Mexico is pushing to double crude oil exports to China next year and boost India-bound shipments, the next stage of a long-term plan to diversify oil sales away from an increasingly energy-independent United States.Mexico is also open to importing light crude supplies from the United States, the country's top oil trade executive said in an interview, a sign that the world's No. 10 oil producer may be ready to give up decades of total crude oil self-sufficiency in order to take advantage of a growing glut of U.S. shale oil."We expect to market increasing volumes of our crudes" to both China and India, said Luis Felipe Luna, CEO of P.M.I. Comercio Internacional, the international oil trading arm of Mexico's state oil monopoly Pemex.Crude oil shipments to China, which have risen from zero in 2010 to more than 20,000 bpd so far this year, will reach a yearly average of 30,000 barrels per day (bpd) but could more than double in 2014, said Luna.Exports to India already stand at nearly 100,000 bpd but are likely to increase in the short and medium term, he said in a rare interview this week. In total, Asia could be taking as much as a fifth of Mexico's 1.1 million bpd of exports.The United States is still by far Mexico's largest oil export partner, but shipments have halved since 2006 to less than 850,000 bpd this year, according to US government data, the lowest rate in two decades due to both declining Mexican production and rising US output.(Reuters)
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Essentially, in my mind, there are three parameters around which the dilemma to ‘serve the chicken or throw it’ revolves. Evaluation partly fuelled by education, evolution triggered by the milieu in which one lives and economic impact.Let’s begin with education. Broadly speaking, anyone who spends two decades of his life ‘learning’, is expected to be more discerning between ‘right’ from ‘wrong’. It can also be concluded that an educated individual will likely do more ‘right’ than an uneducated person. Right? Not exactly.The basic problem here is that there is no fixed parameter to define ‘right’. So, while the current education system certainly helps develop lenses through which one can tell ‘right’ from ‘not so right’, the problem is that what one person considers ‘right’ may not be so for another person. Ironically, the barometers for defining ‘right’ vary from society to society, by time, and indeed by social strata. Besides, there are extraneous factors overriding the inputs delivered or expected to be delivered by the education system. Every child in the country is encouraged by his elders to be the best in his class, and since success is based on a comparative scale, the general tendency among most educated Indians is to benchmark themselves against fellow mates. Ironically, the elders giving advice to these children are being coached to be good team players in their workplaces. No wonder one often hears in global corporate circles that Indians are excellent individual contributors but poor team players. Therefore, to just blame the education system for the ‘dilemma’ may be fashionable but not comprehensive. Societies evolve over time. More importantly, governance mechanisms mature with time. The critical thing to note here is that human behaviour is dynamic and generally improves over a period of time as the benefits of mutualism become visible.And finally, it is all about the economics of the choices to be made. For most situations, sheer common sense and some basic education is enough to differentiate ‘right’ from ‘wrong’. However, in most cases, the decision is more around the economic impact of the choice. Vatsa, with his high ethical standards, may have compromised on the quality of the bigger lot to achieve the economies of scale but he might have satisfied his ethical ego by rejecting a smaller unfit lot.The jury is still out on drawing a correlation between standard of ethics and degree of fulfilment of physiological needs. So, while being coached to maintain high ethical standards in life, many of us have seen our role models stutter, stammer and falter in high-impact situations.I think that as every child grows up to take on the world, besides the education system, which within its own limitations is expected to convey the acceptable ethical and moral standards, there are several external situations and interventions that exposes the child to the dilemmas of the real world and, in some sense, sets their value systems. It is the same education system and society that created both, a Kundu senior and a Vatsa.The concept Raman brings out on inculcation of dealing with ‘grey zone’ is an interesting one! I think it is time that our pedagogy evolves to the next level of teaching through experimentation and explorations. So, while the young citizens are taught the societal extent of acceptability through textbooks, they are also made aware that life is all about making the choices and living with them.I do agree with Raman on his theory of evolution. I think as our democratic system of governance matures, ‘realism’ would tend to get closer to ‘idealism’ as the community gets exposed to the benefits of honesty, trust and faith in each other.I believe a lot of it is also linked with our economic situation. As the country prospers with better schools and improved literacy standards, there will come a day very soon when our college students would throw the dropped chicken in the garbage bin because at that point everybody would be doing the same. Inshalla! The author is a CFO for global applications business for CSC . He has over 20 years of experience, including at GE and HUL(This story was published in BW | Businessworld Issue Dated 26-08-2013)
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The idealism of education is not about having one’s head in the clouds but about being fully mindful of the goings-on in the larger society. Not supporting them, but just being aware.The search for the truth, or the search for precision in whichever domain of study we undertake, ensures that we continue to evolve and reach higher rather than lower levels. If people become cynical about learning, then who will provide the engine for the future? The belief that education must be moderated by a large dose of reality means only that our students need to be better informed about the legacies that are constantly in the making by opportunists and the short-sighted, and the price they are likely to pay in future.There is a fundamental ‘sleight of hand’ involved in this story. Organisations can play around with their standard ‘tolerance ranges’. The idea that “schools should bring in reality” puts the entire blame on the so-called idealism of schools. The issue is not the school but the people in organisations who want to take short cuts to maximise their gains. If schools do not have ideals, how can the future be an advancement of the present?We are all aware of how progressively standards can get eroded. Pieces of chicken falling on the floor to be picked up and used without a care or tweaking quality standards to pass sub-optimal products, or whatever else, over time results in a very different product with less defined standards than was perhaps envisaged at the start of the operation. The insinuation that the youth have their heads in the clouds or that those responsible for education are being unrealistic is getting the facts all wrong. Perhaps, the kids need to ‘tour’ the reality of the adult ‘sleight of hand’, the so-called grey zones, or rampant opportunism, as evidence of what is actually happening, and then perhaps reflect about what is appropriate and right. Education, like the judiciary, needs to maintain its impartiality for the truth. A corrupted judiciary will result in the absence of safety and a degeneration that will go uncontrolled. Over time there will be anarchy or the absence or disregard of the law. A corrupted education system will result in people who will have no standard for the truth at the heart of all disciplines. Anything will be considered right and acceptable. Where will we stand in the world stage?It is not just about providing more and more mindless people as part of the workforce. This case study makes it appear as if those with falling standards in the world of work are trying to co-opt students to turn a blind eye to what is happening and appreciate the ‘grey’ as a necessity and not as a form of corrupt or unethical practices. Take an instance from our not too distant past: Are we saying that the standards broken for the disastrous Commonwealth Games are really acceptable? That’s the reality of the world and we have to accept it? To hope for something aspirational, better, more vibrant, more inspiring is idealistic? Do we want our children to become cynical and taking short-cuts at every step of the way? What will this do for us as a nation?Old Mr Kundu, Punya’s father (of Part 1), seems to think that his own helplessness as a professional should translate as moderating the idealism of students. Granted that he had a lot of reasons why he was helpless but to think that his constraints should be a lesson for education makes it sound as though he is displacing his anger away from where it really belongs. Idealism is about aspiration, growth and evolution. One cannot grow by not looking at the facts. Our leaders, with their failings or virtues, have to be seen as they are. The objective has to be of going beyond them, and not fitting into their definition of the game. Those in education who are truly promoting excellence through enquiry and reflection are the real heroes — they have the courage to do so inspite of a large group that treats the process like a factory for cogs in the proverbial wheel. The author is a consultant at the Centre For Creative Leadership, Asia-Pac(This story was published in BW | Businessworld Issue Dated 26-08-2013)
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An inter-ministerial panel has suggested higher taxes for non-essential imports with a view to curbing inward shipments and containing the current account deficit (CAD).The Committee has also suggested a list of non-essential items the import of which could be compressed, with a view to bridge the trade gap.These suggestions form part of the recommendations made by the Committee set up by Finance Minister P Chidambaram under the chairmanship of Rajat Bhargava, Joint Secretary (Budget Division) to suggest steps to contain the rising CAD, which had touched a record high of 4.8 per cent of GDP in the last fiscal.The committee has already submitted its report to Chidambaram and according to sources some steps are likely to be announced soon."The panel has suggested higher taxes on those non- essential items which do not add to inflationary pressures," sources said.Chidambaram had earlier said that government would be looking at "some compression in non-oil and non-gold imports, especially of non-essential goods", citing the example of coal and electronic hardware.For the April-June period this fiscal, exports were down by 1.41 per cent at $72.45 billion over the same period last year. However, imports during the period were up by 5.99 per cent at $122.6 billion.Trade gap in the first quarter stood at over $50 billion.India's exports during 2012-13 was at $300.3 billion, while imports aggregated $491.9 billion. Trade deficit stood at $191.6 billion during the period.Current Account Deficit (CAD) occurs when total imports of goods, services and transfers are higher than exports, reflecting outgo of foreign exchange.(Reuters)
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Why does it seem that the states have stopped competing for investment? Remember the 90s when Andhra Pradesh and Karnataka fought tooth and nail to upstage Maharashtra and Gujarat? How the Chennai region managed to get all the auto sector investment even though Pune region had a legacy advantage. The continuing sense of gloom among investors has been fed largely by the increasing lethargy of state governments to push growth. State governments and chief ministers make half hearted attempts to hold investor conferences. More effort is spent on organizing a summit than in clearing hurdles for projects. Chief ministers hold the occasional photo-op meeting with business leaders to show their commitment for growth. But soon after the flash bulbs move away, the chief minister and the government turns its face away from pending problems. Frustrated by such behaviour business groups are getting specific about project clearances. The Confederation of Indian Industry recently sent a list of 62 large projects to central government that are waiting to start operations. The total investment in these projects is over $13 billion. Of these most are in power and petroleum sector while the rest are in transport and township. The clearances they are waiting for are mostly from the state governments. While the central Ministry of Environment has held up a few, the local approvals are proving to be more frustrating. A project management group set up at the central government is trying to push states into getting the clearance done. Read More articles by Pranjal SharmaIn another time and era, state governments would have fallen over each to provide the clearances. Today, investors have to struggle. Part of the reason for this is the sheer increase in number of proposals. States are running out of land but they are also severely short of innovative ideas to resolve issues. Generous compensation, structured employment in projects and removal of archaic rules will automatically speed up the approvals. But the local political leadership is loath to take the effort or to give appropriate direction to the bureaucracy. Not surprising then that an increase number of investors are planning life without India. Even as the central government relaxes foreign direct investment rules, domestic investors are flying away. Much hope is being placed in Raghuram Rajan, the governor designate of Reserve Bank of India. Low growth, falling rupee and high inflation can’t be controlled by the central bank alone. Nor can the central government alone shoulder the responsibility. States will have to pull their weight to ensure that job creation and fund generation for welfare schemes is enabled. Where the central government has failed is to creating a positive sentiment of growth and action. Even if the central ministries don’t control state level issues, they can be proactive in chasing clearances. Political parties must push their Chief Ministers to focus on improving growth. States have to be able to convince citizens that if land and other resources are being allotted for projects, the returns will be better jobs and wealth for all. India needs a fresh batch of chief ministers in states who are eager and hungry for growth and development. Tough to say when this batch will graduate and take charge. (Pranjal Sharma is a senior business writer. He can be contacted at pranjalx@gmail.com)
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The rupee rose on Thursday, 8 August, benefitting from a global risk-on trade, but dealers said the outlook is dependant on further steps from the government and the central bank to help prop up the currency. The rupee was trading 61.19/20 to a dollar versus 61.30/31 last close. It fell to a record low on 61.80 on Tuesday (6 August). Bond yields eased, helped by a rise in U.S. government debt prices. The benchmark 10-year bond yield was down 2 basis points at 8.12 per cent. (Reuters)
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The rupee's fall to record lows has raised chances that the Reserve Bank of India will take more steps to support the currency, as a strategy built on tightening rupee money markets and raising short-term interest rates has had limited effect.The worst performing Asian currency of the year so far hit a new life low of Rs 61.80 per dollar on Tuesday, breezing past a previous low of 61.21 hit on 8 July. Central bank intervention helped the rupee recover, but by Wednesday, 7 August, it was sliding once again, to stand around 61.35 by 11 a.m.Below are the possible steps that the RBI or the government could take to support the currency.RBI ActionsFX interventionTighten liquidity further by:- Raising banks' statutory liquidity ratio of 23 per cent- Further reducing how much banks can borrow from the RBI under the daily repo auction- Reducing the amount of funds RBI provides to banks under the export refinance scheme at the repo rate- Bond sales via open market operations- Raising banks' cash reserve ratio, now at a record low 4 per centRaise the policy repo rate, currently at 7.25 per centProvide a dollar-window for oil firms to pay for importsBuy oil bonds from companies by paying dollarsAsk exporters to convert FX dollar holdings immediatelyAsk importers to delay or stagger dollar paymentsCurb speculation by cutting net open position limitsPersuade banks and financial firms to raise funds abroadGovernment MeasuresRaise foreign investment limits in debtIncrease duties on non-essential imports, like electronicsAttract money from Indian citizens abroad, or issue sovereign debtAnnounce additional fiscal, economic reforms(Reuters)
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For the past two years, the power generation business has been completely unviable,” says Ashok Khurana, director general of the Association of Power Producers (APP). He could well be speaking for the entire sector, which has been grappling with issues such as falling plant load factor, stranded capacity, low generation, critical coal stock levels and rising losses of distribution companies. The last two have seriously crippled the generation sector, say insiders. The past few weeks have seen the government taking steps to revive the sector, but it might be a case of too little too late. The Cabinet Committee on Economic Affairs (CCEA) has cleared a proposal to allow power producers to pass on the cost of imported coal used to make up for the deficiency in domestic supply. The move is expected to provide relief to power projects that have been operating at a plant load factor of 68.40 per cent this year as compared to 73.76 per cent last year.However, many fear a delay in the implementation of the proposal. “It’s too early to predict the final result, as implementation is key to issues that remain unresolved,” says Anil Sardana, managing director, Tata Power. Khurana echoes the sentiment: “Even the first step, where the coal ministry needs to pass an amendment to the National Coal Distribution Policy, has not been taken.”Moreover, industry honchos do not see the CCEA measure as a permanent solution to the fuel crisis. “We have to look at improving the production of coal in keeping with our capacity addition. In the first year of the current (Five-Year) Plan, we have already added some 18 gigawatt (GW) of fresh capacity. Is our coal production going to match that,” asks Arup Roy Choudhury, CMD of NTPC.The problem of mismatch is set to persist with the Ministry of Power targeting 80 GW of fresh capacity in the 12th Plan, of which 23 GW has already been added till June 2013. Barring plants that depend entirely on imported coal and those that are expected to be supplied with coal blocks, the power sector’s requirement will be 653 million tonne (mt) of coal per annum. Of this, only 415 mt will come from Coal India. The remainder will have to come in via imports. The government’s move is going to inflate the electricity bills of consumers. The extra burden will be in addition to the regular tariff hikes prescribed by the financial restructuring package for discoms. “We can’t make the developer responsible for something not in his control. Now, whatever is paid by the developer is passed on to the consumer. It is for the consumers to decide if they want more expensive electricity or if they will be fine with candlelight,” says a senior power ministry official.But there is scepticism about the smooth implementation of the pass-through mechanism. “The discoms will have a problem with this... Politicians will not allow regulators to increase the tariff. The discoms will end up buying electricity at a price higher than what they will sell at. Their losses will go up,” says a senior Planning Commission official.Clearly, there is pain ahead for discoms. “Theoretically, the impact of imported coal is going to get passed through, but it won’t happen quickly. There will be a time lag. The regulatory process takes time unless there is a fuel surcharge in place, which allows for quarterly reviews. Otherwise, the entire process takes more than a year,” says Salil Garg, director, corporates, at India Ratings. Given that discoms already have Rs 70,000 crore of regulatory assets (money recoverable in future from consumers with regulators’ sanction) on their balance sheets, this lag will only increase the pressure. Passing on the extra burden to the consumers will not be easy as pressure builds on state governments to moderate tariff hikes in the future. break-page-breakAccording to Crisil Research data, while 15 states hiked their tariffs in 2012-13, only 13 state electricity regulatory commissions, out of the 21 that applied for a revision this year, have allowed their respective discoms to hike tariffs. Moreover, the average hike this year has been only 5.2 per cent against 13.4 per cent in 2012-13.“In 2013-14, in the first quarter, seven states have hiked tariffs. We expect annual tariff increases of 5-7 per cent from 2013-14 to 2015-16. This, coupled with the implementation of the debt restructuring package for state-owned discoms, is estimated to eliminate the ACS-ARR (average cost supply and average revenue realised) gap by 2015-16,” says Rahul Prithiani, director, Crisil Research.Further, discoms have to contend with their AT&C (aggregate technical and commercial) losses, which stand at an average of 25 per cent, and the growing burden of agricultural subsidies — the sector contributes a measly 8 per cent to the discoms’ revenues while consuming 22 per cent of the total electricity produced. “Despite the current issues, I don’t see much of a problem with the generation sector; the challenge for the power sector lies on the distribution side,” says P. Umashankar, ex-secretary, Ministry of Power.The government’s recent decision to increase the price of domestic gas from April 2014 will make gas-based power costlier. Pre-empting this, Essar Energy has decided to convert two of its gas-based projects (a total of 1,015 MW capacity) into coal-fired ones.While the going has been tough for conventional energy sources, renewable energy has somewhat redeemed itself. It accounts for around 13 per cent of the total installed capacity, or 28 GW, as of March 2013. While technical and economic concerns around renewable energy remain, it is seen as the answer to a power-deficit India, where only 92.8 million out of the total 167.8 million households have access to power. Efforts are under way to integrate this energy into the grid. As things stand today, all the stakeholders need to get their act together: the consumers, the producers, the distributors, the regulators and the government. As the Planning Commission official aptly puts it: “The basic problem with the Indian power sector is that those involved want conflicting things... We have stopped being a fair state and there is no appetite for a fair and equitable solution.” chhavi.tyagi@abp.in;chhavityagi.bw@gmail.comtwitter@chhavityagibw(This story was published in BW | Businessworld Issue Dated 26-08-2013)
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At the reception of Sanchar Bhawan, a stone’s throw from Parliament House, was where it all began. On Thursday, 10 January 2008, the Department of Telecommunications (DoT) issued 122 mobile telecom licences to eight telecom operators in less than two hours. By the end of the day, the government was richer by a neat Rs 12,386 crore. Matters came full circle 49 months later — 4 February 2012 — when Justices J.S. Singhvi and Asok Kumar Ganguly of the Supreme Court quashed the 122 licences, leaving behind a trail of badly bruised telecom companies. The next 18 months were the hardest the telecom industry has faced since inception. The tough times coincided with the slowing down of the Indian economy. That’s when operators, old and new, big and small, national and regional, went all out on reducing costs. The cuts have been maniacal since the industry was saddled with a debt of Rs 250,000 crore ($41.7 billion). One, many free offers were reduced while others were stopped. Some operators did the unthinkable by hiking baseline tariffs. Two, large operators like Bharti Airtel and Reliance Communications (RCom) took measures to retire debt, while newer entrants restricted operations to just a few circles. Three, in the last 18 months, operators cut close to 8,000 jobs, most of which will not be replaced. Four, as voice revenues stagnate, operators have cut data rates — be it 2G or 3G — to woo users. All this fits in to meet the challenge that Mukesh Ambani’s Reliance Jio Telecommunications is likely to pose once it launches operations in 2014. The recent move to allow 100 per cent FDI in the sector could lead to consolidation.The fallout of the licence cancellations was immediate. In less than three months, three operators — Etisalat, Loop Telecom and S Tel — decided to exit. Three others — Uninor, Sistema Shyam Teleservices (SSTL) and Videocon Telecommunications — decided to restrict operations to just a few circles. The subscriber numbers said it all. In the last fiscal, India’s mobile base fell 50 million from 951 million (March 2012) to 898 million (March 2013). While that has resulted in overall teledensity falling from 78.66 per cent to 73.32 per cent, average revenue per user (Arpu) of GSM users has risen from Rs 95.5 in June 2012 to Rs 98 in December 2012, while minutes of usage rose from 346 minutes (March 2012) to 359 (Dec 2012). So is the worst over for the industry? It seems so. Sunil Bharti Mittal, chairman, Bharti Airtel, says: “The telecom industry is on the mend and will get into a strong recovery mode.” Ending Freebies As subscriber numbers fell, operators started by cutting down on freebies. Bharti Airtel reduced discounts and limited the validity of pre-paid cards in January. Idea Cellular and RCom followed suit. While Bharti did not touch tariffs, promotional benefits were reduced and free minutes cut sharply. So, while subscribers pay the same amount, they now get fewer minutes of talk time. Says Hemant Joshi, partner, Deloitte, Haskins & Sells: “What this has done is weed out inefficiencies in the system.” While other operators cut freebies, RCom raised tariffs twice — from 1.2 paise to 1.5 paise a second, and then to 2 paise a second — over the past few months. It’s an indication of a degree of rationality in the industry as it moves from chasing subscribers to improving revenue per minute (RPM) and profitability.That was the easy part. The tough task lay in reducing debt accumulated over the years. Bharti Airtel led with a Rs 63,840-crore ($11.7 billion) debt, followed by RCom with Rs 38,864 crore ($7.15 billion) and Idea Cellular with Rs 11,588 crore ($2.13 billion). The leading operators are highly leveraged. While the net debt/Ebitda (earnings before interest, taxes, depreciation and amortisation) ratio of Idea Cellular is 2.1, it rises to 2.3 for Bharti and 5.4 for RCom, according to a report by financial services firm Axis Capital. Over the past month, both RCom and Bharti Airtel have retired $1 billion of debt each. RCom completed full repayment of two syndicated ECB facilities totalling Rs 6,000 crore ($1 billion) during the quarter ended June 2013. It has also repaid another Rs 1,200 crore ($207 million) of other foreign currency loans during the period. In addition, RCom is looking to leverage land in Navi Mumbai and Delhi. It is believed RCom’s debt/Ebitda ratio could come down to 3 soon. break-page-breakRCom also struck a deal to share its tower infrastructure (45,000 towers) with Reliance Jio Telecom, which will pay RCom at least Rs 12,000 crore ($2.1 billion) over the 15-year licence period. So, RCom is assured of at least Rs 800 crore every year from Reliance Jio. A telecom consultant says: “While it will help RCom pare its debt, it also allows Reliance Jio to launch services faster.” Meanwhile, Bharti Airtel raised $1.5 billion through bond issues in March. It recently retired around 10 per cent of its debt using the Rs 6,796 crore it received from the proceeds of the preferential allotment of 5 per cent equity shares to Qatar Foundation Endowment. During the earnings call after the 2012-2013 results were announced, Sarvjit Dhillon, group CFO of Bharti Enterprises, said, “We do have a process to diversify the debt portfolio. We did have a maiden bond issue this quarter raising $1.5 billion. It is a 10-year bullet repayment.” Restricting CoverageWhile debt is not a problem for newer operators, they are slashing costs. In the November 2012 spectrum auctions, Uninor bid for only six circles, Videocon for seven and SSTL for eight (in March 2013). That has started showing results. Uninor has achieved break-even in three circles — UP East, UP West and Andhra Pradesh, which account for 53 per cent of its 31.8 million subscribers. Says Yogesh Malik, CEO of Uninor: “We currently cover 40 per cent of the population. We will grow wider and deeper in the circles that we cover initially.” We are working to achieving break-even in all six circles by December. Says Ranjan Banerjee, head of strategy, SSTL: “We are working towards breaking even in all circles by end-2014.” Older operators too are tightening their belts. Tata Teleservices (TTSL) has stopped operations in Assam, Jammu & Kashmir and North-east circles, while Aircel has reduced operations in five. Telecom Regulatory Authority of India data shows that the national RMS (revenue marketshare) of the top seven operators is 96.7 per cent. In UP East, the RMS of new operators is the highest nationally, at 6.5 per cent, followed by UP West (5.7 per cent). Now the big focus is on increasing data revenues. The first signs of a rise in data earnings are already there. According to the Nokia Siemens Networks (NSN) MBit Index that tracks mobile broadband in India, mobile data grew 92 per cent during 2012. Says Neeraj Arora, director, Internet Business Solutions Group, Cisco Systems: “As operators face declining profit growth, the push into data increases. We see video as the key disruptor in 4G services.” While 3G is yet to gain traction, operators have slashed both 2G and 3G data tariffs, trying to cash in on rising demand in small town India. Says Mohammad Chowdhury, leader telecom, PwC India: “The recent data tariff reductions are aimed at stretching usage, since they kick in once a user has exhausted his pre-paid data limit. So rather than a ‘price war’, we see this as a further step towards building usage in data.”Much of the increased data usage is because of the government, which has started putting information online. Says Rajan Mathews, director general, Cellular Operators Association of India (COAI): “Data uptake is expected to rise as it becomes easy to access data on government sites.” Across operators there has been a spike in data usage. In the year ending March 2013, Bharti Airtel recorded a 75 per cent increase in data usage per consumer. The biggest uptake in data has been from Airtel’s recent scheme of watching a video at Re 1. A consultant says, “This scheme has taken small towns by storm. It is providing a lot more data traffic than was initially expected.” Like Mittal says, the signs of a revival are visible. But industry needs regulatory support. And DoT needs to settle many issues including 3G intra-circle roaming, tax claims on operators, prospective licence fees and spectrum prices. The biggest driver could be the policy on mergers and acquisitions. Having 6-7 strong operators is better than a dozen weak operators. That could well be the much-needed shot in the arm the industry needs. anup.jayaram@abp.inanupjayaram@gmail.comtwitter@anupjayaram(This story was published in BW | Businessworld Issue Dated 26-08-2013)
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Last October, turbines for the NTPC plant in Farakka, West Bengal, needed to be transported through National Waterway 1 (Allahabad-Haldia) due to their large dimensions and 300,000 tonne weight. It took 45 days for the two boats to get from Allahabad to Kolkata, a distance which should not have taken more than 10 days at the most. The reason? The shallow draught along parts of the Ganga believed to be navigable by fairly large vessels.India has failed to promote and maintain the cheapest and greenest mode of ferrying goods and people — water transport. Even though in the 1980s, of the 14,500 km of navigable waterways in India, 4,500 km were declared commercially viable, they are still “under development”. Currently, less than 3,000 km are used — constituting a mere 0.4 per cent of the total transport share and an even lower 0.15 per cent of freight movement in the country.Waterways in the Netherlands amount to just 5,200 km, but account for 60 per cent of the freight movement in the country. Germany has 56 of its 74 metropolitan regions connected by waterways and has 100 inland ports, whereas India — with a landmass and coastline many times that of Germany’s — has only 190 ports in all, with not even a handful that are inland ports. Again, while the US uses over 19,000 km of commercially navigable inland and coastal waterways to transport 8.3 per cent of the country’s freight, in China that number stands at 8.7 per cent.Proposals intended to promote waterways in India rarely take off, like the Mumbai transport department’s attempts to run a ferry service between Borivili and Nariman Point. First proposed in 1983, the project cost is estimated at around Rs 1,000 crore today. It has been discussed several times, been cleared by the Union environment ministry and the Maharashtra State Road Development Corporation has even gone to the extent of issuing tenders twice over the past four years — but it is nowhere close to starting.At the national level, in the 1980s the Union government had announced six national waterways (NW) — three of which are operational, two are stuck in bureaucratic processes and one’s future is uncertain. Of the three operational NWs, the one on the Ganga is the most popular for cargo and river tourism, largely on account of its proximity to existing or proposed industries, thermal power plants and shrines. Government officials believe this is the best developed and maintained waterway in the country.It’s All PotentialAcross the globe, water transport is recognised as the most fuel- and cost-efficient and the least damaging to the environment. It is largely used to ferry cargo because it makes economic sense. One litre of fuel can move 24 tonne over a distance of one km by road, 85 tonne by rail and 105 tonne by water. Similarly, one horsepower of energy can move 150 kg by road, 500 kg by rail and 4,000 kg by water. “The horsepower-load ratio in water transport is far more viable than any other mode of transport,” says R.P. Khare, chief engineer, Inland Waterways Authority of India (IWAI). On the cost side, he says it takes around Rs 6 crore to develop and maintain one km tonne of waterway, 1.5 to 2 times that for rail and 2 to 3 times that for roads.Water transport, for the most part, is nonexistent in India even after 25 years of the passage of the Inland Water Transport Act. In 1986, the Act was implemented, IWAI was set up and the Ganga-Bhagirathi-Hooghly system became the first NW. Yet, it is hard to name even half a dozen companies utilising water transport for goods or people. According to K.J. Sohan, former Kochi mayor and member, standing committee on town planning, Kochi Corporation, the neglect of waterways can be blamed on the lack of a “godfather” and the economics of patronage. “The most coveted mode of transport is road transport — and the exponential growth of this sector has been largely due to the automobile industry. Unfortunately, there is no boat-making industry.” Sohan says he submitted a proposal to the Centre for the revamp of Kochi’s waterways under the Jawaharlal Nehru National Urban Renewal Mission. “I never got any response and today the city is plagued with congested roads and many diversions with the upcoming metro project,” he adds.Incidentally, Kochi’s ferry service, operating from 50 jetties and used by thousands of people for going to work, shop or school, has boats that are noisy, rickety and polluting, in the absence of a policy and funding to improve services.Within the IWAI — the nodal agency on waterways set up under the ministry of shipping — there is more talk of potential than actual utilisation. As per the authority’s estimates, NW 1 is located close to 15 sanctioned and proposed coal-based power plants that could provide 25 million metric tonnes of cargo per annum (mmtpa). Fertilisers from the existing plants amounting to around 10 mmtpa can be moved on waterways as, of the 25 mmtpa consumed in India as a whole, Uttar Pradesh, Bihar and West Bengal use up 10 mmtpa. In 2010-11, around 33 million tonne (mt) of foodgrain was transported using rail and road networks, of which 30 mt was inter-state transportation. IWAI says waterways could supplement rail and road networks as in 2010-11 around 3 mt of grain could not be transported.The authority recently released a report on the development of waterways over the next two decades, which suggests NW 1 has a potential of 10 mt of coal by 2019-20, 1 mt of fertilisers, 2.5 mt of fly ash, 2 mt of foodgrain, over-dimensional cargo (ODC) of 2 mt and other commodities to the tune of 0.49 mt. During the same period, the estimate for NW 2 is around 2.6 mt of coal, 0.2 mt of fertiliser, 1 mt of foodgrain, 2 mt of cement, 1.8 mt of ODC and 0.5 mt of other cargo. For NW 3, the estimates add up to a total of 4.73 mt.A Deluge Of ProblemsThe reasons cited for poor development of water transport are lack of industrialisation along river banks, shortage of manpower in IWAI, lack of political will, poor technology, lack of incentives and an income assurance to attract investment. The lack of development of the water sector can also be blamed on the nature of Indian rivers and slow-moving vessels. Rivers in India carry a heavy silt load and are prone to flash floods. The fact that most water transport is slow moving does not appeal to business enterprises, says S. Sriraman, a professor of transport economics, Mumbai University.“A major drawback in Indian waterways transport is the lack of integration with other modes of transport,” he says. Explaining the need for integrated transport systems, the professor cites the National Transport Policy’s emphasis on the need for multi-modal integrated transport systems in urban India to reduce congestion — a fact rarely taken into account when planning roads, railways or metro systems, as evident from the ever-increasing congestion.Funds crunch has been the main hurdle for water transport. For 2013-14, it was allocated Rs 300 crore, but by June the sum was reduced to Rs 200 crore. Before the 11th and 12th Five-Year Plans, the total budgetary allocation for IWAI did not exceed Rs 100 crore for a five-year period. The National Transport Development Policy Committee (NTDPC) report notes that since IWAI’s inception in 1986, until 2012, Rs 886 crore was spent on NW 1, 2 and 3 and Rs 150 crore on schemes and subsidies. But with the 11th Plan’s increased allocation, IWAI spent Rs 560 crore, bringing the total spend over 25 years to around Rs 1,500 crore.Asked about why water transport has not moved forward despite many factors in its favour, IWAI vice-chairperson Jayshree Mukherjee says, “We are hoping with the example of NW 1, things will look up and more investors will come forward.” NTDPC, IWAI and logistics firm JITF Vector have signed an agreement to transport 330 mt of coal on NW 1 from Haldia to the Farakka plant. If the project is successful, NTPC and Jindal will look to expand the same to two more power plants — Barh and Kahalgaon in Bihar.Officials at IWAI inject a note of caution. They say private investment will only come in if there is a guaranteed load to be carried. “An assurance of sorts is needed,” says Khare. Citing the example of Goa where barely 80 km of waterway is used to carry over 55 mt of iron ore, he says water is used wherever there is a promised load as it is the cheapest form of transport.With the increasing interest of investors, officials and even tour operators, things are looking up. “We will be able to improve the waterway facilities to ensure private investment,” says Khare. He adds that in the 12th Plan, IWAI proposes to spend Rs 1,500 crore — around what it has managed to spend over 25 years. But, at present, waterways in India transport only 100,000 people and 4.5 mt of cargo annually. If projects in the pipeline materialise, investors come forward and the IWAI does not disappoint, India could boast of one of the largest and greenest transport networks in the world. mmatbworld@gmail.com(This story was published in BW | Businessworld Issue Dated 26-08-2013)
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