meghalaya) across 700 hotspots and 500 retailers. Express WiFi has been deployed in partnership with ISPs AirJaldi in Uttarakhand, LMES in Rajasthan, Tikona in Gujarat, and soon with Shaildhar in Meghalaya.
He also said that Facebook was working with Airtel to bring 20,000 more hotspots throughout the country. Express WiFi is currently live in Indonesia, Tanzania, Kenya and Nigeria.
Explaining how Express WiFi works, Seth said that Facebook is providing the software stack for the entrepreneurs, data analytics and in some cases some funds to help start operations. However, he said that the entrepreneur can choose any internet service provider (ISP) for bringing the WiFi to the hotspot.

“We will recommend ISPs based on our tests and usually the speed of the Wi-Fi has to be somewhat around 10mbps,” Seth said, adding, that if someone wants to use the WiFi, the person will buy a data card just like prepaid vouchers and use it on their devices.
“Anyone can access the Express WiFi network by signing up with an Express WiFi retailer and purchasing a daily, weekly or monthly data pack at a rate set by our partners. They will then be able to connect to the Express WiFi hotspot, register/create an account, login and start browsing or use any app on the entire internet,” Seth explained.
He also said that “this will kill the need of owning 4G devices and that will be immensely helpful for India where 4G is catching up fast but has a long way to go before it becomes mainstream.”
However, Seth didn’t clarify how Facebook would generate revenue streams but said that the company was providing the software stack and analytics free of cost to entrepreneurs.

Seth also said Facebook will have no control over data costs and individual suppliers will decide that. Now this means that you might be charged differently for the same amount of data in different public WiFi hotspots. However, Facebook said that the cost of data will be affordable.
“It is similar to the cybercafe model that thrived around a decade back,” Sanchit Vir Gogia, chief analyst at Greyhound Research said.
Currently, as per TRAI data only 390 million people are connected to the internet. However, Express WiFi launch comes a day after TRAI chairman RS Sharma said that the regulator will come out with its recommendations on net neutrality by the first half of July.
TRAI had struck down Facebook’s previous programme – Free Basics in India – that aimed to connect the “unconnected Indians” on the grounds of net neutrality. Net neutrality regulation ensures that all ISPs charge customers the same price for accessing all websites and services.

This also doesn’t mean Facebook is flouting net neutrality norms as Jio also offers data at lower prices than rivals.

Google and Microsoft also have been working on similar connectivity project. Google is already providing a free WiFi service in several railway stations in India in partnership with RailTel and the programme is expected to be scaled to 400 stations in the country.
Google also plans to extend Google Station to cafes, malls, universities and bus stations – a programme to offer high-speed browsing at any place that has a wired internet connection. However, it may not be a free service, with revenue being split between Google and the space owner.

The company is testing its Project Loon that will use balloons to take internet access to remote locations. It is also learnt to be looking at putting Google Accelerator boxes in cafes and restaurants.
The Mountain View internet giant also has a WiFi plan called Google Fi, which Facebook claims is different from its Express WiFi. A Fi user pays Google directly and accesses the internet riding Google’s partnerships with ISPs, public WiFi and network operators.
Redmond-based Microsoft is trailing along as well. The company is working on TV White Spaces technology which lets the company broadcast internet signals at unused low-frequency spectrum bands. The company claims that since the frequency is low, the signals can be transmitted over larger areas bringing down the cost of laying optical fibre.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.

18.1. Amazon Prime a key differentiator for the US e-commerce firm in India
Livemint, Apr. 25, 2017

Bengaluru: Amazon’s flagship membership programme Prime, which has helped the e-commerce giant lock in millions of online users in the US, is proving to be a key differentiator for the retailer in India as well, a report said.
Data from the report by market researcher RedSeer Consulting, shows the number of Prime subscribers in India rose rapidly during the October-December quarter, reaching 5-6 million at the end of December. Prime now accounts for nearly a third of Amazon’s active customer base with 25-30% of Indian customers opting for it, the report said. These estimates include paying and non-paying subscribers.

Prime subscribers spend at least 15% more than non-Prime customers and place more orders on an average every month, the data shows. They seem to be more satisfied as well: according to RedSeer, average Net Promoter Score (NPS)—an indicator of customer satisfaction—for Prime customers in India was 40% against 24% for non-Prime customers.
In less than nine months since Prime launched in India, it accounts for one out of every three orders that Amazon delivers to customers—highlighting how consumers are increasingly paying for quicker and more reliable deliveries and hence are increasing their online spending budgets on platforms that offer such membership programmes.

Prime has become a key lever for Amazon in its battle against arch-rival Flipkart. A significant part of Prime’s growth is also being driven by its online video streaming service, which competes with Netflix and Hotstar. The Indian numbers mirror a phenomenon that Amazon first witnessed in its home market, the US, when it first launched Prime in 2005. Over the last decade, Prime became one of the biggest levers of Amazon’s growth in the US, as the online retailer sold more to existing customers, who typically ended up shopping more from Amazon after signing up for Prime.
“We’ve seen a big rise in frequency as well as a big lift in actual order values from Prime customers,” Akshay Sahi, head of Amazon Prime in India, said in an interview with Mint earlier in April. “What happens is, apart from mobile phones, any of the other categories are not one-time purchase categories. Because you just keep buying more and more of those things. Your fashion budget will move more towards Amazon, your electronics budget will move more towards Amazon, your consumables budget moves more towards Amazon because of the loyalty you have and the experience you enjoy and the programme that you’re a part of.”

Last July, Amazon India launched its annual Prime membership programme in more than 100 cities, offering one-day and two-day delivery on hundreds of thousands of products and exclusive discounts for an initial price of Rs499 per year.
Prime was the single biggest-selling product among the 15 million units sold on Amazon India during a five-day sale in October. Amazon expanded the service by adding video content in December through Amazon Prime Video, pitting it against Netflix and Hotstar.
Prime’s success in India may force arch-rival Flipkart to re-think its strategy towards paid subscription services. So far, Flipkart has not actively promoted its own loyalty programme for consumers, as the e-commerce firm privately believes that Indian shoppers typically don’t care or pay for delivery and convenience or content.
“Flipkart is missing out big-time by not promoting its own membership service as aggressively as Amazon. They still have an opportunity to educate customers and offer them that option of quicker and cheaper deliveries, but they have to get into this game quickly,” said Harminder Sahni, founder and managing director, Wazir Advisors, a consulting firm.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.

18.2. Amazon to add 14 new warehouses, plans to double storage capacity in India
Livemint, May 03, 2017

New Delhi: Online marketplace Amazon said on Tuesday that it plans to double its storage capacity in India this year and will open at least 14 new warehouses across the country, including the seven that it recently opened to boost sales of large appliances and furniture.
Amazon India (Amazon Seller Services Pvt Ltd) said the new warehouses will be set up in Telangana, Haryana, Maharashtra, Madhya Pradesh, Uttar Pradesh and Andhra Pradesh and be fully operational by the end of June. The expansion of its infrastructure is intended to ensure Amazon maintains its rapid sales growth. The company reported an increase in unit sales of 124% in calendar year 2016. In the first quarter of this year, it registered a jump in unit sales of 85%.
The new warehouses will cater to tier-2 and tier-3 cities across the country, as part of the company’s efforts to reach more remote parts of the country. Amazon is also doubling the storage capacity of its warehouse in Ahmedabad and increasing the storage space of its warehouse in Delhi by six times to meet higher-than-expected demand.

Including the seven new warehouses, Amazon will have 41 warehouses across nearly 13 states in the country — far more than arch-rival Flipkart. In April, Amazon had said it would open seven new warehouses to boost sales of high-priced products such as televisions, refrigerators and furniture.
“We are seeing really strong growth here. We want to ensure that Indian customers can buy anything, anytime from anywhere in the country.
With the additional capacity, we will serve more sellers better,” said Akhil Saxena, vice president and head of supply chain at Amazon India.
Amazon, which over the past four years has made significant market share gains at the expense of local rivals Flipkart and Snapdeal in India’s $15-billion online retail market, will continue to invest in building more infrastructure as part of its rapid expansion plan across the country.
So far, Amazon has committed to spending at least $5 billion to grow its India business. Of this it has already spent nearly $2.5 billion. Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.

19.1. We’ll continue to have travel brands under a common board’, Thomas Cook’s CEO

BusinessLine, Purvita Chatterjee, 8 May 2017

Thomas Cook India recently expanded its international footprint by acquiring tourism firm Kuoni’s global network of destination-management specialists in 17 countries. Having bought out Kuoni’s travel business in India in 2015, this was an additional buy for the Fairfax-owned travel company, which now has a global footprint, giving it an incremental revenue of $200 million from the overseas markets.

In a free-wheeling interaction post the announcement of the recent deal, Madhavan Menon, Chairman and Managing Director, Thomas Cook India, describes his company as a global one which is listed in India, and talks about the strategy forward.

Excerpts:

Why did Thomas Cook India decide to go in for another acquisition of Kuoni’s destination-management specialist business across 17 countries?

A year-and-a-half ago, we had entered into an agreement with Kuoni to acquire their operations in India and Hong Kong.

Subsequent to that, they decided to divest their destination-management business. Ever since we made the acquisition, we had a potential appetite to look at companies within Asia since we believe Asia will be a destination of choice all over the world and travel from Europe and the US will get restored to its pre-2015 levels.

Therefore, it was important to be present in the incoming business in Asia. With this acquisition, we will now haveincoming business in 17 countries across the world, ranging from Australia, South-East Asia, China, West Asia to the US and Canada.

In India, we are already the largest in the incoming business under TCI Sita, and will now consolidate this division with a global footprint.

How will you integrate the Kuoni global and domestic business of Thomas Cook?

We do not wish to integrate the operations since each of these countries have their own set of rules and regulations. But having said that, we will have a sales force that will go out and source business, bring tourists and interact with local travel agents so that they can send tourists to their respective countries. The objective is to use the sales force and technology to essentially drive synergies.

By expanding your global footprint, what kind of incremental revenues will Thomas Cook India get from overseas markets?

From an accounting standard, we will be consolidating; and the acquisition will accrue profits and bring in $200 million in incremental revenues.

In fact, with this acquisition, we will no longer be an Indian company despite being listed here. It is time to stop calling ourselves as Thomas Cook India since now our business is spread across 20 countries.

Post the acquisition of Kuoni India in 2015, how have you differentiated among all your acquired travel companies in the domestic market?

Thomas Cook India has now been divided into three companies. The first is Thomas Cook and the second is Kuoni India, which has two brands — Sita and SOTC; the third company is the merged entity of TCI and Sita.

How will you position and manage the multiple travel brands under your portfolio?

Both SOTC and Thomas Cook are retail brands, and will compete with each other in the holiday space.

Each has a huge brand loyalty; so there is no need to disrupt them. Just like HUL has several brands of soaps which compete with each other, we will continue to have travel brands that are part of a common board.

Did demonetisation impact your travel business?

Demonetisation did not impact us, and by January this year, we saw bookings back to normal and on par with 2014. In the West, travellers make bookings 11-12 months in advance and such bookings are not spot transactions. These are travellers who come from cashless economies and carry credit cards. The cancellations were marginal in our case.

What kind of business are you expecting from your online platform?

Today, 16 per cent of our sales come from the online platform, which is growing 36-40 per cent annually. For a brick-and-mortar player like us, it is a significant amount.

We only sell our packaged holidays online, and going ahead, we expect equal amount of business between the online and offline spaces.

Since 2012, Thomas Cook India has been on an acquisition spree. What has been the experience of buying out timeshare companies such as Sterling Holiday Resorts?

Sterling Resorts had been going through a traumatic period for 18 years. Since our investment, it has renovated its properties. Last year, it turned profitable at a cash level and should get EBITDA positive this year.

Would you consider investing in some of the travel start-ups since they seem to have innovative products?

Yes, there are some interesting things happening in the start-up space. We will keep looking, and invest if there is an opportunity.

How are you viewing the GST roll-out and its impact on your operations?

We are in an advanced state of readiness with our internal accounting and software.

It is going to be an evolutionary process. While there may be an immediate change in the pricing for our packages, in the medium and short term, it will average out.

19.2. How Byju’s built its brand

Livemint, Sadhana Chathurvedula, 28 Apr.2017

What started with low-key online courses, education start-up Byju’s is now eyeing overseas expansion. Can it sustain the momentum it has built so far?

Bengaluru: Byju Raveendran says he builds fan bases—a strange thing to say for someone who is founder and chief executive officer of an education start-up.

“I believe when you take sessions in auditoriums, you’re creating a kind of fan following. You can’t do a math class in a stadium. It has to be a math performance,” says Raveendran, 36.

His performances have served him exceedingly well. His company Byju’s, run by Think and Learn Pvt. Ltd, is India’s best-funded education start-up, having raised $204 million from venture investors Aarin Capital, Chan Zuckerberg Initiative, International Finance Corporation (IFC), Lightspeed India Partners Advisors, Sequoia Capital India Advisors, Sofina SA, and Times Internet Ltd and Brussels-based family office Verlinvest SA.

The beginning, in 2007, was uneventful.

"Our product is built on that strong belief that when students learn on their own, where they take the initiative, whatever you call learning, that counts for 50%. Unfortunately, today it’s 100% spoon-feeding in a lot of students’ cases, 100% learning for exams and not the other way around" - Byju Raveendran

Raveendran, who was then working as an engineer for a UK-based shipping firm Pan Ocean Shipping Ltd, helped a few friends who were working in the information technology industry in Bengaluru prepare for the Common Admission Test (CAT), which opens the doors to India’s best management institutes.

“They came to me for help in CAT because they knew me as someone who’s good in cheating in exams. They don’t use the word but they knew me as someone with short-cuts and exam hacks,” says Raveendran.

He then “casually” took the exam with his friends too, just to see how it went.

“They were taking it like this is the end of it. For me, it was just like another Sunday afternoon. Went and took the exam and that’s the reason I think I did well, just like how I used to do well in almost all the other exams,” he recalls.

When the results were announced, Raveendran’s friends had done well. He himself scored 100 percentile.

Thinking big

Raveendran got interview calls from all the Indian Institutes of Management (IIMs), but chose to return to his job. A couple of years later, more of his friends sought his help, informally, and he started teaching them too.

He took the CAT again, and scored 100 percentile once more. He was hooked to the respect he was getting and decided to take six months out to see what would happen if he taught with a structure.

Raveendran started conducting workshops on the weekend, with the classes growing in popularity. When one classroom wasn’t enough to accommodate students, he booked an auditorium with a seating capacity of 1,200.

“If you are copying someone, maybe thinking big is not that important because you need to copy it very well and you need to execute it well but if you’re doing something new, thinking big is 50%. From a classroom of 40 I thought of going 30x without ever worrying... I was sure that if I’m booking 1,200 I will fill it. Sixth or seventh week the auditorium was full. Then I never looked back,” says Raveendran.

At this point, students from various cities were coming to Bengaluru to attend his classes, so Raveendran decided to go where the students were.

“Then, my schedule used to be something like this—Saturday morning in Bangalore, evening in Chennai, Sunday morning in Bombay, evening in Pune,” he says.

From 2007 to 2009, he travelled to nine cities to take classes and says he got “addicted” to this.

“I did all this almost alone. In between, some of my best students started joining me. Some of them went to IIM and came back; some of them even after getting into IIM decided to follow my path because maybe they were inspired with what I was doing. And then, by 2009, five of my top students joined me. They helped me to scale up business, scale up content, and then we scaled up using video format and started offering all these sessions through video. 2011 is where we formed this company,” he says.

Growing up

Raveendran self-assuredly rattles off the story of how the company came to be (speaking an average of 138 words per minute during the course of our hour-long interview) while repeatedly insisting that he’s not trying to be boastful.

He grew up in Azhikode in Kannur district of Kerala. His parents were teachers at the Malayalam-medium government school he attended, but always made sure he wasn’t in any of their classes. It would have been awkward, you see. Raveendran had a habit of bunking classes to play football, cricket, badminton and table tennis.

“From 7th class onwards, I spent a lot of time outside, playing games. Played multiple games at university level. Almost all of them at college level and school level. Represented state at school level and university level, captained most of the teams. It’s all those things, if you ask me, the reason for what I am able to do today,” he says. “I just capitalized on two of my strengths—the logic which I got from my love for math. Math is still my first love, and the real life skills, that extremely positive attitude which you learn from games.”

Potentially vast market

Byju’s initial offerings were all centred around test-preparation, and these were much more low-key than the jazzy, high-production-value videos and content that it currently generates for the K-12 (kindergarten-Class XII) segment, with more than 500 members in the research and development team.

This content is what’s helping Byju’s accelerate growth and be one of the top education start-ups in the country.

There are about 20 million children between Classes VI and XII in India who have access to the Internet and take private coaching classes, which translates to an addressable market opportunity of about $2.5 billion, according to research by consulting firm RedSeer Consulting.

Byju’s initial offerings were all centred around test preparation, and these were much more low-key than the jazzy, high-production-value videos and content that it currently generates.

Since launching in 2015, Byju’s claims its app has had more than six million downloads. It had 320,000 active users as of November last year. The number of people who buy its premium service is growing every month, claims the firm.

“A great company will be converting anywhere around 8-12% of people who try out their app. 8-12% is a fairly high number given the fact that in education your ticket sizes are larger as well. You’re no longer selling a Rs500 product or a Rs200 product, you’re selling a product which runs into thousands of rupees. Also, with education, unlike most of the sectors, the repeat rates are very high. For example, a student would start with Byju’s in the sixth standard or seventh, so Byju’s is looking at a four-year or seven-year timeline in certain cases, where they can continue to tap into the same user,” says Kunal Walia, founder and managing partner at Khetal Advisors, a Bengaluru-based investment bank that has worked with multiple education start-ups.

Byju’s has grown exponentially in the last year. Its team of 200 has grown to 1,000.

"Byju’s is looking at a four-year or seven-year timeline in certain cases, where they can continue to tap into the same user"- Kunal Walia, founder and MD, Khetal Advisors, a Bengaluru-based investment bank.

Raveendran says he trusts the core team he put in place, and the culture that the company naturally has, to take the message forward. Most of the top management, which includes his wife Divya Gokulnath who is also a director in the firm, were his students.

Raveendran’s management style is to praise his employees a lot.

“You encourage them, and kids get lot more excited about that. That’s why if you want to do something positive, you need to appreciate them lot more than what they deserve. This is something which I believe, because it has worked for me and I see that working with my kid, and I see that working with people who are close to me now as part of my team,” he says.

Cracking the B2C market

Raveendran’s experience outside the rigours of a structured education system, or spoon-feeding, underpins much of Byju’s product strategy today.

“Our product is built on that strong belief that when students learn on their own, where they take the initiative, whatever you call learning, that counts for 50%. Unfortunately, today it’s 100% spoon-feeding in a lot of students’ cases, 100% learning for exams and not the other way around. The other way around is you learn such that exams are taken care of. They are just part of the process and not the end of it,” he explains.

Byju’s has made progress in cracking the business-to-consumer (B2C) market, one typically thought to be very tricky because it involves not just engaging children, but convincing parents that an app is a suitable substitute for real-world coaching, and trusting the company with their child’s education.

A big part of this, it claims, is its focus on content and designing personalized learning through what it calls a “knowledge graph”. With this, the app learns which concepts a student may need more practice at, and adjusts learning plans accordingly.

Since launching in 2015, Byju’s claims its learning app has had more than six million downloads. Photo: Hemant Mishra/Mint

“The average time spent on our app is 40 minutes. When parents see children using smartphones for something other than fun, they immediately get convinced, because they themselves end up wasting a lot of time on phones. Our TV ads are completely targeted at students. Lot of agencies have told us to target parents because they are the ones who will pay for it,” says Raveendran.

“Our product and go-to-market are both targeted at students. B2C is our only channel. We’re not trying to change the system. It can easily coexist with the system. It’s not a replacement of teachers,” he adds.

Getting people to pay

Ultimately, it also depends on the commerce behind the offering, says Vinod Murali, managing director at venture-debt provider InnoVen Capital India.

“What Byju has done really, really well and why he is getting all this love from the market is because he cracked the commerce part of the question very, very successfully. To get people to pay at a $150 price point, almost Rs10,000 and get them to pay for this annually was a bold move, because this is not your primary offering to parents. You have school, you have your regular classes and this is the extra step that you take,” says Murali. Byju’s is a part of InnoVen’s portfolio.

"What Byju has done really, really well and why he is getting all this love from the market is because he cracked the commerce part of the question very, very successfully" - Vinod Murali, managing director of Innoven Capital India.

“It’s not like other people are not doing this, but they are doing it at a different level. Byju’s is maybe more than a year ahead in terms of business volumes, and that’s showing,” he adds.

The fact that Byju’s had an offline presence has also helped in gaining parents’ trust in the brand.

“There is deep learning and deep brand visibility that gets built when you are an offline company to begin with. For you to transition to online, it becomes that much more simpler because there is some recall factor there and people view that as one of the experts in the domains. That brand elasticity of moving from offline and expanding to online is what served Byju’s considerably, along with obviously the content,” says Walia of Khetal Advisors.

Byju’s has its sights set on the overseas market too, what with investors like the Chan Zuckerberg Initiative and IFC on board.

“There are things which we need to do exactly like this to go global. We have to create things which students like, they are the influencers. We know that it’ll work. Almost 15% of our students are already coming from outside India, but we have to change some of the layers—the style, the teachers, the accent. The underlying thing can and will remain the same. The foundation is the content,” says Raveendran.

The specific international markets that Byju’s will focus on will depend on the traction it gets, he says, and adds: “It’ll take us 18-24 months based on our current bandwidth and then we will go very strong.”

‘No short-cuts’

There is a lot of work ahead for Byju’s in the coming year to sustain the momentum it’s built up so far. The Times of India reported in January that it made its first acquisition by buying Vidyartha, a career guidance and academic profile-builder.

“From a product point of view, we are adding more grades. We have just started working on languages, that might take more time. We will go deeper and deeper in India. We need to create awareness not just about the brand. Challenge is to create awareness about a segment where students learn and not just memorize,” says Raveendran.

While the focus so far has been on teaching students mathematics and science, Raveendran says he believes that every subject can be taught better with the aid of technology.

“We started with math and science but we are also working on other subjects coming out in the mid-to-long term. Every hour of content we do it’s like we are creating a movie. We can’t do short-cuts. But all subjects can be taught,” he adds.

20. Indian healthcare must be evidence-based

Livemint, Nayan Chakravarty and Kavita TatwadiKrithika Sambasivan, 10 May 2017

The Union cabinet recently approved the National Health Policy, 2017. In a welcome move, the policy includes progressive steps towards universal and affordable access to healthcare services for the underprivileged. It does this by making provisions for comprehensive primary care via the conversion of 150,000 sub-centres (the first contact point between the primary healthcare system and the community) in Indian villages to “Health and Wellness Centres”. There is provision for every family to be provided with a health card that will link it to the primary care facility and make it eligible to receive a defined package of services anywhere in the country. While this is a positive step, the government will require a robust mechanism to implement and monitor the mammoth mission.

In the past, policymakers’ good intentions have been marred by the lack of effective public service delivery mechanisms. An inefficient service delivery mechanism creates inequity in access to healthcare and results in the suppressed uptake of services by the masses as they turn to private alternatives. In a study conducted by the World Bank and Harvard University in 2003, it was found that in 1,500 primary healthcare centres across India, 40% of healthcare workers in government health clinics were absent from work. While this was found through direct observation, official records may not have reflected the absence.

The National Health Policy states that to increase “accountability and governance”, the government will aim at increasing both horizontal and vertical accountability by providing a greater role for local body participation and encouraging community monitoring. A study, conducted by the researchers at the Massachusetts Institute of Technology, US, with NGO Seva Mandir in the sub-centres of 135 villages of Udaipur from 2005-07, suggested that monitoring, coupled with punitive pay incentive, reduced the absence of nurses from 60% to 30% in healthcare centres. This proves that healthcare workers are responsive to properly administered incentives, and that comprehensive monitoring does make a difference.

The issue of poor uptake of healthcare programmes by the masses is a result of mismanaged health centres and, to some extent, human psychology. For the underprivileged, a visit to a primary healthcare centre may mean the loss of a day’s wage. Given that a full immunization schedule requires at least five visits to the sub-centres, for a poor family the opportunity cost is huge, especially given a bad service delivery system. A lack of understanding of the benefits of vaccination, and, to some extent, distrust in government healthcare services, exacerbate the problem. The World Health Organization reported that in 2015, 19.4 million infants worldwide were not reached with routine immunization services. More than 60% of these children live in 10 countries, including India. Could there be a way of incentivizing the poor to immunize their infants? A research study done by the MIT on 2,000 children from 134 villages of Udaipur, from 2004-07, helped provide immunization services through mobile camps on fixed days in one intervention. In the other intervention, it incentivized parents with a gift of 1kg of lentils on immunization days and a thali on the completion of the whole schedule. It showed that providing poor families with non-financial incentives in addition to reliable services and education about immunization was more effective in nudging them to complete their child’s immunization schedule than just providing reliable services alone.

While the healthcare policy relies heavily on technical research in pharmaceuticals and equipment, when it comes to service delivery, evidence-based policy has been absent in India. Policymakers need to know what works and what doesn’t. There is evidence to show that projects fail largely as they are not evidence-based. However, the biggest dilemma that policymakers face is that though there is abundant evidence available, there is a lack of consensus about its quality. Some of the evidence is not available in a suitable form, but, primarily, policymakers have multiple goals other than research effectiveness to focus on. Policymakers’ demands for quick results restrict policymaking processes from being evidence-based.

The government has allocated Rs48,878 crore to the health sector in the recent budget, increasing it to 2.2% of the total Union budget . With such a massive investment, the government would do well to ensure that healthcare services reach the intended beneficiaries and that the beneficiaries avail of them fully. There is an immediate need for policymakers to sit across the table with researchers and have a meaningful dialogue. Think tanks are now focusing increasingly on building evidence bases for policies and programmes that can improve development outcomes. Researchers are aiding the government and stakeholders in conducting rigorous research and utilizing research findings.

The National Health Policy aims at inclusive partnerships with academic institutions, NGOs, and the healthcare industry. It also speaks of “research collaboration” in healthcare delivery. Spending some resources on research will help the government deliver benefits in an effective way as well as avoid the often-repeated mistakes of earlier mechanisms. With minimal investment, the government will stand to gain from robust evidence. Research can prove to be a shot in the arm for safeguarding the government’s health goals—and the population.

INDIA & THE WORLD

21. India successfully launches South Asia Communication Satellite

PTI, 5 May 2017

PTI ISRO’s GSAT-9 communication satellite, which Prime Minister Narendra Modi called India’s gift to its South Asian neighbours, was successfully deployed by a GSLV-F09 rocket, launched from the Satish Dhawan Space Center in Sriharikota, on Friday.

India today successfully launched the South Asia Communication Satellite, fully funded by it and touted as an “invaluable gift” to its South Asian neighbours, that would provide communication and disaster support to the nations of the region.

Built by the Indian Space Research Organisation, its latest communication satellite GSAT-9 called SAS rode piggyback on the 50-m-tall rocket Geosynchronous Satellite Launch Vehicle (GSLV-F09) with the indigenous cryogenic powering the Upper Stage.

The GSLV-F09 blasted off at 4:57 pm in clear weather from the second launch pad at the Satish Dhawan Space Centre in Sriharikota in Andhra Pradesh and injected the GSAT-9 into the orbit in a flawless flight.

“Successful launch of South Asian Satellite is a historic moment. It opens up new horizons of engagement. This will also greatly benefit South Asia & our region’s progress,” tweeted Prime Minister Narendra Modi announcing the success of the launch.

The GSLV-F09 mission is the 11th flight of the GSLV.

With a lift off mass of 2230 kg, GSAT-9 is a Geostationary Communication Satellite providing various communication applications in Ku-band with coverage over South Asian countries.

The satellite will enable a full range of services to neighbours including the areas of telecommunication, television, direct-to-home, VSATs, tele-education and telemedicine.

It can also provide secure hotlines among the participating nations, which will be useful for management of disasters like earthquakes, cyclones, floods and tsunamis.

Configured around the ISRO’s standard I-2K bus, the main structure of the satellite is cuboid in shape built around a central cylinder with a mission life of more than 12 years.

The satellite costing around Rs. 235 crore is fully funded by India.

Touted as a ‘invaluable gift’ to its South Asian neighbours, seven of the eight SAARC countries — India, Sri Lanka, Bhutan, Afghanistan, Bangladesh, Nepal and Maldives, are part of the project.

Pakistan has opted out of the project, saying it has its own space programme.

22. Why governments make poor economic choices

Livemint, Vivek Dehejia, 7 May 2017

Governments take a populist turn in economic policymaking for different reasons—primarily because they think it is a formula for success in elections

My most recent column interrogated the putative relationship between good economics and good politics, suggesting that we have reason to be sceptical of the oft-repeated claim that there is a causal relationship between the two. Good economics, in short, may or may not be good politics. It falls, therefore, on incumbent politicians to pursue good economic policies, if they choose to, not purely looking at short-term electoral calculus, but taking the long view.

Aye, there’s the rub. Incumbent politicians must be convinced that good economics is, indeed, embedded in an understanding of the state which sees government as the guarantor of the rule of law and property rights, provider of internal and external security, and of a small and well-circumscribed set of public goods and services, or, more broadly, as intervening in sectors characterized by chronic market failure.

Unfortunately, such a view, which one might dub a “classical liberal” or (moderate) libertarian position, is not the norm amongst India’s political class, which still harbours unreconstructed predilections towards statism and government command and control.

It is not hard to understand the genesis of such views. I have had the opportunity to speak at some of the best university campuses in India over the years, and am consistently struck by how fundamentally anti-free market the prevailing intellectual currents run and how strong remains the faith that the government knows best. And these views are prevalent not just in the humanities departments, as you would expect, but even among students of economics and business. And their professors are often worse! There are, in other words, multiple drivers of poor economic policy choices by governments, not merely political expediency.

Governments take a populist turn for different reasons—first and foremost, of course, because they think it is a formula for electoral success. Yet, the success of advocacy for populist policy interventions is not merely a matter of cynical electoral math but reflects also this statist mindset. After all, you have to believe in the primacy of liberty and of free markets, to push for it aggressively when you are in office, unless your back is to the wall and you are doing so out of necessity.

Readers of my work will know that I have dubbed this failure to make an intellectual, principled case for pro-market reforms going back to 1991, the “original sin” of reform in India. The trouble is, if the rationale for good policies is that they are done in a mode of crisis, the resolve to persist with those policies will fail to stick when the crisis has passed.

Please note that I am not here re-litigating the tiresome and already settled debate of whether economic reforms were imposed on India as part of a so-called Washington Consensus. That bogey has been debunked, and it is now, or should be, well understood that there were important indigenous intellectual drivers of reform—the work of economists such as Jagdish Bhagwati notable amongst them. In other words, there was an ideational background to the 1991 reforms, but this does not mean that the politicians who carried them out after the initial crisis receded carried conviction.

The notable exceptions in India were, of course, prime minister P.V. Narasimha Rao, the godfather of Indian economic reforms in the early 1990s, and prime minister Atal Bihari Vajpayee, the father of the far-reaching reforms of the late 1990s—yet these are the exceptions, within their own parties, and more generally.

As I and others have argued in detail elsewhere, the 10 years of Congress-led rule from 2004-14 were marked by a notable lack of conviction in pursuing the second generation of economic reforms, with, instead, a penchant for entitlement-based welfare schemes.

In part, this reflected a smug complacency driven by the high rates of gross domestic product (GDP) growth that India managed to achieve without much reform. Indeed, 2010 saw year-on-year GDP growth touch a magical 10.26%, according to World Bank data—marking India’s very brief entry into the double-digit growth club. If you have already been admitted to the club, after all, there’s very little short-term incentive to pay the entrance fee after the fact.

But this is not the whole story. Again, as I have argued elsewhere, the last Congress-led government evidently lacked intellectual conviction in favour of reforms, making it easy to push these into the future as long as growth was good. And, when growth turned down, it was too late to turn things around before the electoral defeat of 2014.

Former Congress leaders, and writers sympathetic to them, point out, with some justice, that several of the flagship schemes of the current Bharatiya Janata Party-led government are the progeny of schemes going back to the previous government. Perhaps the would-be reformers in that government might now be looking back with regret at missed opportunities, maybe even former prime minister Manmohan Singh.

We are again in a situation with acceptably high but not double-digit growth, and again without a clear sense that the government of the day feels any particular urgency in pursuing potentially unpopular reforms in its remaining time in office. We have seen this movie before. Let us hope for a different ending.

Every fortnight, In The Margins explores the intersection of economics, politics and public policy to help cast light on current affairs.

23.1. Solar tariff falls 80% in 6 years

Business Standard, May 15, 2017

In a bidding held for the 500-Mw Bhadla solar power park in Rajasthan, domestic company ACME won the top slot by quoting Rs 2.44 a unit for 200 Mw. It was closely followed by SoftBank Energy with Rs 2.45 for 500 Mw. As the tender followed a bucket-filling method, ACME will build 200 Mw and SBG Energy 300 Mw. The park is being developed by IL&FS.

Government officials pointed out this rate was lower than the average coal-based price and the grid parity price for solar to match with coal. This rate was closer to spot power price as well. Two days ago, for a 250-Mw segment of the park developed by Adani Power, South African company Phelgan Energy Group and Avaada Power Group, promoted by Vineet Mittal’s Welspun Energy, quoted Rs 2.62 a unit. Japan’s SoftBank Energy was a tad below at Rs 2.63 a unit.

The tariff in Bhadla has been fixed for 25 years with no escalation and the bidders have sought no viability gap funding from the government, officials said.

"Some of the main contributing factors are the 7-8 per cent higher yield in Rajasthan due to better solar radiation conditions, a drop in module prices in the international market, and strengthening of the rupee against the US dollar," said Ashwini Kumar, managing director at Solar Energy Corporation of India (SECI).

SECI is a wholly owned public sector undertaking under the ministry of new and renewable energy (MNRE) that executes solar bidding."

"There are multiple drivers. One, the project level risks in terms of timely availability of land, transmission as part of solar park scheme, and counter party risk in terms of payment timelines is mitigated appropriately in the structuring of the project by making NTPC/SECI has the counterparty. Second, this risk mitigation structure have unlocked relatively cheaper source of capital in the market especially from the foreign investors'" said Vivek Sharma, Senior Director, Infrastructure Advisory, CRISIL

Lack of any mega tenders, the large size of the park capacity, and an influx of cheap financing and capital options were also cited as the reasons for such low bids."

Since too much capital is chasing too few projects, this in turn is leading to competition and a much lower return expectation of 8% to 10% than a typical expectation of 14% to 16%.. Also, there are players in the market who are purely looking to unlock the value through an IPO, therefore, for them to show a growth in top-line is critical than overall risk return matrix," said Sharma.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.

23.2. Solar power tariffs fall to new low of Rs2.62 per unit

Livemint, Mayank Aggarwal &Utpal Bhaskar, 10 May, 2017

India’s solar power tariffs fell to a new low of Rs2.62 per unit during the auction of a 250MW capacity at Bhadla in Rajasthan

New Delhi: India’s solar power tariffs fell to a new low of Rs2.62 per unit during the auction of a 250 megawatt (MW) capacity plant at Bhadla in Rajasthan.

South Africa’s Phelan Energy Group and Avaada Power bid Rs2.62 per kilowatt-hour (kWh) to win contracts to build capacities of 50MW and 100MW, respectively, at Adani Renewable Energy Park Rajasthan Ltd. SBG Cleantech bid Rs2.63 per kWh to construct a 100MW capacity, said a person associated with the auction process, requesting anonymity.

This price is lower than the average rate of power generated by the coal-fuelled projects of India’s largest power generation utility, NTPC Ltd, at Rs3.20 per unit.

“Another milestone towards PM @narendramodi’s vision of clean affordable power for all: Bhadla Solar Park achieves tariff of Rs2.62/unit,” Piyush Goyal, India’s minister for new and renewable energy, power, mines and coal, said in a tweet.

India’s solar power generation capacity has increased by a third to 10,000 MW from 2,650MW as of 26 May 2014.

SBG Cleantech is a joint venture between Japan’s SoftBank Group Corp., India’s Bharti Enterprises Ltd and Taiwan-based Foxconn Technology Group. The venture was set up in June 2015 after SoftBank Corp.’s Masayoshi Son pledged to invest at least $20 billion in solar energy projects in India.

Avaada Power is promoted by Vineet Mittal and is his second innings in India’s clean energy space after Tata Power Co. Ltd bought the entire 1.1 gigawatt (GW) renewable energy portfolio of Welspun Energy Ltd for $1.4 billion last year.

A total of 27 bids aggregating 3,250MW were received for the 250 MW capacity on offer.

State-run Solar Energy Corp. of India (SECI), which is also running the bid process for another 500MW of solar power capacity at Bhadla, had set the reserve price at Rs3.01 a unit before the reverse auction began on Tuesday afternoon.

The auction for this 500MW capacity being developed by Saurya Urja Co. of Rajasthan Ltd on 11 May is now eagerly awaited, with experts being of the opinion that the tariffs may fall further. Rajasthan Renewable Energy Corp. Ltd is a joint venture partner in both parks.

Anish De, partner, infrastructure and government practice, at consulting firm KPMG in India, said that the Bhadla tariffs change the equation for every form of electricity generation in the country.

“It has beaten all expectations. The industry was expecting the tariff to fall to Rs2.8 per unit. At these prices, it is a matter of time before solar along with storage transforms India’s energy landscape,” said De.

However, some analysts have expressed concerns about the sustainability of such low tariffs.

Consulting firm Bridge to India in March termed the recent low winning bids for solar power projects in India “unsustainable” and warned that “inadequate risk pricing poses a severe viability challenge for the sector”.

The solar space has already seen a significant decline in tariffs from Rs10.95-12.76 per kWh in 2010-11. The previous low was Rs3.15 per kWh, bid by France’s Solairedirect SA in an auction last month to set up 250MW of capacity at Kadapa in Andhra Pradesh. This low was preceded by Rs3.30 per unit quoted for a 750MW project at Rewa in Madhya Pradesh.

SECI has attributed the bidders’ interest to tripartite agreements (TPAs) between the Reserve Bank of India, the Union government and the state governments, which provides comfort to power producers against payment defaults by state electricity boards (SEBs).

India’s growing green economy has been fuelled by the government’s ambition around clean energy. India plans to generate 175 gigawatts (GW) of renewable energy by 2022. Of this, 100GW is to come from solar power projects.

With 8.8GW of capacity addition projected for the year ahead, India is set to become the third-biggest solar market globally in 2017, overtaking Japan, according to the India Solar Handbook 2017 released by Bridge to India on Monday.

24. From here to $20 trillion: India’s economic growth strategy

BusinessLine, Niranjan Rajadhyaksha, 9 May 2017

The NITI Aayog action plan to boost agriculture as well as job creation in modern activities fits well with what has happened over the past few decades

The Economic Survey as well as the new NITI Aayog action plan could be read as a vote of confidence in the Asian development strategy. Photo: Pradeep Gaur/Mint

The NITI Aayog has put out an action plan for the next three years. The document has been severely criticized for being a laundry list of government policies. A strategy document is to follow. It should ideally have come before the action plan—to provide a strategic backdrop for individual policies listed out in the three-year action plan. The sequencing is a bit odd.

There are some elements of strategic thinking that can be gleaned from the action plan itself. The NITI Aayog, in its discussion on transforming Indian agriculture, has dealt at length with the challenge of increasing farm productivity. It has later backed a traditional Asian strategy of creating quality jobs through the expansion of the organized industrial sectors as well as a shift within it towards more labour-intensive goods and services.

Exports have been given a central role in the transformation plan. The export market is far bigger than the domestic market. The need to compete in competitive global markets creates incentives for higher productivity. Large firms also support an ecosystem of smaller firms that provide intermediate goods through supply chains.

The implicit NITI Aayog strategy should be seen against international development experience over the past six decades. In a new paper published in January, economists Xinshen Diao, Margaret McMillan and Dani Rodrik have empirically examined the drivers of economic transformation across the world. They have decomposed growth into two categories. The first driver of economic growth is labour productivity changes within a sector. The second driver is the change in labour productivity as people move from the traditional to modern sectors. Latin American growth is better explained by higher productivity within sectors. African growth is driven by structural change as labour is reallocated.

The odd thing in this growth decomposition is that both drivers do not kick in. Latin American growth has been accompanied by weak structural change as people have moved from high-productivity work to low-productivity work. African growth has been accompanied by deterioration in productivity growth in the individual sectors of the economy. This is paradoxical, since the Asian growth experience was based on both drivers—and powered by export growth. Productivity within sectors went up even as there was a structural shift of labour from farm to factory.

Diao, McMillan and Rodrik note that the Indian growth experience has been closer to what happened in Asia rather than the record in Latin America or Africa. The NITI Aayog strategy of boosting farm productivity on the one hand and creating new jobs in modern activities on the other fits well with what has happened in the past few decades. Interestingly, the Economic Survey written this year by Arvind Subramanian also notes that India has begun to resemble Asia in terms of its fiscal balances, high savings rate and trade openness.

The Indian development strategy is clearly influenced by the work of the West Indian economist W. Arthur Lewis, who won the Nobel Prize in 1979 for his description of the development process. Lewis drew an important distinction between the traditional and modern sectors of an economy. Productivity is higher in the latter. Economic growth thus depends on how rapidly resources, and especially labour, move from the traditional to the modern sectors of an economy.

The NITI Aayog needs to make some of these issues clear in its promised strategy document. It also needs to grapple with the undeniable fact that India has not been able to pull off a Lewisian transition. In his landmark 1992 budget speech, Manmohan Singh had clearly said that the policy goal over the long term was “to evolve a pattern of production which is labour intensive and generates larger employment opportunities in productive higher income jobs….” Twenty five years later, the NITI Aayog action plan seems to be informed by the same reasoning.

The Economic Survey as well as the new NITI Aayog action plan could be read as a vote of confidence in the Asian development strategy—and a counter to the quixotic ideas about using the millions of tiny enterprises in the informal sector to drive economic transformation.

But there are challenges as well. The ability to create jobs in modern enterprises will be tested by the increasing use of automation in factories and offices. The ability to push exports will depend on whether the global system remains open in the face of growing protectionist sentiment in the developed world. These two challenges—weak job creation as well as export pessimism—have cast a long shadow on Indian development strategy at least from the days of the second Five-Year Plan.

The past 25 years have seen the Indian economy grow more than eightfold in dollar terms between 1992 and 2017, according to data from the International Monetary Fund. A $293 billion economy is now a $2.4 trillion one. Average incomes have also gone up by a factor of six over the same period—from $318 to $1,850. The big question is if, assuming the same momentum, the next 25 years will end with a $20 trillion economy where the average Indian citizen earns $7,100.

What is the strategy to get there—or even beyond?

25. PM Narendra Modi’s focus shifts back to India’s foreign policy

Livemint, Elizabeth Roche, 14 May 2017

Narendra Modi is set to give more attention to foreign policy with visits to Germany, Spain, Russia, Kazakhstan and Israel in the coming weeks.

New Delhi: With assembly elections and a Parliament session that cleared important tax legislation behind him, Prime Minister Narendra Modi is set to give more attention to foreign policy with visits to Germany, Spain, Russia, Kazakhstan and Israel—besides possibly the US—in the coming weeks.

Modi’s first foreign visit of 2017 was to Sri Lanka on 11-12 May where he took part in the international Buddhist Vesak Day celebrations—commemorating the birth, enlightenment and the death of Lord Buddha. The visit came almost six months after his 10-12 November visit to Japan—seen as one of the longest gaps between foreign visits by the prime minister since he took office in May 2014.

With crucial state polls to Goa, Manipur, Punjab, Uttar Pradesh and Uttarakhand in February and March where Modi was seen as the star campaigner for his Bharatiya Janata Party (BJP), “the focus was naturally on domestic issues,” said a person familiar with the development. With the National Democratic Alliance government advancing the budget session of Parliament by a month—from end-February to end-January with the general budget being presented on 1 February than 28 February—Modi’s parliamentary schedule also had to be taken into account before fixing dates for his travel abroad.

Almost immediately after the conclusion of the state assembly polls, the Modi government played host to a slew of leaders including the prime ministers of Malaysia, Bangladesh, Sri Lanka and Australia besides the presidents of Nepal, Cyprus and Turkey.

Later this month, the prime minister will visit Germany on 30 May for inter-governmental consultations with Chancellor Angela Merkel and then visit Spain on 31 May for the first stand-alone bilateral visit by an Indian prime minister since that of former prime minister Rajiv Gandhi in 1988.

From Spain, Modi will head to St Petersburg in Russia to attend the St Petersburg International Economic Forum (SPIEF) to be held from 1-3 June. He will also hold his annual summit with Russian President Vladimir Putin on the sidelines of SPIEF.

Later, on 8-9 June, Modi is expected to visited Astana in Kazakhstan for Shanghai Cooperation Organisation (SCO) meet, where he is expected to come face to face with Pakistan’s PM Nawaz Sharif. It is unclear at present whether the two prime ministers will sit down for talks like they did on the sidelines of the SCO meet in Ufa in Russia in July 2015.

In July, Modi is expected to visit Israel, in the first-ever visit to the Jewish country by an Indian prime minister. India and Israel established diplomatic relations in January 1992 and both countries are looking at the possibility of an exchange of prime ministerial visits by the time the 25th anniversary year closes in January 2018. Ahead of that, Modi will be hosting Palestinian President Mahmoud Abbas in New Delhi next week.

Modi is also expected to travel to Hamburg for the G20 meet on 7-8 July, according to Indian government officials.

Officials are also working on possible dates for Modi to visit the US and meet President Donald Trump, people familiar with the matter said.

* * *

LISBON, 20th May 2017

NEWSLETTER, 20-V-2017

INDIA

– GENERAL POLICY, INFRASTRUCTURES, COUNTRY FINANCES, ETC.

1.1. New CII chief sees India growing at 10% in 3 years

BusinessLine, 4 May 2017

Healthcare major Apollo Group’s Shobhana Kamineni has all her hopes set on the Indian economy and has predicted a 10 per cent growth in gross domestic product (GDP) in three years.

On Thursday, Kamineni, Executive Vice-Chairperson of the Apollo Group, took charge as the President of the industry body Confederation of Indian Industries (CII) for 2017-18.

The issue had recently raised a furore when Bibek Debroy, Member of the NITI Aayog, said farmers should be liable to pay taxes.

1.2. Why India should tax agricultural income

Livemint, 2 May 2017

A number of other states such as Uttar Pradesh and Rajasthan have flip-flopped on the issue over the decades, introducing and then rolling back agricultural tax.

It would be a pity if the logic of the colonial administration continued to dictate tax administration in India nine decades later.

2.1. Modi @ 3: A year of big-bang action

BusinessLine, Richa Mishra, 15 May 2017

Winds of change

India Inc endorsement

Over the past three years, Mittal added, the sentiment around India has become “much more positive” despite a challenging global environment.

‘UPA schemes repackaged’

Looking ahead to the next two years, which will lead up to general elections in 2019, even those who acknowledge the frenetic pace of policy actions of the past year wonder if they will be sustained.

(With inputs from KR Srivats, Surabhi, AM Jigeesh and Amiti Sen)

3.1. Global pension funds scouting for deals in India's solar power sector

Reuters, 30 Apr. 2017

Power generation

Investors' focus is primarily on solar power generation, funding large-scale solar parks.

APG Asset Management, which last year agreed to jointly invest $132 million with India's Piramal Enterprises into solar power, is looking for more deals.

“We expect to be able to announce another investment in the Indian renewable energy sector in the coming months,” said Hans-Martin Aerts, APG's infrastructure head for Asia Pacific.

Aiming high

China, the world's biggest solar producer, more than doubled its capacity last year, to 77.42 GW.

India typically logs more than 300 days of sunshine a year.

Kim declined to comment on any specific investment plans, but two people with knowledge of developments said CPPIB was scouting for deals.

Funding and M&A in India's solar sector amounted to around $1.6 billion in January-March, says research firm Mercom.

While deal sizes have been relatively small, some companies such as Japan's SoftBank, along with partners, have pledged to invest $20 billion in Indian solar power generation projects.

Not all sunshine

None of this comes without risk, of course.

Intermittency - power is only produced under bright sunlight - is another issue, as there are additional costs for using inverters or diesel generators to use solar power at night.

“Based on current market conditions and policies, I see a path to 65-70 GW (solar capacity) by 2022, but not more,” said Mercom CEO Raj Prabhu.

That's still some way short of the government pledge for 100 GW by 2022.

“To reach 100 GW by 2022, distribution company finances need to improve drastically, power demand has to increase quickly, and transmission infrastructure needs to keep up,” Prabhu said.

3.2. Sun shines on $300-billion global fund for clean energy

BusinessLine, Twesh Mishra, 1 May, 2017

The ISA was instituted to connect nearly 121 solar-resource-rich nations for research, low-cost financing and rapid deployment of clean energy.

Funding mechanism

“The corpus will never be spent and acts as a permanent endowment to the ISA. All that can be spent is the interest on the corpus,” Tripathy said.

This will be similar to initial contributions by the Indian Renewable Energy Development Agency and the Solar Energy Corporation of India to the ISA.

4.2. We want to scale up innovation culture at Tata group: CTO Gopichand Katragadda

Livemint, Shally Seth Mohile, 15 May 2017

Tata Sons chief technology officer Gopichand Katragadda on facilitating the creation of tech road maps to sharpen focus on consumers through digitization.

How are you facilitating innovation at individual company level?

Which are the companies that are part of Innovation Edge?

Are there any tangible targets for these?

5. Arun Jaitley, launches Operation Clean Portal; Will enable citizen engagement for creating a tax compliant society and transparent tax administration

The salient features of the Operation Clean Money Portal launched today are:

Providing comprehensive information at one place consisting of Step by Step Guides, Frequently asked Questions, User Guides, Quick Reference Guides and Training Toolkits related to verification process and other issues.
Enabling Citizen Engagement for creating a tax compliant society where every Indian takes pride in paying taxes. Citizens would be able to support the Operation Clean Money by taking pledge, contribute by engaging and educating fellow citizens, and share their experiences and provide feedback.
Enabling Transparent Tax Administration by sharing status reports (including sanitized cases and explanation of verification issues) and thematic analysis reports (e.g. taxpayer segment analysis of cash deposit data).

Providing detailed explanation to create environment of transparency
Sharing investigation findings for specific segments (e.g. Jewellers, petrol pump, traders, property purchasers etc.)
Centralised monitoring and gradual escalation of inadequate response cases for enforcement action