India can’t grow on the back of FDI for long: NITI Aayog CEO Amitabh Kant
At a time when BJP-led NDA government is opening up its key sectors to foreign direct investment, a top official of its think tank NITI Aayog said that the country would not grow on the back of FDI for a very long time. “India cannot grow on the back of FDI for very long. It will grow on the back of domestic market and government is creating an enabling environment to do so,” Aayog’s CEO Amitabh Kant said at the CII Annual session on Monday. According to Kant, India should be clear that it needs to have rigorous approach to manufacturing through exports. “Make for India is absurd. Challenge for India is to look at right size and scale and think of global markets to drive its growth as was done by China,” Kant said. Kant was speaking at the CII session on “Global slowdown — implications for the world’s fastest growing economy. The idea was backed by Jamshyd N Godrej, past president of CII and CMD of Godgrej & Boyce Manufacturing. “India should not go back to the old idea of making everything for India,” he said. Besides manufacturing, Kant feels it is rapid and planned urbanisation that will drive growth in the country. “Urbanisation will be a very critical angle of growth. Currently india has haphazard and very poor level of urbanisation. Indian cities will have to drive India’s GDP growth,” he said. Kant said government is trying to dismantle 68 years of legacy and in three-four years things will change radically, enabling India to fly in the global growth.
Why the rules against heavy discounts will actually help the ecommerce bandwagon
Indian ecommerce market is now the fastest growing globally and is projected to reach over $100 billion by 2020. Several factors favour continued growth of ecommerce in India, including limited product availability in tier II and III cities and high cost of physical retail space in tier I cities. That said, the market faces a major uncertainty today, having grown so far on the back of massive amounts of venture capital, which is now slowly drying up. Ecommerce firms initially justified the aggressive spending as the cost of educating consumers and changing their deep-seated habits. But investors are getting increasingly impatient. Flipkart, the industry’s torchbearer, recently saw its valuation drop by nearly 30%, and many smaller firms are struggling to survive. Rather than infusing more funds into these companies and sponsoring massive discounting, investors are asking for a plan that eventually leads to profitability. Stop Counting on Discounts That is unfeasible as long as aggressive discounting remains the norm. The question though is which company will reduce discounting and risk a loss of market share in the quest for profitability. As of now, no firm is willing to take the risk despite the pressing need. But they may just be getting help from the most unlikely quarter the government. Earlier this week, the government released guidelines on the ecommerce sector, specifically on FDI in online marketplaces in India. Among other things, the new guidelines mandate that marketplaces cannot influence the selling price of goods. This is interesting and, if enforced strictly, will have tremendous impact on Indian ecommerce. In the long-term, it will actually help the ecommerce companies. It may seem surprising that the loss of price control will help them. But, as of now, they are all locked in a battle for market share and they are all bleeding money because the focus of that battle is so much on discounts. The rule can help put price out of the equation and cause ecommerce firms to focus on other aspects such as service quality and product innovation. That focus may help increase margins, which will be good for these companies and their investors. Obviously, another implication is that it will also nullify the price advantage of ecommerce over physical retail. But the period of educating Indian consumers about ecommerce through massive discounts is over. With artificial discounts off the table, it will have to be other factors such as convenience that draw people to buy online. Also, ecommerce companies can focus on genuine cost advantages they have (like lower real-estate costs) as opposed to fake price advantages created through investor money. In the short-term, there is no doubt that ecommerce companies will lose some customers to physical retail. But the inability to discount heavily will actually be good for the industry in the long-term. It is surprising that it will happen due to a government mandate rather than their own initiative. True Marketplaces Another interesting mandate in the recent guidelines is that no single vendor can account for more than 25% of sales on a marketplace. This rule is to help ensure that companies that claim to be marketplaces are true marketplaces. The rule helps Snapdeal the most. The company has been set up as a true marketplace from the very beginning. Flipkart and Amazon will both be affected. For Flipkart, WS Retail (a former Flipkart subsidiary) accounts for over 25% of its purchases. Flipkart will have to rely less on WS Retail, which should suit its own decision to become more like Alibaba in China (a marketplace) rather than Amazon in the US (inventory-led B2C model). For Amazon again, it will have to ensure that Cloudtail, which is partly owned by Amazon, will have to be less than 25% of sales. I suspect the adjustment will be hardest for Amazon.
E-comm norms to provide level playing field, clarity: Nirmala
Government today said e-commerce guidelines have brought in “greater clarity” about the sector and they will provide a level playing field to both online and offline stores. “I am very enthused and encouraged by various write-ups in newspapers that the clarification indeed has brought in greater clarity and also probably checked predatory pricing and discount giving exercises,” Commerce and Industry Minister Nirmala Sitharaman told reporters here. She said the market is free and the government does not believe in interfering in it, adding “somewhere we have to ensure Indian players and Indian market situation does not get unnecessarily skewed to distort any free trade practices.” “The clarification, which we have issued has only resulted in bringing in level playing field (to) those in the brick and mortar bracket of the commerce. E-commerce has been encouraged but obviously it’s not going to restrict the consumer,” she said at the sidelines of a CII function. The statement assumes significance as some industry experts have raised concerns over certain conditions of the e-commerce guidelines like, players would not directly or indirectly influence prices of the products. While the government permitted 100 per cent Foreign Direct Investment (FDI) in marketplace e-commerce retailing, the guidelines stated that such entities will not directly or indirectly influence the sale price of goods and services and shall maintain level playing field. In view of the guidelines, e-retailers having foreign investments may now find it difficult to provide lucrative discounts to attract customers. Discounts can only be given by the owner of the goods or provider of services.
Airline cancellation, booking charge hikes under DGCA lens
In a much belated move, the Directorate General of Civil Aviation (DGCA) has finally brought the constant hikes in cancellation and rebooking charges by airlines under its scanner. DGCA chief M Sathiyavathy has asked her deputy Lalit Gupta to examine the entire gamut of these charges and submit a report on the same this week. The regulatory move comes as a leading low cost carrier last week hiked cancellation charges to a flat Rs 2,250 for all passengers cancelling up to 2 hours before the flight departs. Before this, passengers cancelling were charged Rs 1,900 if they cancelled tickets more than a week prior to scheduled departure. This was the fourth upward revision in a year. Other airlines are also expected to follow suit. “As the safety regulator, we ideally should not interfere in the commercial decisions of airlines. But in this case we are getting complaints from the public. Based on the Lalit Gupta report, we will act if the cancellation/rebooking charges are found to be unreasonable,” said a senior DGCA official. In the last one year itself these charges have been hiked several times by some airlines. They started last year with Rs 2,000. Later they had three slabs: Rs 1250 for cancellations 30 days before flight; Rs 1,500 for cancellation from 30 days to a week before departure and Rs 2,000 for a week before flight time. After that these charges were revised to be between 1,900 and Rs 2,250. Consumer organisations have been complaining to the DGCA for almost a year but the regulator has not acted so far. Last year, Air Passengers’ Association of India chief Sudhakara Reddy had sent a mail to the aviation ministry and DGCA over the same issue.
MBL Infra bags Rs 2,126 crore road devpt projects in UP, Uttarakhand
Construction firm MBL Infrastructures has bagged road development projects worth Rs 2,126 crore from NHAI in Uttarakhand and Uttar Pradesh. “MBL Infrastructures Ltd has been awarded the following projects on DBFOT (Design-Build-Finance-Operate-Transfer) Hybrid Annuity basis by the National Highways Authority of India (NHAI)…worth Rs 2,126 crore,” the company said in a regulatory filing today. First project is worth Rs 942 crore for four-laning of Chutmalpur-Ganeshpur section of NH-72A from 0 km to 16 km and Roorkee-Chutmalpur-Gagalheri section of NH-73 from 0 km to 33 km in the state of Uttarakhand and Uttar Pradesh under NHDP-IV. Second project is worth Rs 1,184 crore for four landing of Gagalheri-Saharanpur-Yamunanagar section of NH-73 from 33 km to 71.64 km state of Uttar Pradesh under NHDP-IV. Construction period is 730 days for both the projects.
Essar Oil plays the ‘made in UK card’ to gain retail market share
Essar Oil is playing the ‘made in UK’ card and pricing products aggressively to grab a bigger piece of the fuel-retailing pie that has been thus far dominated by global energy conglomerates such as BP and Shell. The company has opened six retail outlets, making its debut in the consumer segment, and has plans to run 400 outlets in three years. “Retail venture is aimed at derisking.With our efforts, we have already turned around the Stanlow refinery but now there is limited opportunity in the refinery business,” Naresh Nayyar, executive chairman of Essar Oil UK, told ET. Billionaire brothers Shashi Ruia and Ravi Ruia-led Essar Group acquired the refinery from Royal Dutch Shell in July 2011 and has been able to turn around its performance and capture 15% of the UK’s road transport fuel demand. Essar Oil UK has turned around the loss making unit with a record net profit of $ 187 million in 2015-16 and its highest ever operating profit of $ 340 million in the period, pri marily by rationalising operations, increasing ef ficiencies, diversifying the crude basket and implementing margin improvement programmes. The company has made a quiet foray into the retail business, focusing more on local branding and marketing exercise to leverage of its local presence with the tagline “direct from our UK refinery .” The Essar outlets offer prices at discount to competitors and have managed to clock 20% average revenue growth. “We have grown 45% since we moved to Essar and competitive pricing is a key factor but it also helps that the branding is bright to look at. The chanllege for these guys is to build a big network so that we can use fuel card. A lot of independent companies have talked about entering energy business but this is backed by a multi billion conglmerate and thats why the likes of BP and shell are worried this time,” Shane Thakrar, CEO of HKS Group told ET. His company runs 61 outlets across the country which includes one Essar outlet at Coalville, Leicestershire. SB Prasad, chief commercial officerretail of Essar UK said: “For us ro make a dent in this market as an Indian company was tough. We are building a brand that conveys that our refinery is local unlike others.”
World’s largest oil firm Aramco plans to invest in India
Saudi Oil giant Aramco, the world’s largest oil firm with crude reserves of about 265 billion barrels, plans to make major investment in India’s petroleum sector as it considers India the most preferred destination to invest at a time when the global economy is in a crisis. Head of Aramco Khalid A Al Falih called on Prime Minister Narendra Modi during which he conveyed that the state-owned company was eyeing India as the most preferred investment destination. “Minister Al Falih to PM: Aramco looks to India as its No 1 target for investmen,” External Affairs Ministry Spokesperson Vikas Swarup tweeted. Aramco is Saudi Arabia’s national oil company with crude reserves of about 265 billion barrels which is over 15 per cent of all global oil deposits. The Saudi government plans to sell shares in Aramco and transform the oil giant into an industrial conglomerate. Energy-powerhouse Saudi Arabia is India’s largest crude oil supplier, accounting for about one-fifth of total imports and both sides were of the view that cooperation in the sector should expand. India is specifically looking at Saudi investment in “high temperature deep sea off shore exploration” and has opened up the sector for FDI. India’s ties with Saudi Arabia, one of the world’s leading oil producers, have been on an upswing over the last two decades based on burgeoning energy ties. The two countries are keen to move beyond buyer-seller relationship in the sector and go for joint ventures and investment in refineries and oil fields.
European Investment Bank to lend $512 million for Lucknow metro
The European Investment Bank will give 450 million euros ($512 million) in loan to India to finance the construction of Lucknow’s first 23 km-long metro rail line and purchase a fleet of new trains. An agreement on the first tranche of the credit was signed in Brussels on Wednesday during the 13th EU-India summit attended by Prime Minister Narendra Modi. The loan represented the largest project financing by European Union’s official bank, also the world’s largest international public bank, in India since its engagement in the country began more than 20 years ago and the most significant investment in sustainable public transport outside Europe, Luxembourg based European Investment Bank (EIB) said. The 450 million euro ($512 million) long-term loan – expected to cover half of the total project cost for the Lucknow Metro – will be used to finance the first metro line in Lucknow, including both construction of the 23 km-long new metro line and a fleet of metro trains. The line is the first part of a broader metro network planned for Lucknow, the capital city of Uttar Pradesh. When it becomes operational, the new metro is expected to increase the use of public transport from 10 per cent to an estimated 27 per cent in the city of three million people, the bank said in a statement. EIB president Werner Hoyer said the bank would expand its support for long-term investments in India and unveiled plans to open a regional representation for South Asia in New Delhi by the end of this year. The EIB has supported long-term investment across India that has helped the country harness renewable energy, strengthened industry and reduced carbon emissions. The bank recognises that the time is right to increase its engagement in India, Hoyer said. “The first metro line in Lucknow is a flagship project not only for Uttar Pradesh and India, but also for the bank’s strengthened global commitment to support transformational investment,” Hoyer said. The loan agreement was signed by India’s Ambassador to Belgium, Luxembourg and the EU Manjeev Singh Puri and EIB Vice President for Asia Jonathan Taylor in the presence of Modi, European Commission President Jean-Claude Juncker and European Council President Donald Tusk. The EIB had committed loans totalling more than 1.34 billion euros for longterm investment in India since the cooperation began in 1993.
Modi govt to soon launch smart villages project: Rajnath
After launching smart city project, Modi-led NDA government at the Centre would soon launch “smart village” project in a bid to ensure all-round development of the villages. While inaugurating the exhibition on crop insurance scheme at Ganna Sansthan on Saturday, Union Home Minister Rajnath Singh said that those who were critical of the Modi government that villages were not being made smart, the fact is that soon a project to make villages smart would be launched. In the first phase, the Centre proposed to convert around 300 villages throughout the country as smart, Rajnath said and added that such villages would have better infrastructure, connectivity and improved irrigation system to name a few. To a question on Chief Minister Akhilesh Yadav’s allegation that the Centre was responsible for the underdevelopment of Bundelkhand, Rajnath said that the UP government should fulfil its responsibility instead of indulging in blamegame. The Centre was ready to cooperate with the state governments wherever the need will be, the Home Minister further said. Once again showering praise one former prime minister Atal Bihari Vajpayee, Singh said that when the former PM had talked about linking rivers for better irrigation and ensuring balance, many people had criticised and termed the project as impossible. However, now the river linking project was going on successfully at several places including Madhya Pradesh, where linking of two rivers have been almost completed, the Union Minister said and added with this river linking project would be further expedited. The Home Minister later visited Integral University where Minority Affairs Minister Najma Heptullah joined him. Both Heptullah and Rajnath had come for the launching of skill development mission at 10 madrassas. Expressing surprise over being invited for the first time in this university, Rajnath said that next time round he would not only come to the University but will also have interaction with both students and faculty of the university.
500 researchers to dwell on engineering trends in smart cities
Gujarat’s first three-day national level conference on emerging research trends in engineering will kick start from Monday at the Vishwakarma Government Engineering College (VGEC) in Chandkheda. The event will see a number of research papers being presented by national level engineering institutions including the IITs’. Apart from them senior scientists from Isro, Institute for Plasma Research (IPR) will be part of the national level seminar. This year the event will see nearly 500 researchers from various engineering backgrounds present papers on emerging technologies for smart cities. In the run up to the event, organizers of the National Conference on Emerging Research Trends in Engineering (NCERTE) received 257 research papers from across the country , out of which 162 papers will be presented at the event.