Tuesday, July 31, 2012

$197 billion in lawsuits. Serious.

So far, the July 2008 acquisition of Countrywide Financial has brought to Bank of America’s table, $197 billion in lawsuits. The bank is in a mess and there appears no relief to the state that the beleaguered entity is in at present. There is one quick-fix solution though – a spin-off!

Back in 2006, Bank of America (BofA) was a different company – profitable and growing endlessly. On July 20, 2006, this growing feeling of conceitedness encouraged Kenneth Lewis (the-then CEO of BofA) to declare before a group of coffee-sipping, cookie-munching senior executives gathered in the auditorium of the bank’s headquarters in Charlotte, that everyone in the auditorium was now an employee of the “most profitable financial outfit in the world”. The verbal jubilation was an outcome of the company’s second quarter earnings (Q2, FY2006), which stood at $5.5 billion – the highest ever quarterly bottomline in the 102 year-old history of the financial outfit. In terms of market capitalisation too, then, BofA was just $4 billion away from taking over Citigroup as the world’s largest wealth manager. [It finally managed that on November 28, 2006, when its m-cap of $243.71 billion surpassed Citi’s $243.52 billion.] All was going well, until two years later, in July of 2008, BofA made a “relatively low-priced” acquisition worth $4.1 billion. That was to change its future, perhaps forever. It was the second-lowest amount spent by BofA in its endeavour to grow inorganically during the past decade – lowest being the $3.3 billion spent on acquiring The US Trust Company from the Charles Schwab Corporation on July 1, 2007 – an exercise which it had managed well till then. But in its effort to outrun and outspend competition, BofA hardly realised that this one deal was synonymous to a blindfolded banker running into a pit of “bad loans”. Countrywide Financial was that pit.

At $4.1 billion, the deal came across as a good bargain, given that the mortgage major had delivered a return of 23,000% to shareholders between 1982 and 2003 (more than what Washington Mutual, Walmart and Berkshire Hathaway managed in the same period). Moreover, the acquisition promised to consolidate BofA’s position as the leading mortgage originator in US. What BofA ignored was the fact that Countrywide had achieved all this by touring on the subprime mortgage bus.

In FY2008, BofA’s revenues stood at $124.13 billion, with net profits of $4.01 billion. Even as the subprime mortgage scandal unfolded, claiming victims in the third and fourth quarter of 2008, the bank’s operational structure withstood all punches. Revenues and profits rose to $120.95 billion and $6.27 billion respectively in FY2009. But behind the curtains, the bank’s financial DNA had changed fast and dangerously so.

In 2007, the contribution of the highly volatile package of home loan & insurance businesses to its topline was just 5.4%. This changed to 12.5% in 2008, 14% in 2009 and then (understandably fell) to 9.5% in 2010. During FY2009 and FY2010, as more foreclosures surfaced and customers defaulted on their home loans (coupled with troubles with credit card defaults, which contributed to 23.1% of its topline during the two years), BofA suffered losses amounting to $5.79 billion (losses arising out of the credit card, home loan & insurance businesses during the two years totalled $24.9 billion).

Till date, BofA has been paying the price of loans issued by Countrywide. In fact, just after BofA settled a $8.5 billion lawsuit filed by a consortium of 22 investors in June this year (related to bad mortgages), the American Insurance Group (AIG) sued BofA on August 10, 2011, for $10.5 billion, alleging that the bank and its subsidiaries issued defective mortgages to borrowers who were not in a position to repay and then repackaged them into securities worth $28 billion which were then sold to AIG.

BofA’s Q2 results for this fiscal don’t look encouraging either. The bank posted a net loss of $8.8 billion (its worst ever!). Speaking to B&E from Chicago, Jim Sinegal, Associate Director of Morningstar, says, “Thanks primarily to its $4 billion acquisition of Countrywide in 2008, BofA now possesses tens of billions of dollars in potential legal liabilities. Earnings must improve substantially in order for the bank to achieve escape velocity from the weight of billions of dollars in legacy mortgage-related liabilities threatening to reduce capital to unacceptable levels.” Under the purview of limited liability laws, stakeholders of a publicly-listed entity are not liable for its defaults. In this case, the shareholder is BofA. This implies that the bank can treat its bleeding bottomlines, if it is to pull the shutters on Countrywide. So, the question is – why hasn’t BofA taken bankruptcy protection on Countrywide yet? Because it cannot.



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Monday, July 30, 2012

Wrong ends from The Barrel

Governments of Countries Facing mass killing Incidents must Immediately clamp down on legal Gun Possession 

Carnage merchant Anders Behring Breivik, in a ludicrous act of insanity propelled by extreme right wing emotions, gunned and bombed around 98 Norwegians to death on July 22, 2011. However, the blame for this terrible tragedy should also go to the ease with which the average Norwegian citizens can acquire guns today.

Although acquisition of firearms in Norway is regulated by the state, it is not very difficult to acquire one on the pretext of hunting or for the sport of shooting. The result – an estimated 500,000 guns are owned by private homes in this tiny country. Going by the Gun Ownership Rate (Small Arms Survey 2007) i.e. guns per 100 residents – Norway was at an (un)impressive 11th position with a score of 31.3. However, topping the list most convincingly is the United States with a score of 88.8 (2007 figures). There are few restrictions on possessing firearms in US, protected by the Second Amendment to the US Constitution. The culpable nation had seen 24 such incidents of mass murder since 1960, which is the highest in the world! After US, the next 6 countries with the highest gun possession rates (legal guns per 100 population) are Yemen (61 guns per 100 population), Finland (55), France (32), Canada (31.5), Germany (30) and South Africa (13), according to the c. These 6 countries also top the world in terms of mass murders after US, though the pecking order is different: Germany (7), South Africa (5), France (5), Yemen (3), Canada (3) and Finland (2).

Therefore, a direct inference can easily be drawn when it comes to the correlation between the ease of availability of legal arms in a particular country and the incidents of gruesome mass murders that happen there.


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Saturday, July 28, 2012

Great People, Greater Institutions

Latin American states are led by Iconic Leaders who last The Short term, while North America is led by Democratically elected leaders through strong Institutional structures, which last the long term. Time enough for South American nations to gain from institutionalising Governance Structures than depend on individuals

Only some news reports have the potential to spread like wildfire and transcend borders; and these are reports that have titanic ramifications for the world at large. A case in point was the press release from the office of Venuzuelan President Hugo Chavez, which said that he would be undergoing an operation on June 10, 2011 to remove an abscessed tumour with cancerous cells. The world was left stunned and speculations were being made on how long the 57-year-old Chavez would continue and who would be the possible successor!

This has led to a very relevant debate on Latin American leadership and its future. Interestingly, Latin American states have mostly been led by iconic leaders, statesmen and politicians. Hugo Chavez himself is one Venezuelan leader who attracted enough international attention with his Bolivarian ideology and bold leadership. From the ranks of an ordinary military officer, he went on to become the 56th President of the state and is ruling since 1999. Similarly, a press operator in an automobile parts factory, Luiz Inácio Lula da Silva became the 35th President of Brazil. He served Brazil for two terms from 2003 to 2010 with dignity and pride during which Brazil gained immense prosperity and prestige. He has been widely recognised as the most popular and influential Latin American political figure. He was often described as “a man with audacious ambitions to alter the balance of power among nations.” The third iconic figure who fortified Latin American politics is Cuban Revolutionary leader Fidel Castro. He not only served Cuba as Prime Minister during 1959 to 1976 and later as President during 1976 to 2008 but also saved Cuba from US imperialist aggression, and he is recognised as one of the world’s greatest leaders.



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Friday, July 27, 2012

Goa talks to Virat Bahri on The Company’s outlook

P. K. Mukherjee, MD, sesa Goa talks to Virat Bahri on The Company’s outlook post The Lifting of The Export ban and The Sfio Report

B&E: Indian steel companies often complain that we should be looking at value adding our iron ore within the country rather than exporting it. What is your stand on this issue?
PKM: Theoretically, yes. (But) where is the capacity to consume? How much capacity have we added since independence? Value addition, as stated above, is a big subject and we can discuss over it for hours. I can only say that nowhere in the world does steel producers depend only on captive ore. Instead, players buy ore from merchant miners at international prices, be it Australian Blue Scope or even US Steel mills, leave aside the Japanese and Europeans who have largely depended on imported ore for decades and still compete year after year in the international market with competitive technology – they invest in sinter plants and consume all grades of ore instead of high grade lumpy ore as a major portion. There are so many sponge iron plants in this country that only consume high grade lumpy ore of specific size, leading to crushing of limited natural resources and generating more fines; leave aside the question of their environmental footprints.

B&E: What is your outlook for the current fiscal? How do you see the break up of your Indian and global businesses altering?
PKM: Domestic sale as a percentage of total sales is going up. But a significant quantity coming out of Goa mines, which is having low grade reserves and is not touched by domestic steel producers will necessarily have to be exported continuously. The Karnataka scenario and transport bottlenecks in Goa would determine our outlook this fiscal. We’ll continue to maximize the volume within all regulatory parameters. Subject to the above, we look forward to volume growth of about 20% from our Goa and Karnataka mines put together.

B&E: What is your stand on raising of export duties by the government? How is the new manufacturing policy expected to affect your business?
PKM: We believe in free market economy and more regulations have various fall outs, which, in the long run, may not be helpful for the country as a whole.

B&E: What is the status of the SFIO investigation that questions your overinvoicing of imports and what is your stand on the same? How important is transparency to you as an company?
PKM: We’ve received the SFIO report and are in the process of compiling our comments & are confident that the ministry will consider the report objectively after evaluating our comments.


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Thursday, July 26, 2012

Stratagem-HONDA INDIA: SAGGING SALES

Failure to Refresh its Offerings has Cost Honda dear, which has Lost Sales and its Leadership Position in The Executive and Premium Cars. 

Above all, it’s the rising demand for diesel cars and the new product offerings in the mid-size sedan segment that has caught Honda unawares. Even the Johnnie-come-lately Volkswagen’s Vento has outsold Honda City, selling 3,994 units as against City’s 2,773 units at the end of March 2011. What’s worse, the beleagured Japanese automaker has no back-up plan to make up for the loss of volumes on account of the tremblor disaster. In a scenario where 65% of the total cars sold in the mid-size sedan segment are powered by a diesel engine, Honda paid the price of completely ignoring the diesel engine car market and then waking up too late by when competitors had already charged ahead. As such Honda is still two years away from developing a diesel engine for its cars in the Indian market. “Keeping in mind the price differential between petrol & diesel, it is expected that the demand for diesel cars will go up even further,” says Kapil Arora, Partner (Automotive), Ernst & Young. Going by market estimates, close to 40-50% of the total sales of products like Vento and SX4 come from the diesel variants. The sudden dieselisation of the Indian sedan market has only added to the woes of the Japanese auto major. “The rise in demand for diesel cars is because of the gap in the price of petrol & diesel. As diesel is comparatively cheaper and gives better mileage, consumers are preferring diesel cars in the light of the rising petrol prices,” says Jnaneswar Sen, VP – Marketing, Honda SIEL. He adds that Honda will take another two years to come up with a diesel engine for the Indian market. The question is: Will Honda be too late to in waking up to the call by 2013?

Going by the market standing at the end of FY 2010-11, Honda SIEL has a 2.36% share in the Indian passenger car market, as compared to the 14.26% share of Hyundai Motor India. The latter entered India in 1996 (almost a year after Honda’s entry into India). Even players like Ford, General Motors and Toyota have inched ahead of Honda even though they started their Indian journey around the same time. For the record, GM today has a market share of 4.25% while Ford is the sixth-largest player with a 3.91% market share. Taking into account the success of products like Figo, Beat and Spark, Honda seems to have ceded the space in the hatchback segment to its rivals. But for the earthquake, the launch of Honda’s Brio, which is expected to debut in the high-volume fetching sub Rs.5 lakh segment, has just got a little longer. The product was expected to be running on Indian roads by August 2011, but now it will be launched during the last quarter of this year. “Apart from the metros, we see huge growth potential in Tier-II & Tier-III cities for this car and therefore we have been expanding our sales network to reach out to newer cities and markets in the last 2 years. The potential to increase sales from the rest of the country is huge,” says Sen.

In the meantime, Honda will have to ramp up its marketing efforts to make up for the lost volumes due to the production cuts. As the Brio will make its debut during the festive season, Honda will be pinning a lot of hopes to pull off high volumes. Considering that Honda will not make its presence felt in the diesel segment until 2013, Brio will be the only hope for the company to make it count in the highly-competitive Indian market. One hopes that Honda’s extensive research on the Indian hatchback market and the lessons it learnt from the Jazz episode will help the Japanese carmaker to get it right this time around with the Brio.

Read more.....

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Tuesday, July 24, 2012

The BPL Blinder

Varying findings of different Committee Reports, an Absolute lack of consensus and The Dependence of poverty alleviation schemes on BPL Estimates makes its Calculation process Extremely crucial. And now, Despite Accepting that 37% of India could be in The BPL category, The Government has failed to notify this.

After a prolonged dilemma over the number of persons falling below poverty line (BPL), the Planning Commission accepted the Suresh Tendulkar Committee report on the scale of poverty in India and found the recommendation regarding a higher number of people being covered under BPL schemes reasonable. Amid confusion and differences over the number of persons falling below poverty line obstructing the proposed legislation on food security in India, the Planning Commission decided to go with the BPL figures contained in the Tendulkar Committee report. With this, the number of people under BPL would rise to 37.2% of the total population (from around 27% earlier) a figure crucial to determine the extent of beneficiaries of government subsidies and the food security bill. However, despite the government having accepted the report in 2010, it is yet to notify the new poverty estimation, which will make the Tendulkar committee figures, though pegged as an underestimate, applicable to all Central government schemes.

The number of BPL people is determined at the national and state-levels by the Planning Commission through large sample survey of consumer expenditure carried out by the National Sample Survey Organisation (NSSO), often referred to as available data‘. Going by government definition, BPL is an economic benchmark and poverty threshold used by the government to indicate economic disadvantage and identify individuals and households in need of government assistance and aid. It is determined by using various parameters which vary from state to state and within states as well. But taking into account the Government‘s consistency in providing varying figures about the extent of poverty in India, it is difficult to arrive at an exact figure. The government adopts various measures to reduce poverty – through subsidised kerosene and cheaper grain for the poor population. With the government counting on these schemes to eradicate poverty in India, and the extent of these schemes dependent on the BPL numbers, it becomes increasingly important to adopt a correct methodology to arrive at a realistic figure that can actually serve in the interest of the most vulnerable classes of society where the benefits of government schemes are most required. In the absence of a uniform statistical measure of poverty, it is obvious that the government programmes for poverty alleviation will not prove meaningful.

Uncertainty within the government over actual BPL figures is evident from the varying estimates that different government-appointed committees have tabled. Report of the Saxena Committee, constituted by the Ministry of Rural Development, says that 49.1 % of the population in the country is living below poverty line, and at least 23% of the poor do not possess a ration card, leave aside a BPL card. “The exclusion errors from BPL lists frequently reflect the powerlessness of the most vulnerable and are a direct function of their weak political bargaining power and our inability to include them in state programmes in the last 60 years is a severe indictment of public policy and its implementation,” the Saxena committee has observed.

The latest poverty ratios released by Planning Commission based on 61st round of the National Sample Survey Organisation (NSSO) in 2004-5 estimated that 28.3% households in the rural areas were living below poverty line. In contrast to this figure for the same period, the Arjun Sen Gupta Committee constituted by the government for gauging poverty in the unorganised sector the country revealed that more than 77% of people are forced to live on Rs.20 or less per day, which is insufficient even for bare minimum requirements. The panel estimates the number of poor on basis of the National Sample Survey Office’s sample survey of expenditure and fixes state-wise number of poor. Baffled by the different poverty figures, the government has now asked all ministries to only use the planning commission’s figure of 27% in all its communications henceforth.

In line with the government instructions, the Planning Commission has now decided to maintain the state-wise number of BPL families (which decide the extent of schemes run by the state governments) as per NSSO data available, against the usual practice of state governments calculating these numbers. While the rationale behind the decision is still skewed, the Commission is further learnt to have issued a sealing to state governments that the number of BPL families should not exceed a certain estimate. The Parliament’s standing committee on Finance, headed by former Finance minister Yashwant Sinha has sent a serious note to the commission objecting the government’s move. The committee has also said that the number of BPL families should be decided by the state governments as it is primarily their job. Expressing apprehensions over differences between the Centre and states over population of Below Poverty Line (BPL) families and discrepancies in the existing BPL lists, Sinha has also cautioned the government against rolling out the proposed food guarantee law without resolving all the issues related to BPL population in the country. While urging the government to sort out all the issues relating to poverty criteria, estimation, identification and targeting before finalising the Food Security Bill, the Committee underlined that it was “concerned about the efficacy of the proposed Food Security Bill when the criteria of identification of the poor remains nebulous”. The standing committee has also noted that various expert groups have indicated different aspects of poverty based on different assumptions and context.



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Friday, July 20, 2012

Seconds on Air, Hours off it!

The World Suffers huge Productivity Losses because of Sports Tournaments

Although most bosses try every trick in the book to avoid pilferage of productivity, mega sporting events do end up with employees diverting their man hours into watching the games! Even though there is much leisure or patience today to sit through a one day international, India Inc. is likely to witness a substantial productivity-pilferage during the ongoing ICC World Cup. ASSOCHAM estimates that around one-fifth of employees (12 million) are likely to bunk office or cut short their working time, resulting in a loss of 768 million man hours. Around 15% of the managers have agreed in principle to allow employees to take some time off to watch matches, although 29% have refused to allow non-attendance.

However, the FIFA World Cup makes ICC pale in comparison. According to an article by Associated Press, the productivity loss to Germany was a staggering $8 billion (0.27% of GDP), while Britain lost $1.5-2.3 billion due to the 2010 World Cup football. In the quarterfinals, where Netherlands was playing Brazil, almost the entire population of the former left office by 1 pm. Thousands of Dutch workers did not attend office during the European Championship in Portugal in 2004. The 2009 NCAA tournament in America also enthused millions, leading to lost productivity to the tune of $3.8 billion (Challenger, Gray & Christmas Inc.).

In 2009, when some top web sites showed college basketball, an estimated 7.9 million logged on, and mostly office goers! Add to that, numerous and endless post-match discussions and you have even more to deal with. And to imagine that a number of such companies pay through their teeth to sponsor them.


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Wednesday, July 18, 2012

Weakened Domestic demand in Nordic’s biggest Economies

Tighter Monetary Policy has not only Weakened Domestic demand in Nordic’s biggest Economies, but has also put a Brake on Region’s overall Growth Momentum. Is Nordic slipping back into recession? 

While the central bank of Sweden didn’t respond to the queries sent by B&E (till the time this magazine went to print), Øystein Sjølie, Communication Advisor at Norges Bank, parried our queries: “We are not authorised to comment on the economic situation of the country.” However, central banks of Finland and Denmark were at least brave enough to accept the fact. “Public finances have weakened substantially as a result of the recession, from a surplus of more than 3% of GDP in 2008 to a deficit of 2.8% in 2009 and just over 5.5% in 2010. The deterioration is not only caused by the automatic effects on both the revenue and expenditure sides, but also by considerable fiscal easing and public investments. In view of the prospects of dampened growth and continued deterioration of the labour market, the government deficit is expected to remain large with the public sector’s debt too rising sharply,” agrees Merete Lucie Trojahn, spokesperson, Danmarks Nationalbank to B&E.

Even Tuomas Saarenheimo, Head of Monetary Policy and Research Department, Bank of Finland accepts the fact to B&E that the Finnish economy has been hard hit by the global financial crisis. And why not? The share of exports, which was more than 40 % of GDP (in volume terms) before the crisis burst out, has declined by nearly 25% in volume terms in 2009. But he also gives the other point of view, “Although the current state of the Finnish economy is much less gloomier than it looked like about half a year ago, one should remember that Finland is still highly dependent on the overall development of the world economy and world trade. If the world economy continues to recover, the Finnish firms are in a good position to benefit from increasing demand in the export markets or vice versa.”

Though Denmark and Norway saw their real GDP rising during the first quarter of 2010, the scenario here too looks bleak as high-frequency data by Moody’s Economy.com points towards a slowdown in these economies in the near future. In fact, manufacturing purchasing managers’ indices for Denmark and Norway have been trending weaker since March 2010. Further, rising levels of household debt too posses a threat to the region’s recovery in the long term. While household debt is 167% of disposable income in Sweden (compared to 104% a decade earlier), the ratio has almost doubled in Finland to 107% in 2009 from 65% in 2000. Even in Norway, the debt ratio is expected to reach 197% of disposable incomes by 2010 end, up 14.5% from 2005 level.

No doubt, one way out of the chaos is to ease the monetary policy; but then, it might fall back on the policy makers as it could further bloat the new housing bubble which is in the making in most of the Nordic countries. A closer look at the numbers and one can clearly assess the real threat. While existing home prices in Norway and Sweden have risen substantially by 10.8% and 10.7%, respectively, in Q1 2010 from year-ago levels, they have gone up by 10% in Finland, after surging a record 11.4% in Q1 2010.

All this clearly points towards a real estate bubble that could further undermine the region’s recovery and weaken consumption, if and when it bursts. If experts are to believed, then the houses are expected to lose a fifth of their value in the next 3-5 years. And if that happens, chances are that Nordic region might slip back into recession and this time a prolonged one. “A 20% drop would probably be instrumental in bringing on, or deepening, a double-dip recession,” Par Magnusson, the chief Nordic economist at RBS in Stockholm tells B&E. Certainly, it seems that winter has already started in Nordic, though this time a little early!



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Tuesday, July 17, 2012

Neighbour’s envy. Hooda’s pride. That’s Haryana!

At the recently concluded India-Japan Global Partnership Summit in Tokyo, Haryana’s Chief Minister Bhupinder Singh Hooda, made a strong pitch for investment in his State. In an exclusive interaction with B&E, Hooda says the state’s strong industrial base, infrastructure and agriculture are its drawing card.

Chief Minister Bhupinder Singh Hooda is just back from his visit to Japan after leading a high-powered delegation to the India-Japan Global Partnership Summit in Tokyo. Haryana already tops the list of investments from Japan in India and the state expects a lot more in the coming years. Almost 70% of the state’s population is still dependent on agriculture but the spate of development and industrial growth that Haryana has witnessed in recent years is nothing short of impressive. The industrial drive, which began around the new millennium has, under the leadership of Hooda, gathered greater force and momentum along the way. In fact, the state’s economic growth and multifaceted development is often cited by the ruling Congress-led UPA government at the Centre as a standing example for other states to follow.

In an exclusive interaction with B&E, Hooda says the response he received from Japanese investors looking to invest in Haryana was more than encouraging. “For Japan, Haryana is a different ball game altogether,” says Hooda. With one-third of Haryana falling under the National Capital Region, the state has been able to attract sizable investments from multinational companies, large business houses, foreign investors, NRIs and small scale entrepreneurs. Today, the state encourages industrial policies that are environment friendly and conducive for investment.

“The key focus of investments here is on small and medium enterprises, so that the people of Haryana also get more opportunities for employment and a better life,” says Hooda. During the visit, Hooda also met with Japan’s Prime Minister Yoshihiko Noda and sought his help in spurring Japanese investment and flow of technology to creating new capacities in Haryana’s manufacturing and infrastructure sectors. The chief minister took great pains in highlighting Haryana’s sound economic indices – its high per capita income, decent industrial infrastructure, strong manufacturing base, advanced agriculture sector and vibrant service sector – to impress upon Japanese investors to step up their investments in the state. Haryana enjoys a particularly strong reputation in manufacturing sectors like automobiles & auto components, light engineering goods, IT & ITeS, textiles & apparel and electrical & electronic goods.

As per a research study of the National Council of Applied Economic Research (NCAER), Haryana ranks number one on Per Capita-Net State Domestic Product (PC-NSDP) among major States. The Gross Domestic Product (GDP) of Haryana is expected to grow at 9% during 2010-11, per capita income at 7.2% and revenue receipts at 23.7% against 13.8% in 2009-10. Another study published by industry trade body Assocham points out that Haryana stands out among all States for showing the highest implementation rate of 81% on the pledged investments. Even though the protracted slowdown in the global economy is having an adverse effect on several industries, especially those from the MSME sector, Haryana has responded to the call by taking timely measures. “Even during the peak slowdown period, we took various steps which have led to the maturity of 70% of the investment proposals during 2008-09,” Hooda tells B&E. “This level of investment maturity was the highest in the country during the period,” he adds. A recent report by the Confederation of Indian Industries (CII) states that the performance of the service sector in Haryana has helped the state post higher than national GDP growth between 2004-05 and 2009-10.

Born to a renowned freedom fighter, Choudhary Ranbir Singh, in Sanghi village of Rohtak in Haryana, Hooda got his first opportunity to lead the state government as chief minister in March, 2005. He created a history of sorts in the Haryana assembly elections of 2009, when he once again led the Congress to victory. Since 1972, no party had returned to power in Haryana. An alumnus of Sainik School, Kunjpura, in the Karnal district of Haryana, and a graduate from the University of Delhi, Hooda is a veteran politician who was a Member of Parliament in the Lok Sabha for four terms in 1991, 1996, 1998 and 2004. He served as Leader of the Opposition in Haryana’s Legislative Assembly from 2001 to 2004. Earlier he was President of the Haryana Pradesh Congress Committee (HPCC) from 1996 to 2001 and has had the distinction of defeating the late Chaudhary Devi Lal, a stalwart politician from Haryana, in electoral battles fought in the Jat heartland of Rohtak for three consecutive Lok Sabha terms.

Haryana’s success in building its image as a state that stands apart from the others – especially in terms of investments, industrialisation and development – can be attributed largely to Hooda’s ability in attracting investment through investor-friendly policies and timely, smooth delivery of services. “We have made concerted efforts to remove bottlenecks for the smooth operation of industries,” says Hooda. During his tenure as CM, the state government has enacted the Industrial Promotion Act 2005, introduced self-certification schemes and made provisions for providing a conducive and enabling environment for investors.

The state’s policies on land acquisition have also won plaudits. Haryana offers the highest market rates in the country for land acquired from farmers for development projects. Still, there have been instances of protests against these very policies. Hooda says he believes that there is always scope for improvement and assures that his government is taking all possible measures to ensure that outstanding issues are resolved at the earliest. “Please remember that this state was the first to introduce the concept of annuity payments in lieu of land acquisition from farmers,” Hooda points out. Many suggest the state’s annuity payment concept for land acquisition, where the compensation is based on annuity and value-added market price of the land, can serve as a practical model for other states. Apart from offering lump sum compensation, it provides a 33-year annuity, annual hike, plots, jobs and even a 20% incentive for a no-litigation agreement.



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Monday, July 16, 2012

if the government wants to achieve this desired growth, it certainly needs to undertake immediate reforms to augment domestic coal supply

To meet the growing demand of electricity in the country, the approach paper of 12th Five year Plan (2012-2017) targets to set up 100 GW of capacity. However, if the government wants to achieve this desired growth, it certainly needs to undertake immediate reforms to augment domestic coal supply. 

The issue of coal availability also assumes significance because to sustain the economic growth rate of 8-9% over the next few decades, India has to invariably depend on coal. While demand for coal from the power sector is set to grow by around 10% (driven by new capacity additions), the supply through domestic production is seen at around 7-8%. However, it is still difficult to understand who is to be blamed. And if analysts are to be believed, coal demand and, hence, coal prices are only going to rise because the existing demand-supply mismatch is only going to get worse. According to the BP Statistical Review of World Energy 2011, while global coal production grew 6.3% between 2009 & 2010, consumption rose by 7.6%. In India too, the rapidly rising demand is seeing an increasing dependence on imports. Coal imports this year are estimated to be a whopping 84 MT, a figure likely to double in the next two years. In fact, as per data available with the Commerce Ministry, $8,183.38 million was shelled out in FY2010 for importing coal. Well, this figure has already reached $6,993.69 million in FY2011.

In view of growing mismatch between demand and supply, the government is said to be in plans to allow private companies into commercial coal mining. Mining giants like BHP Bilton, Rio Tinto, and Sesa Goa are expected to be allowed access to captive coal blocks reserved for cement, steel and power sectors. Having faced stiff opposition to this proposal from the Left in Parliament earlier, the government is now in plans to achieve the same without having to face the Parliament. Under the captive mining policy, coal blocks are offered to private players in approved end-user segments like cement, power, steel, syngas and liquefaction. These firms, in turn, are free to form joint ventures in mining. Even under the auction route, only these sectors are eligible to participate. As per sources, the coal ministry has already sought legal opinion on its plans to allot captive coal blocks to private miners on the condition that they tie up with approved end users for supply. There are also plans to review the current coal distribution policy to ensure that priority sectors get adequate fuel. Capacity addition in India’s electricity sector in the 12th Plan (2012-17) too runs the risk of getting derailed due to uncertain domestic availability and volatile international prices of coal, unless immediate reforms are undertaken to augment coal supply, warns a paper by industry chamber FICCI and consultant in energy sector ICF. In fact, the paper asks for allowing captive mines to sell surplus coal at market prices to incentivise additional production and full-scale commercial mining at market prices through amendment in the Mines & Minerals (Development & Regulation) Act.



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