The one thing that people want to protect today is the data that they have. It could be on a mobile device, a laptop, a tablet or on the company's server. However, protecting it has become all the more difficult. That's where Verizon Business comes in. It brings out an annual Data Breach Investigation Report (DBIR) in conjunction with experts including the United States Secret Service, the Dutch National High Tech Crime Unit, the Australian Federal Police, the Irish Reporting & Information Security Service and the Police Central e-Crime Unit of the London Metropolitan Police. The DBIR report spans 855 data breaches across 174 million stolen records. A. Bryan Sartin, Director, Investigative Response, Verizon Business was in India to attend the Nasscom Security Summit. Sartin spoke to BW's Anup Jayaram on the issues in securing data and where India is today.Excerpts:Can you tell us what Verizon Business does on security? How is that important for India now?I head a specialty team in Verizon called the RISK team. That stands for Research, Investigations, Solutions and Knowledge. We have two very specific areas of focus in Verizon. One is, investigations—digital forensics, computers and response, electronic discovery, IT investigations when security is undermined, when security becomes a problem for Verizon customers or for anyone in the world, public or private sector. We are the world's leading non-military IT investigation team. So we are called to perform investigations and coordinate with law enforcement.Our second objective is all about intelligence. We see what happens when security becomes a problem and we go case by case picking up artifacts of intelligence, converting that into knowledge, particularly security knowledge. We hope to drive that back into the ground, make our people smarter and drive that back to customers.That's one of the reasons I am here. India is a very hot market investigations-wise. There's a tremendous amount of demand for response to electronic crimes, cyber crimes. So we have investigations going on here in India right now. I am not here for supervisory capacity but also speaking to customers. There are a few of them. There is a lot of action here both on the civil and the criminal side. Our electronics discovery business which is litigation support for civil matters has always been a big area. Starting last year, data breach investigations in India have picked up a lot for us.Any particular reason for that?I think so yes. At an overarching level, we are seeing some trends. There is a general trend in electronic crimes, away from financially motivated crimes towards "hactivism" and specially cyber espionage and cyber warfare. Cyber espionage in particular is a crime that targets intellectual property. India is heavy in intellectual property. As India grows, intellectual property here will also grow. I would say, based on the demand we see in India now, this is one of the top two or three sources of electronic crime.What's the kind of electronic crime that you have seen?The worst in terms of uninteresting and least sophistication are financial crimes. Historically, 90 per cent of all the crime we saw was financially motivated. Those were attacks against banks and insurers, big retailers and targeting consumer records. Ten years ago, we used to see very sophisticated attacks in that arena. But, they have not become more sophisticated. They have in fact become less sophisticated over time. We still see more financial crimes than others. Criminals are picking small targets like hotels, pharmacies, restaurants. That's the boring side. We see the same old stuff over and over again.On the other end of the spectrum, hacktivism has been an amazing adversary over the last year with groups like Anonymous. That's a totally different kind of adversary. Instead of being entities closely affiliated to crime, these are anyone not already affiliated to a group. All of us might be Anonymous and not know about it. The nature of these crimes is revenge. They are retaliatory crimes. They are politically motivated and they are to damage the reputation of the victim. And there are thousands of ways to do that. Hacking and stealing data is just one of those. And because of that helping customers understand the nature of the threat, how to detect it, how to prevent it. That's a big focus for us. You can deface someone's website site. You can get into their e-mail system and find embarrassing things and post them online. We have always seen proprietary kind of data posted online. That's clearly an indication that your security is not so effective. What's the strangest case that you have seen?In a real twist, we had a major hactivism case in the US this past year where credit card information was stolen and the perpetrators took credit cards and made donations to charities in the victims' names. And pretty sizeable donations in some cases. One of the interesting twists that came out of that was when many of the victims found out what was done with their money were very reluctant to retract the donation even though it was made illegally. That's a funny twist. Isn't it!!Recently Yahoo had some IDs hacked into…That's right. The information that you read online made it sound like a sequel injection attack. I am very surprised that it happened. You must have seen in our DBIR, that SQL injection was big three or four years ago. At one point it accounted for 80 per cent of stolen records. It was discovered as a threat in 1998. So, it's been there for over 10 years. It is one of the easiest attacks to detect when it is happening against your systems and networks. It is one of the easiest vulnerabilities to diagnose. You can even do it with a few keystrokes. So to see an entity like that suffer a SQL injection attack in this day and age is a little bit shocking. What didn't shock me is how weak password security is. Apparently, so many of those passwords were posted online. Massive quantities of passwords were common to many websites. And as I understand there were many people who used the same password there and on Google mail. Talk about weak password security.That facilitates account takeover. Password security is something most enterprises across the globe have figured out very well. But it needs a lot more. Around 70 per cent of all data breaches, the initial point of entry is remote access. The top five actions that lead to a threat to data, whether you talk about small victims, large victims, you talk about cyber warfare situations, weak passwords security factors into a lot of those.How do you analyse the data breaches that you detect?We build attribution tables from every data breach that we investigate. It is the science behind tracking and collecting artifacts and intelligence from each case. About two-thirds of the cases, we can say specifically who is behind the breach even down to the individuals' name. We know their aliases; we know the outlets through which they buy stolen data. Often, we know data breaches they have been affiliated to in the past. Using attribution tables, help us tie-up tools, methods and techniques, down to names of adversaries, and build tables linking individuals to crimes. We do that to set the stage for prosecution. But the more we exchange that kind of intelligence with enforcement agencies and governments around the globe, the better we will get.Are people finally prosecuted for such crimes?In fact, very, very often. It is far more often than most people think. Internationally there is a perception, especially in India, that these kinds of crimes never lead to arrests, especially when the perpetrator is outside of India. If the attack comes from China, the US or Mexico, people don't think it leads to something. But they do. That's part of the problem. The public is so interested in the victims, who is getting hacked? And they are interested in whether their data was stolen. People seem to be less interested in criminals being brought to justice for some reason. That's unfortunate.That reminds me of the fact that these days is something that is factored into hacktivism is personal information. It is not PII (personal identifiable information); it is as much about that data that people make available willingly online on platforms like Facebook, MySpace and LinkedIn profiles.What problems arise from such data posted online? Sartin: The RISK Man (BW Pic by Bivash Banerjee) Let me give you an example of what I was referring to. There was a big data breach, intellectual property that was stolen. This made headlines all around the globe. In the investigation we found exactly how it started. The criminal sent eight emails, eight different messages. They included a PDF attachment and there was malware implanted in the header. If someone opened it, it would execute on their system. Only one of the eight victims fell to it and she had some interesting hobbies. One of them was knitting. She had one of these knitting blogs where she would spend an hour a day in her office reading blogs.She was a technical person by the way, a member of the security department of that company. She was a trainer. She went around to different company offices and teaching people things like don't tape you password on the keyboard. She receives an email from her favourite knitting blog and it had an attachment which appeared to be a platinum membership subscription. She had never received an email from the knitting blog. And all of a sudden when she sees that, all the security training goes right out of the window. She opens the attachment and there was no text inside the attachment. It's blank.Being the technical person she was, she forwarded the mail to the webmaster of the favourite knitting blog and said this is obviously corrupted in transit. So could you please resend it? It spread from there.How big a threat are data breaches to the world?They haven't been so big a threat historically. If you look at the number of crimes targeting consumer behaviour, debit cards historically were a big target. In most countries there is this concept of zero liability for the loss, so long as the card holder reports the fraud. The victims really have been banks and the merchants rather than the individuals.Cyber warfare targets are very, very different. Instead of being the retailer, the restaurant or the healthcare company, it is the power plants, the water districts, the manufacturing companies, it's the critical infrastructure inside a given country. Most countries around the world, India included, are looking at better ways to secure the nation's assets. They have to prioritize and protect themselves from possibly the most threatening situations, which are things that affect large swathes of voters. Ultimately, water districts and things that take the power grid offline are worst case scenarios. The migration from cyber crimes to cyber warfare and cyber espionage affect the individual consumer more than it has done historically.Do you see IT security becoming a bigger threat as we go along?It's getting bigger as we go along. You look at mobility –machine to machine type, the diversified supply chain management and things like that. Mobile workforce and work from home employees. The need for security is becoming more acute, the awareness of that need is becoming more acute. In the last 10 years things have really changed. Security is not something in a box that once you do you have it. It's not out a technology but about a process.There was a mindset shift change about 5-6 years ago. Up until then, people thought good security was about protecting everything in the network. Nowadays, people are realising, security is more about data, more than about networks and tangible things. You are responsible for the data as a security professional, whether it is within the confines of your network or outside. With mobile forces being what they are, with tablet computers and smart phones, we are poking more holes in an out of that perimeter. So security needs to change.What about when senior official lose their laptops?When people leave Blackberry's in taxicabs and laptops at train stations, there are easy ways to control this. Disk encryption on the laptop is not difficult. Once the content is encrypted you can't use it. If I tell IT and security that I have lost my device, they can instantly wipe it remotely. There are little smart steps that people can take to mitigate the risk.There is the other issue of convenience these days with tablets connecting to the company's network. You see CIOs pointing out that end users simply want it to do their job. They need to access their email anywhere in the world with their smart phones. But, they also know that they do not have a good means of securing those devices. So its convenience versus good security, and right now it is convenience that is ahead.In India I see some very positive and compelling developments. It is very common in the US. India and the US are very much in the same place. There is a concern over the need for cyber intelligence. You see our data risk report. Take for example that crimes don't happen in minutes. They happen over weeks, months and years. On average it is seven months from point of entry to the time that the victim finds out. In 90 per cent of the times, the victim does not find out on their own but from a third party. Those are shocking statistics. They actually get worse every year, not better. You get a feeling that people are fighting modern era crimes with tools that are from the early 90s. The path forward is cyber intelligence and the sharing of intelligence.
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Dr Enase Okonedo, dean of the Lagos Business School (LBS), is a Fellow of the Institute of Chartered Accountants of Nigeria. She is a member of the senate of the Pan-African University, and the chairperson of the board of the Association of African Business Schools (AABS). Okonedo also serves in the academic advisory board of Global Business School Network (GBSN) as well as on the board of several indigenous companies. Recently in India, to develop partnerships between African and India Business Schools, Dr Okonedo spoke to Pranjal Sharma about new initiatives that will allow faculty and students from Africa and India to work together. Should management education be common to all countries?Business management education is contextual. Students must understand the social , political and economic context of business. Good leadership has to understand that. The knowledge imparter has to be world class. Making contextual does not mean that it has to compromise on quality to suit the standards of a country or a region. The best practices have to be maintained. For example, the just-in-time programme works well in Japan. But in Africa or Nigeria, the ground realities of low infrastructure and systems have to be accounted for. Therefore it is important to have a context to adapt and then innovate for local needs without compromising on the basic tenets. We have to be innovative in our thinking and practice. Faculty talent and supply is a global problem and it's the same for us in LBS and AABS. But the professors have to go beyond their own academic fields. The economics professor can't just focus on theory. He or she has to be aware of the market realities.We have mentor dean programmes for faculty to prepare them for future. The case study method is the main pedagogy for us. Now the new cases are from specific countries. They are not generic any more. So that's an innovation we have done. Is the demand for management education in African countries growing? How does AABS manage its membership?At AABS, there are 25 member schools with 3 in the pipeline. There is a set criteria to be a member. The fees has to be of a mimimum level. The school must have executive education programmes and degree courses. They must have a minimum number of PHDs and should have an active research work. Very few schools are private. Most are government run schools. There are only about 80 business schools in Africa for a population of 1.2 billion. It's a pretty dismal situation. We need more high quality schools. LBS is a private school.We are hoping the more private business schools will come up and our members will grow. University education is subsidised by the govt. In most countries there isn't enough funds for business schools. Therefore the management schools find it tough to invest more to improve the delivery of courses. We are trying to pull up the quality of business schools and increase AABS membership to 30 by 2015. What is your priority for the Lagos Business School?Over the last three years, the research agenda has been expanded. Two new centres are being launched. One is a competitiveness and strategy centre. The other is leadership and ethics centre. LBS has always taught ethics in its programmes. In some ways, it was ahead of the US institutions from day one. There are 250 graduates in the MBA programme every year. While the executive education programme has about 3,000 students.In executive education, students come once a week or once a month. The market for programmes for senior management is big. We have launched a modular executive MBA programme. We are also working on a faculty development programme in partnerships with other B schools. The vision of the LBS is to prepare students to work not just in Nigeria but in entire Africa. What kind of partnership do you foresee with Indian business schools?There are many similarities with India in terms of economic development. This is the second study trip of AABS to India. It has been very instructive. We are looking at launching several new initiatives with Indian business schools. These include student exchange programmes, faculty collaboration and developing joint courses. We may not have a joint venture to launch campuses but will have a strong academic linkage and engagement. The response from Indian B schools has been very good. Most professors have a strong affinity with Africa. There is a common heritage. They are willing to go out of their way to give their time and effort for our schools. There is a lot of passion to work together. Currently there is no exchange programme but we hope to launch some soon. The institutional framework is being created now for future .Can business schools help Indian companies in Africa?Indian nationals are now working in Africa. They must understand the importance of studying the market where they are doing business. So executive education for them is important. We can help provide these in AABS schools. The corporations are now realising the importance of education. We are working to create institutional collaboration with Indian corporations. I think companies should now drive the partnership and tell us what can be done to help them do business in Africa. Indian corporations are perceived differently from earlier. Previously they were seen as traders and small exploitative operations that did not invest in the country. Now Indian companies have invested so the perception has improved dramatically. They realise the Indian companies want to create wealth and value. The IndiAfrica campus outreach programme is holding several events in universities and business schools in Africa. What has been the impact?The IndiaAfrica campus outreach programme is a great beginning made by the Public Diplomacy Divison of India's Ministry of External Affairs and TheIdeaWorks agency. It is helping the students to think of the options beyond their country and the continent. It is opening new possibilities for them. They are eager to work and embrace the world beyond their environment. The business plan competition is a great way to sow the seed of excitement and entrepreneurship. Students realise that they start young as entrepreneurs.I think the next step is to track the impact of the entrepreneurship. To see how many students actually took the plunge. To see what is helping them and what is holding them back.We need to create more awareness about these programmes. IndiaAfrica effort is a great beginning.There is a lot of interest about India in the B schools of Africa. The graduate students understand less about India.Many young MBA students are now keen to work in Indian MNCS. They realise that such companies can offer them a good career.(Pranjal Sharma can be contacted at pranjalx@gmail.com)
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When you ask the National Highways Authority of India (NHAI) for the reasons for the slowdown in both the handing out of road projects and road building, the authority points to several causes. Not the least among them is what NHAI officials call the “Haldea factor”. Incidentally, the Planning Commission often steps in to correct what it sees as incorrect practices and systems. BW’s Anjuli Bhargava spoke to Gajendra Haldea, advisor to the deputy chairman of the Planning Commission, to determine whether he has solutions or is part of the problem. Excerpts:Q:Very few companies are bidding for road projects now. Why? A:That is not true. In March 2012, several PPP projects witnessed robust competition. However, a few projects rolled out in April/May received lukewarm response. This is primarily because the projects were less viable. We need to recognise that bidders will come forward only when projects are bankable and well structured. In the past too, during the periods when there was robust interest, there were some that got just one or two bids. Hence, the phenomenon is project-specific.Q:Companies say bankers have become wary and many projects are finding it hard to achieve financial closure...A:This is partly true. Some of the banks may have reached sectoral limits while some others may have reached group exposure limits. Among other things, the government is encouraging infrastructure debt funds which will take out loans of existing projects from the books of the banks and refinance them. This will create space for new projects. In some cases, bankers may feel that bidders have overstretched themselves or bid too aggressively. Who do we blame that for? It is always possible that some players may make mistakes and they ought to pay for that. Theoretically, if out of 100 projects, 5 don’t achieve financial closure, NHAI has to quickly forfeit the bid security and rebid. It’s no big deal. But I do think that the system of bidding for road projects has been a bit flawed in the recent past. If you want keen competition, you must get credible players and short-list them. In the US, the number of short-listed bidders is fixed at 5 by law. That is also the international best practice. PPP projects require a lot of effort and expenditure in bidding. So if you ask 20 people to bid, serious players often withdraw. Too many players tend to cause disorderliness. That is why you don’t have 20 telecom operators competing in the same area. Normally about 3 to 5 credible players produce keen competition. In the case of NHAI, it has, often, allowed far too many players to bid at the final stage. ‘I think, of late, NHAI has rolled outsome projects that are not viable’Q:Why are companies looking for buyers for many of their existing assets?A:The prevailing market sentiment is not something I entirely go by because infrastructure is a long-term game. As we have observed in the past, everybody seems over-exuberant in good times and in the not-so-good times, everyone imagines himself in the doldrums. I think the balance lies somewhere in between. At present, some companies may be wanting to sell off for their own reasons. But this cannot be generalised as a trend.Q:But NHAI is not meeting its target in awards, leave alone completion.A:NHAI has not been stable in processing and awarding of projects. In the last 8-9 months, it has been deficient in its preparation of projects. It’s not that projects are not there; it’s just that they are not ready to be offered. In March 2012, NHAI hurriedly awarded a number of projects in just two weeks, primarily to show higher achievements in 2011-12. Actually, many of these projects would have normally gone to 2012-13. As a result of this, NHAI had little to show in April/May. Q:What about NHAI’s record on completion?A:A number of PPP projects have been completed. Conventional item rate projects in any case take much longer — an average of 5 years to complete while PPP projects take about half that time. It has now been decided by the government to give up the archaic item rate system and move to the turnkey approach. We have consulted extensively to make sure that the new system is acceptable to all.Q:What is the learning from the Delhi-Gurgaon expressway?A:This was awarded before the model concession agreement (MCA) was approved and has some weaknesses. The toll plaza has become a hold-up point. Clearly, there is some fault in the contract and/or it may a case of faulty enforcement. To take care of such problems, there is a provision in the MCA which says that if the traffic goes above the designed capacity of the road, you either have to terminate the contract or upgrade the service. Long hold-ups at toll plazas are also not allowed. Once you charge a user fee, you owe a certain level of service. Q:You are looking at building expressways. What will this cost and how will it be financed?A:The Minister for Roads and Highways has asked us to structure the first expressway between Delhi-Jaipur. This will be followed by Delhi-Chandigarh. The Delhi-Jaipur project may cost about Rs 15,000 crore. This will need private investment and some viability gap funding. Some real estate development or other support may also be necessary. (This story was published in Businessworld Issue Dated 20-08-2012)
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Seven years after the central government launched the Rs 1 lakh crore urban infrastructure programme, the Jawaharlal Nehru National Urban Renewal Mission or JNNURM, preparations are on to launch its second phase with a massive investment plan of Rs 2.09 lakh crore. Urban development minister Kamal Nath speaks to BW’s Joe C. Mathew about the learnings from phase I and his plans for the next phase. Excerpts:Q:What are the take-aways from phase I of JNNURM? A:An evaluation of JNNURM has revealed a lack of capacities at the municipal and state levels . Weak governance resulted in unsatisfactory project implementation. Delay in procurement processes, non-availability of suitable contractors and land acquisition issues were also there. In the next phase we, therefore, propose to strengthen municipal entities as local governments with their own municipal cadre and own sources of revenue. User charges for water supply, solid waste management and other municipal services will be one way of revenue generation. Enhancing property tax coverage and collection and e-governance of all services are also proposed. Land-based financing sources — conversion charges, impact fees, etc. — will also help.‘Land monetisation allows generation of substantial resources’Q:What are the salient features of JNNURM II? A:It is in the final stages of preparation and the exact allocation and sectors are yet to be finally closed. We expect it to be a significant increase over the first phase, and around $35-38 billion. However, the priorities as brought out in different plans, including city development and sectoral plans, and priorities of states will be the guiding factors in the allocation. The development work done in the first phase will also affect the funding. Some of the priority sectors will be urban renewal, water supply, solid waste management, sewerage and urban transport. Q:What would be the ideal Centre-state share of investments?A:Land and development-related issues fall under the State List. More central intervention may be achieved through the implementation of schemes that are largely funded by the Centre. Under such schemes, states may be required to undertake reforms in return for accessing substantial grants for implementing urban development policies. For progressive states, the ideal share of Centre-state stakeholding may be 50:50, but for other states, it will be 25 per cent state contribution and the balance from the Government of India. In the case of special categories like hill states and the North-east, the central contribution could be 90 per cent.Q:How will you tackle the gap between infrastructure and growth in cities? A:Census 2011 indicates an increase in urban areas by about 54 per cent from 5,161 towns in 2001 to 7,935 in 2011. The total urban population is about 377.1 million (31.16 per cent) of the total of 1,210.19 million. There are 468 cities with a population of over 100,000, of which 53 cities have a population in excess of one million. Of over 500 mega projects that were sanctioned under JNNURM, 120 have been commissioned. A multipronged strategy is required across ministries dealing with land, transport, infrastructure, etc. As we know, migration is inevitable, especially in a rapidly developing country with a young age profile. Developing adequate levels of urban-rural linkages and putting in place a statutory system of regional development will go a long way. Futuristic planning must respond to sustainability issues and my ministry has finalised the standards. Q:How do you plan to tackle the land acquisition issue? A:Increased efficiency of land use is not being addressed on a scale that it merits. More importantly, land monetisation allows generation of substantial resources. A comprehensive review of the master plan for Delhi is under way, and based on the large number of suggestions received, higher floor area ratio for hospitals as well as mass transit corridors are being considered. Compulsory land acquisition will be increasingly difficult, largely due to stakeholder concerns. An alternative may be a partnership approach.Q:You have advocated new financing models, including private-public partnerships (PPP) in urban infrastructure projects. How far has this been successful?A:Sensing the fund requirements of urban local bodies to create requisite infrastructure, the Government of India had set up a high powered expert committee (HPEC) in 2008 to estimate the investment requirement in urban infra sectors. The HPEC has estimated that the investment in this sector has to go up to 2.1 per cent of GDP by 2022. Despite the reforms proposed and the concomitant increase in the revenues of local bodies as well as higher allocations under JNNURM, the HPEC estimates a deficit of 0.39 per cent of GDP in infrastructure funding. This gap has to be bridged through innovative options like PPP. While various PPP models in the urban infra sector have reached a certain level of maturity (urban transport), they are still low in areas like sewerage disposal, storm water drainage, streetlighting, etc. JNNRUM funds have given a push to PPPs in these domains. We have identified a list of municipal corporations that can go for public borrowing in terms of municipal bonds to generate funds. We want others (urban local bodies) to raise funds for infrastructure development as well. Q:Poor governance has often been cited as one of the reasons for failure in urban planning and implementation. How do you intend to tackle this problem? A:Better governance is crucial for translating the large outlays of our flagship programmes into enduring outcomes. Along with strengthening of governance structures, we need to have better human resources. Administration and technical management of urban development must become more professional. Technology must be deployed to improve service delivery. We would also want capacity building to include training of elected representatives in urban governance issues. The globally accepted 4P framework, people-private-public-partnership, indicates that the role of people in urban renewal and management projects is crucial. Therefore, best PPPP practices and models must be deployed for India’s urban management agenda to succeed.(This story was published in Businessworld Issue Dated 20-08-2012)
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French infrastructure major Alstom, a global player in transport infrastructure, power generation and transmission with a turnover of E19.9 billion (2011-12), is betting big on India’s urban infrastructure. The firm is already associated with almost all ongoing Metro projects and is bidding for more opportunities in the urban transport sector. Alstom is in the final stages of commissioning its greenfield metro coach manufacturing facility at Sri City (bordering Andhra Pradesh) to cater to the needs of the Chennai Metro project. Henri Poupart, president, global operations of Alstom’s transport division, talks to BW’s Joe C. Mathew about the importance of Indian market. Excerpts:How do you see the growth of urban transport infrastructure in India?It is difficult to predict a particular rate of growth (for India) due to the uncertainty of the timing of the business, particularly in the case of mainline railways. However, there is definitely a need for substantial investment in existing railway infrastructure. Hence, there is a large market potential. In the case of Metros, however, there is predictability, with an average of one new Metro project each year. Can Alstom play a bigger role in upcoming urban rail projects in various cities?Yes. Alstom Transport has all the expertise and it can play a very important role in several upcoming urban rail projects. Not only can we make the trains, we are also capable of offering a full systems turnkey solution along the lines of what we have executed for the Metro in Singapore.What is the size and scope of the Chennai facility?We do not wish to disclose details of our Sri City (Chennai) facility. The facility has been set up to manufacture electrical multiple units, which are coaches with their own propulsion (they do not need engines to haul them).What is the role of the Transport Information Solutions (TIS) Engineering and Development Centre in Bangalore?The TIS Centre in Bangalore provides engineering support for a number of our signalling projects in India, Europe and in Asia. This centre is in the midst of being expanded to a global centre of competence in certain TIS solutions, product engineering and R&D. In the next two years, we plan to double the number of engineers and software specialists in this centre. As we operate in a very competitive environment, it won’t be appropriate for us to divulge specific details of our investment and the capabilities that we will develop.What are your plans for the Coimbatore unit?The Coimbatore unit was established in 1999 to manufacture a range of traction and signalling equipment for supply to the Indian market. The factory is ISO 2000 and 14001 certified and is located in an industrial area with access to component suppliers. This unit supplies its production to various Alstom rolling stock and component manufacturing units in Europe. Its priority in the next few years will be to supply traction components and looms for the trains of Chennai Metro; these will be made at our Sri City factory.How do you see the business climate in India, especially after the retrospective tax decisions of the Indian government?The tax regime seems to be highly uncertain with retrospective legislation and subjective interpretations. These uncertainties make the Indian business environment much more challenging. Nevertheless, India is an important market which we cannot ignore and we are optimistic that these issues will be resolved in a fair and reasonable manner. What do you think about India’s tender system for infrastructure projects?The tendering system in India is a process wherein a bidder who is technically compliant and offers the lowest price is the winner, which is a fair and objective method. However, we expect qualitative factors such as lifecycle cost, energy consumption, etc. to be used increasingly in the evaluation criteria, beyond price per se. Such evaluation methodology is used in several countries for selecting the winning bidder in railway and Metro projects. We also see maintenance being bundled along with the supply contracts.Alstom On Indian TrackSupply order for 184 coaches to Chennai MetroContract to design, build and commission train control system for Jaipur MetroRail infrastructure contract for Chennai MetroSignalling systems for Bangalore MetroElectric traction components for Delhi MetroTechnology revamp of 38 motor coaches for Western RailwayDesign, supply and commissioning of audio frequency track circuits for zonal railways, Mumbai Railway Vikas Corp.Metro coach factory near ChennaiDo you have a differential pricing for developing countries? The French government has said your high speed train project is too expensive even for the developed world...Any large infrastructure project such as the high-speed railway involves a significant investment outlay in a developed or a developing country. The French government’s comments on this have to be viewed in the context of the ongoing challenges affecting most of the European economies. The benefits of a high-speed rail project are not questioned, rather it is the timing of the spend. A very large proportion of the expenditure in a high-speed line is accounted for by the civil infrastructure. Elements such as the high-speed trains, signalling and power supply are smaller. In our business, the question of differential pricing does not arise since each project or customer requires a unique solution. Moreover, the projects are typically won through international competitive bidding wherein a market price is established by the process. Localisation can play an important role in price competitiveness. What will mass transport systems of the future look like?In the video ‘Vision for transport in 2035’, Alstom has introduced its vision of the transport system 25 years from now when efficiency, economy and environment will go hand in hand. This vision talks about a new era of transport where the challenge will be to manage the global travel of 7 billion people without depleting the earth’s resources. The idea would be to make travel simpler and economical as well as sustainable.The vision explores the possibility of door-to-door travel where one single ticket will ensure the multi-modal transportation of a person from one continent to another, ensuring a smooth and trouble-free experience. The congestion and pollution associated with individual modes of transport will be a thing of the past.(This story was published in Businessworld Issue Dated 20-08-2012)
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On 21 June, the Competition Commission of India (CCI), the country's anti-competitive practices watchdog, slapped a fine of Rs 6,304 crore on 11 leading cement manufacturers on cartelisation charges. It also imposed a fine on the Cement Manufacturers Association for collecting price information and using it to help members act in a coordinated manner on price, dispatch and supply. The decision came as a shock to cement makers such as Jaypee, ACC, Ambuja, Ultratech and others. The companies are firming up legal defence and are expected to approach the appellate authority soon. Ashok Chawla, chairman, CCI, speaks to BW's Joe C. Mathew on the reasons behind the decision and what it means for the established trade practices in the country. Excerpts:Cement manufacturers and their association refute all charges levelled by CCI. They say they have only been doing what any other industry or trade body would do to promote genuine business interests. Trade associations have a very important role to play. They provide a platform to the members to get together, and to know what is happening, in terms of technical and other economic matters that affect their industry. It helps them learn good practices. In the process of providing that platform, there is absolutely no harm if they get together and take up matters of individual benefit. But when associations cross that thin dividing line, and get into areas where they actively encourage the coordination of prices, production capacities, or in terms of dividing the market, that is something which is violative of the Competition Act. Collection and dissemination of information has always been part of associations' role. Even government departments seek sectoral data. What is your view on this?The very innocent function of collecting data is one thing. Where it is collected with an ulterior motive, it cannot be acceptable. These days the companies have their own data in the public domain; there are third-party agencies for this. Associations can put data into the public domain. So it is not per se the act of putting data in the public domain that is violative; the problem comes when that information is used to the collective advantage of the members and with the intention of causing volatility in the market and, therefore, cutting on consumer welfare. That is not acceptable. In the case of cement companies at least, there seems to be a historic reason for the Cement Manufacturers Association (CMA) to collect this data and provide it to the government agencies?Well, the Commission has passed an order on what they are supposed to do and what they are not. So they will have to comply unless they get some relief from the appellate forum. The CCI has found fault with associations in the film trade, medicine, and several others. Is there a need for more awareness of laws?It could be. The law is of somewhat recent origin. It is possible that associations may have been doing these things earlier too, and are continuing either because of lack of awareness of the Act or because of reasons slightly different. In any case, we have a fairly robust advocacy programme in place. We could step that up. But at the end of the day, it is for the associations to act with restraint and act as bonafide self-regulating organisations, and not overstep the parameters of the law.In cement, normally the leaders fix the price and others follow. Can we really say that there are issues in such price patterns?It depends on what the market structure is. One cannot draw any specific or generalised conclusion. There are industries like cement where the market concentration is reasonably high — 10 cement producers account for 70–75 per cent of the market. The rest of the producers, whose number may be large, have only 30 per cent share. Conceptually, if there is an industry where the market is very fragmented and the top 10 or 20 do not account for a substantial percentage of the market share, the dynamics of that market are very different. The probability of producers of a product where there is high market concentration coming together is more likely. This is purely from a conceptual point of view. This is the way it works, and not just in India. So one has to look at the structure of the industry, market concentration, and then certain other parameters of the level of concentration. There are various tools that one can use to check for potential likelihood of violation. That, of course, has to be buttressed with a lot of information and details to come to a conclusion that is in the nature of a judicial decision.break-page-breakIsn't under-capacity utilisation the prero-gative of an organisation? Won't commercial considerations drive such decisions? Let us not talk about any particular industry. Conceptually, what you are saying is that if the marginal cost is more than the marginal revenue, then that activity at that margin will not take place. Absolutely correct. That is what economics says. But if the capacity is not being operated even though the marginal revenue is more than the marginal cost, then it lends itself to other issues. You mean to say the case of the cement sector should be taken in isolation?Absolutely. Market behaviour and dynamics cannot apply across sectors. Every industry will have its own peculiar set of circumstances. And one judgement cannot apply to other sectors. What will be the impact of this verdict on the cement pricing mechanism? That is very difficult for us to say. That is not really the intention of our order, in this particular case, or in any other case. It is for the enterprises that operate in the market to take this decision. We hear that associations related to jute mills, sugar and several others are facing similar charges?Associations' relationship is only incidental; we do not start with associations. We look at the basis of information that comes to us from public or suo moto to see if there is a prima facie likelihood of competition being distorted. If so, we order a detailed investigation through the director-general. The commission then examines the report and hears the parties. At any point, there would be sectors and activities that we would be looking at. But what will be the final decision is very difficult to say. When you took charge about eight months ago, CCI had a lot of backlog of cases. What is the situation now?Broadly speaking, we started work as a commission in 2009, and in three years, we have about 265-odd matters or cases; 200 have been decided. So, 65-plus matters are currently with CCI and the DG (investi-gations). Most of the backlog has been cleared. "The problem comes when information is used to cause volatility in the market"(BW Pic By Ashok Chawla) What will be the impact of the proposed Banking Law Amendment Bill on CCI? Will its M&A approval jurisdiction get reduced?The government is proposing to amend the Banking Regulation Act. Once that happens, banking M&As will go out of the purview of CCI. Till then, they will remain with us. But we will have the power before and after the merger to intervene if there is any anti-competitive practice. Formation of cartels, abuse of dominance — these will remain with us. To look at a financial institution before or even after a merger in relation to how they are behaving, whether they are up to the benchmark set under the Competition Act or not, will continue to be our responsibility. For example, if three or four banks are forming a cartel and carrying on something that is punishable under the Act, we can investigate. If the facts are proved true, we can take action. For insurance, there is no proposal for such an exemption. For telecom also some view has been expressed, but there is nothing formal at this stage. The Cabinet has decided that a Group of Ministers will look at issues related to the proposed amendment to the Competition Act and the matter of CCI versus sectoral regulators. But that is still at a very preliminary stage. The government may soon approve a new Competition Policy. What could be its impact on the functioning of CCI? It will help build the culture of competition. Once that policy is approved by the Cabinet, what it implies is that all government policies and economic policies will have to go through the prism of competition assessment. And they will have to be competition law-compliant. To that extent, CCI's job as the regulator or enforcer of the Competition Law becomes relatively simpler; because entities that are not compliant will begin to do so. But in any case, we will continue to do our job as that is the mandate given to us by Parliament. Among the major verdicts, only in a few cases has the decision been unanimous. Why are there frequent split verdicts? When you have a judicial body pronouncing on sensitive economic matters, and you have a bench of seven people, it is neither necessary nor completely desirable that there should be a unanimous verdict. What is really important is that the decisions — whether of the majority or minority — are clearly articulated and put in the public domain. This helps the stakeholders and helps build the jurisprudence in competition law. (This story was published in Businessworld Issue Dated 09-07-2012)
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The coal sector has seen more than its share of rough weather in the past few months — power producers complaining about coal shortage, Coal India being served with a presidential directive, the Comptroller and Auditor General (CAG) alleging undue benefits from coal block allocations. Should the sector be opened up for commercial mining? Are power producers' coal woes exaggerated? Would auctioning of captive coal assets be a better route? What ails the sector and can things can be set right? BW's Yashodhara Dasgupta spoke to Union minister of coal Sriprakash Jaiswal. Excerpts: What are the factors that are keeping coal production lower than demand?There are enough coal reserves in India that can be extracted easily. But there are immense hurdles. For one, we need environment and forest clearances. We need them not just from the central government but from the state government as well. We should be able to acquire land. People should be willing to leave the land. Then they should be rehabilitated. Infrastructure for coal mining needs be developed after this. It takes five to six years to do it all.Do you think there is any inefficiency within the coal sector?I do not deny the fact that we are absorbing all the modern technologies in India. I don't agree that this is happening. Time and again, we direct Coal India to use the most modern technology for production. We send them abroad to see the technology and use those equipments which would give the most output of coal. The challenge is big. The way that the economy is growing, till we supply sufficiently, power cannot be produced and without power, everything would come to a standstill. We always try to ensure maximum production of coal. FAST FACTS Coal strength India has a total available coalbearing area of 26,000 sq. kmPower generation India produced 423.554 billion kilowatt hours from coal-based plants during April-December 2011. This was a growth of 9.17 per cent over the same period a year agoCoal-based UMPPs Sasan in Madhya Pradesh, Mundra in Gujarat, Krishnapatnam in Andhra Pradesh and Tilaiya in Jharkhand ProductionRaw coal: 307 million tonne (MT) during Apr-Nov 2011, against 320 MT a year earlier.Coking coal: 28.3 MT, against 28.7 MT during the same period a year ago Will privatisation bring in more efficiency in the sector?This is why we have given coal blocks to the power sector. So that requirements for imports can be met through this. We have received gains of 20 per cent from it. But 80 per cent is still remaining because they are also going through the same hurdles of clearances, land acquisition and law order. For instance, Jharkhand has good availability of coal but law and order is weak. Chhattisgarh has tremendous Maoist problems. Our miners cannot go beyond a limit.What about privatisation in terms of removing Coal India's monopoly?There's no doubt that coal production can increase substantially with commercial mining. But Parliament must pass a Bill for this. This is a regulated sector that was nationalised in 1972. If you want to bring it into the open market, a new law must be passed. You can see how many problems come in a coalition government. Privatisation cannot be done in such a government.Coal India outsources some of its work to private players. Is this a way to bring in privatisation?No. Any nationalised company can bring any private contractor for any job. It has the right to do it.In the past five years, the environment ministry is supposed to have already cleared over 100 GW of power capacity. Are power producers' complaints exaggerated?None of the power plants (to whom Coal India supplies coal) has had to shut down due to lack of coal. Yes, some may have critical or super-critical stock but there are other reasons for it. Some plants produce more than their capacity and coal linkages. Some power plants are so old that they cannot run their operations within their existing linkages. They need even more coal to run their plants. Some power plants were supposed to import say, 20 per cent coal but they didn't do so. That's why their stock position is at critical level. But all in all, no power plant will shut down due to non-availability of coal.In the past few years, was power capacity added in haste without checking coal linkages etc?Assessments are always done. But sometimes actual figures fall short of the assessments. Like I said, there are many problems and these are increasing by the day especially in the past 5 years. For instance, land acquisition was not an issue 5 years back. People have become more aware now and don't want to give up their land. They ask for random amounts of money. When the assessments were done, we were sure it would be met. There are many reasons for failing to meet the mark.Would auctioning be a better method than First Come First Serve?With auctioning, nobody will get the scope of raising fingers. Yes, power tariffs will rise with auctioning, but at least nobody can say there was favouritism involved in the allocations. This is the biggest benefit of auctioning coal blocks. It is in the final stages. Identification of coal blocks has been done. We have engaged consultants (Crisil) to decide the methodology. Their report should be in within a month. We will proceed according to the method suggested by the consultant.Can PSUs can now sell coal from their captive blocks in the open market?If state governments want, they can sell coal from their allotted blocks to the market. But the coal blocks to the private sector are only for end-use purposes.Wouldn't the proposed coal regulator overstep into the jurisdiction of the Coal Ministry?We have prepared the Bill and placed it in front of the Cabinet. Some of them have objected to it. To resolve those issues, we've referred it to the GoM. Even if this overlaps in our jurisdiction, let it. If things get better because of it, we have no issue with it. Its biggest responsibility will be increasing production, looking into safety issues and coal pricing.What is the purpose of the new fuel supply agreements (FSA)?All the power plants – to whom the government had given commitments – are almost ready. It would be an injustice if we tell them we will supply only 50 per cent of the contracted amount. Why should they sign PPAs if we tell them to import the remaining 50 per cent? FSAs have been done for them – to supply at least 80 per cent of their coal requirement. They can buy the rest through e-auctions and imports. The responsibility is ours as we had made the commitment. The way the production has been increasing, Coal India and its subsidiaries are quite capable of meeting their commitments. Also, for a year, it did not have a chairman. It's only now that they've got a proper chairman – one who knows the mining sector and has administrative knowledge.There were reports that NTPC does not want to sign the FSAs. Why?NTPC is unhappy with the penalty clause of 0.01 per cent. Both NTPC and other private players are objecting to such a low penalty rate. The contention is, if Coal India defaults on coal supply, what can you do to them? Of course, it's a commitment of the government of India. They will get the coal. But their demand is justified. With such a low penalty rate, there will be no apprehension on defaulting. At the time of the Presidential Directive, the decision on penalty was left to Coal India so it could reduce it a bit if it wanted to. But we did not expect them to lower to this level. Anyway, the FSAs are being signed. About 18 have been signed so far. We'll talk to Coal India if it becomes necessary.What do you think about the Sasan coal blocks issue?This has been referred to the GoM. They will decide on it. Coal Ministry has no role in it.Your comments on the CAG's new report on coal block allocations?We have not received any report yet. And anyway, we have answered all questions related to allocations on our website. We do not know any specifics of the report yet. The interview was conducted in Hindi(This story was published in Businessworld Issue Dated 04-06-2012)
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Kishore Biyani, the Chairman of Future Group, is the largest retailer in the country with 17 million square of feet of space. From 2006, his bets have ranged from retail to financial services to restaurants to supply chain management. Although a debt of Rs 7,800 crore has hounded the Group, he was able to convince investors about India's consumption potential and kept them more than interested. Of late he is looking at making the business leaner and stronger and has put an end, at least for now, to a period of experimentation. By selling a stake in Pantaloon stores and Future Capital Holdings, he has managed to wipe out close to Rs 6,050 crore of debt in the last one month. This is how it happened. It received Rs 1,600 crore from the AB Nuvo deal and another Rs 200 cr for the BCCL placement. The FCH deal with Warburg Pincus helped slash the group's debt by Rs 4,250 crore (Rs 450 cr plus Rs 3,800 crore automatically wiped out). But Biyani is a confident man and is now turning the corner. He spoke to Businessworld's Vishal Krishna about his plan for the coming year.You have collected so much data on Indian customers, what is it telling you about your business?Few years ago I would have told you that retailing was an art, it required someone with an understanding of operations. It needed someone who could risk it all and build an efficient chain. But now it is a science, we have close to two million loyal customers across different brands in the group. Central alone has five hundred thousand loyal customers. We are at that stage where we have to use this knowledge not just to generate sales, but how to engage them and stock merchandise according to their tastes and preferences. But data mining is becoming important and it goes beyond what loyalty cards tell you. It is this that will build our business going forward.You have created a strong merchandising team to help you expand the lifestyle formats?The lifestyle formats, Central and Brand Factory can now generate Rs 4,000 crore in the coming year. The merchandising team in Central now knows what brands work since it is a market place. It is a place where brands compete for space. Thanks to my cousin Rakesh Biyani — who created processes a decade ago — it has become such a success.Consumption is also slowing in the country, but Brand Factory as a format grew 15 per cent, what worked?It works because the people in the aspirational segment are more than the ones in the upper middle class. It is where people buy previous seasons collection at discounts all year round. It is a business the group banks on during a slow down because it is designed to provide shoppers a great experience at all year discounts.Are you expanding home formats like electronics and furniture?Electronics we have seen that the format is growing slowly, we might at another look at the strategy this year on this. Similarly with the home format we might go slow.You have sold stake in a couple of businesses, is there a more realistic view to expanding the business now?The group will continue to focus on the food and lifestyle formats. It is the core business. The whole business is about mapping what formats work in tier 2 and 3 cities. We'll plan expansion and the capex according to that. The Central and Brand Factory are amazing success stories for us.
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