Kohima gears up to be in the second Smart City list
Having missed the first list of Smart Cities Mission (SCM), Nagaland government is now gearing up to include the capital city in the mission from amongst a list of 23 Fast Track Cities. “Since we were unable to achieve the cut-off 50 marks for the first phase of the mission, Kohima has been given a second chance by the Union Urban Development Ministry by putting it amongst the 23 Fast Track Cities, out of which around 15 would be selected for developing into Smart Cities,” Parliamentary Secretary R Tohanba said here today. Kohima Municipal Council (KMC), in consultation with stake holders of the capital city and Gurgaon-based Voyants Solutions Pvt Ltd, has prepared a fresh Detailed Project Report to be submitted to the Centre on April 10, he said. “We intend to transform Kohima into a Smart City by providing basic requirements of the denizens such as proper electricity, water supply, information technology, better traffic management, security and improved road conditions,” Tohanba said. The second Smart City list will be declared on April 15, he added.
NHAI hikes toll fee on National Highways
Toll fee on national highways was today hiked by 3 per cent, but it will be applicable to only 20 out of the 42 plazas in Tamil Nadu. The revision of user fee on National Highways effected from today was done on the basis of the National Highways Fee (Determination of Rates and Collection) Rules, 2008, the National Highways Authority of India (NHAI) said. Such a revision in the month of April was “automatic” and “routine” as per the original notification, the Regional Office of NHAI said in a release here. The revision effected this year is “very marginal” and “mere 3 per cent compared to the previous financial year”, it said. “In fact, there is no increase in the rates applicable for Car, Van, LCV (Light Commercial Vehicle) etc, in most of the toll plazas since the revised rate is rounded off to the nearest five rupees,” it said. In Tamil Nadu, the hike is applicable to 20 of the total 42 toll plazas, it added, without elaborating further. The increase in user-fee for the succeeding year was calculated based on the increase in Wholesale Price Index (WPI) with respect to the current year as per the rules, it added. NHAI’s statement came in the wake of opposition to the “periodical revision” from a section of road-users in Tamil Nadu such as lorry owners and traders, which the NHAI termed as a “misconception”. Political parties, including DMK and PMK, have sought a rollback of the hike in user-fee.
‘Fear psychosis’ in the industry has been curbed: FSSAI
With industry fearing excessive regulation in the wake of Maggi controversy, food regulator FSSAI has said it has taken a number of steps to check any “fear psychosis” among companies. The Food Safety Standards Authority of India (FSSAI) has relaxed the product approval process for proprietary food products and nutraceuticals. It had also last week issued clarification about the standards of monosodium glutamate (MSG). After the ban on Maggi in June last year, the food industry had complained about ‘inspector raj’. Even Food Processing Minister Harsimrat Kaur Badal had said that the regulator has created an environment of fear in the industry. When asked about whether there is any fear psychosis after the Maggi ban incident, FSSAI CEO Pawan Agarwal said that it has taken number of steps to ease approval process without compromising on the quality norms of the products in order to address any fear among the industry. “… the fear psychosis has been curbed up to a large extent with various landmark initiatives taken by the FSSAI in easing the approval of food products and nutraceuticals,” Agarwal told PTI. “But at the same time, utmost importance has also been given to ensuring quality of the food items,” Agarwal said. Maggi noodles was banned by FSSAI in June last year for allegedly containing lead beyond the permissible limit. It came back into the market in November 2015. Elaborating on steps taken by the FSSAI, Agarwal said the food products for which standards were not laid down in the Food Safety and Standards Act but have approved ingredients, now may not require any approval. He also mentioned that the restricted enforcement activity against nutraceuticals and health supplement companies to only testing of products till new standards are notified To empower the consumers, Agarwal said FSSAI has launched an app through which general public can get information about the standards. The authority has also started awareness and training programmes for the food business operators about how to implement the food safety standards. As FSSAI has been streamlining its regulations to ease product approval process, Union Minister Harsimrat Badal had also said that there will more investment and innovation in the food sector. She has been raising industry and quality issues with the food regulator. Welcoming the latest initiatives by the FSSAI, CII last week had said that the recent notifications by the regulator on proprietary food, and notice on harmonisation of Food Additives with Codex, mark the beginning of a new chapter in developing and promoting India as the global hub for food industry.
Indian ecommerce players brace for Alibaba’s onset, keep an eye out on Amazon
Ensconced in his red chair, it has been a hectic Wednesday afternoon for 49-year-old Rajat Sethi. His small, three-room office in Delhi’s cramped Karol Bagh market is swamped with pressure cookers, sandwich makers, hand blenders, air fryers and rice cookers. There is hardly any place for chairs. Sethi, a small electronics dealer, has been busy wiping sweat off his forehead from Delhi’s dry summer; but he is also feeling the heat as his small enterprise seeks to keep pace with orders from some of the biggest names in India’s ecommerce industry. As a small but important cog in the ecommerce gravy train, his business has worked with both Flipkart and Amazon in the past, and is now being wooed by Snapdeal. With Chinese ecommerce giant Alibaba too on the way, business sentiment hasn’t felt better for sellers like Sethi. From a time when ecommerce companies had the upper hand, cherry-picking sellers, life has come full circle for people like this electronics vendor. Now, his business is being courted by a raft of incentives. “I would have never imagined such a thing some three years ago. But cut-throat competition means ecommerce players are going all out to woo sellers,” he says. “Consumer loyalty would be hard to achieve, so they are trying their luck with sellers.” Even as he decides how to deal with Snapdeal’s overtures (for the present, not too favourably, given his perception that Amazon and Flipkart are larger in electronics), sellers like Sethi are acutely aware that the industry they form the bedrock of ecommerce, specifically marketplace ecommerce could be set for a tectonic shift. That’s because Alibaba, the Chinese internet giant, is set to make its entry into India and with it change the rules of the game, forever. The ecommerce industry’s metamorphosis may have got a firm shove with recent guidelines from the Department of Industrial Policy and Promotion (DIPP) permitting foreign direct investment (FDI) in marketplace businesses (and not business models based on holding inventory). But, more painfully for this industry, it slammed the door on discounts of any sort. While this move came on the back of intense lobbying by the old guard in an effort to win back business, ecommerce companies’ arms have been twisted to fall in line and they are scrambling to find a way out. Omni-channel Marketplaces “DIPP’s move will help clear the ambiguity in the (retailing) market and level the playing field (between offline and online retailers),” says Kumar Rajagopalan, chief executive of industry lobby Retailers Association of India. “Marketplaces, like malls, should have no role in dealing directly with consumers and influencing prices.” While he accepts that ecommerce companies may find loopholes to keep business going as usual, he predicts that both sides may want to collaborate with each other and build omni-channel marketplaces, rather than extend this feud. “In a world of discounts, several owners are worried about their brand’s reputation,” he adds. “This may change that perception.” A key part of this policy is the move to break the sway large sellers had over business from ecommerce companies; in turn, this will benefit smaller enterprises looking to cash in from this ecommerce boom. Darshan Mehta, a Mumbai-based fashion apparel seller, is listed on Flipkart and Snapdeal and has a turnover of over Rs 60 lakh per month on Flipkart and `80 lakh on Snapdeal. Over the past month, he has been aggressively wooed by the former to exclusively sell on its marketplace, with a complete waiver of shipping charges and 100% reimbursement on returned damaged products. With the online battle only expected to intensify and regulation shifting, sellers like Mehta may cash in on this generosity. “It’s the sellers and the consumers who stand to benefit most from the dogfight between the ecommerce players,” he says. “It’s not that ecommerce players have become generous to sellers. They are being forced to do so because of the threat from Alibaba.” For India’s ecommerce sector, then, Alibaba’s much spoken-of India launch is one challenge facing the industry in the midst of a painful transition. While local players prepare to deal with not just Amazon, but Alibaba too, their onset may be a good reason for an industry in some strife to fix itself. Ecommerce executives may promise the moon to consumers, but, internally, they have struggled to convert this promise to profits. Pampered by almost a decade of generous risk capital backing, these companies have thrived on selling heavily discounted products to eager consumers. The good times may now end. As funding dries up, dozens of companies may find themselves run into the ground, heralding a clear-out for this industry. “The industry is poised for consolidation and a series of mergers and acquisitions,” says Harish HV, partner at Grand Thornton’s India Leadership Team. “Deep discounting is putting massive pressure on these businesses and, for many, these massive losses will be impossible to sustain.” For many industry watchers, however, the next significant milestone is Alibaba’s India entry. “Alibaba coming to India can do exactly what Amazon did a couple of years ago,” says Arvind Singhal, chairman of retail consultancy Technopak. “They don’t have to worry about raising funds, they are not obliged to show their books to anybody but their investors.” Alibaba’s Magic Moves This means the Chinese giant will bring the entire weight of its technology platform, supply-chain management capabilities and financial muscle to the Indian market. Having made its name in the Chinese market, Alibaba knows a thing or two about large scale its Single’s Day holiday sale turned into a $14.3 billion windfall for the firm last November, outdoing the much-hyped Black Friday sale in the US. What differentiates Alibaba from other global ecommerce networks is an assemblage of subsidiaries that straddles the entire purchase cycle: consumer-to-consumer (Taobao, which is similar to eBay), business-to-consumer (Tmall, like Amazon), and business-to-business (Alibaba, a wholesaler-like model). And it provides all this for free. This, perhaps, explains why Alibaba does a higher sales volume than Amazon and eBay combined
Amazon in lone battle to delay government’s ecommerce norm rollout
The ecommerce industry’s response to new government rules is boiling down to a tug of war between Amazon versus the rest. That’s the way it seems going by a draft letter circulated by the Internet and Mobile Association of India (IAMAI) lobby group among its members at the behest of Amazon India. The draft seeks time until September to comply with requirements for ‘marketplaces’, the business model followed by the country’s biggest ecommerce companies Amazon India, Flipkart and Snapdeal. The key seems to be the stipulation that one vendor can’t account for more than a fourth of sales on a platform. Cloudtail, part-owned by Amazon, is a big seller on the marketplace. “On behalf of the industry, we would like to state that the ecommerce companies already operating under this model would require some time to examine the provisions in greater detail and assess the impact, if any, on their business,” says the draft letter, which ET has seen. “This might include making necessary adjustments and changes in existing operational practices to comply in letter and spirit with the conditionalities explicitly detailed in the press note.” Amazon India did not respond to an email asking if it needed time to be in line with the new rules and if there were differences on this between the company and its two main rivals. To all queries in general, Amazon India has always said it’s in compliance with laws of the land. Flipkart said it conformed to the rules. “We have always been compliant of all rules and regulations and will continue to adhere to the new guidelines as well,” a spokesperson said in an email. Snapdeal declined to comment. No agreement has been reached on sending the letter because Amazon’s rivals aren’t too keen on backing the plea, said several people aware of the matter. They believe they are already compliant and such a request would be “bad optics,” said one of them. IAMAI is a lobby group with members ranging from tech companies to ecommerce companies, including the three cited above. The draft letter, addressed to the Department of Industrial Promotion and Policy (DIPP), began circulating among about a year ago. But the country’s largest online marketplace says it has been steadily reducing this dependence. Similarly, Vector E-commerce was one of the biggest sellers on Flipkart’s fashion ecommerce unit Myntra until recently. The government clarification became necessary as brick-and-mortar retailers complained that ecommerce companies were getting around the ban on overseas investment in business-to-consumer (B2C) multi-brand retail by describing themselves as marketplaces. The government said the new rules would ensure a level playing field and put an end to predatory pricing. Offline retailers have welcomed the new rules. Apart from ecommerce companies, IAMAI members include Facebook, Reliance Jio, Google, IBM and others. Snapdeal cofounder Kunal Bahl had welcomed the new rules as soon as they were issued, saying the company already conformed to them. Its position is, clarity should be sought on specific issues and seeking blanket six-month delay won’t be helpful, said some of those cited above. People familiar with Amazon India’s operations said Cloudtail accounts for well over 25% of sales on the platform. Cloudtail is a joint venture between Amazon Asia and Infosys founder NR Narayana Murthy’s personal investment vehicle Catamaran through holding company Prione Business Services. It isn’t clear if other ecommerce companies would have a problem complying with the rule. WS Retail, originally owned by Flipkart’s founders before being spun off, accounted for about 80% of sales until members on March 30. Press Note 3 issued by DIPP on March 29 allowed 100% foreign direct investment in marketplaces, clearing up ambiguity about the businesses that Amazon, Flipkart and Snapdeal operated in India. But while defining a marketplace for the first time, it barred such platforms from offering discounts on their own or influencing sellers in any manner besides limiting sales by a vendor or a group company to 25%. “In the wake of such eventualities, we request the department to kindly extend date of implementation of notification from the current March date of 29 to September 30,” said the draft letter addressed to DIPP joint secretary Atul Chaturvedi, who signed the Press Note. Press Note 3 issued by DIPP on March 29 allowed 100% foreign direct investment in marketplaces, clearing up ambiguity about the businesses that Amazon, Flipkart and Snapdeal operated in India. But while defining a marketplace for the first time, it barred such platforms from offering discounts on their own or influencing sellers in any manner besides limiting sales by a vendor or a group company to 25%. “In the wake of such eventualities, we request the department to kindly extend date of implementation of notification from the current March date of 29 to September 30,” said the draft letter addressed to DIPP joint secretary Atul Chaturvedi, who signed the Press Note. IAMAI president Subho Ray declined to comment. Snapdeal cofounder Kunal Bahl had welcomed the new rules as soon as they were issued, saying the company already conformed to them. Its position is, clarity should be sought on specific issues and seeking blanket six-month delay won’t be helpful, said some of those cited above. People familiar with Amazon India’s operations said Cloudtail accounts for well over 25% of sales on the platform. Cloudtail is a joint venture between Amazon Asia and Infosys founder NR Narayana Murthy’s personal investment vehicle Catamaran through holding company Prione Business Services. It isn’t clear if other ecommerce companies would have a problem complying with the rule. WS Retail, originally owned by Flipkart’s founders before being spun off, accounted for about 80% of sales until about a year ago. But the country’s largest online marketplace says it has been steadily reducing this dependence. Similarly, Vector E-commerce was one of the biggest sellers on Flipkart’s fashion ecommerce unit Myntra until recently. The government clarification became necessary as brick-and-mortar retailers complained that ecommerce companies were getting around the ban on overseas investment in business-to-consumer (B2C) multi-brand retail by describing
Marketplace e-com:25% cap on sales to end monopoly of few vendors
The 25 per cent limit on single-vendor sales on e-commerce marketplaces having foreign investment is aimed at ending the monopoly of a few big sellers and encouraging more small and medium players to sell their goods online, a senior official said. Some e-commerce players, industry experts as well as IT industry body Nasscom are of the view that capping sales from a vendor at 25 per cent of the total sales in the marketplace may prove to be restrictive, more so if the vendor sells high value items. “The capping will also end the monopoly of one or only few sellers on the marketplace platform. The condition will give huge opportunities to thousands of small and medium vendors to sell their goods online,” the official in the Commerce and Industry Ministry said. Fixing of the limit for a single vendor was important as it would ensure that marketplace is true representation of its nature, the official added. Permitting 100 per cent FDI in marketplace model of e-commerce, the Department of Industrial Policy and Promotion (DIPP) has put a condition that an e-commerce entity will not be permitted more than 25 per cent of the sales through its marketplace from one vendor or their group companies. Nasscom had said that due to this cap, the industry might face difficulties in case of sale of electronic items, where a vendor may be offering exclusive access to certain items or discounts. Further, the guidelines or clarification on FDI in e-commerce, the official said, would lead to growth of several ancillary activities involved in the sector such as warehousing and logistics. “These norms mainly aimed at striking a balance between e-commerce and brick and mortar stores,” the official added.
Startups like Flipkart, Snapdeal try to conserve money by reducing ‘cash burn rate’
For consumer internet companies used to spending their way to market leadership or otherwise, conserving cash has now become a priority to extend their runways. In the new regime, startups are shunning previously popular buzz-phrases such as ‘growth over profit’ and ‘winner take all’ and adopting new ones instead getting ‘unit economics’ right and reducing the ‘cash burn rate’. With funding hard to come by, and investors fretting about returns, it is dawning on startups big and small that the bottom line matters. Which is why the most astute among them are reducing the amount of money they use to grow their business termed the burn rate and sharpening focus on the core business. It is time for prudence over profligacy. “Across all companies both within our portfolio and outside it, it is twice as normal to see burn rate levels in January and February that are half or one-third of their peak levels,” said Mohit Bhatnagar, managing director at Sequoia Capital, which has backed hyper-local delivery startup Grofers, restaurant listings service Zomato and budget hotel aggregator Oyo. Unlike last year when large fund raises were the norm, this year “companies are not rewarded if they have exponential growth with broken unit economics”, he said. ‘Cash burn rate’ is a measure of negative cash flow that was being used as a weapon by startups to outgun their rivals to win market share and pump up growth. This was being fuelled by copious cash from a plethora of investors ranging from venture funds to hedge funds and strategic investors aggressively scouting for the next multi-billion-dollar company. Among those now taking cash burn most seriously are online marketplaces Flipkart and Snapdeal, India’s two most valuable startups. They have reduced the cash burn rate by over one-third, according to several people in the industry aware of the changes afoot in Indian internet companies. Flipkart, India’s most valued startup with an estimated worth of over $15 billion (Rs 1 lakh crore), has managed to trim burn rates from a peak around $80-100 million per month in the last quarter of 2015 to around $50 million now, the sources said. A person familiar with the thinking in the company told ET that Flipkart may further reduce its burn rate by $10 million. A large part of it is driven by the fact that first two quarters of the year are considered a slow period for retail sales, but focus is now on carefully watching costs, the person said. Rival Snapdeal has been able to cut its burn rate by as much as 40% compared to last year, an investor in the company told ET. The Delhi-based company, in which Japan’s SoftBank is the biggest investor, was spending around $20 million per month last year. Flipkart and Snapdeal did not reply to emails seeking comment. The total value of venture capital invested took a drastic fall of over 80% during the first quarter of 2016 to $337 million from $1.79 billion in the same period of the previous year, according to VCCEdge. Both large players like Flipkart and Snapdeal, who raised three rounds of funding each in 2014, closed only one financing round in 2015. Smaller startups have seen even more drastic changes, ranging from shutting down operations in some cities to laying off staff. Experts believe that startups will have to focus on building a sustainable product to win and raise more capital, rather than spending more money and rapidly expanding operations. “The cost of running a business has to be reduced as there are innate inefficiencies that have crept in,” said Sreedhar Prasad, a partner specialising in ecommerce and startups at KPMG. The cautionary mood was best exemplified when Flipkart backer Tiger Global pulled back from India and SoftBank, which poured over $1 billion into Indian startups in 2014, began to caution startups on their spendthrift ways. “Costs will have to be cut in areas like salaries, duplication of work within departments and reducing cost of operations,” said Prasad. Several startups, especially in areas like hyper-local delivery, aggressively expanded to dozens of cities across the country in the first half of 2015 but have since cut back on operations. Food delivery players like Zomato and TinyOwl and grocery delivery players like Grofers and PepperTap are among those which shut operations in smaller cities. While many companies continue to spend capital, they are now able to direct the money towards building long-term infrastructure. “We are burning cash on operations where we will lose until we build the infrastructure. We have significantly reduced the discounts, but burn rate doesn’t come down significantly if you shut smaller cities,” said Albinder Dhindsa, cofounder of Grofers. Some, like budget hotel aggregator Oyo, have seen burn rates slide from $8 million a month in the last quarter of 2015 to $4 million recently, according to sources. While this has been driven by efforts to consolidate the aggressive expansion undertaken by the company in 2015, part of it is also because of the need to conserve cash. “Among our focus areas last year was building scale and with over 65,000 branded hotel rooms in the country, we have made significant progress. As the “network effect” kicks in for us, we expect to drive more efficiency in the business and further enhance our unit economics,” said Kavikrut, chief growth officer, Oyo Rooms while declining to comment on the burn rate. Monitoring costs and improving unit economics is also becoming essential for raising more capital. Take for instance home and beauty services startup Taskbob, which has cut burn rate by over 33% since October 2015. “Focus has completely shifted from top line & revenues to sustainability. Across all costs like operations, marketing and recruitment we are carefully evaluating return on investment,” said CEO Aseem Khare. This also meant that 16-month-old startup has put on its plans to ex pand to Bangalore, but go deeper into existing Mumbai market to drive better unit economics even after raising a Rs 28-crore funding round in
GST will be rolled out soon: PM
Assuring Saudi and Indian business leaders that his government is working to set up a predictable long-term taxation regime, Prime Minister Narendra Modi on Sunday said the long-awaited Goods and Services Tax (GST) would soon be implemented in India. “Don’t worry…GST will happen, it will be a reality soon,” Modi said, addressing the gathering at Saudi Arabia’s Chamber of Commerce here. “Retrospective tax is a matter of the past. My government will continue to work towards establishment of a predictable long-term taxation regime,” he added in a reference to recent disputes involving Indian tax authorities and multinationals like Cairn and Vodafone. The Goods and Services Tax (GST) Bill, to implement a pan-India tax for a complete overhaul of the extant indirect tax regime, has been approved by the Lok Sabha. It is currently stalled in the Rajya Sabha, where the ruling Bharatiya Janata Party-led National Democratic Alliance (NDA) doesn’t enjoy a majority. The government hopes the next biennial elections in the Rajya Sabha will give it enough seats in the upper house to pass the GST Bill. Modi, who is undertaking a three-nation tour, landed in Saudi Arabia on Saturday on the last leg. He urged the audience to move beyond the traditional bilateral trading relationship. “Let us move beyond merely the export-import relationship. Joint investment, technology transfers are areas that we should explore,” Modi said. Listing petroleum, renewable energy, infrastructure, defence and agriculture, as areas ripe for expanding cooperation, the prime minister said: “India and Saudi Arabia should look at working together for building a dynamic global management sector for the cyber world.” “India and Saudi Arabia are old friends, but we are ready to take bold new steps into a golden future,” he added.
SIA’s low cost arm, Scoot, to launch India flights soon
Scoot Airline, the low-cost arm of Singapore Airline (SIA), is all set to land soon in three Indian cities including Chennai, making it the fourth carrier from the Southeast Asian naton to operate to the world’s fastest growing aviation market here. An announcement in this regard is likely to be made in a month, sources in the know of the development said. Besides parent Singapore Airlines, two of its two subsidiaries Tiger Air and Silk Air also operate to India at present. SIA also holds 49 per cent stake in Indian full service carrier Vistara, in which Tata Sons is a majority stake holder with 51 per cent. “Scoot Airline plans to operate from Chennai, Amritsar and Jaipur as part of its India entry plan. The airline is in the process of getting all mandatory approvals. A final announcement in this regard is expected to be made in the next couple of weeks,” the sources said.
Navi Mumbai airport inches ahead, on paper
It seems the proposed Navi Mumbai International Airport (NMIA) project is moving, at least on paper. The Airports Authority of India (AAI) has started putting together a team that will be tasked with air traffic management at the proposed airport. “Though there is still no clarity regarding the functionality of the proposed airport, work on formation of a team that will set up the air traffic management infrastructure is on,” said a senior AAI official. The AAI manages most of the civil aviation airports in India and also the air traffic management of the privately held ones, namely Mumbai and Delhi. The air traffic infrastructure includes setting up of an Air Traffic Control (ATC) tower and a building that can have related equipment, apart from laying of cables. According to government officials, despite the NMIA project being first conceptualised way back in 1970s, it was unable to move ahead due to protracted negotiations with farmers over land issues. The farmers wanted a compensation of Rs20 crore per hectare, or 35% of the land back as a developed plot. However, the government was unwilling to offer more than 22.5%.