www.livemint.

com New Delhi, Mumbai, Bangalore, Kolkata, Chennai, Ahmedabad, Hyderabad, Chandigarh*, Pune* Monday, April 25, 2011 Vol.5 No.97 `3.00 24 PAGES

CORP:Devinjit Singh on
Carlyle’s India focus >10
CAPITAL CALCULUS: Anil Padmanabhan
on the widowing of India >4
BANKER’S TRUST: Tamal Bandyopadhyay
on the delay in new bank licence norms >6
EXCLUSIVE PARTNER
WSJ: Dollar’s decline speeds up on
low interest rates, rising inflation >20

SENSEX 19,602.23 ® NIFTY 5,884.7 ® DOLLAR `44.36 ® EURO `64.68 ® GOLD `22,030 ® OIL $123.99 ®

REGULATORY ACTION
EARNINGS SCORECARD Regulator pulls QUICK EDIT
Opening a
MFsforcedto Riding on a 26.6% growth in sales, the 103 listed firms that have so
far declared their results for the March quarter reported a 25.86%
rise in net profit, lower than the 29% increase in the previous
quarter. Analysts say that though the earnings have largely been
in line with expectations, these are early days yet.
up Delhi airport
for high cost
of makeover
market
compensate Net sales
% change (year-on-year)
Figures in brackets denote
value in R crore
See Page 6

63.15
(108,694.60)
B Y T ARUN S HUKLA
tarun.s@livemint.com
·························
NEW DELHI
P rising open new
markets requires
much more than offering
products at competitive
prices. Today, it requires

investors
52.08
41.84
(105,139.63)
(110,131.89)

23.88 26.59
D elhi airport’s $3 billion
makeover has resulted in
great acclaim for Terminal 3 as
the active support of
governments for private
firms. India has been a
(115,069.08) (137,599.49)
17.56 -11.20 14.69 a world-class facility. But the laggard in this respect
(74,126.73) (72,416.19) (120,587.15) newfangled modernity has while China has used
-1.72 -1.42
(66,623.05) (92,886.15) come at a steep price, which every tool at its disposal to
BNP Paribas, Deutsche of them wanted to be identi-
Dec Mar Sep Dec Mar Jun Sep Dec Mar
may be paid for by travellers help its companies and
AMC pay back investors fied, given the sensitivity of the
matter.
quarter Jun
for several more years.
After an audit of the project,
has leapt ahead.
This rankles much more
FY09 FY10 FY11
after market regulator Mint has reviewed a copy of FY: fiscal year the regulator has criticized when companies from
found they violated the letter addressed to affected Operating profit Delhi International Airport other countries stitch
investors by one of the asset % change (year-on-year) Pvt. Ltd (DIAL) for overshoot- lucrative deals in South
mutual fund norms management companies. Figures in brackets denote 41.34
(22,599.92) 38.66 25.50 ing the budget to more than Asia and our firms can
value in R crore (24,952.27) 26.04
Accounting violations are (24,757.55) (28,485.47) twice the initial estimate, not only wring their hands in
21.53 26.70
B Y A NIRUDH L ASKAR & rare in the mutual fund indus- (19,881.72) 17.12 (27,211.65) 20.69 doing enough to keep a curb desperation.
K AYEZAD E . A DAJANIA try as every transaction has to 10.34 (29,878.85) on surging costs, keeping the On Sunday, the Union
(21,477.94)
························· be reported to Sebi and veri- 0.19 (17,855.42) civil aviation ministry out of government took a step in
MUMBAI fied by the auditors. The Sebi (15,989.32) the loop and exceeding its rectifying the situation

I ndia’s stock market regula-
tor is contemplating action
against two multinational
asset management firms for al-
leged violation of norms gov-
erning mutual funds (MFs), ac-
cording to two persons with di-
rect knowledge of the develop-
ment.
“We are examining the
whole issue,” said a Securities
and Exchange Board of India
(Sebi) official aware of the de-
velopment.
In the first such instance in
the `7 trillion Indian mutual
fund industry, Sebi has already
compelled BNP Paribas Asset
Management India Pvt. Ltd
and Deutsche Asset Manage-
ment (India) Pvt. Ltd to com-
pensate investors after it car-
ried out an inspection in Feb-
ruary.
BNP Paribas has been found
guilty of transferring losses
from one set of fixed-maturity
plans (FMPs) to another, thus
unfairly forcing losses on in-
vestors in the second set of
schemes. Deutsche Asset Man-
agement erroneously valued
some assets in one of its debt
schemes, leading to a shortfall
in returns for investors.
The Sebi inspection found
that in fiscal 2008-09 both the
fund houses violated rules and
compromised the interests of
investors.
“BNP Paribas paid about `20
crore and Deutsche paid near-
ly `3 crore to the affected in-
vestors,” said the second per-
son mentioned above. Neither
Mint is also available for R3 without
a combo offer
Mint is also available for R5.50 with
Hindustan Times under a combo offer
spokesperson declined to
comment for this story.
“The said payments were
made pursuant to a review of
valuation guidelines and ap-
plication of such revised
guidelines to the investments
in some of Fortis Fixed-Term
Plans existing in early 2009 of
Fortis Mutual Fund,” a BNP
Paribas spokesperson said.
“The resultant valuation sur-
plus was distributed recently
to the investors in consultation
with Sebi.”
The episode occurred when
the fund house was owned by a
different entity.
BNP Paribas was originally
formed as ABN Amro Asset
Management (India) Ltd. In
2008, it was renamed Fortis
Mutual Fund, and in 2010 was
rechristened BNP Paribas Mu-
tual Fund. It has assets worth
`4,674 crore.
A Deutsche Group spokes-
person in India denied any vi-
olation of norms. “We would
like to state that there has been
no violation of any mutual
fund regulations by Deutsche
Asset Management that has re-
sulted in any losses to the in-
vestors in our debt schemes,”
the spokesperson said. “All our
schemes meet Sebi’s as well as
our stringent internal guide-
lines.”
On being asked about com-
pensating the investors, the
spokesperson said: “We have
emailed you our response. Be-
yond that, I cannot comment.”
Deutsche manages `8,187
crore in assets.
There are 41 asset manage-
ment companies in the Indian
mutual fund industry.
“Sebi conducted inspections
and found one AMC guilty of
transferring certain assets un-
der one set of FMP schemes to
another at a price higher than
the actual market value then,”
one of the two persons said.
This was done through inter-
scheme transfers, but it forced
investors in the buyer schemes
to incur losses. In April, Sebi
ordered them to compensate
investors. Both the AMCs have
already done so.
Sebi has tightened mutual
fund norms extensively since
TURN TO PAGE 2®
Dec Mar Jun
quarter
FY09
Net profit
% change (year-on-year)
Figures in brackets denote
value in R crore
6.66
12.88 (11,101.17)
-38.73 (11,752.32)
(8,846.53)
Mar Jun
Dec
quarter
FY09
Net sales for banks has been considered as the sum of net interest income
(interest earned on loans minus the cost of deposits) and non-interest income
Irda to change
rules for
pension plans
B Y A NIRUDH L ASKAR
S NEHA S HAH
·························
MUMBAI
I ndia’s Insurance Regulatory
and Development Authority
(Irda) is set to change rules for
pension plans that account for
about 30% of the life insurance
industry’s business, a top offi-
cial said.
This may help the industry
recoup business volumes that
have dropped sharply after the
regulator imposed stringent
guidelines late last year.
“There was a representation
from life insurers pressing on
the need for expanding the
range of unit-linked pension
products,” an Irda official said
on condition of anonymity.
“Various models are being
worked out and we need to see
what suits the companies best.
It’s a priority item and we will
come out with the revised
guidelines as soon as possi-
ble.”
Irda in June altered norms
that govern unit-linked insur-
ance plans (Ulips)—a hybrid
insurance product that invests
TURN TO PAGE 3®
ALSO SEE
>Irda to look into cost of regulation
Sep Dec Mar Jun Sep
FY10
41.81
(12,545.67) 21.39
(13,475.19) 29.50 (16,191.80)
19.36 (15,428.68)
(14,027.20)
5.67
(11,914.42)
Sep Dec Mar Jun Sep
FY10
SUCCESSION QUESTION
Sathya Sai Baba passes away
B Y A NIL P ENNA
·························
HYDERABAD
&
S ri Sathya Sai Baba, wor-
shipped by millions as god
incarnate and derided by de-
tractors as a charlatan, died on
Sunday in Puttaparthi, Andhra
Pradesh, leaving behind a vast
spiritual empire with estimat-
ed assets of at least `40,000
crore and no chosen successor
to occupy his mantle. He was
85.
“Sathya Sai Baba is no more
with us physically. He left his
body at 7.40am due to cardiac
and respiratory failure,” the
Sathya Sai Super Speciality
Hospital in Puttaparthi, 450km
from Hyderabad, said in a
statement.
He had been admitted in the
facility’s intensive care unit on
28 March with cardiac and re-
spiratory complaints.
As Prime Minister Manmo-
han Singh, Congress party
president Sonia Gandhi and
other influential personalities
condoled Sai Baba’s death,
Puttaparthi saw a spontaneous
shutdown in mourning. About
6,000 policemen had been de-
ployed in Puttaparthi as devo-
tees descended on the town af-
ter hearing about the deterior-
ating health of Sai Baba, who
counted presidents, prime
ministers, movie stars, cricket-
>P7 ers and business leaders
Dec Mar mandate on the amount of
work it was supposed to do.
FY11
DIAL, comprising a GMR In-
frastructure Ltd-led consor-
tium, completed the develop-
29.06 ment of the airport in a record
37 months that ended March
25.86
(17,654.55) 2010. The airport was privatized
by the government in 2006. The
modernization cost shot up
from `5,900 crore to `12,700
Dec Mar crore in the same period.
About one-fourth of the
project cost is to be recouped
FY11 through passengers by direct
Source: Capitaline
TURN TO PAGE 3®
YOGESH KUMAR/MINT
& PTI
PTI
Wide following: Sathya Sai Baba.
OBITUARY
Sathya Sai Baba
1926­2011
among his followers.
Andhra Pradesh chief minis-
ter N. Kiran Kumar Reddy, who
flew to Puttaparthi, announced
four days of state mourning
until Wednesday for Sai Baba,
whose last rites will be per-
formed with state honours, de-
scribing him as a “symbol of
love, affection and passion”.
His body was moved to his res-
idence, Prasanthi Nilayam, for
devotees to pay homage.
Sai Baba’s death sparked
concerns of a potential void
and a battle of succession in
the Sri Sathya Sai Central
Trust. Formed in 1972, it man-
when commerce minister
Anand Sharma announced
a deal for a substantial
buyer’s credit package to
Bangladesh (Page 11).
This money will be used to
fund development in that
country by spending it on
project-related imports
from India.
Bangladesh should be
seen as an experiment in
this respect. If this works
well, it should be quickly
scaled up both in Dhaka
and elsewhere.
ages a university, speciality
hospital, religious museum,
planetarium, railway station,
airport and sports stadium in
Puttaparthi, administers water
supply projects in drought-
prone districts of Andhra Prad-
esh and Tamil Nadu, runs edu-
cational institutions and con-
ducts health clinics across the
country. The trust, with a pres-
ence in 165 countries, accepts
only cheque or cash donations
through banks, but details of
its income and expenses are
“shrouded in a cloak of secre-
cy”, the Press Trust of India re-
ported.
According to estimates, the
value of the trust’s properties,
movable and immovable,
could be anywhere between
`40,000 crore and `1.5 trillion,
the news agency said.
“I have spoken to the trust
members,” the chief minister
said in Puttaparthi. “The trust
members have assured us that
all trust activities will continue
to go on in the same way as
they are going on now. All of us
believe Sathya Sai Baba still
lives with us. Only his body has
departed...They (trust activi-
ties) will run in the same way
as they are being run now.”
Even if the trustees, who in-
clude former chief justice P.N.
Bhagwati, ex-Central vigilance
TURN TO PAGE 2®

For breaking news, log on to

www.livemint.com

Mint is also available for R5 without

02
MONDAY, APRIL 25, 2011, DELHI ° WWW.LIVEMINT.COM
mint
WHAT’S ONLINE AT
WWW.LIVEMINT.COM INSIDE MINT TODAY

MINT VIDEOS

West Bengal polls: heavyweights Indian steel suppliers lag As Arab spring turns violent, Business of Life:
Cooking with Lounge face off in Kharad constituency behind racing auto sales democracy faces big challenges Raise the bar
Belle pepper
The flavors of the East and the West Trinamool Congress’ Amit Mitra will take on state Despite surging demand for automobiles in India, The exuberant “Arab Spring” has morphed into a Salary hike time is here and could prove fruitful if
mix in this creamy pepper and finance minister Asim Dasgupta of the Left Front, steel makers are lagging behind in supplying season of deadly crackdowns, sectarian strife and one knows how to make the right noises. A list of
roesti dish. who has been winning the seat since 1987. >P4 special auto­grade steel to manufacturers. >P7 dimming prospects for democracy. >P20 five proactive approaches one can use. >P12­13
(www.livemint.com/
cookingwithlounge)

Sebi forces MFs to Sathya Sai Baba

passes away
compensate investors ® FROM PAGE 1 will happen as he predicted.”
Born Satyanarayana Raju in
® FROM PAGE 1 breaching valuation policies, mutual fund houses faced re- commissioner S.V. Giri and Puttaparthi on 23 November
said the second person. demption pressure on FMPs TVS Motor Co. Ltd chairman 1926, as a child Sai Baba was
2009. Among many moves, the “While buying or selling il- when a liquidity crisis gripped and managing director Venu said to be unusually intelli-
most prominent was to scrap liquid debt securities, fund the financial system in the Srinivasan, name a person to gent, known for his talent in
The Week in Review the entry load or upfront com- houses value the scrips as per wake of the collapse of US in- head the trust, it remains to be drama, music, dance and writ-
Your executive summary of the top mission paid to distributors for the valuation matrix provided vestment bank Lehman Broth- seen whether devotees will ac- ing, and as a composer of po-
stories from the week that was, investing in a scheme. Sebi’s by rating agencies Crisil (Ltd) ers Holdings Inc., forcing the cept the candidate, PTI said. ems and plays.
from RIL’s fourth quarter earnings to latest move to inspect schemes and Icra (Ltd),” said the head Reserve Bank of India to open The trust itself has moved to On 20 October 1940, at the
the latest monsoon forecast. that have been closed and of fixed income at a large do- a special window for mutual scotch any speculation about a age of 14, Raju declared him-
(www.livemint.com/weekinreview) forcing the AMCs to compen- mestic fund house. funds. void following Baba’s death. self a reincarnation of the Sai
sate the affected investors in- “If a fund manager antici- Also, till that time, fund “There is or will be no vacu- Baba of Shirdi, whom he re-
dicates that the regulator is pates losses on certain debt houses were allowed to indi- um and we firmly believe that ferred to as “my previous
continuing with its investor- papers during redemption, he cate returns on FMPs and buy Baba will continue to guide the body”.
centric approach under its new may transfer the securities to instruments having varying trustees. The interests of the In his early years as a spiri-
MINT BLOGS chief U.K. Sinha, who took
over from C.B. Bhave on 18
another scheme by way of in-
ter-scheme transfers,” he said,
maturities, irrespective of the
tenures of the FMPs. So, a one-
institutions are paramount,” it
said in a recent statement.
tual guru, he became famous
for producing holy ash and
Livewire February. requesting anonymity. “If the year FMP could buy a bond Contenders to succeed Sai other objects from thin air and
FMPs are close-ended debt market value of the securities that would have matured after, Baba’s include K. Chakravar- was reviled by critics and ra-
Cordelia Jenkins schemes that usually invest in transferred is lower than the say, two years. Additionally, thy, who quit the Indian Ad- tionalists, who called him a
The mood in O.P. Saini’s courtroom fixed-return instruments such price at which they were FMP investors were allowed to ministrative Service in 1981 sleight-of-hand trickster and
has settled into a comfortable rou­ as certificates of deposit, com- bought from another scheme, redeem investments any time and moved to Puttaparthi on campaigned against him with
tine by Day 4 of the 2G scam trial. mercial paper and bonds that the investors suffer.” during the tenure of the FMPs the guru’s advice. He has been magic shows.
(http://blog.livemint.com/livewire) mature at the end of the FMP’s “Such losses should be veri- by paying an exit fee. secretary of the trust since He wasn’t spared scandal,
term. These plans typically fied in the accounts of the To ensure that panic re- 1994. Sai Baba’s nephew R.J. including allegations of sexual
have a tenure of 90 days to AMC by its internal auditors. demptions do not negatively Ratnakar, son of his late broth- abuse that were denied by his
SLIDESHOW three years.
Sebi allows FMP securities
Some fund houses have a prac-
tice of verifying all scheme-re-
impact existing investors as
well as the FMPs’ health, Sebi
er Jankiram and an MBA, is an-
other potential successor
organization. On 6 June 1993,
an attempt was allegedly made
Remembering Sathya Sai Baba to be sold at fair market value, lated investments on a daily changed the rules first in De- along with Sathyajit, the per- on his life by his close aides.
Sai Baba died on Sunday in provided the sale protects the basis before cross-verifying cember 2008 and again in early sonal attendant of Sai Baba Six inmates of Prasanthi Ni-
Puttaparthi, Andhra Pradesh. interests of unit holders. them on a quarterly basis by 2009 through a set of direc- since 2002. layam were killed in the inci-
(www.livemint.com/slideshows) “For BNP Paribas, there another auditor,” he said. “If tives. Sathyajit, who joined Satya dent, which still remains a
could be two critical viola- such losses are not accounted The new rules banned FMPs Sai School at the age of five, mystery. In more recent years,
tions. Firstly, displaying an act for, it amounts to a serious vio- from giving indicative yields completed his education from the humanitarian and philan-
of discrimination among in- lation of Sebi norms.” and offering premature re- the Sathya Sai Institute of thropic work performed by his
vestors by forcing losses on Profits and losses on demption. FMPs were also told Higher Learning with an MBA organization has been ac-
one set of investors to benefit schemes are recorded in the to invest in instruments that degree as a university topper. knowledged even by those who
another set; and secondly, us- revenue accounts of AMCs. If matured in line with the Sai Baba, known to his fol- are not his acolytes.
ing inter-scheme transfer to profit on the sale of invest- scheme. lowers as bhagwan (god), died “I am not his devotee, but
unfairly pass on losses to a set ments shown in the revenue These rules not only ensured before the date he had himself what I feel is whatever work
of investors, thereby beating account includes profit or loss that the books of AMCs were prophesied. He had predicted the Baba has done for the pub-
the whole objective of inter- on inter-scheme transfer of in- not hurt by any redemption that he would live up to the age lic is exemplary,” said Ra-
scheme transfers,” said one of vestments within the same pressure, but also increased of 96, when his successor ghuram Chowdhary, a farmer
the two persons cited above. mutual fund, the AMC needs transparency for investors. would be born in Karnataka’s in Anantapur town. “Making
“Transferring assets from to disclose the aggregate sepa- Sebi has also come out with Mandya district. available potable water in
one scheme to another at a rately without clubbing the a string of regulations for debt “The trust will go on as per drought-prone villages of
loss and then concealing it is a profit or loss on sale of invest- funds, as well as several other its constitution,” said J. Eshwar Anantapur district, setting up
gross violation of Sebi norms,” ments to third parties. If this is areas governing the mutual Prasad, a Sai Baba devotee and of medical facilities and edu-
he added. not done, it amounts to a vio- fund industry, including better former judge of the Karnataka cational institutions definitely
For Deutsche AMC, the vio- lation of Sebi norms. disclosure. high court. “As far as a spiritu- deserve appreciation.”
lation could be in the form of In September-October 2008, anirudh.l@livemint.com al successor is concerned, it a.penna@livemint.com

IGate Corp. .............................................10 Mukherjee, Pranab ..................................6

INDEX OF
COMPANIES
Key companies in Mint today.
Aegon Religare Life Insurance Co. Ltd 1,3
Allsec Technologies Ltd ........................ 10
Apax Partners Holdings Ltd ................. 10
Aricent Inc .............................................10
Axis Bank Ltd ........................................15
Bain Capital Llc ..................................... 10
Bank of India .........................................15
Bennett, Coleman and Co. Ltd ................6
Bhushan Steel Ltd ...................................7
Blackstone Group LP .............................10
Bombardier Inc. .....................................10
Cairn India Ltd .......................................11
Carlyle Group LP ....................................10
Claris Lifesciences Ltd ..........................10
Container Corp. of India Ltd .................16
Crisil Ltd ................................................ 10
Delhi International Airport Pvt. Ltd ... 1,3
Dr. Reddy’s Laboratories Ltd ................ 11
Engineers India Ltd ..............................1,3
Essar Steel Ltd ........................................7
Future Capital Holdings Ltd ................... 6
Future Ventures India Ltd ...................... 6
GMR Infrastructure Ltd .......................1,3
Gokaldas Exports Ltd ............................10
Great Offshore Ltd ................................10
Gujarat State Petroleum Corp. Ltd ........9
HDFC Bank Ltd ........................................6
HT Media Ltd ...........................................6
Hero Honda Motors Ltd ........................10
Infosys Technologies Ltd ...................6,15
Infotech Enterprises Ltd .......................10
JSW Steel Ltd ......................................... 7
Jindal Steel and Power Ltd .................. 16
KKR and Co. LP ......................................10
Kobe Steel Ltd .........................................7
Kotak Mahindra Bank Ltd .......................6
Life Insurance Corp. of India ...............1,3
Mahindra Lifespace Developers Ltd .......7
Mahindra and Mahindra Ltd .................10
Marico Ltd ..............................................10
Mercedes­Benz India Pvt. Ltd ................7
Microsoft Corp. ......................................15
Nathan Associates Inc. ...........................5
Nestle India Ltd .....................................16
Nippon Steel Corp. ..................................7
Oil and Natural Gas Corp. Ltd ................ 9
Oriental Bank of Commerce ................. 18
Pantaloon Retail (India) Ltd ...................6
Patni Computer Systems Ltd ...............10
Pfizer Inc ................................................11
Pohang Iron and Steel Co. ......................7
Reliance Industries Ltd ...................6,9,15
Reliance Infrastructure Ltd .................. 15
SBI Life Insurance Co. Ltd ...................1,3
Steel Authority of India Ltd ...................7
Sumitomo Metal Mining Co. Ltd ............7
TNT NV ..................................................10
TVS Motor Co. Ltd ............................... 1,2
Tata Consultancy Services Ltd ...............6
Tata Motors Ltd ......................................4
Tata Steel Ltd ..........................................7
United Technologies Corp. ....................10
Vedanta Resources Plc ..........................11
INDEX OF Narang, B.D. ...........................................18
Narayan, J. Hari .......................................7
INDEX OF Corrections &
PEOPLE Raju, Satyanarayana ............................1,2 BRANDS Clarifications
Key people cited in Mint today. Rao, B.K. ..................................................9 Key brands in Mint today. feedback@livemint.com
Reddy, B.V.R. Mohan .............................10
Al­Ahmar, Ali Mohsen .....................20,21 Reddy, N. Kiran Kumar .........................1,2 Axis Bank ...............................................15 A 23 April story on The
Ali, Zine Al­Abidine Ben ..................20,21 Saleh, Al Abdullah ............................20,21 Citibank ..................................................18 Hindu incorrectly
Arjundas, Anita .......................................7 Saleh, Ali Abdullah ............................... 20 Coca­Cola ...............................................15 attributed a quote to the
Banerjee, Mamata ...................................4 Sharma, Anand ...................................1,11 Dr Reddy’s ............................................ 11 newspaper’s national
Bernanke, Ben ..................................15,20 Singh, Devinjit .......................................10 Infosys ................................................... 15 bureau chief Siddharth
Bhagwati, P.N. ......................................1,2 Singh, Manmohan ...........................1,2,11 Lee Cooper ...............................................6 Varadarajan.
Bhave, C.B. ............................................1,2 Singh, Rahul ............................................ 5 Mercedes­Benz ........................................7
Biyani, Kishore ........................................ 6 Sinha, Sanjay .........................................10 Infosys ................................................... 15 Mint welcomes
Dasgupta, Asim .......................................4 Sinha, U.K. ............................................1,2 Microsoft ............................................... 15 comments, suggestions
ElBaradei, Mohammed .....................20,21 Srinivasan, Venu .................................. 1,2 Nestle .....................................................16 or complaints about
Gadhafi, Moammar .......................... 20,21 Stagg, Richard .......................................11 Reliance ................................................. 15 errors.
Gandhi, Sonia ....................................... 1,2 Sundaresan, S. .........................................9 Tata Motors .............................................4 Readers can alert the
Geithner, Timothy .................................20 Tamara, Ram ............................................5 Wipro ..................................................... 18 newsroom to any errors
Giri, S.V. ................................................1,2 in the paper by emailing
Hasina, Sheikh .......................................11 us, with your full name
Hazarika, A.K. ..........................................9 and address, to
Jena, Shrikant ......................................... 4 feedback@livemint.com
Jindal, Naveen .......................................16 It is our policy to
Johari, Nittin ...........................................7 promptly respond to all
Kaul, Sanat ...........................................1,3 complaints.
Keswani, Patu ........................................11 Readers dissatisfied
Khemani, R. Shyam .................................5 with the response or
Kumar, Dhanendra ...................................5 concerned about Mint’s
Loder, Christopher .................................11 journalistic integrity may
Mathur, S.B. ......................................... 1,3 write directly to the
Mitra, Abhik ...........................................10 editor by sending an
Mitra, Amit ..............................................4 email to
Mubarak, Hosni ................................20,21 asktheeditor@livemint.com
Mukherjee, Malay ....................................7
 www.livemint.com 03 MONDAY, APRIL 25, 2011, DELHI

mint Leading the News

Regulator pulls up Delhi
Irda to change rules
projects should be approved by
the aviation ministry or AAI be-
fore being implemented. The

airport for steep costs cost estimates should be ready

with the developer beforehand,

for pension plans

it said.
® FROM PAGE 1 DIAL in a detailed response

levies on airfare. DIAL has ask-

Passengers would argued the modernization proj-
ect was completed within 37
ed the regulator for about already have paid months, though a project of this
`3,500 crore in airport devel- scale would have typically taken
® FROM PAGE 1 by Towers Watson, a global fi- minimum guaranteed return opment fees. `1,800 crore by 40-60 months.
nancial services research and on unit-linked pension plans. Passengers are already paying “The board was apprised of
part of the premium in equi- consulting firm, there has been It disallowed partial with- `200 on domestic tickets and 1 March 2012 as project cost on various stages of
ties.
The changes, which came
a sharp reduction in business
since the new rules came into
drawals in such pensions and
annuity products during the
`1,300 on international flights as
airport development charges,
development charges estimation. AAI and MoCA were
constantly monitoring the proj-
into effect from September, in- force. premium-paying period. The which would add to `1,800 crore ect through an independent en-
cluded the so-called linked “The private insurers...expe- insurers were asked to convert by 1 March 2012. gineer, whose role and responsi-
pension schemes that invest in rienced negative growth of the accumulated fund value DIAL has also asked for an ad- within their cost estimation pre- bility included design and area
equities and bonds, but there about 34% over the period Sep- into an annuity at the chosen ditional `1,793 crore, of which pared at the time of financial oversight,” a DIAL spokesperson
was no stipulation on the tember 2010 to February 2011 retirement date. the Airports Economic Regulato- closure.” said. “The board had appointed
quantum of such investments. compared to the same period Under the new guidelines, ry Authority (Aera) has proposed A reason for the escalated cost a sub-committee on project cost,
In contrast, traditional plans in the previous financial year,” policyholders are allowed to to clear `994.5 crore so far. Aera was that design was being car- which in turn had appointed au-
invest at least 50% in govern- the report said. withdraw up to a maximum of made its observations on the ried out in parallel with the mod- ditors to verify project cost. The
ment bonds, 15% in infrastruc- “Last year, we added nearly one-third of the accumulated technical and financial audit ernization and information was sub-committee found the project
ture instruments and the rest `2.65 trillion value as a done by Engineers India Ltd not available for this, EIL said. cost as being satisfactory.”
in equity, bonds and other as- total premium. lump sum at (EIL) and consulting firm KPMG The consulting firm also The ministry had a dedicated
sorted money market instru-
ments.
Going by the
historic trend,
Under the revised the time of
vesting. In
on the modernization.
The 179-page final audit re-
pointed out that estimation, ne-
gotiations and price reductions
committee that conducted quar-
terly reviews of the moderniza-
Irda had made it mandatory this year the guidelines, the 4.5% case a policy is port was made available this were done on a notional basis by tion programme from 2006 till
for insurers to offer a 4.5% total premium surrendered, week on the Aera website. DIAL. the airport regulator was set up
guaranteed return on all linked should have guaranteed return the money is “Important stakeholders such “Due to the high risk involved in late 2009. An aviation expert
pension and annuity schemes. been at least locked up to as the MoCA (ministry of civil in the project, the percentage of said the report suggests this was
The Life Insurance Council, `3 portion in a pension
trillion,” the vesting pe- aviation) and the AAI (Airports risk premium considered by the not enough of a check.
a representative body of Indi-
an life insurers, proposed
said S.B. Math-
ur, secretary,
scheme may no riod and no
withdrawals
Authority of India) were not reg-
ularly updated on cost overrun,”
principal contractor and sub-
contractor were also high, which
“Based on the reading of the
report, the ministry does not
some changes to the regulator
for pension schemes, said a
Life Insurance
Council. “But
longer be mandatory can be made.
Insurers ex-
the report said.
The DIAL board, which in-
were totally borne by the JVC
(joint venture company, DIAL)
seem to have intervened at the
right time,” said retired aviation
member of the council. with the pect Irda to re- cluded members of the ministry resulting into further increase in ministry bureaucrat Sanat Kaul,
Another Irda official said the plunge in sales following the lax these norms. and AAI, got to know of the cost project cost,” EIL said. referring to escalated costs and
regulator is likely to accept new pension policy guidelines, “The two-third annuitization overrun only by the time the KPMG said some of the risk new provisions made for allow-
most of the suggestions. Both the total premium could be part will be relaxed under the modernization was near-com- mitigation “steps are not entirely ing an airport development fee
declined to be named. maximum `2.8 trillion by revised guidelines as policy- plete, “by way of the project cost compliant with international to be levied on passengers.
Under the revised guide- March end.” holders want a certain amount report in March 2010”. AAI has a best practices and at no stage “These are blank spaces and
lines, the 4.5% guaranteed re- Following a high-profile reg- of corpus in hand under any 26% stake in DIAL. was the project cost capped and need intense investigations,” he
turn portion in a pension ulatory turf war on Ulips be- circumstances,” an official of a Prior approval of the board the risk of escalation shared with said. “From a public point of
scheme may no longer be tween Irda and capital market Mumbai-based private life in- was not taken for an increase in the engineering procurement view, there seem to gaps which
mandatory. regulator the Securities and surance company said. “It can GFA (gross floor area) by nearly and commissioning (EPC) con- need to be answered.”
Policyholders are likely to be Exchange Board of India, the be around 40% as allowed in 84,000 sq. m from that finalized tractor”. Kaul said there was also a
given options to choose from a insurance regulator made a the new pension scheme”, run at the master plan stage. There were no “incentives and need to have a through report on
range of pension products number of changes in rules by the Pension Fund Regulato- The Aera report includes the penalties to enable better con- the lessons from the public-pri-
linked to equity without a governing the instrument. ry and Development Authority. audits by KPMG and EIL. trol on cost” by sub-contractors vate partnership in airports fol-
guaranteed return, but holding To help policyholders pro- He, too, declined to be EIL said IGI’s Terminal 3 was in the project. lowing the Delhi and Mumbai
prospects of better return in tect lifetime savings from ad- named due to the sensitivity of on par with international stand- EIL has recommended that in privatization programmes.
the long run. verse market fluctuations, it the issue. ards. “However, the cost of the future any variation in area, vol- “There is a need to find out what
There would be yet another mandated insurers to offer a anirudh.l@livemint.com project could not be contained ume and specifications in similar is happening in these projects.”
option where the insurers may
be allowed to offer products
with a guaranteed return of
4.5%, but with many riders, in-
cluding health cover.
“At present, to guarantee a
return of 4.5% in the long run,
we need 30-year debt papers
with a coupon of at least 7%,
which are unavailable. Also,
4.5% is a small guarantee and
it doesn’t appeal to customers,
who are used to buying Ulips
with hopes of higher returns,”
said the marketing head of a
Delhi-based private life insur-
er.
“If a major portion of the
premium is allowed to be
linked to equity, it will be easi-
er for the insurers to offer
higher returns to policy-
holders,” he added.
“The revised rules may allow
insurers to link a higher pro-
portion of the premium to eq-
uity,” said another person fa-
miliar with the development.
“But the regulator may man-
date the insurers to have at
least a certain portion of their
pension scheme portfolio un-
der products with 4.5% guar-
anteed return.”
Both persons spoke on con-
dition that neither they nor
their organizations be named.
Irda’s stringent norms kept
many firms from launching
new pension products under
the new guidelines.
Of the 23 life insurance com-
panies, only four— Life Insur-
ance Corp. of India, ICICI Pru-
dential Life Insurance Co. Ltd,
SBI Life Insurance Co. Ltd and
Aegon Religare Life Insurance
Co. Ltd—have launched new
plans.
These 23 life insurers have
assets under management of
about `14 trillion. During the
first 11 months of fiscal year
2011, the new business premi-
um of private insurers grew
just 4% to `30,756.02 crore
over the April-February period
of the previous year.
According to a March report
04 LEADING THE NEWS
MONDAY, APRIL 25, 2011, DELHI ° WWW.LIVEMINT.COM
IMPORT STATUS
Fertilizer contracts not
enough to meet needs
Since March, Indian
firms have sought to
import 1.8 mt of DAP
but there are no MoP
import contracts
B Y A MAN M ALIK
aman.m@livemint.com
·························
NEW DELHI
I ndian companies have failed
to contract diammonium
phosphate (DAP) and muri-
ate of potash (MoP) in quanti-
ties adequate to meet domestic
needs, despite the subsidy on
non-urea fertilizers having been
raised for the second time since
February,
Each year, India requires
about 7 million tonnes (mt) of
DAP and 6 mt of MoP, most of
which is imported, either as a
finished product or at an inter-
mediate stage—phosphoric and
sulphuric acid or the raw mate-
rial, rock phosphate.
Since March, Indian compa-
nies have sought to import 1.8
mt of DAP but there are no MoP
import contracts, officials said.
While the government has not
yet notified the second upward
revision, companies have been
BENGAL POLLS
Heavyweights face off in Kharda constituency
B Y R OMITA D ATTA
romita.d@livemint.com
·························
KOLKATA
T hree years ago, when Singur
was on the boil, the Trina-
mool Congress, West Bengal’s
main opposition party, faced flak
for leading a violent agitation
against Tata Motors Ltd’s Nano
car factory near Kolkata.
Amit Mitra, former secretary-
general of industry lobby group
Federation of Indian Chambers
of Commerce and Industry (Fic-
ci), was no exception.
He described the political pro-
tests against the proposed facto-
ry as unfortunate, although he
said governments shouldn’t be
acquiring land forcibly.
Since then, Trinamool Con-
gress chief Mamata Banerjee has
risen in popularity, thanks large-
ly to her objections over land ac-
quisition in West Bengal. With
her party becoming an impor-
tant ally of the Congress in New
Delhi, opinions have changed—
Mitra now considers Banerjee as
a person who has the vision to
turn things around for the state.
Having shed Savile Row suits
and pinstripes to don India’s po-
litical uniform—white dhoti and
kurta—Mitra is one of the Trina-
mool Congress’ key candidates
in West Bengal’s assembly elec-
tion this year, pitted against the
state’s finance minister Asim
Dasgupta at the Khardah constit-
uency on the northern fringes of
Kolkata.
“If he wins, and the Trinamool
Congress is voted to power, he is
to become either the finance or
the commerce and industries
minister,” said a Union minister
from Banerjee’s party, who did
not want to be named. “He was
handpicked by our leader long
ago to be one of the key minis-
ters in her cabinet.”
“People thought my wife and I
were eccentric when we decided
to return from the US in 1990,”
said Mitra, adding that he was
“taking it a step ahead” by trac-
ing his roots in West Bengal.
“You and I have waited for
34 years; the time has come to
give democracy a chance in
informally allowed to import
DAP and MoP at benchmarked
prices of $612 and $420 per
tonne, respectively.
DAP is used in conjunction
with or as a substitute for urea,
and MoP is primarily used for
crops such as sugarcane and
rubber.
“Although less than a fourth
of the total domestic consump-
tion of DAP has been contracted
for import, we
are confident
that the coun-
try will not be
short on phos-
The government has
raised the subsidy
phatic con-
tent,” said an on non­urea
official of the
department of fertilizers twice
fertilizers
(DoF), on con-
since February
dition of ano-
nymity. “As for
MoP, we’re not particularly con-
cerned, as it is used primarily for
cash crops.”
Sudhir Panwar, a professor at
the University of Lucknow, disa-
grees.
“Potash is important for root
development in plants, and is,
therefore, used in the sowing
season. Its non-availability
would have an adverse impact
Wooing voters: Trinamool Congress candidate Amit Mitra (left) campaigns in Kharda constituency, where
he stands against state finance minister Asim Dasgupta of the Left Front.
West Bengal.”
Though Banerjee is excited at
getting people such as Mitra to
join her party—he even drafted
the party’s manifesto, which
looks more like a five-year busi-
ness development plan than a
political statement of pur-
pose—he wasn’t given an easy
seat.
Dasgupta has been winning
from Khardah with about
159,000 voters from 1987,
and had in 2006 won by a
margin of over 40,000
votes.
Though in the 2009
general election, the tide
turned and the Trina-
mool Congress led from
the Khardah assembly
constituency by at least
INDIA
VOTES
1,400 votes, the constitu-
ency has been expanded
this time under so-called
delimitation to include some tra-
ditional Left strongholds.
Even as Dasgupta’s supporters
crunch numbers to show he is
the favourite this time, too, Mitra
seems unfazed—he is counting
on the sweeping anti-incumben-
cy wave and the state’s rocketing
indebtedness to swing votes
even in the Left bastions added
to the Khardah constituency this
time.
on crops in regions with
sub-normal rains,” he said.
“Also, growth and development
of almost all crops except pulses
would be negitively impacted.”
On 11 April, the Fertilizer As-
sociation of India (FAI) said that
if international prices of MoP
did not soften, the industry
would have to take a potash
“holiday”, referring to a situa-
tion where a particular com-
modity is not
imported.
the
In 2010-11,
bench-
marked price
for DAP was
fixed at $500
per tonne, and
for MoP at $370
per tonne. The
international
spot price for
DAP hovers at
$610-630 per tonne and for MoP
at $400-430 per tonne.
In a 19 November notifica-
tion, DoF fixed a subsidy of
`12,960 per tonne for DAP and
`12,831 for MoP for 2011-12.
This would have allowed private
companies to import DAP and
MoP at or below the bench-
marked prices of $450 and $350
per tonne, respectively.
For months, the Trinamool
Congress has been running a
pointed campaign against the fi-
nance minister for what it calls
the “profligate” state’s outstand-
ing debt of `1.9 trillion. But how
does Mitra propose to tackle it if
he gets to occupy the office of his
key opponent?
“The Centre, too, has faced
huge deficits, but we managed to
turn around,” said Mitra. “Ben-
gal, too, can emerge from
this crisis, but to do so it
needs a leader with vi-
sion and a road map,
who can convince the
Planning Commission
and the Centre to offer
more financial support.”
The Left Front, he al-
leged, doesn’t have the
vision. “We need short-
term support initially,
such as interest waivers,
but going forward we need to
generate more income to resolve
this crisis.”
Mitra was referring to West
Bengal’s poor tax-state domestic
product (SDP) ratio which, at
less than 5%, is one of the worst
in the country. One of West Ben-
gal’s key problems is its inability
to shore up tax revenue, accord-
ing to Abhirup Sarkar, professor
of economics at Kolkata’s Indian
As companies had failed to
contract the fertilizers at these
levels, in March the government
had raised the benchmarked
prices to $580 per tonne for
DAP, and $390 per tonne for
MoP.
As India subsidizes fertilizers,
the procurement price is a func-
tion of the subsidy the govern-
ment offers on various catego-
ries of fertilizers. Most importers
finalize contracts for the follow-
ing fiscal by January or Febru-
ary.
The issue of fixing the subsidy
for decontrolled fertilizers has
generated much debate within
government circles. On 23 De-
cember, Mint reported that ju-
nior minister for chemicals and
fertilizers, Shrikant Jena, had
circulated an internal note argu-
ing that the proposed procure-
ment price be “significantly re-
duced” from the $370 per tonne
that Indian companies are pay-
ing this fiscal. Jena was of the
view that the procurement price
for MoP should not be higher
than $300-320 per tonne.
In an internal note that Mint
reviewed, Jena asked the minis-
try to determine whether inter-
national suppliers of DAP and
MoP are negotiating the “India
price through only one of the
major suppliers like Phoschem
and Canpotex... If this is true, we
need to examine as to whether
these arrangements in interna-
tional trade are legal in the con-
text of free trade practices, WTO
(World Trade Organization)
agreements, and anti-trust laws
of USA, and take appropriate ac-
tion for derecognition of such
entities, wherever desirable”.
INDRANIL BHOUMIK/MINT
Statistical Institute.
“The poor tax-SDP ratio indi-
cates people don’t pay taxes in
this state—they get away by pay-
ing the party in power,” he said.
“The entire system is responsible
for this situation, not just the fi-
nance minister.”
But Dasgupta knows from ex-
perience that not too many peo-
ple in Khardah—largely an in-
dustrial neighbourhood— would
be swayed by economic theories
he and Mitra have learnt at for-
eign universities.
So he points at the “hundreds”
of small and medium enterprises
that have mushroomed in his
constituency and claims success
for the Left Front government for
creating jobs. There are some
500 small and medium industrial
units along the Kalyani express-
way, a nearby arterial road that
connects Kolkata with North 24
Parganas district, Dasgupta said,
adding: “Units like these dot
Khardah, providing employment
to thousands of people—that is
what matters most.”
But alongside, many large fac-
tories in the neighbourhood of
Khardah have closed down, and
the Trinamool Congress has po-
sitioned Mitra as one who could
bring life back to them, given his
contacts in the industry.
mint
CAPITAL CALCULUS
ANIL PADMANABHAN
To read all of Anil Padmanabhan’s earlier columns, go to
www.livemint.com/capitalcalculus
THE WIDOWING
OF INDIA
THE
L ast week, two widows were
beaten to death in Ranila
village in Bhiwani district of
NEW
Haryana. They were allegedly
murdered by the nephew of
one of the deceased women,
CENSUS 2011
apparently because he
suspected the two to be in a
lesbian relationship.
There is more to the incident
than just than the obvious disquieting facts: It happened in
Haryana, which holds the dubious record of the worst child sex
ratio in the country; it occurred in a state ruled by the Congress
party, a key proponent for women’s rights; and apparently the
incident happened in the presence of some of the villagers.
The incident, once shorn of its dramatic nature, highlights a
social problem, which so far we have preferred to ignore. Now,
all of this may be about to change.
The country’s demography, with respect to gender, is
undergoing a transition for the last three decades. What is
happening is that women have begun to outlive men. While the
global norm is that women outlive men, in India it was, for a
host of reasons, reversed till about the mid-1980s. Initially the
change was incremental, but the trend has gradually
accelerated. The 2010 census will in all likelihood—when the
detailed data is put out—confirm this enduring trend.
So what will happen now, assuming the practice of women
marrying men at least 5-10 years older stays, is that there will
be more widows. So far, public policy has struggled to deal with
the problem of widowhood, often leaving it to society and its
prejudices. Documentary film-maker Pankaj Butalia showed us
in his compelling documentary, Moksha (1993), the fate of the
abandoned widows of Vrindavan and the devastating
consequences for a society living in denial. The unsavoury
episode in Haryana suggests that their fate can be worse.
The problem, if viewed in the present, may not seem
alarming. True, but that is because at the moment, the Indian
population is very young—60% estimated to be less than 35
years of age—and longevity is gradually improving as mortality
in higher age groups declines. Once the demographic
dividend—a phenomenon where the
mint COLUMN bulk of the population is in the
working age group—has been
harvested, the problem could be
acute, especially given the absolute numbers of India’s
population—currently estimated at 1.21 billion. We may still be
20-30 years from the problem peaking.
The life expectancy tables put out by the office of the census
commissioner are revealing. While the sex ratios at birth, due
to reasons well discussed, tend to be skewed against the girl
child, the gender balance corrects in later years when the
biologically stronger women start to correct this imbalance.
Given that women tend to marry older men, any comparison
of life expectancy across gender should factor for this.
Accordingly, one has taken the benchmark of life expectancy
for men at 60 years and 50 for women; the more pedantic
among us can do a fine tuning with a five-year gap, but will
(have checked with a demographer) throw up a similar
outcome.
The life expectancy tables show that in 1970-75, 13.4% males
aged 60-plus years would survive, while the proportion would
be 21.3% of women aged 50-plus; in the period 2002-06, the
survival proportion for the respective age groups for men was
16.7%, and 26.9% for women.
Two distinctive trends stand out: One, both genders have
improved their longevity. Second, the improvement in the
survival rate of women is better than that of men, implying that
the gap between the two demographies has widened.
This trend is unlikely to be reversed. What it then implies is
that we are potentially looking at, for the want of a better
phrase, the widowing of India. Is public policy prepared to
address the issue? There is no visible action.
And, ghastly anecdotal tales such as the episode in Haryana
suggest that rural society is just not prepared to address the
problem or prefers to live in denial. The outlook in urban India
could be no better. Growing atomistic families means that the
social back-up that came with joint families cannot be taken for
granted.
Like in the case of missing daughters (the abysmal, skewed
child sex ratio against girls), Haryana has, thanks to the
dubious acts of some of its populace, once again served up a
fresh policy challenge to the country. The issue is whether a
government so besieged in the short run and busy putting out
political fires would have the bandwith to address the problem.
Anil Padmanabhan is a deputy managing editor of Mint and
writes every week on the intersection of politics and economics.
Comments are welcome at capitalcalculus@livemint.com
WWW.LIVEMINT.COM
To read our earlier stories on Census 2011, go to
www.livemint.com/census2011
 mint LEADING THE NEWS 05 MONDAY, APRIL 25, 2011, DELHI ° WWW.LIVEMINT.COM

Shortage of TELECOM TANGLE

trained staff Chandra asks for interim replacement on Uninor’s board

to hamper CCI PTI day-to-day affairs as an interim Chandra should resign from the for dealing with company affairs said, adding that the request (to

work: experts feedback@livemint.com

·························
NEW DELHI
B Y S ANGEETA S INGH
sangeeta.s@livemint.com
·························
U nitech Wireless Ltd’s chair-
man Sanjay Chandra, ar-
rested by the Central Bureau of
NEW DELHI
Investigation (CBI) in the wake
arrangement, real estate compa-
ny Unitech Ltd said on Sunday.
Unitech Wireless is a joint
venture between Unitech and
Norway’s Telenor. Telenor
holds majority stake in the tele-
com venture. The company had
chairmanship of Unitech Wire-
less till the investigations into
2G spectrum issue are over.
“We would like to clarify that
Mr. Sanjay Chandra has not re-
signed, however in light of the
recent developments in the in-
in the near term,” Unitech said
in response to a query by PTI.
“One of Unitech’s nominee
nominate an alternate director
in place of Chandra) was sent a
few days back.
directors will take over as the
chairman of the board. This re-
quest was sent a few days back,
Chandra and Unitech Wire-
less have been named in the
chargesheet filed by CBI as ac-
the company said. cused in 2G spectrum scam.

I ndia’s anti-trust regulator has

a tough task in hand to moni-
tor mergers and acquisitions
of second-generation (2G) spec-
trum scam, has asked the tele-
com firm’s board to appoint an
acquired licences to offer mo-
bile service in 2008, which have
come under the scanner.
vestigations, he had already re-
quested the Uninor (Unitech
Wireless) board to appoint an
It (Unitech) will continue to
monitor the situation closely
and review the decision should
Chandra was arrested last week
after the Special Court denied
bail to him along with other ac-
(M&As) given a severe shortage alternate director to deal with its Telenor had demanded that alternate director in his place the need arise, the company cused.
of trained personnel, experts
said.
“There are currently a handful
of people in the M&A team. Once
cases start pouring in, it will be
very difficult for CCI (Competi-
tion Commission of India) to
handle them, given the paucity
of staff,” said Rahul Singh, assis-
tant professor, National Law
School of India University, Ban-
galore, who is currently on leave
and advising legal firms on com-
petition law. “Besides, how many
of them have received the requi-
site training to take on such cas-
es, which are so complex in na-
ture?”
“I don’t think we are grossly
under-staffed. We are recruiting
and will soon have enough peo-
ple,” a CCI official said on condi-
tion of anonymity. “Besides,
training is a constant process at
CCI.”
The commission’s M&A divi-
sion has 14 people and CCI has
around 150 people in total, ac-
cording to the official.
CCI was established in 2009
with a chairman and five mem-
bers. It has started looking at
cases of cartelization. Provisions
relating to M&As were notified
by the corporate affairs ministry
in March.
The skill deficit is seen in the
orders that the authority has giv-
en so far on issues relating to
cartelization and abuse of domi-
nant position, Singh said.
“There are 50 closure orders
and four final orders,” he said.
“The learning curve is going to
be very steep.”
Five years ago, when CCI only
had an advisory role on issues
such as monopolies and
cartelization for lack of statutory
backing, it commissioned a
study by the Indian Institute of
Management, Bangalore (IIM-B)
to find out how much staff would
be needed once it started func-
tioning.
IIM-B suggested that CCI will
require 240 people with degrees
or experience in accounting, law,
economics and company affairs.
Over the next five years, the
study recommended, the com-
mission should have at least 480
employees.
“Such (numbers of) people are
nowhere to be seen,” Singh said.
Ram Tamara, director, Nathan
Associates Inc., agreed with
Singh on skill problems. “Com-
petition law is a fairly significant
economic legislation and com-
plex in nature, which has to be
dealt with extreme caution,” he
said.
“In the US, the Federal Trade
Commission (FTC) hires econo-
mists having PhDs in industrial
analysis. Even if CCI does not
hire economists of such calibre,
does it have the provisions for in-
stitutional training to economists
which they hire,” Tamara asked.
FTC looks into anti-competi-
tive business practices in the US.
CCI chairman Dhanendra Ku-
mar on Thursday said at a meet-
ing with industry lobby groups
that the commission is a work in
progress.
“Everything from capacity cre-
ation to fine-tuning of M&A reg-
ulations will be taken care of,” he
said.
R. Shyam Khemani, former
competition policy adviser to the
World Bank Group, came to Ku-
mar’s defence.
“They are working on capacity
creation,” Khemani said. “I
would not say CCI has adequate
number of staff, but they will be
getting there.”
06‘ MONDAY, APRIL 25, 2011, DELHI
Corporate News
MARCH QUARTER
Sales momentum continues,
but profit growth moderates
Profits of the 103 listed
firms that have so far
declared results grew
25.8% on the back of a
26.6% rise in net sales
B Y P RAMIT B HATTACHARYA
A SHWIN R AMARATHINAM
·························
MUMBAI
E arly results declared by
Indian firms show that
profit growth has mod-
erated in the March quarter
even as the momentum in
sales growth continues.
Profits of 103 listed firms
that have so far declared their
earnings in the March quarter
grew 25.8% on the back of a
26.6% rise in net sales. While
the earnings declared so far
have largely been in line with
expectations, analysts say
these are early days yet as most
companies are yet to post their
results.
Among the 30 firms on the
benchmark Sensex index of the
Bombay Stock Exchange, only
five have declared their earn-
ings so far.
At least two Sensex
firms—Infosys Technologies
Ltd and India’s most valuable
firm Reliance Industries Ltd
(RIL)—have disappointed the
markets.
In the case of Infosys, guid-
ance for earnings in fiscal 2012
was below Street expectations,
and the stock has been ham-
STOCK LISTING
Future Ventures IPO
may involve long wait
for returns: analysts
B Y P RAMIT B HATTACHARYA
pramit.b@livemint.com
·························
MUMBAI
T he initial public offer (IPO)
of Future Ventures India
Ltd, a venture capital (VC) firm
focusing on the consumption
sector, is a unique investment
opportunity but one that might
involve a potentially long wait
for returns, analysts say.
Future Ventures will sell 750
million shares from Monday and
has priced its IPO at `10-11 per
share. The around `750 crore
share sale is the first public of-
fering above `300 crore priced
at par in at least five years, ac-
cording to data from Capitaline.
This is the first listing by a VC
fund in India, and the proceeds
of the issue will be used to ex-
pand existing subsidiaries as
well as to finance new acquisi-
tions in the fashion, food pro-
cessing, retail and rural distri-
bution sectors. In effect, the
company will use the proceeds
to fund its expansion plans in
the consumption space.
While the lack of any compa-
rable listed peer makes it an in-
teresting offer, the absence of a
track record in managing its
businesses profitably makes Fu-
ture Ventures a risky proposi-
tion. The record of the promot-
er, Kishore Biyani-led Future
Group, in India’s capital mar-
kets could also make some in-
vestors cautious.
Pantaloon Retail (India) Ltd,
mered down 12% since it de-
clared its results on 15 April.
Its listed peer, Tata Consul-
tancy Services Ltd (TCS) saw a
49% growth in profit, in line
with expectations. Infosys and
TCS are India’s two largest
software exporters.
& The 14.1% profit growth of
RIL missed Street consensus
estimates, and operating mar-
gins in its petrochemicals
business fell below expecta-
tions.
Banks led by HDFC Bank
Ltd, which posted a 33%
growth in prof-
it, have largely
been in line
with expecta-
Concerns on growth,
tions. earnings, which have
“These are
still early days, brought down stocks
and there is no
secular trend. since the start of the
The
have
results
been
year, still remain
mixed,” said
Harendra Ku-
mar, head of research at Elara
Capital Plc. “While Infosys dis-
appointed, other IT (informa-
tion technology) companies
like TCS and HCL Technolo-
gies (Ltd) have done well.”
Typically, brokerages cover
at most 200 of the biggest
firms. Of the 103 firms that
have declared earnings, less
than 15 are covered by ana-
lysts.
The earnings season is sig-
nificant as it comes on the
back of a pull-back in the stock
the flagship company of the Fu-
ture Group, had made promises
about opening new stores and
giving dividends during its IPO
in 1992, which it could not fulfil
in the promised time-frame, the
red herring prospectus filed
with the regulator shows. Panta-
loon Retail’s stock traded below
its offer price for close to seven
years after an initial listing pop.
In 2008, Future Capital Hold-
ings Ltd was offered at `700-765
just ahead of the market slump.
It has fallen 78% to `164 since
then.
Biyani told reporters he was
aware of the losses investors
suffered in that offer and was
making amends by selling Fu-
ture Ventures shares at par.
The financials show why the
company has not priced its
shares at a premium. On a con-
solidated basis, Future Ventures
is making losses, its cash flows
are negative, and a number of
its business ventures are yet to
break even. According to the
prospectus, half the ventures
floated by it, including most of
its subsidiaries, were making
losses as of December.
Citing poor earnings visibility
and the lack of exit routes in the
short run, Deepak Tiwari, an an-
alyst at Mumbai-based broker-
age Kisan Ratilal Choksey
Shares and Securities Pvt. Ltd,
advised investors to avoid the
issue in a 21 April note.
“Since the company will keep
on acquiring new entities in
market. After underperforming
its peers for over three months,
Indian markets have bounced
back in the past month.
The Sensex has moved up
9.8% in line with other Asian
peers on the back of rising
fund flows to emerging mar-
kets. India has seen net foreign
inflows of $1.3 billion (`5,579
crore) this year so far, higher
than any other equity market
in Asia excluding Japan, ac-
cording to Bloomberg data.
However, concerns
growth and earnings, which
have brought
on
down stocks
since the start
of the year,
still remain.
The ability of
companies to
pass on in-
creases in raw
material, in-
terest and
wage costs will
be keenly
watched by analysts to deter-
mine the extent of downgrades
in their estimates of profit
growth in fiscal 2012.
“So far, it is only banks and
IT firms that have declared
earnings. We have to see how
manufacturing firms fare in
protecting their margins,” said
Rajesh Iyer, head of research
at the wealth management arm
of Kotak Mahindra Bank Ltd.
Economists have downgrad-
ed India’s gross domestic
product growth estimate for
Track record: Future Group promoter Kishore Biyani.
their nascent stage or early-
growth cycle, consolidated
earnings may be subdued due to
the accumulated losses,” Tiwari
wrote.
VC funds typically take sever-
al years to incubate and develop
a venture, which is why it may
not be the ideal investment plat-
form for a retail investor, said
Vikram Uttamsingh, executive
director and head of private eq-
uity at consulting firm KPMG.
“While for institutional inves-
tors, a venture capital might be
a good opportunity to spread its
investments out, for a retail in-
vestor, this might be a high risk-
high reward investment for
which he may not have much
appetite as such investments in-
volve a long gestation period,”
Uttamsingh said.
The company management
said it plans exits from invest-
ments through IPOs of subsidi-
aries or by finding institutional
buyers. It would take several
years to grow profitable busi-
nesses, establish a track record,
and then make public offerings,
analysts say. As many as 36 of
the 48 Future Group companies
have made losses in the past
fiscal 2012 to 7-8.5% from
8.5-9.5% earlier, citing slow
pick-up in capital expenditure
and high inflation, which
could lead to higher-than-an-
ticipated rate tightening.
Wholesale Price Index data
for March released last week
show inflation rose higher
than expected at nearly 9%.
The Reserve Bank of India
(RBI) has raised its policy rates
eight times since March 2010
to 6.75%, but real interest rates
remain negative.
Analysts say many of the
macro concerns have been
priced in, and unless there is a
sharp rate tightening by RBI,
markets may not see a major
decline.
Elara Capital’s Kumar said
while there might be 2-3%
downward revisions after the
current earnings season, mar-
kets would not be affected
much.
“We might see downgrades
in profit expectations for fiscal
2012 by 2-3%, but even then,
earnings for large caps would
grow by over 17%,” said Ku-
mar. “Things could turn out to
be different if RBI starts tight-
ening aggressively.”
Other than the earnings
number that listed firms are
declaring now, it is the level of
crude oil prices and RBI’s
moves that would determine
the extent of change in the
market’s expectations on cor-
porate earnings’ growth.
pramit.b@livemint.com
HEMANT MISHRA/MINT
three fiscals.
The unique model of Future
Ventures may find institutional
backers though, given its suc-
cess in managing brands such
as Lee Cooper and Indus
League. Although its mettle in
the packaged consumer goods
sector, an intensely competitive
industry, remains untested, the
Future Group has tasted success
in retail. Pantaloon is the big-
gest listed retailer in terms of
turnover today.
Future Ventures is valued at
1.1 times its book value, which
appears attractive. However,
goodwill, an intangible asset
used for accounting adjust-
ments, accounts for 41% of its
net worth of `738 crore. Adjust-
ing for goodwill, the company is
valued at 2.7 times its book val-
ue.
Bennett, Coleman and Co.
Ltd (BCCL) has a 12.1% stake in
Future Ventures. BCCL, pub-
lisher of The Times of India and
The Economic Times, and HT
Media Ltd, which publishes The
Hindustan Times and Mint, are
competitors.
Sujan Bandyopadhyay con-
tributed to this story.
www.livemint.com
mint
BANKERS’ TRUST
TAMAL BANDYOPADHYAY
To read all of Tamal Bandyopadhyay’s earlier columns, go to
www.livemint.com/bankerstrust
WHY THE DELAY IN NEW
BANK LICENCE NORMS?
I ndia’s banking regulator is yet to release draft guidelines on
licensing norms for new banks. Finance minister Pranab
Mukherjee first announced the government’s intention to allow a
set of private firms in the banking space in his February 2010
budget speech, surprising the Reserve Bank of India (RBI), which
was till such time pushing for consolidation in banking. More
than a year later, there is no sign of the draft rules even after
Mukherjee said in this year’s budget speech that RBI would issue
guidelines on new banking licences by 31 March.
This has not happened because the finance ministry is not
happy with the draft prepared by the central bank. It wants too
many changes.
RBI first prepared a discussion paper on the subject in August
and sent the first draft guidelines to the ministry ahead of this
year’s budget. But the ministry has not cleared the guidelines yet.
It is pushing hard for the regulator to make some changes—big
and small—and RBI is willing to accommodate some but not all.
We don’t know when the regulator will be in a position to release
the draft guidelines.
Let’s take a look at the suggestions of RBI. I have not reviewed
the draft guidelines prepared by the central bank, but from
various sources who have direct and indirect knowledge of what it
contains, I understand that RBI is ready to allow big industrial
houses to set up banks if it gets the power to supersede boards of
banks that are not being run properly.
It also wants the right to oversee the operations of the
promoting company and any affiliates that will have business
relationships with the bank. This is being done through an
amendment of the Act that governs banking in India. Mukherjee
in his February 2011 budget speech promised the changes in the
Act, and the proposed amendment to the Act was tabled in
Parliament during the budget session itself.
Currently, RBI does not have the power to dismiss a bank
board, but under section 45 of the Banking Regulation Act, 1949, it
can force the amalgamation or merger of a bank with another,
and force a reconstruction of the board to protect the interests of
depositors, shareholders and employees.
RBI is also in favour of an industrial group setting up a holding
company to own the bank and other financial services companies
of the group, keeping the manufacturing and trading business out
of it. This will help the Indian central bank regulate the group
better. The so-called wholly-owned non-operative holding
company, according to the draft, should be registered with RBI as
a finance firm and governed by a
mint COLUMN separate set of prudential
guidelines.
Those industrial groups that
will be allowed to set up banks will have strict restrictions on
exposures to other group firms. The regulator is not comfortable
giving a licence to any industrial group that gets 10% of its income
from real estate or the broking business.
The minimum capital a new bank would need is pegged at `500
crore, and the RBI paper that is lying with the finance ministry
also insists that the new banks need to be listed within the first
few years. Among other things, the draft guidelines outline how
much the foreign shareholding should be in a new bank, and how
fast the promoter needs to pare its stake from 40% to 15%, and
says rural branches should constitute one-fourth of the branch
network to ensure the spread of banking services.
Although the new private banks that have been functioning are
required to have at least 25% of their branch network in rural and
semi-urban India, most have focused only on semi-urban centres
and have ignored rural India. This time around, RBI does not
want to take any chance, and it wants the new banks that will be
given licences to spread banking services in even remote and
thinly populated villages.
I am told that the finance ministry is not comfortable with RBI’s
suggestions on paring the promoter’s stake within the first few
years as well as capping the foreign stake. It also does not want
RBI to be bluntly saying that no industrial house with exposure to
the real estate sector will be allowed to set up banks, even though
it appreciates the spirit behind it. Similarly, it is not very excited
about the central bank’s insistence on rural banking and tough
talk on superseding bank boards.
I don’t know when the finance ministry will finally give its green
signal. After its nod—and necessary changes—RBI will release the
draft guidelines, seeking public comments. It will take a few
months more to prepare the final guidelines. And all applications
seeking banking licences will be examined by an external group
before RBI considers them. I will not be surprised if we hear
Mukherjee in his February 2012 budget speech reiterating his
commitment to allow new private companies to establish banks.
What is not clear is: why did RBI have to send the draft
guidelines to the finance ministry? After all, it’s a mere draft, and
it will be finalized only after receiving comments and feedback
from various quarters. Couldn’t RBI have gone ahead with the
draft guidelines and taken into consideration the government’s
feedback before finalizing it?
There are various theories doing the rounds. One is the
regulator’s reluctance to be solely responsible for drafting the
guidelines for the most critical segment of the financial segment
when the second-generation spectrum licensing scam is emerging
as the largest political corruption case in India. For the same
reason, the government also is not in a hurry to push new banking
licences, many in Delhi say. The delay, it seems, is deliberate, and
neither the government nor RBI is too keen to welcome a new set
of private banks in a hurry.
Tamal Bandyopadhyay keeps a close eye on all things banking
from his perch as Mint’s deputy managing editor in Mumbai.
Please email your comments to bankerstrust@livemint.com
 mint
WORK IN PROGRESS
Indian steel suppliers
lag racing auto sales
Tie­ups with foreign
firms for tech upgrade
may take time to make
headway; to fill the gap,
imports could increase
B Y R UCHIRA S INGH
ruchira.s@livemint.com
·························
NEW DELHI
A lthough demand for au-
tomobiles is surging in
India, steel makers are
lagging behind in supplying
special auto-grade steel to
manufacturers, making neces-
sary ever-increasing imports.
India’s automobile sector is
seeing sales rising by 12-14% a
year, and changing trends and
greater safety requirements
mean they need more of high-
tensile, light-weight and corro-
sion-resistant steel.
Primary steel manufacturers
supply about 6 million tonnes
(mt) of flat steel products to
this sector, including some
high-tensile steel from their
total output of about 70 mt, but
around 1-2mt of high-tensile
steel, mostly for critical auto
components, has to be import-
ed.
While steel companies have
tied up with foreign firms to
get the necessary technology
to boost production of such
steel, experts say it will take a
few years for the ventures to be
firmly established. Till that
time, to fill the gap, auto-grade
steel imports could increase.
“Auto steel needs high tech-
nology and right equipment.
All that is happening, but it
will take more time,” said Nit-
tin Johari, chief financial offi-
cer of Bhushan Steel Ltd, which
was one of the first to make au-
to-grade steel in 1997 under a
technical collaboration with
Sumitomo Metal Mining Co.
Ltd of Japan.
“Till the time more capaci-
ties are added, there could be
more imports. It could rise to
3-4mt,” Johari said.
Even though car sales have
GROWTH STRATEGY
Mahindra Lifespace looks beyond
Mumbai, plans low­cost housing
B Y M ADHURIMA N ANDY
madhurima.n@livemint.com
·························
BANGALORE
M ahindra Lifespace Devel-
opers Ltd, the real estate
and infrastructure arm of the
Mahindra Group, is looking at an
India growth strategy through
fresh land purchases and is eye-
ing new segments such as rede-
velopment in Mumbai and low-
cost housing.
For 2011-12, Mahindra
Lifespace seeks to deploy around
`200 crore on strategic land ac-
quisitions for projects that will
largely focus on residential de-
velopment.
The realty firm, which has fo-
cused on housing development
in Mumbai so far, apart from its
two ongoing special economic
zone (SEZ) projects under the
Mahindra World City concept,
will also look at markets such as
Bangalore.
“We would like to be present
in at least 8-10 cities, though we
have seen real estate firms have
not found it easy to do pan-India
development,” managing direc-
tor and chief executive Anita Ar-
jundas said. “However, we be-
lieve that we would be able to
BOOSTING PRODUCTION
 JSW Steel produces some grades of
steel with technology support from
Japan’s JFE Steel
 A joint venture (JV) between Bhushan
Steel and Japan’s Sumitomo Metals will
set up a 2 mt auto steel plant by 2014-15
 A JV between Tata Steel and Japan’s
Indian steel makers
are cautious due to
the fast­changing
nature of trends in
the car industry
been strong in the past several
years, for steel makers, cater-
ing to this industry is still a
work in progress.
JSW Steel Ltd and Japan’s
JFE Steel Corp. announced a
technical collaboration in 2009
for automotive steel produc-
tion.
“There are different grades.
Some we are starting to pro-
duce right away. Gradually it
will be ramped up,” said Jayant
Acharya, director, commercial
and marketing at JSW Steel.
Tata Steel Ltd and Japan’s
Nippon Steel Corp. signed a
joint venture agreement in
January for production of
600,000 tonnes a year of auto-
motive cold-rolled steel at
Jamshedpur, in a project cost-
ing approximately `2,300 crore
and expected to come on
stream in 2013.
manage it with the help of our
professional, corporate struc-
ture.”
In the coming quarters, Mahi-
ndra Lifespace will launch maid-
en residential projects in Hy-
derabad and Nagpur. It will also
launch projects on land that it
bought in recent months from
other group firms in Pimpri, near
Pune, and Ghatkopar, a Mumbai
suburb.
As a mid-
term strategy,
Arjundas said
For 2011­12, the
the firm is look- firm seeks to deploy
ing at the `10
lakh category of around `200 crore
budget houses
and research- on strategic land
ing the seg-
ment.
acquisitions
“We are also
in negotiations
for two housing redevelopment
projects in suburban Mumbai as
a testing ground. Depending on
how it goes, we may do more
such projects,” she said.
For the quarter ended 31
March, Mahindra Lifespace
posted a 30% rise in net profit to
`103.05 crore from the year ear-
lier. Its debt-to-equity ratio was
0.4.
Nippon Steel will produce 600,000
tonnes of auto cold-rolled steel by 2013
 Essar Steel and Kobe Steel of Japan
signed a memorandum of understanding
(MoU) to collaborate on auto steel
 SAIL and Kobe Steel have an MoU to
collaborate on auto steel
PHOTOGRAPH BY BLOOMBERG
State-run Steel Authority of
India Ltd (SAIL) has an agree-
ment with Japan’s Kobe Steel
Ltd and South Korea’s Pohang
Iron and Steel Co. (Posco), but
specific plans are yet to be
shaped.
Why has India’s steel indus-
try, the fifth largest in the
world, been slow in keeping up
with this trend?
Experts say steel companies
have been caught up with the
usual difficulties surrounding
mining and setting up of plants
involving difficult regulatory
approvals and social issues,
and foreign technology has not
been easy to come by.
“Earlier, the Japanese and
the Koreans were closely
guarded. Now they have real-
ised Indian companies would
need the technology, especial-
ly as auto makers of their na-
tionality are here,” said Man-
ish Pande, regional director at
CRU Strategies, a metals, min-
ing and power consultancy.
Besides, what has made In-
dian steel makers cautious in-
vestors are the fast-changing
nature of trends in the car in-
dustry and fears of a downturn
in the demand for cars.
“All of us are looking at au-
tomotive as a market. All of us
The company, along with its
subsidiaries, sold residential
units worth `700 crore in the
same period, 19% up from a year
ago. The corresponding area
sold this year is 1.41 million sq.
ft, compared with 1.22 million
sq. ft the previous year.
A February report by Motilal
Oswal Securities Ltd said that
along with its two SEZs in Chen-
nai and Jaipur,
Mahindra
Lifespace is also
acquiring two
more
SEZs—1,000
acres in north
Chennai and
3,000 acres near
the Mumbai-
Pune express-
way. The com-
pany has paid
an advance of `130 crore.
“We expect clarity on these ac-
quisitions to emerge in six
months,” said analysts Siddharth
Bothra and Sandipan Pal in their
report. “While it has ongoing SEZ
projects at Chennai and Jaipur
with 4,550 acres area, its project
pipeline comprises four attrac-
tive integrated development pro-
jects of 6,500 acres.”
CORPORATE NEWS 07
are looking at investments. But
how has the auto sector per-
formed? In the US, the auto
sector drove steel to bankrupt-
cy,” Malay Mukherjee, chief
executive officer of Essar Steel
Ltd, said at the Indian Steel
Markets conference last
month.
Essar Steel, too, is getting
into automotive steel with an
agreement with Japan’s Kobe.
Primary steel makers also
fear getting out-priced by nim-
ble secondary producers or
cheap foreign producers. To
counter these, they need heavy
investments in research and
development.
“Demand keeps coming
from the auto side to invest re-
sources in steel making,” said
Narendra Chaudhary, a steel
consultant who has worked for
ArcelorMittal and SAIL. “Fun-
damentally that means more
lightweight steel but with the
same strength and prefabricat-
ed parts. All this means costs
for steel makers.”
But in the long run, the steel
industry is expected to cope
with the increased demand
from auto makers, experts
said. “Steel makers should be
able to address their concerns
with their alliances with for-
eign companies,” said Ashish
Upadhyay, associate director,
Fitch Ratings, who ruled out
any possibility of profitability
being hurt by any increase in
imports.
“India is still the low-cost
producer, and firms have cap-
tive mines. Anti-dumping du-
ties can also come into play,”
Upadhyay said.
But some demand for premi-
um and highly specialized
steel would continue to be im-
ported in the foreseeable fu-
ture.
“We locally assemble the C,
E and S class cars at our plant
at Chakan. Being an assembly
plant, we import kits from
abroad, which are then assem-
bled at our plant,” said Manas
Dewan, general manager, stra-
tegic planning and corporate
communications at Mercedes-
Benz India Pvt. Ltd.
“To become a full-fledged
manufacturing organization,
there needs to be significant
increase in volumes to justify
the investments,” he said. “In
the short and mid term, we do
not foresee see an increase in
volumes to justify complete
manufacturing.”
MONDAY, APRIL 25, 2011, DELHI ° WWW.LIVEMINT.COM
IMPACT ON INDUSTRY
Irda to look into
cost of regulation
B Y R EMYA N AIR
remya.n@livemint.com
·························
NEW DELHI
I ndia’s Insurance Regulatory
and Development Authority
(Irda) is planning to commis-
sion a study to calculate the
cost of its decisions on insurers
and the subsequent impact on
the cost of insurance policies.
In the past year, insurance
companies have had to incur
higher costs as Irda asked for
higher disclosure require-
ments, brought in large regula-
tory changes in products, and
tightened distribution norms.
The regulator wants to know
if the cost of regulatory burden
has “become heavy or has
eased”, said J. Hari Narayan,
chairman,
Irda.
“There have
been attempts
Irda is responding to
done in other industry concerns
countries…no-
tably in Aus- that insurance
tralia… Other
jurisdictions companies have had
have also done
it,” he said.
to cope with many
“We need to
improve upon
changes within a
the kind of short span of time
concepts and
find how best
to measure
that.”
Last year, Irda said compa-
nies have to make quarterly
disclosures, including seg-
ment-wise reporting of busi-
ness figures.
In addition, it changed rules
governing unit-linked insur-
ance policies (Ulips)—a hybrid
product that invests part of the
premium in equities. Life in-
surance companies had to re-
work their entire unit-linked
product offerings and offer a
completely new set of Ulips
from September. At that time,
Ulips constituted around
80-85% of the business of life
insurance companies.
Insurers also incurred costs
over strengthening accounting
teams, reworking product
structures, training sales
teams, reprinting brochures
and working out new advertis-
ing strategies.
Alpesh Shah, partner and di-
rector, Boston Consulting
Group India, said that by cal-
culating the cost of the regula-
tory burden, Irda can ascertain
if it is doing too much or over-
stepping boundaries.
“Regulators have to protect
consumer interests and at the
same time ensure that the in-
dustry is healthy and viable,”
Shah said. “By looking at the
cost burden of regulatory deci-
sions, the regulators can take a
call on whether its decisions
are an overall good measure.”
The regulatory burden can
be broadly classified into three
categories—cost incurred for
complying
with regula-
tion, burden
due to regula-
tion making
some busi-
nesses unprof-
itable and im-
pact on profit-
ability due to
changes, he
said.
Although
the industry
may consider
the last com-
ponent as a
cost burden, it may not be re-
garded as such by the regula-
tor, Shah said.
The process may take a
while to be completed, said the
chief executive of a life insur-
ance company who did not
want to be named.
“Irda will have to go to each
insurance company and find
out what has been the impact.
It will be different for each
company,” he said. “It remains
to be seen if they will be com-
mitted enough to carry out this
large logistic exercise.”
Irda is looking at better and
not just more regulation,
Narayan said, responding
to industry concerns that firms
have had to cope with many
changes within a short span of
time.
08 CORPORATE NEWS
MONDAY, APRIL 25, 2011, DELHI ° WWW.LIVEMINT.COM
mint
PRADEEP GAUR/MINT

A FORTNIGHTLY FEATURE FROM INDICUS ANALYTICS HOUSEHOLD SIZE

AFFORDABILITY DICTATES
33%
36%
HOUSE OWNERSHIP
Owned Rented
Other
24%

ASSET OWNERSHIP 20% 21%

56% 37%

The heterogeneity that characterizes the modern Indian consumer 7%

has created a maze that marketeers would like to unravel in order 2%
to target their products and services precisely. In this fortnightly 0%
1 2 3 4 5 >5
series, Indicus Analytics presents the various facets of urban No. of members
consumers, across geographies and socio­economic groups. HOUSEHOLDS BY NUMBER INDUSTRY TYPE OCCUPATION TYPE
OF EMPLOYED MEMBERS Construction/real estate

T he second largest sub-segment of

urban SEC E households is formed
by households whose chief wage
earner is middle-aged and married with
60% of the households have more than two
children in six towns—Jodhpur, Bikaner,
Aligarh, Bareilly, Bhavnagar and Gwalior.
The spouse of the chief wage earner also
More than two members
Two members Single member
Manufacturing
Transport and communication
Agriculture and related Others
Regular salaried
Self employed
Others

young children. The chief wage earner is
an unskilled worker with low levels of edu-
cation—a majority have completed just
primary school.
With little educational backing, most of
the chief wage earners have managed to
find work as casual workers; while a little
less than one-third have their own busi-
nesses, which would include small kiosks,
hand carts, etc., essentially in the trade
sector. A little over one-quarter of chief
wage earners have regular salaried jobs at
the lowest level in small businesses or
households.
Broadly, the source for livelihood in this
category comes from the unorganized sec-
tor, with just about 7% working with the
government or private sector companies.
Those who work in large firms or the pub-
lic sector would have completed middle
school, but again, would be at the lowest
rungs of income.
When it comes to sectors of employ-
ment, construction and real estate account
for jobs to almost half the segment, follow-
ed by manufacturing, transport and com-
munication, and agriculture and related
activities. The presence of the last category
shows low education and skill base re-
stricts employment to primary activities.
Even in metros, there is a minuscule
percentage of people involved in cropping,
fishing, etc. This sector forms a major
source of livelihood in urban areas of dis-
tricts such as Medinipur, Bellary, Jalgaon,
etc.
Households in this category typically
consist of four to five members. These are,
to a large extent, nuclear families and less
than 10% have senior citizens. Around 40%
have more than two children, even in the
lowest income segments in urban areas.
As expected, northern districts show great-
er tendency for more children; more than
has low levels of schooling—less than one- 19%
third have made it to middle school. In 69% 9%
most households, the spouse is a home 27%
maker, taking care of the children. In 20% 42%
about one-fifth of the households, the 25%
women are also employed outside the 25%
homes. Interestingly, in Vellore, Erode, 26% 31%
Dharwad and Virudhunagar, more than 5%
40% of the spouses are earning, while Sri-
nagar has the lowest participation of
spouses in this category. INCOME DISTRIBUTION AGE GROUP
In most households, the chief wage
earner is the sole earning member and an-
nual household incomes fall predomi- <25 years 3%
nantly in the lowest income class of less
than `3 lakh a year. Yet, as these earners 25-34 years 52%
are settled in their careers and families,
more than half the households own hous-
es. A little more than one-third of the 35-44 years 39%
households stay in rented houses, while a
mere 7% live in employer-provided ac- 45-54 years 4%
commodation. The smaller towns with 96.83% Households with
annual income
more affordable real estate prices see <R3 lakh
higher ownership of houses even among >54 years 1%
this segment.
When it comes to asset ownership,
households in this category clearly go in EDUCATION
for two-wheelers as the vehicle of choice, Higher secondary
basically for reasons of affordability. Still, Middle school
Literate below primary
the penetration of two-wheelers is low
with just 25 % of these households owning
a two-wheeler. Even when the need for a
four-wheeler is high given the size of fami- 2.09% R3-5 lakh
ly in a typical SEC E middle-year house-
hold, ownership of car is this category is
rare. 55%
43%
Ownership of refrigerators and micro- 0.76% R5-10 lakh
waves is low while television penetration
level is high. This segment is not as net- 0.18% R10-15 lakh
savvy as the younger SEC E households, 0.15% >R15 lakh
and it is television that scores much higher
than all other media; even radio gets one- 1%
fourth of the time spent on an average by a Graphic: Paras Jain/Mint
household on watching TV.
 mint
MANPOWER CRISIS
ONGC battles retirement problem
Almost all officers at
the director and
executive director level
in the company are
set to retire by 2013
B Y M AULIK P ATHAK
maulik.p@livemint.com
·························
AHMEDABAD
I t’s not just ageing oil wells in
Assam and Gujarat that In-
dia’s largest explorer Oil and
Natural Gas Corp. Ltd (ONGC)
is grappling with. The company
is working hard to come to terms
with a looming manpower crisis
as at least 100 employees retire
every month.
After the Mumbai High (earli-
er called Bombay High) discov-
ery in the mid-1970s that led to a
recruitment drive till the 1980s,
the state-owned company went
slow on hires in the 1990s. Sub-
sequently, there was an exodus
of staff to the private sector and
greener pastures in the Gulf.
Of the 40,000 employees it had
at the end of 2000, at least 11,000
have left or retired as of 2010,
leaving a void of skilled workers.
It now has 33,000 employees, of
which 4,000 have been recruited
in the last three years. Four thou-
sand are set to retire by 2014.
“This turnover factor being
easily identifiable is well within
the capacity of the company to
manage. In fact, the company
has been pursuing an aggressive
intake policy during the past
three-four years,” a spokes-
person said.
On Wednesday, when the
board of ONGC visited a site near
Ahmedabad to celebrate the
golden jubilee year of the firm’s
first well in the region, acting
chairman A.K. Hazarika repre-
sented about half its strength,
also concurrently director for on-
shore, human resources and new
business initiatives.
The company’s new explora-
tion director B.K. Rao joined a
month ago and will reach the re-
tirement age in two years.
“The process for the appoint-
ment of a new chairman is on,”
said petroleum secretary S. Sun-
daresan, who visited the site with
ONGC’s top officials.
The average age of an employ-
ee in ONGC today is about 48-50
and many experienced people
are in the retirement mode, ac-
cording to Hazarika.
“Retirement of experienced
employees is of serious concern
to us. We are trying to promote
younger people. They have to be
trained faster to take up respon-
sibility quicker. There has been a
lot of attrition in the past, but it
has come down considerably to-
day,” according to Hazarika.
In a bid to curb attrition, the
company has been recruiting
about 1,000 people a year in the
past four years, he added. The
company has government per-
CORPORATE NEWS 09
mission to induct 1,500 more. All
the recruitments are made at the
entry level.
Many of the key people in
companies such as Reliance In-
dustries Ltd and Gujarat State
Petroleum Corp. Ltd are from
ONGC, Hazarika said.
Almost all officers at director
and executive director level at
ONGC are set to retire by 2013.
Their current average age is 58
years, according to official fig-
ures.
“ONGC is a company that re-
quires people with expertise. Ar-
eas such as exploration and dril-
ling require experienced people,
and this can come only with
time. Replacing 10,000 experi-
enced hands having 20-30 years
of experience with new ones will
not help much immediately,”
said an ONGC official, who did
not want to be named.
The shortage is most severe
among specialized workers such
as senior scientists and engi-
MONDAY, APRIL 25, 2011, DELHI ° WWW.LIVEMINT.COM
The current average
age of directors and
executive directors
is 58 years, as per
official figures
neers, and it will take anywhere
between five and 10 years to
train replacements to help close
the gap, another ONGC official
said. He, too, requested ano-
nymity.
There are close to 1,400 man-
agers in drilling, production and
reservoir disciplines. “The aver-
age age for E4 level officers
(managers), including those who
have risen from ranks, is 50
years,” according to the compa-
ny spokesperson quoted earlier.
From the current pool of 474
officers at executive director,
general manager and group gen-
eral manager levels, 256 are go-
ing to retire by 2013.
An official at an oil and gas
field in the eastern part of India
said there was no crisis as there
had been some excess hiring in
the past on hopes of another big
discovery similar to Mumbai
High.
“Only few departments may
be affected. Also, the recent hir-
ing is not done on a one-to-one
basis and is a mass recruitment
drive. ONGC has been a pioneer
in oil and gas exploration activity
in India and it has a limited his-
tory of turnover. When private
players came in, the one place
they shopped for talent was at
ONGC,” the official said on con-
dition of anonymity.
The company said salaries
have improved at the state-run
company.
“There has been a recent revi-
sion in the ONGC pay scales,”
the company said in an emailed
response. “The new scales are
quite attractive compared to pri-
vate organizations. In fact, at the
initial level, they are more than
that of the private sector and
have been attracting the needed
talent to the company.”
10 CORPORATE NEWS
MONDAY, APRIL 25, 2011, DELHI ° WWW.LIVEMINT.COM
NEW VENTURES
Logistics companies see a
shake­up among executives
Most executives plan to
start their own logistics
companies because
of strong growth
potential in the sector
B Y P .R . S ANJAI
pr.sanjai@livemint.com
·························
MUMBAI
M ore than 300 execu-
tives quit Mahindra
and Mahindra Ltd’s
Mahindra Logistics Ltd unit 10
months ago to start a new firm:
Leeway Logistics Ltd.
Sanjay Sinha, then managing
director of Mahindra Logistics,
led the mass exodus. Leeway
Logistics has become a `100
crore plus company in nine
months.
This isn’t an isolated in-
stance. Many leading logistics
companies divisions are seeing
their executives turn entrepre-
neurial.
Abhik Mitra has stepped
down as managing director of
the Indian unit of Netherlands-
based logistics company TNT
NV. Mitra, a renowned logistics
expert, confirmed that he had
resigned from TNT, but did not
comment on his plans.
Mitra is joining private equi-
ty firm India Equity Partners
(IEP), which has an interest in
investing in logistics compa-
nies, according to a person
close to the development.
“Mitra would be responsible
for setting up a logistics com-
pany and investing in related
sectors,” he said, requesting
condition of anonymity. Mint
could not immediately contact
India Equity Partners.
Mahesh Niruttan has re-
signed as chief executive officer
(South Asia) of leading interna-
tional logistics company Agili-
ty Logistics Group. He will
start his own company in India.
Niruttan did not confirm or
deny this.
“We are just copying what
(N.R.) Narayana Murthy of In-
fosys (Technologies Ltd) did 20
years ago to start a revolution
SPECIALIZED SERVICES
Infotech Enterprises plans to
strengthen engineering focus
B Y S URABHI A GARWAL
surabhi.a@livemint.com
·························
NEW DELHI
M id-size information tech-
nology (IT) firm Infotech
Enterprises Ltd is moving away
from the IT services business to
strengthen its focus on special-
ized engineering projects.
Infotech Enterprises, which
reported a revenue of `1,188
crore for fiscal 2010-11, started in
1991 as a firm focused on the
geographic information systems
(GIS) business, with engineering
services as a second area of fo-
cus.
In a recent interview, B.V.R.
Mohan Reddy, Infotech Enter-
prises’ chairman and managing
director (CMD), said the compa-
ny was transforming itself into an
engineering company. “We have
one large contract in the tradi-
tional IT services space for which
we have created a separate sub-
sidiary.”
This strategy helped the com-
pany survive the global econom-
ic crisis, the aftermath of which
has seen several smaller and
mid-size IT firms that have no
GOING PLACES
who
ABHIK MITRA
MAHESH NIRUTTAN Agility Logistics
ASHU KHANNA
VISHAL SHARMA AP Moller-Maersk Group
SANJAY SINHA Mahindra Logistics
in the Indian IT (information
technology) sector,” said San-
jay Sinha, managing director
and founding member at Lee-
way Logistics.
“There are many more going
to take up this entrepreneurial
game considering its poten-
tial,” he added.
Leeway started with a capital
of a little over `10 crore and is
now in talks with a clutch of
private equity players for fund
infusion to expand the firm.
Executives are turning into
entrepreneurs largely because
of the growth potential.
Logistics infrastructure is a
critical enabler of India’s agen-
da for economic development
and urbanization, according to
a September 2010 McKinsey
and Co. report—Building In-
dia: Transforming the Nation’s
Logistics Infrastructure.
“Recognizing its pivotal role,
the Indian government will
have tripled annual spending
on logistics infrastructure over
the past seven years, from
about $10 billion (around
`44,500 crore) in 2003 to $30
billion in 2010. Despite this in-
crease, the country’s network
of roads, rail, and waterways
will be insufficient to accom-
modate a threefold increase in
freight movement over the
coming decade. This shortfall
in logistics infrastructure will
put India’s growth at risk,” said
the McKinsey report.
The firm is focusing
on new business
segments within
engineering such as
nuclear engineering
specialization finding it difficult
to sustain themselves.
“We are constantly faced by
disruptive technology, so the
idea is how to redesign the as-
sets. If you look at the engineer-
ing spend globally, that’s grow-
ing around 4% year-on-year, and
global sourcing as compared to
outsourcing is growing at a much
higher rate of around 10%... It is
much faster than the traditional
IT services spending growth
rate,” he said.
The company is focusing on
new business segments within
engineering such as nuclear en-
gineering.
Reddy added that the firm
continues to do some mainte-
nance work or writing code,
where
from INDIA EQUITY
PARTNERS
TNT
STARTING A NEW
LOGISTICS FIRM
VALYOU
CONSULTING
Marico
FOUNDED
TUSCAN VENTURES
FOUNDED
LEEWAY LOGISTICS
Entrepreneurs are convinced
that they can bridge the short-
fall.
“There is no glamour in the
logistics business, but there is
money. Only thing is that you
need to get your hands dirty.
The textbooks on management
may not help you when you are
interacting with warehousing
staff and drivers,” said Lee-
way’s Sinha.
Executives are also finding
freedom in the role of entrepre-
neurs.
“Legacy issues in large global
logistics organisations such as
a top-heavy cost base and IT
systems are limiting maximiza-
tion of the high market poten-
tial in the Indian context, creat-
ing opportunities for entrepre-
neurs to correct these issues.
This correction, they must feel,
is best done on a clean slate,”
said Gautami Seksaria, founder
and partner, Supply Chain
Leadership Council (SCLC), an
organization building an active
community of logistics profes-
sionals in India.
Being part of a company
doesn’t allow for radical per-
sonal growth, Sinha said.
“An entrepreneur can (grow
rapidly). Its market tempted to
me to quit from the comfort
zone. And no regrets,” Sinha
said.
According to Sinha, Leeway
Logistics has surpassed `100
crore by turnover in nine
which comes as a part of some
manufacturing contract, but it is
not doing any business in the
traditional hot spots of the IT
sector such as banking and fi-
nance services.
“The IT services business is
becoming a lot more complicat-
ed… We believe that you should
do something that we are good
at. You have to offer something
which is unique,” he said.
Revenue for the three months
ended 31 March rose 33.5% to
`3,25.8 crore from the year earli-
er and 3.8% from the preceding
quarter.
Net profit stayed the same as
that in the preceding quarter and
was down 28% from the year ear-
lier to `36.98 crore. The operat-
ing margin for the March quarter
was 14.3%.
Brokerage firm India Infoline
Ltd said in its report published
after the results that the margin
trajectory “for Infotech has be-
come a bit of a concern on the
back of 720 basis point fall over
March quarter of last financial
year. Though the management
suggests stronger margin, we re-
main cautious”. A basis point is
months. The company has 170
big corporations as customers
with 369 contracts. Leeway Lo-
gistics is a third-party logistics
company that helps companies
in transportation, warehousing
and distribution.
Executives aren’t just quit-
ting to start new logistics firms.
Take the case of Vishal Sharma,
chairman and founder of pri-
vate equity firm Tuscan Ven-
tures Pvt. Ltd.
When Sharma was working
as vice-president and head of
the shipping business at
AP Moller-Maersk Group in
India, he sensed the opportuni-
ty for cold chain companies.
Instead of starting a cold chain
company, Sharma founded pri-
vate equity firm that incubated
its own cold storage chain,
ColdStar Logistics Pvt. Ltd.
Some executives leaving
their companies are turning
advisors. Ashu Khanna quit his
position as head supply chain
(nature care and value added
products) for Marico Ltd to
join Valyou Consulting.
“Valyou Consulting will be
starting its operations from 1
May and it will be advising
companies on procurement,
supply chain transformation
and implementation of logis-
tics projects,” said Khanna. “I
have put in `30 lakh as initial
capital and will tap venture
capital funds at a later stage.”
A consultant to logistics
companies, requesting ano-
nymity, said at least half a doz-
en top executives from various
companies are planning to set
up their own logistics compa-
nies shortly and are searching
for investors. “Private equity
funds are also interested in set-
ting up their own logistics com-
panies and are searching for
executives to head them,” he
said, without divulging details.
According to a research re-
port by Crisil Ltd in September
2009, the Indian logistics in-
dustry’s revenue is expected to
grow strongly over the next five
years from an estimated `2.76
trillion in 2008-09 to around
`4.64 trillion in 2013-14.
one-hundredth of a percentage
point.
It added that the management
has guided for operating margin
to improve to 16-16.5% in fiscal
year 2011-12 with higher fresher
additions, increasing utilization;
selling, general and administra-
tive expenses leverage; and pric-
ing improvements being effec-
tive levers.
“We are enthused by the sus-
tained overall growth in reve-
nues over the last couple of quar-
ters, leading to 30% year-on-year
growth in FY11 (dollar terms),” it
said.
Dipen Shah, a senior vice-
president at Kotak Securities
Ltd, said the slowdown did not
impact the company’s perfor-
mance much as it has “grown
well over the last eight-nine
quarters due to its focus on engi-
neering services against the tra-
ditional IT services business”.
However, the GIS business,
which comes under network and
content engineering, contributes
30%, while engineering, manu-
facturing and industrial products
make up for the rest of the reve-
nue of the firm.
“There are challenges in the
GIS business as the traditional
business is going through a
transformation… The addressa-
ble mark is shrinking there,” said
Reddy.
Bombardier Inc. and United
Technologies Corp. are some of
the largest clients of the firm.
Powered by Mint, Dow Jones Newswires and The Wall Street Journal
Fresh approach: Devinjit Singh, managing director, Carlyle India.
TURNING FLEXIBLE
Carlyle to tweak
strategy to suit
Indian PE market
B Y S HRADDHA N AIR
shraddha.n@livemint.com
·······················
MUMBAI
A fter striking only one
deal, a $650 million
(around `2,892.50 crore) in-
vestment in Housing Devel-
opment Finance Corp. Ltd
(HDFC) in 2007, the buyout
arm of the Carlyle Group LP,
one of the world’s largest
private equity (PE) funds, is
ready to tweak its strategy
and be more flexible to suit
the Indian PE market.
“We are willing to play
across the spectrum in
terms of character of the
deal,” said Devinjit Singh,
managing director, Carlyle
India Advisors Pvt. Ltd. “We
can do a minority private
deal, we can do a private
buyout, a public minority
deal and a public buyout.”
He attributes this to com-
panies in India listing very
early in their evolution,
which limits the scope of in-
vesting in companies in the
private space. So for a fund
that is only playing in the
private space, the opportu-
nities can be limited.
While buyout funds such
as the Blackstone Group LP
and KKR and Co. LP, which
have had a few majority
stake transactions
mostly minority ones, have
raced ahead in striking
and
deals, Carlyle’s buyout fund
has been more cautious.
Blackstone has bought out
Gokaldas Exports Ltd and
Intelenet Global Services
Pvt. Ltd, while KKR has
bought out Aricent Inc.
Last year, Carlyle was
among those seeking to ac-
quire a stake in Hero Invest-
ments Pvt. Ltd (HIPL), which
owns 17% of Hero Honda
Motors Ltd. It also sought to
acquire Patni Computer Sys-
tems Ltd.
In February, Bain Capital
Llc and the Singapore gov-
ernment announced the
purchase of a 30% stake in
HIPL for `3,900 crore, while
iGate Corp., backed by PE
firm Apax Partners Holdings
Ltd, bought 63% of Patni for
$921 million.
The growth capital fund
has, however, been active
and has made investments
in companies such as Allsec
Technologies Ltd, Claris
Lifesciences Ltd, Elitecore
Technologies Ltd and Great
Offshore Ltd.
“Their (Carlyle’s) ap-
proach has been very aca-
http://online.wsj.com/public/page/deals­india.html
mint
demic,” said a PE fund man-
ager, who did not wish to be
identified because he was
commenting on a rival fund.
Explaining the approach,
Singh of Carlyle said, “We
are willing to be flexible in
terms of deal construct, but
where we are not willing to
be flexible is compromise in
terms of our methodology of
evaluation. We will not com-
promise on our diligence.”
According to Avinash
Gupta, head, financial advi-
sory, Deloitte Touche Tohm-
atsu India Pvt. Ltd, there is
very little scope for buyout
funds if they are looking
only for majority stake
deals. “Even PE firms who
sell out want to sell to a stra-
tegic investor rather than
another PE firm,” he said.
Another problem buyout
funds face is that they’re not
too keen on small deals.
“We have run mandates for
several deals where the buy-
out funds backed out of
good deals because the
cheque size was too small,”
said Gupta.
Carlyle has $106.7 billion
under management across
84 funds, according to its
website. It invests in India
out of its Asia funds.
Buyout firms present in
the country have a degree of
flexibility because
don’t have India-dedicated
they
funds, which means they are
not in a hurry to deploy the
money,
Chidambaram,
said Srinivas
managing
director, Jacob Ballas Capi-
tal India Pvt. Ltd. “Buyout
funds in India will do
growth capital and struc-
tured deals. They are not
looking at India for surviv-
al,” he said. “They are more
opportunistic investors.”
Last year, Carlyle finished
raising its third Asian buy-
out fund, a $2.5 billion fund.
It has done six deals so far
across Asia from this fund.
“We are hoping that we do
a few deals in India, but we
will wait for the right deal,”
said Singh. “We have an
overall philosophy of being
disciplined and being pa-
tient and waiting for the
right deal.”
Deals India, published
jointly by Mint, Dow Jones
Newswires and The Wall
Street Journal, is a one stop
destination for investment
professionals following deal
flow, deals news, private-eq-
uity and venture-capital ac-
tivity in India.
 www.livemint.com 11 MONDAY, APRIL 25, 2011, DELHI

mint Need to Know

PTI
‘Oil price rise to Pakistan Army chief Gen Ashfaq Parvez
Kayani before the Mohali meeting. The
version were released. BLOOMBERG

affect India’s growth’
New Delhi: A rise in global oil prices by
$10 (`433) per barrel would reduce
India’s economic growth by 0.2 percent­
age points and also affect the country’s
current account deficit, Goldman Sach
said.
“A VAR (value­at­risk) analysis sug­
gests that a $10 increase in oil would
reduce GDP growth by 0.2 percentage
point,” Goldman Sachs said in its latest
edition of ‘Asia Economics Analyst’.
India imports three quarters of its
annual oil and gas requirements, with
the West Asia and North Africa region
contributing to a substantial chunk of it.
Trade push: Union commerce minister Anand Sharma with Ban­ India’s import bills amount to $18 billion.
gladesh Prime Minister Sheikh Hasina in Dhaka on Sunday. Global oil prices have almost doubled
in the past one year. Brent crude, one of
India offers $100 mn credit the benchmark index, was trading at
nearly $124 on 23 April. PTI n
report is false,” PM’s media adviser Har­
ish Khare said in a statement.
London­based ‘The Times´ on Satur­
day reported that Singh had appointed
an “unofficial envoy” to make contact
with Kayani.
The talks, through a back channel,
have encouraged the UK and US believe
that the countries’ competition for influ­
ence in Afghanistan could be better
managed during efforts to start a peace
process, the media report had said. PTI
PHARMA
Dr Reddy’s to sell
depression pill in US
Mumbai: Dr. Reddy’s Laboratories
Ltd, India’s second­largest drug maker,
will be allowed to sell a generic version
of Wyeth’s antidepressant drug starting
POWER Cambodia,
CERC to audit price Thailand clash
discovery mechanism
New Delhi: The Central Electricity Regu­ continues
latory Commission (CERC) will audit the
price discovery mechanism being used B Y J ANESARA F UGAL
at the country’s two power exchang­ feedback@livemint.com
es—Indian Energy Exchange and Power ····················
PRASAT (THAILAND)
Exchange India.
At power exchanges, utilities and
other electricity providers offer to sell a
specific quantity of energy at a particu­
C ambodia and Thailand
exchanged heavy weapons
fire for the third straight day on
lar price while potential purchasers sub­ Sunday, officials said, after fierce
mit their bids. These exchanges help in
discovering the price of power based on
fighting on their joint border left
10 soldiers dead.
the principle of demand and supply. The Thousands of civilians have
CERC has already invited bids for audit fled both sides of the disputed
of trading software algorithm used by jungle frontier because of the
the power exchanges for price discovery.
The audit would look at whether market
fighting, which has shattered a
tense two­month lull in hostili­

to Bangladesh agencies INTERNATIONAL

Pirates release
B Y A SIT R ANJAN M ISHRA Greek­owned ship
asit.m@livemint.com
················································
Mogadishu: Somali pirates have freed a
Greek­owned, Cyprus­flagged ship they
DHAKA seized in January after receiving a ran­
I ndia will provide buyer’s credit up to $100 million
(`443 crore) to Bangladesh government agencies for
project exports from India.
This is expected to enable Indian companies to be com-
petitive against peers from other countries such as China
som, pirates and a piracy monitoring
group said.
The pirates said they had released
MV Eagle, a 52,163 deadweight tonne
merchant vessel and its crew of 24 Filipi­
1 June following an agreement with the
unit of Pfizer Inc.
Pfizer spokesman Christopher Loder,
who confirmed the agreement in an
email on Saturday, declined to disclose
its financial terms. Wyeth, a unit of Pfiz­
er, and Dr. Reddy’s reached a settlement
to sell the drug Effexor XR in the New
Jersey Federal Court, Press Trust of India
reported on April 22. Pfizer last year sold
$1.7 billion of Effexor, which was
Wyeth’s best­selling antidepressant
drug until 2008, before cheaper generic
rules and regulations are being adhered
to in the price discovery process. PTI
ties.
Clashes began in the border
district of Phanom Dong Rak on
Friday. On the Cambodian side,
n denotes a longer the National Committee for
version of this news Disaster Management told AFP
that 12,000 people had been
story is available at evacuated. Thailand has said no
www.livemint.com.
Please search online by
company name.
one was killed on Sunday.
Six Cambodian troops and four
Thai soldiers were killed in the
first two days of hostilities. AFP

in bidding for infrastructure projects in Bangladesh. nos that was seized in January about
An agreement to this effect was signed between the na- 500 miles south­west of Oman, while it
tions at Dhaka during a two-day visit of Indian commerce was en route to India from Jordan.
minister Anand Sharma. Pirates said they received a $6 million
The credits will be provided under the National Export (`26.5 crore) ransom for the ship’s
Insurance Account (NEIA) through Exim Bank, while the release.
risk will be covered by the Export Credit Guarantee Corp. “We have received our $6 million ....
of India Ltd (ECGC). “This will handle political risks in The ship has just started to sail away
such exports,” Sharma told reporters. from our zone with a warship,” a pirate
Such credit will be in addition to the line of credit of $1 who gave his name as Kalif told Reuters
billion announced during a visit of Bangladesh Prime by phone from the coastal town of El­
Minister Sheikh Hasina in January 2010 to India for pro- Dhanane. REUTERS
jects such as railway infrastructure, supply of locomotives
and passenger coaches and procurement of buses. MARKETS
Buyer’s credit provides a safe mode of financing to Indi-
an exporters and serves as an effective market entry tool.
Sebi to start toll­free
Under the scheme, Exim Bank finances and facilitates helpline for investors
project exports from India by extending credit to overseas New Delhi: Capital market regulator,
sovereign governments and state-owned entities for im- Securities and Exchange Board of India
port of goods and services from India on deferred credit (Sebi) will set up a toll­free helpline to
terms. respond to queries of investors and help
Indian exporters can obtain payment of eligible value them track the status of their com­
from Exim Bank against negotiation of shipping docu- plaints.
ments. Credit period would typically be five to eight years. The investors, according to a strategic
Such loans would be disbursed for large project exports, action plan approved by the Sebi board
especially in the infrastructure sector, such as roads, earlier, will be able to communicate in
bridges, railways, power line, sewerage plants, water treat- their own languages.
ment facilities and housing. The investor awareness and educa­
The scheme was announced earlier this month and Ban- tion plan also includes a web­based cen­
gladesh will be the first country to receive such loans. tralized investor grievances tracking sys­
Sharma, who met Hasina before leaving for Delhi on tem to help investors track their com­
Sunday, said India will actively consider the proposal by plaints. The proposals to establish a hel­
Hasina to open two railway links between the neighbours pline for investors and have a grievances
which were abandoned after the 1965 war. tracking system, among others, were
Both countries resumed rail service between Kolkata approved by Sebi in a board meeting
and Dhaka in 2008 after 43 years. A passenger train named held in February. PTI
Maitree Express runs twice a week between the two cities.
India is the second largest exporter to Bangladesh with NATION
a share of 12.61%, while China tops the list at 16.16%. In-
dia’s exports to Bangladesh stood at $2.3 billion in
Kerala CM to lead
2010-11, while imports were at $283 million. endosulfan protest
India’s latest announcement may also help Bangladesh Thiruvananthapuram: Pressing for a
to bridge the huge trade deficit that it has with India. Re- nationwide ban on endosulfan and India
lationship between both the countries is expected to get a advocating against the chemical’s use at
further boost with the visit of Indian Prime Minister Man- a Geneva convention, Kerala chief minis­
mohan Singh later this year. ter V.S. Achuthanandan will lead a day­
long sit­in in Thiruvananthapuram on
Monday.
CORPORATE
Lemon Tree in pact The protest, to be staged at the Mar­
Vedanta deal: UK with Warburg
tyrs’ Column in the city from 10am to
5pm, will demand that India advocate a
govt backs Cairn New Delhi: Hospitality firm Lemon Tree global ban on endosulfan at the interna­
New Delhi: The UK has opposed the Hotels has tied up with the US­based tional convention on pollutants begin­
Indian government’s move to put condi­ investment firm Warburg Pincus Llc to ning in Geneva on Monday.
tions for clearing mining firm Vedanta enter into the the real estate sector. Rights activists, elected representa­
Resources Plc’s acquisition of Cairn The Indian company is planning to tives, cultural leaders, politicians and vic­
India Ltd, the Indian arm of the UK­ invest over `1,400 crore to launch tims will participate in the protest.
based Cairn Energy Plc, saying such a housing projects in India. Lemon Endosulfan has been banned in Kerala
decision will kill the $9.6 billion (around Tree has formed a 51:49 joint ven­ in view of the ill­effects of its use in
`42,530 crore) deal. ture—Oceanus Real Estate Pvt. parts of the state, including nearly 400
British high commissioner to India Ltd—with Warburg Pincus for the hous­ human deaths and chronic health prob­
Richard Stagg has written to the Prime ing projects. lems and stunting growth of hundreds
Minister’s Office (PMO) on 31 March, “The joint venture with Warburg Pin­ of people, many of them children.
saying an approval subject to state­ cus will develop at least three to four The state has been pressing for a
owned Oil and Natural Gas Corp. (ONGC) affordable housing projects in Gurgaon,” countrywide ban on the pesticide. PTI
being allowed to recover `14,000 crore Lemon Tree Hotels chairman and
royalty—payable on behalf of Cairn
India —will render the transaction
managing director Patu Keswani said.
PTI n
PMO denies Kayani
unviable, officials aware of the develop­ contact reports
ment said. ECONOMY New Delhi: The Prime Minister’s Office
“...a decision to approve the transac­
tion on the basis of such a pre­condition
FDI in services dips (PMO) on Sunday termed as “false” a
media report that Manmohan Singh had
would fundamentally change the com­ 22% to $3.27 bn contacted Pakistan army chief Gen Ash­
mercial basis upon which the transac­ New Delhi: Foreign direct investment faq Parvez Kayani before the Mohali
tion had been agreed as well as unfairly (FDI) in the country’s services sector meeting between Prime Ministers of the
impact minority shareholders in Cairn declined by about 22% to $3.27 billion two countries.
India,” Stagg wrote. “It would, therefore, (`14,960 crore) during April 2010­Feb­ “We have seen media reports quoting
render the proposed transaction ruary 2011, according to the industry a British newspaper saying that Prime
unviable.” PTI ministry data. PTI Minister Manmohan Singh contacted
12 MONDAY, APRIL 25, 2011, DELHI
WORKPLACE
www.livemint.com
Learn to play to your strengths
Don’t sugar­coat the truth, assess your weaknesses. Work on mastering them
if you can, delegate if you can. If everything else fails, consider a career switch
B Y J ODI G LICKMAN
······································
N ot that it’s news to me, but it has come to my
attention twice in the past two weeks that I’m
a terrible speller. A reader comment pointed out
that I used the word “conscious” when I meant to
say “conscience”. He added a “sigh” and a “real-
ly?”, as if to say “shouldn’t you know better?”—and
of course I should. Only the week before I had re-
ceived an email from another perturbed fan about
a misspelling on my own website’s home page.
Again, not my finest hour.
There are few people who welcomed the inven-
tion of automatic spellcheck with more glee than I.
I work very hard to check and recheck my spelling.
But the fact remains, no matter how hard I try, how
aware I am of my shortcoming in this area, I am a
terrible speller.
Here’s what else I’m not good at: merger math,
focusing on details, following through on things
that don’t excite or interest me, paying bills on time
and negotiating. So I quit banking and started my
own communication-training firm (because I’m a
great talker and I never wanted to look at an accre-
tion/dilution analysis again). I hired a virtual assis-
tant to manage the details of my calendar, travel
and administrative life. And I’ve outsourced to my
husband all bills, legal matters, licensing issues,
negotiating contracts and more (he’s a keeper).
When we’re asked the question in the interview
“What are your weaknesses?”, we prepare an an-
swer to show that we’re slightly flawed, yet still
99% fabulous. The question is a mockery of a trav-
esty of a sham. But in real life, it’s a hugely impor-
tant one to ask of yourself and to answer truthful-
ly—what aren’t you good at?
If you’re not good at doing what you make your
living doing, then you probably need to consider a
career change. It is horribly stressful to do some-
thing you know you’re not good at. Investment
banking left me with a pit in my stomach every
day. I knew I had untapped potential, but I always
felt as if I was floundering. That sense of inner
dread is one of the worst ways to spend your days.
If you’re good at some aspects of your job and
CUBICLE SMARTS
EFFECTIVE MANAGERS ADMIT MISTAKES
When is the last time you said words like these to the
people who work for you?
“I don’t know.” “I was wrong.” “I’m sorry.” “Would
you help me?” “What do you think?”
“What would you do?” “Could you explain this
to me? I’m not sure I get it.”
No one, boss or not, likes to admit error or
ignorance. But an inability to recognize
and admit openly when you lack
knowledge or make a mistake
will make you less effective as a
manager in two ways. First, it
will keep you from learning. As
you advance, you’ll soon rise
beyond the level where you can be expert
in the work of all those you manage. Sooner
or later—probably sooner—you must learn
to manage those who know more than Owning up: It’s a matter
you and know they know more. of building trust.
Be honest: Don’t
be afraid to
admit your
weaknesses.
not at others, then you need to recognize those
weaknesses before others do and then figure out a
strategy to compensate. You have three choices on
how to handle your weaknesses:
Take it on the chin: Concede that you must master
your areas of weakness to fully do your job well—
you’re going to have to (suck it up and) learn ac-
counting; study the art of the successful sales pitch
or train yourself to speak up in meetings if that’s
how to get promoted in your organization. Find
mentors, work harder or stay later. Ask for stretch
assignments or take a class. Take charge of your
learning to get to where you need to be to succeed.
Don’t lie to yourself or sugar-coat the truth; this
isn’t an interview, it’s your livelihood. You should
be great at what you do.
Outsource or delegate (lucky you!): If you don’t have to
personally master the things you’re not good at,
then do as Marcus Buckingham suggests and play
to your strengths. That’s one of the great benefits
of being an entrepreneur—I decide what I do per-
sonally and what I hire others to do for me. If you
know you can succeed without learning how to
sell, write a business plan or stage a press event,
then by all means, run with it. Delegate what you
can and focus your time and energies on the tasks
and projects that thrill and excite you, and that you
can kick ass in.
Find a new job: If, however, the idea of mastering
the skills you need to succeed in your current job
nauseates you, then perhaps you’re in the wrong
business. If you can’t envision getting to where
you want to be by relying on your natural talents
or leveraging your ability to learn, then it’s time
to consider an exit strategy. Life is too short to
just get by. Think about what you do well and
what industries or roles you might excel in. Then
start to plant the seeds with friends and col-
leagues of plotting your next move towards
greener pastures. At the end of the day, self-
awareness is our best friend. If we listen to our
gut, trust our instincts, and do the hard work, we
can all realize our full potential. REUTERS
Write to us at businessoflife@livemint.com
The second reason to acknowledge error or ignorance is
the issue of trust. The foundation of your ability to influ­
ence others is their trust in you as a manager, their
belief that you will do the right thing. Pretending
you know more than you do is a good way to keep
people from trusting you and your judgement.
People know when you don’t know something;
they know when you’re wrong or made a
mistake or need help. They’re reas­
sured when you know it too and are
willing to say so.
However, too much expres­
sion of weakness, error and
uncertainty will also diminish
people’s trust in you. In every sit­
uation, you must find that line and remain
on the positive side. Straying too far
from it, one way or the other, will
make you less effective. REUTERS
TONGUE­IN­CHEEK
HARISH BHAT
RAISE THE BAR
Salary hike time is here and can
prove fruitful if you know how
to make the right noises
W ithin the next few days and weeks, many of us will
receive our annual salary raises, in most cases af-
ter we have completed the inevitable ritual of per-
formance appraisals and ratings.
There are only two ways of dealing with anxiety that grips
you during this time—you can either wait for your raise to be
announced, and accept it as a fait accompli (i.e., you can
lump it) or you can do something about maximizing your
raise. The latter strategy is probably the best way ahead.
Have a discussion with your boss about the minimum pay
increase you are expecting; if you have not done this already,
reach into that office right now. And if that is not an idea you
are keen to explore, here are five other proactive approaches
you can use...entirely at your own risk.
Harish Bhat is chief operating officer—watches, Titan Indus-
tries Ltd. He also has many interesting ideas about how best
you can react after you have received your pay increase.
Watch this space.
Write to us at businessoflife@livemint.com
BRINJAL IN
2010
R20/kg
Go ahead, recommend
salary increases for senior
management
When the senior management of your com­
pany gets a large salary increase, chances are
they will be generous towards you as well.
You can trigger this virtuous cycle in various
ways. A simple method is to write a letter to
your company’s chairman. Here is a draft, just
make sure you also send copies to the CEO,
COO and CFO.
Dear Chairman,
The CEO, COO, CFO and senior vice­presi­
dents of our company work incredibly hard,
and deserve nothing less than a 40% salary
raise this year. They work so hard in the office
that they often fall asleep due to sheer
exhaustion. They work equally hard for long
hours on the golf courses, where they have
been heard discussing important business
strategies. They work hard by flying abroad
across time zones so frequently, we pity their
out­of­sync body clocks and muddled brains.
Our company is fortunate to have such dedi­
cated leadership. Why don’t you also consider
giving them a swank new luxury car each this
year? I would be grateful, Sir, for your positive
consideration.
I remain, a most loyal employee
Harish
BRINJAL IN
2011
R40/kg
Raise the inflation flag
Many companies use inflation as a reference
point while planning (or should we say pan­
ning) salary increases, so here’s your opportu­
nity to put economics to profitable use. In a
few meetings where senior management is
present, you must stand up and say something
very intelligent, such as: “The governor of the
Reserve Bank thinks inflation is the biggest
threat to our economy. It is also the biggest
threat to my home. There’s inflation of food
prices, inflation of my spouse’s ego, and also
the unfortunate inflation of my waist.” You
should point out that inflation is currently run­
ning at twice last year’s levels. Signalling is
important, and this is a clear signal of what
this year’s salary increase should be compared
to last year’s lowly raise.
If you like making dramatic statements,
leave two separate mounds of brinjal on your
boss’ table, marked “2010—`20” and “2011—
`40”, respectively. Make sure the brinjals are
fresh, so that he can quietly take them home
after digesting the message. After all why
should you lose an opportunity to make the
boss happy.
What does the
price of brinjals
have to do with a
Invite the HR head
out for drinks
Chief human resources (HR) officers play a key
role in deciding pay increases. Therefore, you
should make your point very effectively to him
(or to one of his underlings if you are at some
distant location). Invite him out for drinks. For­
tunately, most heads of HR love talking, and
are guzzlers par excellence.
After plying the person with a few, talk to
him about some people in other companies,
how much more they earn, and how much
more they party. Use a few names and figures
with flourish, it is unlikely these will ever get
verified. Tell him how the employee happiness
indices of your company are bound to zoom up
if a good pay increase is given out, since HR
heads are perennially concerned about the
health of these coveted indices. Tell him the
matter rests entirely in his hands. Towards the
end, confess that you don’t have money to pay
for the drinks, since at current salary levels you
are perennially broke. That will make a memo­
rable impact on his mind and wallet.
salary hike?
Highlight your extreme
personal circumstances
Your boss has a key role to play in determining
your specific salary increase. Hence, it is your
moral duty towards yourself to highlight to
him the compelling series of miserable circum­
stances that have become your lot in life.
Ask for 5 minutes, but make sure you keep
speaking until he is willing to get rid of you at
any cost. Tell him about how you were nearly
evicted from your apartment, for not paying up
on time. Tell him about how your great grand­
aunt’s hospitalization has sucked up all your
meagre savings. Tell him how expensive it is
these days to keep a thing going with a girl­
friend or spouse, and how the future of your
relationship now depends entirely on the pay
hike you will get. Make your boss feel totally
responsible for your life. If he is human (cau­
tion: not all bosses are), this will play on his
mind when he finally ticks off what your pay
hike should be.
Everything! I am paying
double for them and
everything else now. Don’t
you think our salary hike
should take this into
account?
Ensure all salary increase
meetings are scheduled
after lunch
Did you read the recent news item that judges
give many more generous judgements after a
good lunch ? Now, this is a very useful insight.
Speak to the CEO’s secretary, or the HR depart­
ment guy who schedules these meetings, and
ensure that every meeting called by them to
discuss salary increases is scheduled immedi­
ately after lunch. Well­fed senior managers,
beaming after a hearty meal of roast chicken
and potatoes, are unlikely to adopt a miserly
view of salary increases, unless they are real
Scrooges, the whole lot of them. In which case,
you are totally helpless, and may really have to
lump it when the new payslip comes your way.
MONDAY, APRIL 25, 2011, DELHI 13
TOMORROW IN BUSINESS
OF LIFE BODY & MIND
IRON AWAY THOSE WRINKLES
Botox and fillers are fast becoming a way
of life in the high­flying corporate world
from Mohali to Mumbai
Why you must look
the mirror in the eye
A new book explains why the ability to be resilient
matters in business—and how it can be learnt
T here’s no point managing a team or an entire organization
if you fail at the most basic level. A new book of essays, On
Managing Yourself, teaches you how to look critically at the
mirror. Edited excerpts from a chapter on resilience by journal-
ist Diane L. Coutu:
The Buzz About Resilience
Resilience is a hot topic in business these days. Not long ago, I
was talking to a senior partner at a respected consulting firm
about how to land the very best MBAs—the name of the game
in that particular industry. The partner, Daniel Savageau (not
his real name), ticked off a long list of qualities his firm sought
in its hires: intelligence, ambition, integrity, analytic ability,
and so on. “What about resilience?” I asked. “Well, that’s very
popular right now,” he said. “It’s the new buzzword. Candi-
dates even tell us they’re resilient; they volunteer the informa-
tion. But frankly, they’re just too young to know that about
themselves. Resilience is something you realize you have after
that fact.” But if you could, would you test for it?” I asked.
“Does it matter in business?”
Savageau paused. He’s a man in his late forties and a success
personally and professionally. Yet it hadn’t been a smooth ride to
the top. He’d started his life as a poor French Canadian in Woon-
socket, Rhode Island, and had lost his father at six. He lucked into
a football scholarship but was kicked out of Boston University
twice for drinking. He turned his life around in his twenties, mar-
ried, divorced, remarried and raised five children. Along the way,
he made and lost two fortunes before helping to found the con-
sulting firm he now runs. “Yes, it does matter,” he said at last. “In
fact, it probably matters more than any of the usual things we look
for.” In the course of reporting this article, I heard the same asser-
tion time and again. As Dean Becker, the president and CEO of
Adaptiv Learning Systems, a four-year-old company in King of
Prussia, Pennsylvania, that de-
velops and delivers programs
about resilience training, puts
it: “More than education, more
than experience, more than
training, a person’s level of re-
silience will determine who
succeeds and who fails. That’s
true in the cancer ward, it’s
true in the Olympics, and it’s
true in the boardroom.”
Academic research into resil-
ience started about 40 years ago
with pioneering studies by Nor-
mal Garmezy, now a professor
emeritus at the University of
Minnesota in Minneapolis. After
studying why many children of
schizophrenic parents did not
suffer from psychological illnesses as a On Managing Yourself:
result of growing up with them, he Harvard Business Review,
concluded that a certain quality of re- 185 pages, `595.
silience played a greater role in mental
health than anyone previously suspected.
Today, theories abound about what makes resilience. Looking at
the Holocaust victims, Maurice Vanderpol, a former president of
the Boston Psychoanalytic Society and Institute, found that many of
the healthy survivors of concentration camps had what he calls a
“plastic shield”. The shield was comprised of several factors, includ-
ing a sense of humour. Often the humour was black, but nonethe-
less it provides a critical sense of perspective. Other core character-
istics that helped included the ability to form attachments to others
and the possession of an inner psychological space that protected
the survivors from the intrusions of abusive others. Research about
other groups uncovered different qualities associated with resil-
ience. The Search Institute, a Minneapolis-based non-profit organi-
zation that focuses on resilience and youth, found that the more re-
silient kids have an uncanny ability to get adults to help them out.
Still other research showed that resilient inner-city youth often have
talents such as athletic abilities that attract others to them.
Many of these earlier theories about resilience stressed the
role of genetics. Some people are just born resilient, so the argu-
ments went. There’s some truth to that, of course, but an in-
creasing body of empirical evidence shows that resilience—
whether in children, survivors of concentration camps, or busi-
nesses back from the brink—can be learned. For example,
George Vaillant, the director of the Study of Adult Development
at Harvard Medical School in Boston, observes that within vari-
ous groups studied during a 60-year period, some people be-
came markedly more resilient over their lifetimes. Other psy-
chologists claim that unresilient people more easily develop re-
silience skills than those with head starts. But I observed that al-
most all the theories overlap in three ways. Resilient people, they
posit, possess three characteristics: a staunch acceptance of real-
ity; a deep belief, often buttressed by strongly held values, that
life is meaningful; and an uncanny ability to improvise. You can
bounce back from hardship with just one or two of these quali-
ties, but you will only be truly resilient with all three. These three
characteristics hold true for resilient organizations as well.
Write to us at businessoflife@livemint.com

HELPING HAND
Your domestic staff can get a home loan
Paperwork mainly includes identity and address
proofs, details of dependants and income sources.
A PAN is also required. The loan amount is up to
`7 lakh and the interest 12­14% per annum
B Y H ARSHADA K ARNIK
harshada.k@livemint.com
·························
L ast Wednesday, we told
you how to get your
household staff on a ba-
sic financial track with the
help of schemes launched by
the government and financial
industry.
From having a no-frills bank
savings account to getting into
the habit of saving through a
recurring deposit, your basic
guidance can get them to in-
vest in equities through micro
systematic investment plans.
And by doing so, you can dem-
onstrate to them that they can
not just save and watch money
accumulate, but can also see
their money grow and multi-
ply.
But if you really want to help
them out for the long term, it’s
worth taking a further step.
Once the basic saving habit
has been cultivated and invest-
ments are on track, you can
begin counselling them to fix
goals and targets and invest
accordingly.
One of the primary goals
that your household staff
would have is having a house
of their own. Says Anand Sa-
hasranaman from the Institute
for Financial Management and
Research (IFMR) Trust, who
has been working in the area of
lower-income group housing
and infrastructure financing,
“Owning a home is a dream for
everyone alike. Besides, a
home with clear titles gives a
higher sense of security.”IFMR
Trust works with the mission
of ensuring access to financial
services to every individual
and enterprise.
Making a decision
The decision to buy a house,
even if there are enough funds,
may not come easy to your
MONEY GURU
R.K. Arora
Chairman and managing
director, Supertech Ltd
Disclaimer: The articles and data in Mint Money aim to help readers with their money­related decisions. Each person will have a unique solution that would fit his personal situation, and we advise you to work with a certified financial planner before you buy a financial product.
www.livemint.com
household staff. There are sev-
eral factors they need to con-
sider before taking any step.
Relocation: Typically, to
buy a house that is within their
budget, they may have to relo-
cate from their place of exist-
ing residence. And that may
not be practical.
For one, it may be too long
to commute everyday for work
and the commuting cost may
be impractical too, not to men-
tion the time spent on it. Two,
the income on the basis of
which they are thinking of buy-
ing a house may not be guar-
anteed in the area where they
need to relocate for the new
house.
In short, the decision to re-
locate should be based on two
factors—financial and infra-
structure-related issues. The
financial considerations in-
clude the level of income and
its stability. Says Sahasrana-
man, “If the driver is earning
reasonably well, say about
`10,000 per month in a city
like Mumbai or the wife has
been doing small household
chores for families in the same
locality for a fairly long period
of time, she is likely to be cer-
tain of her jobs. Then they can
financially sustain the loan.”
But the opportunity cost that
the decision will entail has to
be considered, too. Sahasrana-
man adds, “Moving away from
the main city should not come
at the cost of their livelihood.
Therefore, it is important to
ensure that commuting to
work places will not be too dif-
ficult and time consuming.”
They may even need to
check whether the area they
are relocating to has basic fa-
cilities, such as a school in the
neighbourhood.
Getting a loan
Once the decision is made, a
key question would be getting
a loan. With the nature and
amount of salary your house-
hold staff earns, getting a
home loan may seem impossi-
ble. But that is not the case any
more.
Where can they get a loan
from? There are several com-
panies that will lend a helping
hand to those in the low-in-
come group. For instance, Mi-
cro Housing Finance Corp. Ltd
(MHFC), a Mumbai-based
lender, Aadhar Housing Fi-
nance Pvt. Ltd, GRUH Finance
Ltd and SEWA Bank. While
Aadhar disburses such loans
only in select locations in Uttar
Pradesh, Madhya Pradesh and
Bihar, GRUH has a pan-India
presence across several cities.
Yes Bank Ltd also plans to be-
Book flats in initial stages of construction
There is oversupply in some
key markets, including Mum-
bai, Noida and Gurgaon. Will
there be a price correction in
these cities because of the glut?
I agree that there is an over-
supply in key markets. But this
will not put any significant
pressure on property prices
since land is scarce in these re-
gions. Authorities have already
allotted the available land to
developers for residential and
commercial projects. Scarcity
of land will make under-con-
struction projects important
from the aspect of fulfilling
housing demand.
In the next six months, there
will not be any price correc-
tion. But as interest rates will
rise, we may see some kind of
pressure on developers after
6-8 months to bring down
rates slightly.
So what should buyers do?
Prices in key markets, where
there seems to be an oversup-
ply, are affordable at present.
Most launches are happening
gin disbursing similar loans on
a pilot basis in Mumbai next
month. It eventually plans to
extend the facility to other
metros as well.
The best part in these com-
panies is that they have a list of
projects they are financing and
your household staff can zero
in on the project and house
that suits the family. While
MHFC disburses loans only for
projects pre-recognised by it,
others have no such restric-
tions and can sanction a loan
even if they do not already
have a tie-up with the project
your household staff is inter-
ested in, provided the titles are
clear.
Paperwork required: They
will be required to fill up an
application form, which will
now. My advice to homebuyers
would be to buy when the pro-
jects are in their initial stages
of construction. Once the con-
struction on these projects
gains momentum and you see
the structure coming up, pric-
es are bound to go up.
In the recent past, it was seen
that developers were able to
sell all units within a few days
of project announcement. One
developer said it sold the entire
first phase of his residential
project in two days and has al-
ready got requests for the next
phase. What does this trend
mean for buyers? Is the de-
mand real or there is some
kind of speculation involved?
Developers pre-plan their
project construction as well as
sale plans. The construction of
a project is largely dependant
on the sales revenue. It is a
marketing gimmick. The reality
is that developers keep some of
the stock with themselves. After
initial sales, prices go up. This is
the reason why I said one
JAYACHANDRAN/MINT
ask them for basic details such
as identity and address proofs,
family status (number of fami-
ly members employed and the
number of dependants on the
total family income), income
sources and the total family in-
come. A permanent account
number (PAN) card is also
necessary. If your household
staff doesn’t have one, lenders
even help you apply for one.
These companies will then
verify the sources and authen-
ticity of the income by calling
up the employers. You as the
employer do not have to give
any guarantee as such.
Says Rajnish Dhall, chief op-
erating officer and managing
director, MHFC, “For instance,
if a person says that he is a
driver in Mumbai and earns
should be an early buyer. Prices
move up once the project
comes in the market. It has hap-
pened with our projects too.
A buyer should understand
the saleability potential of a
project. If it is already in de-
mand before its launch, it is
likely that there is huge appre-
ciation potential.
Part selling of commercial
space is now allowed by most
authorities in India. But with
part selling come the problems
of mismanagement and dis-
agreement between retailers
and occupiers. How will this
provision impact commercial
real estate in the country?
Part selling is favourable for
developers as it generates cash
for the construction of the
project. Small businesses and
entrepreneurs drive the de-
mand and businesses for the
developers in the commercial
segment. What developers can
do is to keep the management
and control of services in their
hands or outsource it to an in-
MONDAY, APRIL 25, 2011, DELHI
about `7,000 a month, then it
is not difficult to believe be-
cause we know what the aver-
age salary of a driver in Mum-
bai is that. So all we have to do
is check whether he really is
employed at the place he
claims he is.”
Loan details: The borrower
has to put in at least a 20%
margin. However, MHFC en-
sures that the borrower does
not take the margin amount on
loan. This amount can be ar-
ranged by savings, jewellery,
or an ancestral property back
home they have. Says Dhall,
“In fact, we have noticed that
most of our borrowers put in a
margin of almost 35% as they
themselves also want to be
debt-free as soon as possible.”
The loan amount would be
up to `7 lakh in most compa-
nies.
The loan comes at an inter-
est of 12-14% per annum,
which is slightly higher than
market rates; the processing
fee is 1%. The duration of the
loan is 15 years maximum. The
best part is there is no prepay-
ment penalty.
If you have had a long asso-
ciation with your staff, you can
consider helping them not just
financially, but even other-
wise. Confirming his salary de-
tails to the loan company
would be one way to do that.
Says Dhall, “Taking on a loan
is a big responsibility. You can
help them by counselling and
conveying to them the impor-
tance of repaying it on time,
lest they fall in a debt trap. You
can also help buy them an in-
surance (to cover the loan lia-
bility) which we insist on in
case there is no co-applicant.”
A house that you can call
your own is a big security for
almost everyone. If people in
the low-income group manage
one, it could be a breather for
them given that rents keep in-
creasing every year. Moreover,
it will be the biggest financial
asset they are likely to acquire
and one that may become their
biggest financial back-up.
dependent agency.
The government has raised
the housing loan limit under
the existing interest subvention
scheme to `15 lakh from the
existing `10 lakh. Homebuyers
in these categories will contin-
ue to get 1% interest subsidy for
bank loans up to `15 lakh pro-
vided the cost of house does not
exceed `25 lakh. How will the
increase in the limit impact the
real estate sector?
Buyers in the non-metro re-
gions will benefit as the new
price band matches most of
the housing coming up in tier
II and III cities. However, the
challenge comes from rising
interest rates, high property
prices and rising cost of raw
material. For instance, since
January this year, cement pric-
es have almost doubled. Rise
in prices of cement will hit the
developers, as they will direct-
ly pass on the extra cost of con-
struction to the homebuyers.
Devesh Chandra Srivastava
devesh@livemint.com
 mint money MARKETS & FINANCE 15 MONDAY, APRIL 25, 2011, DELHI ° WWW.LIVEMINT.COM

Markets are in rally mode DE­JARGONED

AHEAD OF mained positive and showed improvement. China though sur-
prised with a hike in bank reserve requirement, but it did not
THE TICKER
dampen sentiments as China is expected to go slow on its mone-
tary tightening plans going forward. European data was also
broadly positive and spurred economic optimism.
VIPUL VERMA The Indian markets are likely to move up after consolidating
To read all of Vipul Verma’s earlier columns, go to for nearly three weeks as sentiments have turned positive follow-
www.livemint.com/aheadoftheticker ing a forecast of normal monsoon. However, rise in food inflation
would keep pressure on markets as it would keep the pressure on
Capital Gain Account Scheme
WHAT IS IT?
Capital Gain Account Scheme (CGS) is basically a vehicle through
which certain investments to save long-term capital gains tax have to
be routed in case the investments haven’t been made before the due
date of filing tax returns. This also acts as a vehicle through which tax
payment on long-term capital gains can be deferred.
The CGS account can be opened with a designated nationalized

M uch on expected lines, benchmark Nifty on the National interest rates, which are likely to be hiked again in the forthcom- bank. It applies to all assessees eligible for exemption under sections
Stock Exchange traded in a band with a positive bias. I ing meeting of the Reserve Bank of India. India’s infrastructure 54, 54B, 54D, 54F or 54G of the Income-tax Act, 1961.
had mentioned in my column that the index would output data will also be watched closely on 29 April. This week
trade between 5,712 points on the lower side and 5,929 on the the derivative contracts for April are due to expire on 28 April, HOW IT WORKS
higher side. The Nifty touched a low of 5,694, but broadly traded which will add volatility on bourses. Say, a long-term capital gain comes your way but you aren’t able to
around 5,710 for some time before bouncing off these levels. In- In the US, the earnings season is in full bloom and thus will be invest it within the stipulated period to avoid paying long-term capital
terestingly, the Nifty touched a high of 5,912.81, which was well watched as Microsoft Corp., PepsiCo Inc. and Coca-Cola, would gains tax. In such a case, if you park the money in this account before
within the band mentioned in my last week’s column. post earnings. These companies being not much loved as big in- the due date of filing your return, the claim for exemption or payment
The week was dominated by quarterly earnings as markets vestment bets could change the game if they can show they justi- of capital gains tax may be postponed to a future date. However, at
danced to their tune. First it was Infosys Technologies Ltd’s fy higher valuations. Apart from earnings, investors will also focus the end of the relevant time period, if you fail to invest the money in
earnings, which disappointed the markets with earnings and rev- on the first of the Federal Reserve’s press conferences. A press the relevant asset mentioned in the section under which this transac-
enue forecast and the last was Reliance Industries Ltd, whose briefing on Wednesday is scheduled to start after the rate-setting tion falls, the money will be subjected to long-term capital gains tax.
earnings also lagged market expectations. However, markets saw Federal Open Market Committee wraps up its two-day meeting. Let’s say, you sell a property in April
many ups and downs, which was largely due to firm global trend. Fed chairman Ben Bernanke intends to give four press briefings a 2011. The capital gain made should be
The firm global trend, which was by and large due to good cor- year. This would be the most watched event of the week. used to either buy a house by April
porate earnings saw some potentially serious developments. The Technically, Indian markets are now in rally mode. Technically, 2013 or construct a house by
most important one was the lowering of credit outlook of the US the target for the Nifty this week could be slightly above 6,100, 2014. Until then, you can deposit
to negative by Standard and Poor’s (S&P), citing a risk that though there could be a good resistance around 6056, which is the money in a CGS account be-
policymakers may not reach agreement on a plan to slash the technically important. The first resistance on its way up is at fore the date of filing returns,
huge federal budget deficit. While the credit rating agency main- 5,912, which is the upper end of the trading band and would be which in this case would be 31
tained the country’s top AAA credit rating, it said authorities have watched very carefully. If broken, a rally could begin on bourses. July 2012, to save tax. If you do
not made clear how they will tackle long-term fiscal pressures. The next resistance would be at 6,010, which is also important not acquire the new property till
S&P also said the move signals at least a one-in-three chance and would see some profit booking. If the resistance is breached, April 2014, the long-term capital
that it could cut its long-term rating on the US within two years. then the next resistance would come at 6,056 followed by a strong gains would be taxable in the fi-
Though this may apparently look resistance at 6,118. nancial year 2014-15.
like a matter not affecting the mar- On its way down, the first sup-
kets in short term, but going by the port for the Nifty is likely to TYPES OF ACCOUNT
history, four AAA-rated countries come at 5,810, followed by next There are two types of CGS accounts. Account A is like a savings ac-
that S&P has placed on negative support at 5,761. This would be a count from which withdrawals can be made from time to time. The
outlook between 1989 and this strong support. A close below interest is paid at the banks’ savings account rate. Account B is like a
March, three were downgraded this level would make the market term deposit with two options—cumulative (interest reinvested) or
within 15 months on average. This nervous and the next support non-cumulative (quarterly withdrawal). The interest rate is generally
statistic looks worrisome especially would be at 5,691, which is an fixed by the bank and is either on a par with other term deposits or
in view of the fact that the bur- important support. Any close be- slightly lower.
geoning fiscal deficit in the US low this would mean a bearish
could eventually turn out to be a trend in the short term. WHAT’S GOOD
crisis even bigger than the credit Among individual stocks, Axis You can transfer the account from one branch of a bank to another.
crisis of 2007-08. S&P’s warning is a Bank Ltd, Bank of India and Also, you can transfer your account from account A to B and vice-ver-
smoke signal of a brewing major Reliance Infrastructure Ltd look sa of the same bank if opened under the same provision. After the
crisis. But I do not want to say any- good on the charts. Axis Bank at conversion of the account, interest would start accruing from the date
thing more than this at this point of its last close of `1,447.55 has a of opening the new account.
time as there is no clarity on this target of `1,478 and a stop-loss
subject and I am confident US of `1,393. Bank of India at WHAT’S NOT
policymakers are capable enough `478.80 has a target of `493 and The interest income on these accounts is taxable. Also, for two capital
to manage the crisis. a stop-loss of `457, while Reli- gains made by selling two asset classes, which qualify under different
Moving on, the global economic ance Infra at its close of `696 has sections mentioned above, you will have to open two different ac-
scenario remained positive, with a target of `717 and a stop-loss counts to save tax on both. Also, capital gains made in one asset class
economic indicators pointing to- of `672. cannot be invested in another asset class for claiming tax benefit.
wards further improvement. No- Vipul Verma is chief executive You can withdraw up to `25,000 in cash, any amount above this
ticeably, last week, the positive officer, Moneyvistas.com. Com- limit will be issued in the form of a crossed demand draft. The
housing data in the US improved ments, questions and reactions to amount has to be utilized within 60 days of withdrawal. These depos-
sentiments and aided buying. Oth- this column are welcome at its cannot be used as guarantee to avail other loans.
er economic indicators also re- ticker@livemint.com —Saurabh Kumar
SHYAMAL BANERJEE/MINT

ASK MINT MONEY

Srikanth Meenakshi
Founder and director, FundsIndia.com

It’s easier to manage portfolio if TALKMARKETS

THE LONG AND SHORT OF INDIAN EQUITIES

all holdings are on single platform

I have mutual fund (MF) invest-
ments across several schemes
and eight fund houses. I want to
transfer my MF investments to
one portal. How should I go
about it?
—Sachin
Consolidation of holdings in
a single platform is a good
move, especially for a portfolio
with several holdings. It makes
the job of tracking and manag-
ing the portfolio easier. The
transfer process depends on
two factors—the current chan-
nel of investment and whether
or not there is an active system-
atic investment plan (SIP) in
the folios.
If your current channel of in-
vestment is online—that is if
you have invested in the funds
using the MF companies’ online
platforms—then you would first
need to convert the folios to
“offline” folios. The reason is
that a folio can be held online
through only one service pro-
vider at a time. You can move it
to the “offline” mode by making
a request to the MF company.
After that, you can transfer it to
Mutual funds
the portal of your choice by us-
ing their services.
The second factor is whether
you have an active SIP running
in the folios that you are trans-
ferring. Different MF compa-
nies treat transfer of such folios
differently. Some disallow
transfer of such a folio, while
others discontinue the SIP after
the transfer, and still others
continue the SIP after the trans-
fer. To avoid confusion, the
prudent course would be to
stop the SIP, transfer the folio
and re-start the SIP with your
new service provider.
I started two monthly SIPs in
October. The funds are HDFC
Top 200 (`2,500) and Reliance
Regular Savings Equity (`2,500).
I will continue this investment
for 15-20 years. I want to add an-
other `10,000 to my SIPs. I plan
to add `2,500 each in HDFC Top
200 and Reliance Regular Sav-
ings, and start two new SIPs in
DSP BlackRock Top 100 and
IDFC Premier Equity. Are the
choice of my funds right? Sug-
gest some other options. Can I
consider DSP BlackRock Equity
and HDFC Mid-cap Opportuni-
ties?
—Dipali
Your current selection of funds
broadly invest across market
capitalizations. The funds have
a good track record and can be
reasonably trusted to do well in
the future. The funds you plan
to add are slightly more special-
ized than these two funds. DSP
BlackRock Top 100 is a pure
large-cap fund and invests in
100 largest companies by mar-
ket capitalization.
IDFC Premier Equity and
HDFC Mid-cap Opportunities
are on the other end of the
spectrum and invest in smaller
companies. Either one of these, LIVE COMMENTARY MARKET DECONSTRUCTING
MOVEMENT UPDATES NEWS ANALYSIS ANALYST REPORTS
plus DSP BlackRock Top 100 (FROM 12 TO 1PM)
would add variety to your port-
folio. DSP BlackRock Equity is
another multi-cap fund similar
to the funds you already have in Lookout for us on www.livemint.com
your portfolio.
Queries and views at
mintmoney@livemint.com
16 MARKETS & FINANCE
MONDAY, APRIL 25, 2011, DELHI ° WWW.LIVEMINT.COM
mint money

The sorry state of

MARK TO MARKET RAVI ANANTHANARAYANAN
We welcome your comments at marktomarket@livemint.com state­owned firms
Nestle India overcomes cost hurdles in Maharashtra
T he audit report of the
Comptroller and Auditor 36 working PSUs
N estle India Ltd’s operating profit margin fell in the
March quarter compared with the year-ago period due
to a sharp increase in other expenditure and not
because of input costs.
Material cost to sales fell in the March quarter, repeating a
expensive when input costs are soaring, it may have stepped up
on advertisements to keep up sales momentum.
Nestle India’s profitability was lower y-o-y, but has risen by
nearly 140 basis points over the December quarter. Thus,
growing competition in the instant noodles segment does not
General of India (CAG) for
2009-10 for government
companies in Maharashtra
has been recently released. It
paints a telling picture of the
earned an aggregate
profit of `741.56 cr
trend seen in the December quarter. As a result, its margins appear to have affected it yet. Apart from a better product mix, state of the public sector in in 2009­10, while
improved over the December quarter.
The consumer foods firm appears to have got the upper hand
Nestle India is expanding its capacity to meet growth targets.
That also gives it the benefit of economies of scale.
Maharashtra.
For starters, while the state
21 incurred a loss
over rising input costs through a mixture of selective price
hikes, improved product mix and economies of scale. A lower
The key concerns for the company were competition and
rising input costs. Though competition is still there, its impact
has 62 working public sector
undertakings (PSUs), it has as
of `2,101.56 cr
proportion of free volumes, used as a promotional tool, was appears to be negligible. Input costs appear to have become a many as 23 so-called non-
also partly responsible for the fall in the material cost to sales. lesser threat, and a good crop output in fiscal 2011 should see working PSUs. “As no purpose In an indication of how
Nestle India’s sales rose by 22%; domestic sales increased by prices remain stable, even if they do not decline. may be served by keeping critical land acquisition has
23%, while exports grew by just 10%. Operating profit margin Prices of milk, wheat flour and sugar are stable compared these PSUs in existence, become, the report says that
fell by 30 basis points year-on-year (y-o-y), chiefly due to a 24% with the calendar year 2010. These three contribute nearly half government needs to expedite 20 projects have not got off
increase in other expenditure. One basis point is to Nestle’s input costs. Skimmed milk and green coffee prices closing down of the non-work- the ground “due to
one-hundredth of a percentage point. have risen sharply compared with the March quarter. Similarly, ing PSUs,” the report said. non-acquisition of land”.
Advertising and promotion expenses are likely to be the main palm oil prices had also risen sharply in the March quarter. As for the working PSUs, the The report says that
reason behind the sharp jump in other expenditure. Since the If coffee prices stay high, exports will be hit, and domestic aggregate result of their work Maharashtra State Power Gen-
company has cut down promotional volumes, which become demand, too, could get affected due to hikes in product prices. was that while 36 PSUs earned eration Co. Ltd “had not taken
Global sourcing and forward buying may buy Nestle India some a profit of `741.56 crore in up any renovation and moder-
HEALTHY GROWTH time from the input cost inflation.
Packaging cost is another concern, as rising crude oil prices
2009-10, 21 incurred a loss of
`2,101.56 crore. Maharashtra
nization (R&M) programme of
the existing nine thermal units
Nestle India's March quarter results indicate that input cost inflation may cease will feed into higher plastic cost. While there may be some pain State Electricity Distribution due in the 10th Five-Year Plan
to be a big concern in 2011. still in store for Nestle India, unlike 2010, it does not appear to Co. Ltd topped the losers’ and compromised with
Year-on-year growth during March quarter be a key concern. What could be a key concern is if chart, with a loss of `1,351.45 technical requirements”.
competition steps up the heat in 2011, goaded by stable input crore. The report has the usual list
Sales 22.3% costs, and if it spreads to other categories as well. Most of the investments of errors of omission and
The company’s net profit grew by 27% y-o-y in the March have been in the power sector, commission, but perhaps the
quarter, partly due to lower tax. A tax holiday for its Pantnagar since power deficit in the state most interesting are the
Material cost 19.9%
factory in Uttarakhand will change to a 30% exemption from has been between 25% and comments on the quality of
100% so far from 1 April. 34% of the peak demand dur- accounts. As many as 49
Other expenditure 24% Its tax incidence will increase as a result. Once its new ing 2005-10. Is the state tack- accounts received qualified
projects come on stream, the debt it plans to raise will also ling this on a war footing? certificates from the statutory
Operating profit 21.8% result in higher interest costs, and depreciation will increase. Hardly; the report points out auditors.
Some near-term effect of these events will be visible on that against the required ca- In short, CAG’s report
Net profit 26.6% profits, but investors should keep their eyes on sales growth pacity addition of 5,210 mega- paints a sorry picture of the
and profitability. If it can maintain current levels of growth and watts (MW), the actual addi- state-owned companies in
0 5 10 15 20 25 30 keep profitability intact, then the other factors will not matter tion was a mere 625MW dur- Maharashtra.
Source: Company
much in the longer run. ing 2005-10. MANAS CHAKRAVARTY
GRAPHICS BY SANDEEP BHATNAGAR/MINT

JSPL’s steel segment THE BIG ARE 45

Net revenue as a percentage of nominal GDP

drives profit growth GETTING BIGGER 40

282 BSE-500 firms 24 Sensex firms

The chart shows that net revenues of the

24 firms that have been in the Sensex 35

S hares of Naveen Jindal-led

steel and power entity,
Jindal Steel and Power Ltd
(JSPL), have jumped 5% in the
last two trading sessions. Two
factors triggered this. One, it
announced a cash offer for
acquiring the entire equity of
Australian coal mining firm,
Rocklands Richfield Ltd,
through its subsidiary that
holds 14.2% interest at
present; two, robust results for
the March quarter.
The firm’s efforts to stretch
its horizons in two key
areas—integrated steel
manufacturing and power
generation—are paying off.
For the March quarter,
consolidated revenue grew
21.4% to `3,854.50 crore. The
steel segment was the major
Further, analysts reckon
that the firm’s fuel security
with captive coal mines gives
since 1997-98 have increased as a
percentage of GDP at current prices. 30
37.9%
Similarly, it also shows that net revenues 26.3%
it an edge over other power
producers that have taken a of the 282 companies that have been in 25
beating on bourses. The the BSE-500 Index since 1997-98 have
attempt to buy the Australian also gone up as a percentage of GDP at
20
coal mine is in this direction, current prices. In other words, these big
besides giving JSPL an entry companies now constitute a much larger
15
12.8%
into the coking coal market. portion of the economy than they used to
The quarter’s operating in the 90s. This could be taken as a trend
profit rose 14% y-o-y, while towards increasing concentration in 10 7.5%
that of the stand-alone entity, the industry.
which is reflective mainly of 5
the steel business, grew by GDP: gross domestic product; BSE: Bombay Stock Exchange
1997-98 1999-2000 2001-02 2003-04 2005-06 2007-08 2009-10
37%. Consolidated operating Source: Capitaline, Reserve Bank of India
profit margin, however,
dipped by about 300 basis
points mainly as material
costs rose. One basis point is
one-hundredth of a
percentage point.
But, the same improved by
Concor’s domestic business December quarter. One basis
point is one-hundredth of a
percentage point.

delivers muted performance

contributor, accounting for
72% of revenue compared
with 67% a year ago.
Buoyant auto sales fuelled
demand for steel. For the
March quarter, the volume of
steel pellets sold rose by a
huge 1,792% over the year-ago
period, with higher steel pric-
es also adding up to revenue.
However, sponge iron sales
fell significantly due to captive
consumption for producing
steel. On the whole, iron and
steel revenues were up 27.5%
year-on-year (y-o-y) to
`2,998 crore for the quarter.
JSPL’s power business,
which accounted for
one-fourth of the March quar-
ter consolidated revenue, also
scored well. Merchant power
tariffs recovered compared
with the preceding quarter, al-
though they were lower than a
year ago. This was reflected in
the power segment revenue,
which jumped three times
compared with the preceding
quarter. JSPL’s units operated
at near full capacity, with
three-fourths of the power be-
ing linked to merchant sales.
nearly 600 basis points from
the preceding quarter, mainly
on account of increased sales
of what some analysts term
the “hugely profitable pellets
business”. JSPL’s management
said steel prices would be
relatively stable in the next six
months, though a rise in raw
material costs such as that of
coking coal may lead to some
price increases.
Net profit rose 4% y-o-y on
a consolidated basis, while
that for the stand-alone
business, driven largely by
steel, rose 18% y-o-y.
The firm announced capital
expenditure plans of around
`13,000 crore during the
current fiscal, with a little
more than half the outlay on
the power segment. JSPL’s
integrated approach to growth
has ensured steady cash prof-
its through its growth phase.
Although there may not be
any equity dilution, the
management has hinted at
listing its power subsidiary,
which could see upsides for
the stock.
VATSALA KAMAT
“The sharp QoQ (quarter-
on-quarter) decline in margin
was because of the company’s
policy of giving annual rebates
and discounts to customers in
T he financial results of
Container Corp. of India
Ltd (Concor), a wing of the
TROUBLED WATERS
Shares of Container Corp. have lost 5% since the company announced its results.
the fourth quarter of every
year,” said post-results note
from Alchemy Share and Stock
Indian Railways that runs 105 Container Corp. of India BSE-200 Index 95.92 Brokers Pvt. Ltd. At the net
container trains and level, profit increased at a
specialized warehouses, were 100 faster pace of 17% to `201
below expectations for the crore, helped by strong growth
March quarter. 95 100 in other income (up 35%).
The numbers were affected Concor’s scrip has lost 5%
mainly due to poor perfor- 90 to `1,199 since the results
94.89
mance of the domestic busi- announcement, while the
85
ness, which felt the impact of benchmark Sensex on the
higher rail haulage charges on Bombay Stock Exchange (BSE)
80
specified commodities during gained 2.5%. The stock
3 Jan 21 Apr
the quarter. Revenue from the underperformed the BSE-200
Base value taken as 100 Source: BSE
domestic business accounted Index in the last fiscal as well.
for 21.5% of the total revenue Analysts do not seem
and fell by about 5% against fell by 8.5%. As far as realizations are optimistic on the stock
the same period last year. Note that exim volumes concerned, on the domestic prospects. One reason is
On the other hand, Concor’s performance was relatively route, they increased at a because of higher competition
export-import (exim) business lower compared with the faster pace (up 4%) than exim from private firms and road
accounted for the remaining container traffic growth at (up 2%). transport, which may make
revenue and performed major ports. One reason for Total revenue, thus, passing on cost hikes chal-
comparatively better. Exim this is because of higher increased by 4.7% to `995 lenging for Concor and put
revenue increased by 7.6% unloading by shipping lines at crore. Operating profit margin pressure on realizations. The
year-on-year. Volumes port container freight stations was flat at 23% year-on-year, exim business, though, is ex-
increased by 5.6%, whereas rather than shipping the but slipped by 550 basis pected to do relatively better.
that on the domestic route containers to the hinterland. points compared with the PALLAVI PENGONDA
 mint money MARKETS & FINANCE 17 MONDAY, APRIL 25, 2011, DELHI ° WWW.LIVEMINT.COM

FUNDS | INSURANCE | DEPOSITS | LOANS

Mutual fund schemes to invest in MF update
There are over a thousand mutual fund schemes in the market. Picking and choosing the right one can be tough.
Here's where Mint50 comes in. We have run quantitative and qualitative filters on all schemes to come up with a
Cash holding of equity funds Insurance
chosen set of 50 schemes across categories for you to pick and choose from. Cash exposure of large cap funds Life insurance
Premiums in rupees for the lowest term insurance covers for different sums
NAV 3-yr 5-yr 10-yr Value Research Expense Fund size Scheme % of corpus assured. The term of the policy is 60 years minus the age.
Large-Cap core (daily) return return return rating (3-year) ratio (R cr)
1 IDFC Strategic Sector (50-50) Equity 22.21
Sum assured Age
DSPBR Top 100 Equity Reg 102.89 11.24 15.02 * 1.86 2,802.07 (R lakh) 30 years 40 years 50 years
2 Sahara Super 20 18.51 Kotak e-Term Kotak e-Term Kotak e-Term
Franklin India Bluechip 221.03 12.69 13.40 26.57 1.83 3,396.48 10
3 ICICI Prudential Target Returns Retail 10.36 2,281 3,453 5,993
Kotak Sensex ETF**** 199.19 *** ** * NR 0.50 35.74
4 SBI PSU 9.17 20 Kotak e-Term Kotak e-Term ICICI iProtect
Nifty Benchmark ETS**** 594.48 5.74 11.18 * 0.50 619.83 3,714 6,056 10,633
5 Sahara Growth 8.77
Category average 5.86 10.14 20.75 Kotak e-Term Kotak e-Term Kotak e-Term
6 Franklin India Bluechip 8.68 30
4,423 6,700 11,168
Large & Mid Cap core 7 ICICI Prudential Top 100 8.52 Kotak e-Term Kotak e-Term Kotak e-Term
Birla Sun Life Frontline Equity Plan A 91.17 12.09 16.85 * 1.88 2,749.14 40
8 LICMF Top 100 7.95 5,603 8,630 14,532
Canara Robeco Equity Diversified 55.94 13.09 12.44 * 2.32 392.70 ICICI iProtect Kotak e-Term Kotak e-Term
9 Canara Robeco Large Cap+ 5.80 50
Fidelity Equity 36.69 12.87 15.08 * 1.85 3,062.96 6,783 10,561 17,896
10 LICMF Sensex Advantage 5.54 ICICI iProtect ICICI iProtect Kotak e-Term
Franklin India Prima Plus 226.93 10.62 13.67 27.78 1.92 1,703.72 75
11 ICICI Prudential Focused Bluechip Equity Retail 5.16 9,348 14,725 26,306
HDFC Top 200 218.40 16.06 17.07 31.49 1.79 9,591.25 ICICI iProtect ICICI iProtect Kotak e-Term
12 HSBC Equity 5.01 100
UTI Opportunities 27.86 15.40 12.82 * 1.95 1,517.26 12,023 18,861 34,716
13 Reliance Index Sensex 4.53
Category average 6.54 9.25 23.77 ICICI iProtect ICICI iProtect Kotak e-Term
14 DWS Alpha Equity Regular 4.04 125
15,029 23,577 43,127
Multi Cap 15 Reliance Equity Advantage Retail 3.94 ICICI iProtect ICICI iProtect Kotak e-Term
Core 150
16 Reliance Quant Plus Retail 3.42 18,034 28,292 51,537
HDFC Equity 288.86 18.42 17.02 32.72 1.79 8,404.84 ICICI iProtect ICICI iProtect ICICI iProtect
17 DSPBR Top 100 Equity Reg 3.32 200
ICICI Prudential Dynamic 110.53 12.61 14.19 * 1.84 3,005.30 22,281 35,296 67,945
18 Baroda Pioneer PSU Equity 3.07
Nifty Junior BeES**** 115.06 8.97 11.46 * 1.00 114.98 How to use this data: For a 40-year-old who wants a cover of R60 lakh, the
19 HDFC Index Nifty 2.97 lowest premium is given. the tenure is 30 years for a 30-year-old, 20 years for
Quantum Long Term Equity 22.94 16.90 17.03 * 1.50 66.28 a 40-year-old and 10 years for a 50-year-old person. Note: All the products
20 ICICI Prudential Index Retail 2.92 mentioned above can be purchased online only
Templeton India Growth 125.19 11.83 14.73 26.68 2.10 812.95
21 Canara Robeco Nifty Index 2.63
Satellite
2.49
Health insurance
22 LICMF Systematic Asset Allocation Premiums in R
DSPBR Equity 50.03 12.65 16.22 28.96 1.89 2,351.65
23 Taurus Nifty Index 2.45 Age Sum insured (R)
Reliance Regular Savings Equity 31.42 10.68 19.73 * 1.85 3,263.70
24 Religare Business Leaders 2.30 (years) 1 lakh 2 lakh 5 lakh
Tata Equity PE 49.36 11.36 15.44 * 2.50 721.88
25 ING Large Cap Equity 2.21 Royal Sundaram Royal Sundaram Bharati AXA
UTI Dividend Yield 33.37 16.79 17.11 * 1.88 2,998.41 20-25 1,151 1,850 3,436
Category average 8.26 10.89 27.45 26 Sundaram Select Focus Reg 2.17
Apollo Munich Bharti AXA Bharati AXA
27 UTI Master Plus '91 1.87 26-30 1,208 1,955 3,436
Mid & Small Cap 28 Magnum Index 1.81 Apollo Munich Bharti AXA Bharati AXA
Core 29 Pramerica Equity 1.42
31-35 1,208 1,955 3,436
DSPBR Small and Mid Cap Reg 18.14 15.32 ** * 2.03 1,136.69 Star Health Apollo Munich Future Generali
30 ICICI Prudential SPIcE 1.34 36-40 1,489 2,647 5,672
HDFC Mid-Cap Opportunities 15.66 15.98 ** * 1.99 1,152.26
31 UTI Sunder 1.19 Star Health Apollo Munich Future Generali
IDFC Premier Equity Plan A 32.83 15.07 20.56 * 1.93 1,806.09 41-45
32 Shariah BeES 0.91 1,489 2,647 5,672
Satellite Future Generali Future Generali Future Generali
33 LICMF Index Sensex 0.71 46-50
Birla Sun Life Mid Cap Plan A 109.70 9.77 13.21 * 1.91 1,687.81 2,508 4,058 9,060
34 Tata Index Nifty A 0.62
DSPBR Micro Cap Reg 15.96 14.66 ** * 2.29 438.41 Future Generali Future Generali Future Generali
35 Reliance Index Nifty 0.54 51-55 2,508 4,058 9,060
Category Average 5.85 7.77 25.74
36 Birla Sun Life Index 0.52 Star Health National Insurance Future Generali
56-60
Tax Planning 37 Tata Index Sensex A 0.47
3,309 5,655 12,210
Core 38 HDFC Index Sensex Plus 0.47
How to use this data: For each age band, you can pick the cheapest premium
for three insurance amounts. For instance, the cheapest medical cover for a
Fidelity Tax Advantage 22.72 13.75 15.39 * 1.99 1,173.30
42-year-old for a cover of R1 lakh, R3 lakh and R5 lakh is given
39 HDFC Index Sensex 0.41
HDFC Taxsaver 238.28 14.77 11.08 30.99 1.86 2,823.02 Source : Apnapaisa Research Bureau, www.apnapaisa.com
40 IDFC Nifty 0.38
Religare Tax Plan
Satellite
17.85 12.13 ** * 2.49 102.09
41 Franklin India Index BSE Sensex 0.26 National Pension System
42 Nifty Benchmark ETS 0.25
Sundaram Taxsaver 44.28 7.65 10.85 27.37 1.96 1,446.5 Scheme Net asset value
43 Franklin India Index NSE Nifty 0.24 R (as on 21 Apr)
Category average 6.66 8.25 23.76
44 LICMF Index Nifty 0.23 ICICI Prudential Pension Fund Scheme E - Tier I 13.82
BSE Sensex 5.40 10.26 18.52
S&P CNX Nifty 5.32 10.49 17.80 45 JM Nifty Plus 0.15 IDFC Pension Fund Scheme E - Tier I 13.59
46 IDBI Nifty Index 0.10
Equity-oriented 47 UTI Master Index 0.10
Kotak Pension Fund Scheme E - Tier I 12.89
Core 0.03 Reliance Pension Fund Scheme E - Tier I 13.43
48 UTI Nifty Index
Birla Sun Life 95 318.80 14.68 15.06 22.32 2.33 391.65
49 Quantum Index 0.02 SBI Pension Fund Scheme E - Tier I 11.83
DSPBR Balanced 67.57 11.14 13.80 22.07 2.05 748.25
50 Principal Index -0.09
HDFC Prudence 217.71 18.13 17.73 28.71 1.82 5,808.18 UTI Retirement Solutions Pension Fund Scheme E - Tier I 13.79
Tata Balanced 84.15 11.29 12.51 21.68 2.50 277.48 Figures as on 31st March 2011 Source: Value Research
Source: National Security Depository Ltd

Satellite
FT India Balanced 49.73 8.08 10.84 20.12 2.34 265.83 Home loans
Category average 8.33 9.91 20.01 Cheapest home loans Home loan EMI per R1 lakh for a loan amount of R30 lakh as on 21 Apr

Debt-oriented Conservative EMI per lakh (R)

Home loan company Fixed
5 years
Floating Fixed
10 years
Floating Fixed
15 years
Floating Fixed
20 years
Floating
Core
Birla Sun Life Monthly Income 36.78 9.76 9.32 10.68 1.98 675.43 Allahabad Bank 2,212 2,149 1,449 1,378 1,233 1,152 1,119 1,066
Axis Bank 2,327 2,112 1,553 1,308 1,332 1,059 1,244 949
Canara Robeco MIP 29.68 10.5 10.56 12.79 2.09 363.75
Bank of Baroda DP 2,125 DP 1,335 DP 1,090 DP 998
HDFC MIP Long-term 23.21 12.51 11.00 * 1.45 10,099.87 Bank of Maharashtra 2,137 2,100 1,363 1,308 DP 1,075 DP 965
HDFC MIP Short-term 17.22 7.87 6.50 * 1.72 599.39 Canara Bank DP 2,125 DP 1,335 DP 1,105 DP 998
Reliance MIP 21.83 15.45 11.29 * 1.55 8,393.45 Central Bank of India DNA 2,125 DP 1,349 DP 1,105 DP 998
Satellite Corporation Bank 2,263 2,137 1,478 1,349 1,249 1,105 1,154 1,015
Birla Sun Life MIP II Savings 5 17.61 10.99 9.90 * 1.38 818.37 HDFC Limited 2,199 2,112 1,406 1,308 1,168 1,059 1,066 949
ICICI Bank 2,432 2,125 1,675 1,322 1,469 1,075 1,391 965
UTI Monthly Income Scheme 19.90 8.86 8.44 * 1.80 708.20
IDBI Bank 2,237 2,137 1,449 1,335 1,216 1,090 1,119 982
Category average 7.56 7.70 10.15 Indian Bank 2,174 2,137 1,392 1,349 1,168 1,121 1,084 1,032
Asset Allocation core LIC Housing Finance* DP 2,132 DP 1,330 DP 1,084 DP 975
FT India Dynamic PE Ratio FoF 40.87 10.89 13.12 * NR 0.75 1,495.00 Oriental Bank of Commerce DNA 2,125 DNA 1,335 DNA 1,105 DNA 998
Category Average 7.13 8.82 Punjab National Bank 2,149 2,125 1,363 1,335 1,121 1,090 1,032 998
SBI Easy Home Loan DP 2,100 DP 1,294 DP 1,044 DP 932
Thematic/Sectoral *This bank has interest rates fixed for the initial few years and thereafter then prevailing rate are applicable; The home loan rates are indicative rates, which may
DSPBR T.I.G.E.R. Reg 46.38 2.54 9.98 * 1.85 2,300.89
change according to the credit profile of the customer; fixed interest rates are usually subject to reset clause of two to five years and vary from bank to bank. However,
ICICI Prudential Infrastructure 30.45 2.54 13.72 * 1.85 3,008.77 fixed interest rates of ICICI Bank, HDFC and Axis Bank remain fixed during the entire tenor of the loan; PN: The rates given above are for the first year of the loan tenor.
74.12 3.88 19.51 * NR 1.81 3,653.80 For the subsequent years, the interest rates vary from bank to bank; DP: does not provide; EMI: equated monthly instalment; DNA: data not available
Reliance Diversified Power Sector Retail
33.57 0.49 9.20 * 2.50 1,641.06
Tata Infrastructure
NAV 3-month 6-month 2-year Value Research Expense Fund size
Fixed deposit rates
Short Term (daily) return return return rating (3-year) ratio (R cr)
Bank 6 months-364 days 1-2 years 2-3 years 3-5 years Above 5 years
Core
Canara Robeco Short Term Ret 11.30 2.27 3.78 5.70 1.11 70.82 Axis Bank 7.25-8.25 9.00-9.25 8.50 8.50 8.50
DWS Short Maturity Reg 17.60 2.30 3.20 5.57 1.89 464.69 Bank of Baroda 6.25-7.50 9.00-9.35 9.00 8.50-9.00 8.50
Bank of India 8.00 9.00-9.25 8.25 7.75-8.25 8.50-8.75
Reliance Short-term 18.41 2.01 3.12 5.45 0.66 2,863.88
Bank of Maharashtra 6.50-7.25 8.55 8.55 8.30-8.60 8.00-8.30
Templeton India Short-term Income Ret 1964.78 2.17 3.28 7.89 1.30 4,656.81 Canara Bank 7.75 8.75-9.10 8.75-9.10 8.50-9.25 8.75-9.50
UTI Short-term Income Regular 16.78 1.98 3.54 6.63 0.50 626.78 Central Bank of India 8.50 9.00-9.25 8.75 8.80 8.80
Category average 2.15 3.35 5.52 Corporation Bank 9.15 9.15 9.25 9.25 9.00
1.80 3.47 5.01 Dena Bank 8.00 9.00 8.75-9.00 9.00 8.75
NSE Treasury Bill Index
Development Credit Bank 6.50 7.75-9.00 7.75-8.50 7.75 7.50
NSE G-Sec Composite Index 1.86 2.23 0.79
Dhanlaxmi Bank 8.50 8.50-9.50 8.75 8.75 8.25
NAV and returns are as on 21/04/2011; Value Research rating is as on 31/03/2011; Fund size as on 31/03/2011; * The fund has not yet completed 10 HDFC Bank 6.00-7.75 8.25-8.50 8.50-9.25 8.25 8.25
years; ** The fund has not yet completed 5 years; ***The fund has not yet completed 3 years; ****An exchange-traded fund (ETF), this can be bought or
sold only on stocks exchanges. You need a demat account to be able to transact in ETFs; NR: not rated, since the fund is less than 3 years old Source: ICICI Bank 6.00-7.50 8.25-9.25 8.50-9.25 8.75 8.75
IDBI Bank 7.75-8.00 8.00-9.25 9.00 9.00-9.25 8.75-9.00
How to use Mint50 Indian Overseas Bank 7.25-8.25 8.75-9.25 8.75 9.00 9.00
Among the various schemes, we have chosen 50 schemes across equity- and good track record. You can consider staying invested in them for a long time. IndusInd Bank 6.25-8.50 8.00-9.50 8.75-9.50 8.75 8.75
debt-oriented categories that we feel you should choose from. However, you must Depending on your risk profile, this should form a significant chunk of your Kotak Mahindra Bank 6.25-8.25 9.00-9.40 9.25 9.00 9.00
not invest in all of them. Pick and choose around seven to 12 schemes from portfolio. The “satellite” portion can be used to add the returns kicker or a flavour
Mint50 to build a portfolio that suits your goals. Don’t worry if schemes, you are to your portfolio, such as thematic, infrastructure funds or those that have a Oriental Bank of Commerce 7.25-7.50 9.00-9.25 8.75-9.00 8.50 8.50
already invested in, are not a part of Mint50. Not all schemes that are outside promising track record but are relatively new. If you are planning to invest afresh, State Bank of India 6.00-7.75 8.25-9.25 8.75-9.25 8.25 8.50-8.75
Mint50 are bad. Just because your existing scheme is not a part of Mint50 does start by putting money in large-cap funds and later diversify into mid-cap funds. Syndicate Bank 7.00-8.25 8.75 8.75 9.00 8.75
not mean you must sell it. While poorly managed schemes are aplenty in the One last thing: Value Research pitches active and passive funds in the same
market, there are many that are decent, but not a part of Mint50 because we category. So, it is possible that passive funds, such as Benchmark Nifty BeES and The Federal Bank 6.25-8.25 9.60 9.25 9.00 8.75
think these are better alternatives. Mint50 is not a guide to existing investments. Franklin India Index Fund, have a lower Value Research rating. In rising markets, Union Bank of India 7.50 8.00-8.60 8.75 8.75-9.15 8.50-9.40
Refer to it if you choose to invest afresh. After ascertaining how much you want exchange-traded funds and index funds typically underperform actively managed Vijaya Bank 7.50 9.00 9.00 8.50-9.00 8.25
to put in equity and how much in debt funds, take a core and satellite approach. funds and, hence, a lower star rating. But since a passive fund’s mandate is never
The “core” schemes are the rock solid, long-term performers that come with a to outperform the index, but to mimic it, a lower rating doesn’t matter. Rates for deposits up to R15 lakh as on 21 Apr Interest rates in % per annum Source : Apnapaisa Research Bureau, www.apnapaisa.com
18 MARKETS & FINANCE
MONDAY, APRIL 25, 2011, DELHI ° WWW.LIVEMINT.COM
FINANCIAL DEALINGS
Get product details on paper before investing
M int, along with the
Hindustan Times and
NDTV, brings you a
personal finance show called
Let’s Talk Money. The weekly
call-in show, anchored by Moni-
ka Halan, editor, Mint Money,
and Manisha Natarajan, editor
and senior anchor, special pro-
grammes, NDTV, aims to an-
swer viewers’ questions about
money-linked issues. This is an
edited transcript of the show
that was aired over the weekend
on NDTV Profit and NDTV
24x7.
Natarajan: Last week, we
opened a Pandora’s box on the
rampant mis-selling of finan-
cial products by banks, of cus-
tomers being misled, lied to
and treated with complete dis-
regard by banks... and we ha-
ven’t even touched the tip of
the iceberg yet. This week, we’ll
carry through with the same
theme because we have a mis-
sion; to get policymakers and
banking regulator RBI (Reserve
Bank of India) to sit up and take
notice of this.
Let me introduce the expert
panel once again—B.D.
Narang, former chairman of
Oriental Bank of Commerce;
Monika Halan, editor, Mint
Money and Ashwin Parekh,
partner, global financial servic-
es, Ernst and Young. Amit
Gupta from Bangalore has yet
another story and he wrote in
to us to say what happened to
him was nothing short of a rob-
bery.
Amit Gupta: Let me tell you
my story with guaranteed
NAV (net asset value). I
bought a Birla Sun Life maxi-
mize policy in 2005 with a stag-
gering `60,000 per year. When I
saw the illustration @6% and
10%, they conveniently forgot
to deduct the massive adminis-
tration charges and showed all
of my money as invested in Ul-
ips (unit-linked insurance
products); the truth was the
firm invested only 30% in first
year and about 60% in second
year of the `1.2 lakh I paid.
The principle was guaran-
teed for this fund now in 2009,
when my total investments
were `2.4 lakh and I had to pay
another premium. My fund val-
ue (at maximize with latest
NAV) was barely touching `2
lakh. I surrendered the policy
and then came the fine print.
The principle guaranteed in the
fourth year was till the third
year, meaning in 2009 when I
surrendered my policy, what
was guaranteed was three pre-
miums, not four. For the fourth,
I had to wait one more year,
that is till May 2010, and I
would then have got `2.4 lakh.
So logically, my NAV was high-
er, so I took back the policy at
`2 lakh. Here is the break-up.
Invested `2.4 lakh in 2005-2009
and return in 2009 was `2 lakh.
All because of a sundry
dream of highest NAV and
greed. I think it is time we
bought these robbers to justice
and let them face the music. If I
would have given this money to
my wife, I would have made
more money than this policy.
Natarajan: You are so right.
If she had bought gold with that
money, year-on-year returns
would have been 24%. It is
again a case of mis-selling. Now
that’s what really bugs me, 6%,
10%, this has to stop. They have
brought down the cost of Ulips,
but that’s not stopping Monika.
Investment advice: Manisha Natarajan (left) and Monika Halan
hosting the Lets Talk Money show.
Halan: That’s not stopping,
though it’s got better. He talked
about 65% cost. Yes, it was true,
but from last year that has
changed. The cost structure has
come down drastically. But
again, Ulips and the insurance
products that carry investment
in them still remain profitable
for people selling.
If someone is selling insur-
ance along with investment,
you have to ask the ques-
tion—how much of my premi-
um will get invested? You have
to ask that I am putting `1 lakh,
how much of this goes to work;
ask what is the cost the compa-
ny will deduct in percentage
terms; write that down every
year if it’s a 10-year product; an
insurance and investment
product is a 15-year product,
that’s the sort of lock-in you
should have in mind. Ten years
is the minimum after which you
will start making returns in an
investment-cum-insurance
ANKIT AGRAWAL/MINT
product, and if you don’t ask
the questions, this will contin-
ue. Get the details of the prod-
uct on paper before investing.
Natarajan: Amit accepted
that he didn’t do due diligence
that’s why he was caught. Pra-
deep joins us from Chennai.
Pradeep Negi: While joining
Wipro Technologies, Greater
Noida, on 18 November,
I opened a salary ac-
count with Kotak Mahindra
Bank (Ltd), Noida Sector 18
branch. While doing so, I was
given a list of offerings given by
the bank to corporate custom-
ers. The deputy manager of the
bank had promised me that I
will be given all the facilities
that had been mentioned. After
20 days of opening the account,
I enquired about the credit card
query for which they replied
that two kits had been issued to
me and they had been dis-
patched to my communication
address. Upon regular follow-
up, they have made a remark
that presently, they cannot pro-
vide the facility of credit card as
my office zone doesn’t fall in
their service category. Whereas
two kits that had been issued to
me are nowhere in the line.
This remark purely contradicts
the previous statement. It’s a
concern of total mis-selling,
wherein the emphasis is given
on sourcing of account only.
Banks over-promise and un-
der-deliver
Natarajan: When you were
told that when you open an ac-
count you will get a card but
you did not, that’s again over-
promise and under-delivery.
But the larger question here is
that the customer has to wake
up and get everything in writ-
ing, but what is the regulator
doing about it?
Right now, we
are getting
cases only
from big cities.
Imagine how
rampant can it
get when you
go to smaller
cities.
Narang:
There are two
aspects of this
issue. One is
top manage-
ment; that
how they view
this element of
mis-selling, are they tolerant or
they are indulgent or their level
of tolerance is zero. Unfortu-
nately, within the bank, this so-
called relationship manager
will never allow you to go to the
top level. For example, Citi-
bank; people had number of
queries about what is happen-
ing to them, but they couldn’t
mint money
reach the top, they closed their
own eyes, classic example of
top management closing their
eyes to what is happening to
their clients and they become
very tolerant about their jun-
iors because they are making
money for the organization.
The bigger responsibility before
we got to the regulator is that of
(the) top management from the
bank.
Natarajan: But all these top
managements are getting their
fat bonuses from the money
made by their juniors.
Narang: This is where I
come to. I will put it like this;
major responsibility of supervi-
sing such discretionary ele-
ments is that of the top man-
agement. Lot of people sold
foreign exchange derivatives,
now some of
them were
sold against
the laws of In-
dia, but no
management
is prepared to
take action
against them
who sold.
Quietly, they
were asked to
resign and
they got jobs
in other sub-
sidiaries.
Now, what
does this
mean, banks themselves were
very tolerant to all this. There-
fore, regulation has to not only
penalize mis-sellers, but also
disgorge the profits made by
these organizations illegally;
besides there has to be heavy
penalty, including cancellation
of licences.
letstalkmoney@livemint.com
mint money MARKETS & FINANCE 19 MONDAY, APRIL 25, 2011, DELHI ° WWW.LIVEMINT.COM

WEATHER TO BUY OR SELL

Srinagar
27/ 08 FORECAST:
Hottest: Barmer, Rajasthan 430C
0
Coldest: Darbuk, Ladakh -20 C
Chandigarh
38/ 20 Wettest: Nagapattinam, Tamil Nadu
Del hi
40/ 24
WHEAT MUSTARD JUTE COCONUT
Ja i pur Luc k now Guwahati MCX Lead Int 118.25 Soy Oil Indore 617.25 Maize Nizamabad 1299
38/ 24
Patna39/ 21 Arrivals in Punjab 29/ 20 Rain and hailstorm Timely sown Jute There is a BULLION
Zinc Int 103.5 Seasame Seed Rajkot
Kapas Khali Akola
5100
1141.5 OTHERS
Ahmedabad
Bhopal
38/ 24
37/ 23
and Haryana is during third week crop is three to possibility of Silver Ahm
Gold 995 Ahm
71282
21979
ENERGY
Crude Oil Int 4974
Coconut Oil Kochi
Castor Seed Rajkot
10088
4790
Rubber Kochi
Cardamon Vdu
24033
997.9
Ranchi
42/ 24
32/ 21 Kolkata gathering of April in NW four weeks in scattered light METALS
Brent Crude Int
Natural Gas
5493
195.5
Mentha Oil Sambhal 1220.5 Potato Agra
Sugar-M Delhi
629.5
2902
Nagpur
37/ 23 Bhubaneshwar
34/ 25
momentum now India affected the parts of Assam showers in Kerala Nickel Int
Tin Int
1180.7
1447.5 OIL & OIL SEED
GRAINS/PULSES/CEREALS
Chana Delhi 2249
Potato Tarkeshwar
Sugar-S MCI
457.9
2642
Mumbai 35/ 24 as weather has crop that was at and north Bengal. that would be Copper Int 429.7 Groundnut Oil Rajkot 800 Wheat Delhi 1203.7
33/ 24 Aluminum Mum 121 Mustard Oil Jaipur 550.2 Masur Indore 3125
Hyderabad Vishakhapatnam turned favorable. harvesting/post Current showers in beneficial for the
36/ 23 33/ 24
Dry and sunny harvest stage. the growing region plantations. Proper
Panaji weather will help Mustard is at are helpful for the irrigation may NCDEX OIL & OIL SEEDS Mustardseed Oilcake-Sri Gangangr 990
35/ 26 Guar Seed-Bikaner 2975 Castor Seed-Disa 554.9
the crop at maturity and being crop at enhance the yield BULLION Crude Palm Oil-KDL 521.4 GRAINS/PULSES/CEREALS
Bangalore Silver- Delhi 71637.5 RBD Palm Oil- Kakinada 569.05
31/ 20 Chennai
Port Blair harvesting. Exports harvested in germination. No by almost double. Silver-Intl 67233 Soy Oil Refined-Indore 617.4
Chana MP- Indore
Chana RJ- Bikaner
2315.65
2200
33/ 25 Chandi- Intl 67978.9 Soy Oil Refined-Mumbai
32/ 25 look promising as Gangetic Bengal pests or diseases There are Gold 995-Intl 21542.9 Soy Oil Refined-Nagpur
630
650
Chana RJ-Delhi
Yellow Peas- Mumbai
2250
1791
Cochin A&N Is lands Gold- Intl 21685
31/ 24 33/ 24 Indian Wheat is where subsidence are reported from expectations of Gold 10 gms 22032.5
Guar Seed-Jodhpur
RM Seed-Alwar
2916.8
2580
Jeera-Unjha
Maize YR Devengre
14983.3
1144
Silver 71637.5
Thiruvanantapuram priced in showers would the crop. Notably, increased arrivals Gold999 22032.5
RM Seed-Sri Ganganagar
Soyabean Indore
2538.75
2401
Wheat-Bareilly
Wheat-Delhi
1210
1183.35
30/ 23 Shower Rain T-storm competitively and be welcome. Dry India has lifted all from the two main METALS Soyabean Nagpur
Soyabean ML-Indore
2448
17650
Wheat-Khanna
Wheat-Kanpur
1281.1
1150
Mild Steel-Ghaziabad 31100
tight global yields and sunny weather countervailing Coconut growing Mild Steel Ingot-Mandi Gobindgarh 31530 Soy Bean- Kolkata
Cotton Seed Oilcake-Akola
2420.8
585
Wheat-Karnal
Wheat-Indore
1386.1
1189.7
Widespread thundershowers and rain would continue over Kerala, Tamil Nadu are expected. But in Rajasthan suits duties on Jute states of Kerala
Mild Steel Ingot-Mumbai
Mild Steel Ingot-Raipur
30100
28650 Cotton Seed Oilcake-Kadi 1236.15 Yellow Peas- Kolkata 1960
Mentha Oil-Chandausi 616 Masur-Indore 3012.5
and Lakshadweep Island. Scattered rain likely over NE, coastal AP and A&N the govt. is yet to threshing exports from and Tamil Nadu in ENERGY R M Oil-Ganganagar 539.5 Maize-Karimngr 1176.25
Brent Crude 5499.47 Groundnut Oil-Rajkot 826.4 Barley- Jaipur 1250.75
Islands while isolated in Karnataka, Maharashtra and east & central India. lift an export ban. operations. Bangladesh. the days to come. Furnace Oil-Mumbai 33504.7 Groundnut in shell-Junagadh 631.95 Yellow Peas- Kanpur 2171.5

Read as S : Dust Storm CS: Cyclonic Storm D: Depression, DD : Deep Depression

L: Low Pressure, W.D.: Western Disturbance, C C opyright S kymet C ompany 2011 : All rights reserved.
20
23
MONDAY, APRIL 25, 2011, DELHI
Dollar’s decline speeds
up, with risks for U.S.
With no end in sight
for fiscal worries, the
pressure is widely
expected to continue
B Y T OM L AURICELLA
·························
T he U.S. dollar’s downward
slide is accelerating as low
interest rates, inflation
concerns and the massive feder-
al budget deficit undermine the
currency.
With no relief in sight for the
dollar on any of those fronts, the
downward pressure on the dollar
is widely expected to continue.
The dollar fell nearly 1%
against a broad basket of curren-
cies last week, following a drop
of similar size the previous week.
The ICE U.S. Dollar Index closed
at its lowest level since August
2008, before the financial crisis
intensified.
“The dollar just hasn’t had
anything positive going for it,”
said Alessio de Longis, who over-
sees the Oppenheimer Currency
Opportunities Fund.
The main driver for the dol-
lar’s decline is low interest rates
in the U.S. compared with higher
and rising rates abroad. Lower
rates mean a lower return on
cash—and the pressure from
that factor could intensify next
week when the Federal Reserve’s
rate-setting committee is expec-
ted to signal that U.S. short-term
rates will likely remain near zero
for many months to come. On
Wednesday, Fed Chairman Ben
Bernanke is scheduled to give
the central bank’s first-ever press
conference following a policy-
setting meeting.
But it is worry about the U.S.
budget deficit that is intensifying
the selloff. Last Monday, inves-
tors were spooked by a warning
from Standard & Poor’s that it
might take away the U.S. govern-
As Arab Spring turns violent, democracy advocates face hurdles
B Y M ATT B RADLEY,
M ARC C HAMPION,
M ARGARET C OKER,
S AM D AGHER,
J OE P ARKINSON,
B ILL S PINDLE & E RIK S TIER
·························
SIDI BOU ZID, TUNISIA
A li Bouazizi, who owns a gro-
cery story at the center of
this poor, remote North African
town, was ecstatic when protests
toppled his nation’s dictator in
January. These days, he sounds
deflated.
“This uprising was for what?”
he asked in a recent interview. In
Tunisia, he said, “the people who
have money and the heritage of
the old regime aren’t giving up
control.”
Mr. Bouazizi is no ordinary by-
stander to the revolution. He
played a key role in igniting the
unrest that has spread through
much of the Arab world. In De-
cember, his cousin doused him-
self in gasoline and burned him-
self to death. Mr. Bouazizi posted
on Facebook a video of the pro-
test that followed, then alerted
satellite-news channel Al
Jazeera. Unrest spread rapidly
from there.
But not much has gone the
way many original protesters
hoped. All across the region, the
LEADING THE NEWS
ment’s coveted AAA rating status
amid concerns the Obama ad-
ministration and Republicans in
Congress might not be able to
agree to significant reductions in
the deficit.
In addition, Chinese govern-
ment officials have stepped up
rhetoric hinting they might di-
versify their $3 trillion of curren-
cy reserves away from U.S. dol-
lars. Such a shift would chip
away at what has been a sub-
stantial source of dollar-buying
in recent years.
China has in recent weeks
been allowing its currency, the
yuan, to appreciate steadily. This
poses two challenges to the dol-
lar. First, the more Beijing lets its
currency rise, the less it needs to
buy dollars to offset yuan
strength. Second, other Asian
countries that compete with Chi-
na for exports may also allow
their currencies to strengthen
against the dollar.
Washington has been pushing
Beijing to let the yuan rise
against the dollar and other cur-
rencies, in order, among other
things, to help reduce the U.S.
trade deficit. But a continued de-
cline in the value of the dollar is
a double-edged sword for the
U.S. economy.
A weaker dollar is a boon for
U.S. exporters by making their
goods more competitively
priced. This has been a tailwind
for technology companies and
manufacturers, a bright spot in
the otherwise slow economic re-
covery.
Since the recovery started in
the third quarter of 2009, exports
have contributed about 1.4 per-
centage points to the nation’s
3.0% annualized growth rate,
marking trade’s biggest share of
growth over an 18-month stretch
on record.
But a weaker dollar hits
ON MIDDLE EAST
exuberant “Arab Spring” has
morphed into a season of deadly
crackdowns, sectarian strife and
dimming prospects for democra-
cy—at least in the form many
original protesters envisioned.
That’s partly because protest-
ers took to the streets with a vari-
ety of motivations and wildly dif-
ferent goals. And, like their fore-
runners in Eastern Europe after
the Soviet Union collapsed, the
protesters often have been un-
prepared to battle the en-
trenched forces that have long
supported the dictators they seek
to oust.
Religious and sectarian ten-
sions, too, have surfaced, stalling
movement toward representa-
tive government and open soci-
eties. In Egypt, the Muslim
Brotherhood and other Islamist
organizations are gaining influ-
ence, but their professed com-
mitment to democracy remains
untested. In Bahrain, the pro-
tests and government crack-
downs have inflamed tensions
between Sunni and Shiite Mus-
lims.
Violence in Syria threatens to
engulf the last corner of the Mid-
dle East relatively untouched by
mint
COPYRIGHT © DOW JONES & COMPANY, INC. ALL RIGHTS RESERVED
SINKING FEELING
U.S. Dollar Index, which measures the
dollar against a basket of currencies
85
80
75
70
65
2008 '09 '10
Source: Thomson Reuters via
WSJ Market Data Group
strained consumers by raising
the cost of imported oil, as ex-
porters seek higher dollar-de-
nominated crude prices to offset
the dollar’s waning value.
To a certain extent, some U.S.
officials see the dollar’s decline
as the inevitable result of dispa-
rate growth rates between the
U.S. and the fast-growing devel-
oping world. Mr. Bernanke and
Treasury Secretary Timothy
Geithner have given no indica-
tion they want to alter their
stance.
Rebecca Patterson, chief mar-
kets strategist at JPMorgan Asset
Management, doesn’t foresee
U.S. authorities intervening to
stop the dollar’s fall, unless
there’s evidence the weak dollar
is taking a toll on the stock mar-
ket.
“The U.S. historically has only
gotten active in the currency
market when the dollar moves
were spilling over into other as-
sets,” she says. “American voters
care a lot more about stocks and
their 401(k)s. If the dollar starts
to undermine that, that’s when
the Treasury Department pays
more attention.”
One source of comfort for the
government is that the dollar’s
decline has been orderly. Against
a broad basket of currencies, the
dollar is down 9.1% from a year
ago. In 2003 and 2004—a period
Conditional exit: Yemen’s President
Ali Abdullah Saleh.
the uprisings. That neighbor-
hood includes Lebanon, Israel
and Jordan—all important to
U.S. interests in the region.
None of the uprisings have
played out like the young pro-
testers who started them had ex-
pected. Finishing a revolution,
they’re discovering, is harder
than starting one.
“We knew that it would take
time,” says Adel al-Surabi, the
29-year-old leader of a student
coalition in Yemen, where the
government has cracked down
hard. At one point, government
supporters fired at protesters
from rooftops. “We expected re-
of very low interest rates engi-
neered by Mr. Bernanke’s prede-
cessor, Alan Greenspan—it reg-
istered annual declines of closer
to 10%.
While the weaker currency is
helping to drive the recovery, it
has also contributed to palpable
public worries about inflation
and the diminished standing of
the U.S. on a global stage. The
weak currency helps to drive up
the price of oil in dollar terms,
and therefore gasoline at the
pump, exacerbating another po-
litical problem for Mr. Obama at
the moment. An April Gallup
poll found that 42% of Americans
surveyed had little to no faith
that the Fed would do the right
'11
thing for the economy, and 43%
had little to no faith in Mr.
Geithner.
This past the week, the dollar,
as measured by the index that
tracks it against a basket of cur-
rencies, hit its lowest point since
the 2008 financial crisis. Before
the crisis began, the dollar had
lost more than 40% of its value
against the basket during a
steady six-year decline, driven by
many of the same factors bedev-
iling the currency today. The dol-
lar is 5% away from its all-time
low, hit in March 2008, as
tracked by the dollar index,
which dates back to 1971.
The dollar’s weakness is even
more striking in the face of the
struggles facing the European
Union and Japan, the U.S. cur-
rency’s biggest rivals. Expecta-
tions are growing that Greece,
which required a bailout from
other euro-zone countries in
2010, will in coming months be
forced to restructure its debt ob-
ligations. That could inflict losses
on banks across Europe holding
those bonds—an event that
might be seen as a negative for
the euro.
Japan is struggling to recover
from the earthquake and subse-
quent nuclear disaster. The eco-
nomic toll from the tragedy now
looks as if it may play out for
months. The biggest beneficiar-
ies have been gold, which
crossed $1,500 an ounce for the
first time last week, and other
commodities.
Jon Hilsenrath and Jonathan
Cheng contributed to this article.
—wsj@livemint.com
REUTERS
Yemen protesters
reject Saleh exit plan
Sanaa: Yemen protesters Sunday
demanded the immediate
departure of President Ali
Abdullah Saleh after his ruling
party accepted a Gulf plan for him
to quit in 30 days in a move
promptly hailed by Washington.
The U.S. had urged a peaceful
transition after Saleh’s party said
late Saturday it accepted a Gulf
Cooperation Council plan under
which he would quit after months
of protests. AFP
sistance from the government,
and we expected attacks,” says
Mr. al-Surabi. “But we never ex-
pected snipers.”
The changing face of the revo-
lutions is of concern to the U.S.,
which has backed the general
demands for more democracy.
What worries the U.S. is that the
shifting demands might under-
mine its interests in Yemen,
whose autocratic president has
been an ally in fighting terror-
ism; in Bahrain, where the U.S.
Navy’s Fifth Fleet is based; or in
Jordan and Egypt, which have
worked closely with the U.S. in
trying to resolve the conflict be-
WWW.LIVEMINT.COM
What’s News­
Amid rising scrutiny of their practices, Google Inc. de-
fended the way it collects location data from Android
phones, while Apple Inc. remained silent for a third day.
The companies’ smartphones regularly transmit locations
back to Google and Apple servers, respectively, according
to data and documents analyzed by The Wall Street Jour-
nal. On Friday, a Google spokesman said “all location
sharing on Android is opt-in by the user.”
Former Sony
president Norio
Ohga, 81, who
helped transform
the music indus-
Citigroup Inc. is
likely to step up
efforts to return
capital to share-
holders in 2012,
Calls for Japa-
nese Prime Min-
ister Naoto Kan
to step down are
likely to intensify
try with the de- Saudi Arabia’s this week after
velopment of the Prince Alwaleed his party lost a
CD format, died Bin Talal told re- key parliamenta-
Saturday. porters Sunday. ry seat Sunday.
At least 36 people have dan’s army and rebel mil-
been killed in attacks on itiamen killed at least 55
the western Libyan city of people, a government offi-
Misrata by forces loyal to cial said Sunday in the
Muammar Gaddafi since soon to be independent
Saturday, a rebel spokes- state gripped by a bloody
man there said. He said wave of unrest. The fight-
that eight people were ing raged for about three
killed in bombardment on hours on Saturday in Jon-
Sunday and 28 on Satur- glei state between the
day. More than 100 had southern Sudan People’s
been wounded over the Liberation Army (SPLA)
same period, said the and gunmen led by former
spokesman, Safieddin. militia leader Gabriel Tang,
*** also known as Tang-Ginye.
Security forces raided There were no details of
homes across Syria, arrest- any deaths from the SPLA.
ing regime opponents, as ***
funerals were held Sunday EARNINGS Dubai-based
for protesters and mourn- real estate giant Emaar
ers killed in a bloody crack- Properties on Sunday post-
down which activists said ed a 45% drop in its net
cost 120 lives. Students, profit in the first quarter of
meanwhile, called for a 2011 after a fall in sales.
strike and two MPs re- Net profit dropped to 421
signed after more blood- million dirhams ($115 mil-
shed Saturday when Syri- lion) from 760 million
ans swarmed the streets to dirhams registered in the
bury scores of demonstra- corresponding period last
tors killed in protests the year, while revenue fell 31
previous day. percent to 1.98 billion
*** dirhams ($540 million), a
Clashes between south Su- company statement said.
WSJ For more international business news,
.com log on to www.india.wsj.com
tween Israel and the Palestin- by a March 19 national referen-
ians. dum on a handful of constitu-
What follows are reports from
many of the region’s hot spots,
tional amendments, which
snowballed into a battle over the
outlining the challenges faced by direction of the reform move-
key protest participants as revo- ment and the extent to which
lutionary effervescence gives Egypt should become a secular,
way to unexpected complica- pluralistic democracy.
tions.
Egypt: the religion factor
On the surface, the proposed
amendments didn’t seem mo-
mentous: they called for presi-
In Egypt, traditionally regard- dential term limits and the re-
ed as a leader of the Arab world, duction of barriers to entry for
the revolution began with youth political parties.
activists in Tahrir Square. Hafez But Mr. Saada and many lead-
Abu Saada, director of the Egyp- ers of the reform movement, in-
tian Organization for Human cluding Nobel laureate Moham-
Rights, was there with them. med ElBaradei, felt that if the
These days, Mr. Saada and amendments passed, they would
other secular activists who were be a big impediment to the
at the forefront of the protests movement’s larger goal: a com-
are warily watching two big or- plete overhaul of the constitu-
ganizations that survived the col- tion to whittle down the near-ab-
lapse of the former regime intact: solute power of the presidency.
the military and the Muslim They told voters that passing the
Brotherhood. amendments would put Egypt
The military formally rules the on a faster track to the elections,
nation through a council de- favoring Islamists and elements
signed to pass authority to a ci- of the former regime, who al-
vilian government after a new ready are well organized. And
president is elected. The Muslim whoever wins the next election,
Brotherhood, an Islamist politi- they argued, would have the
cal group that was illegal but tol- power to draft a new constitution
erated under the regime of Hosni full of democratic half meas-
Mubarak, is now legal and en- ures—in essence, a counterrevo-
joys wide support.
Reform leaders were unnerved TURN TO PAGE 21®

mint
WWW.LIVEMINT.COM
As Arab Spring turns violent, democracy
advocates face big challenges
® FROM PAGE 20
lution.
The military implicitly en-
dorsed the amendments by
sponsoring the referendum. And
Islamist groups, led by the Mus-
lim Brotherhood, threw their
sprawling organizations behind
them.
Posters bearing the Brother-
hood’s name appeared around
Cairo telling voters that a “yes”
vote was a “religious obliga-
tion”—even though none of the
amendments made any refer-
ence to religion. The Brother-
hood said it wasn’t responsible
for the posters, but that voting
“yes” was a vote for stability.
Salafis, who practice an ultra-
conservative form of Islam, were
told by their leaders that voting
“yes” was a vote for furthering Is-
lamic values. Egypt’s existing
constitution states that its legal
framework should flow from Is-
lamic law—and Salafi leaders
want to keep it that way.
“We didn’t expect the Muslim
Brotherhood and the Salafis to
use religious debate in this refer-
endum,” said Hafez Abu Saada,
the head of the Egyptian Organi-
zation for Human Rights.
The religious tone caught the
mostly secular and liberal pro-
test leaders by surprise. So did
the result: 77% of voters en-
dorsed the amendments,
The anti-amendment camp
complains that it wasn’t given
enough time to convince the
Egyptian public of the merits of
an entirely new constitution. The
referendum, they note, came
only 17 days after a military-ap-
pointed committee of jurists an-
nounced the proposed amend-
ments. For that reason, Mr. Saa-
da and other secular-minded ac-
tivists contend that the result
doesn’t reflect Egyptians’ appe-
tite for democracy.
The vote left them worried
that the military and the Muslim
Brotherhood are cooperating be-
hind the scenes and have mar-
ginalized much of the young
leadership from the early days of
the protests.
The Muslim Brothers “are not
respecting the opposition,” says
Mr. Saada. “They deal with them
the same way the ruling party
used to deal with them. They
seem like the ruling party now.”
Bahrain: sectarian divide
Bahrain’s antigovernment up-
rising began on February 14,
with protesters calling for demo-
cratic reforms and access to jobs.
Bahrain’s ruling Al Khalifa family
is Sunni Muslim, and the pro-
testers are overwhelmingly from
the kingdom’s Shiite majority.
Nevertheless, there were plenty
of Sunnis who participated in the
demonstrations.
Tens of thousands of demon-
strators occupied the Pearl
Roundabout, a square in the
center of the capital city, Mana-
ma. Munirah Fakhro, a Sunni
politician from the moderate
secularist Wa’ad party who had
long campaigned for reforms,
saw the demonstrations as the
greatest opportunity in a decade
to realize change for all Bah-
rainis.
At first, protesters demanded
reforms to the existing political
system, and Crown Prince Sal-
man bin Hamad bin Isa Al Khali-
fa called for a dialogue with the
opposition. But when some pro-
testers began calling for the oust-
er of the ruling family, Ms. Fa-
khro says, she began worrying
that their demands had gone be-
yond what the ruling Sunni mi-
nority would accept.
“I kept going to Pearl Round-
about and talking to young peo-
23
New hurdles: An Egyptian protester waves Egypt’s flag as thousands gather for a demonstration at Cairo’s
Tahrir Square on April 8.
ple,” she said. “I warned people:
‘This is your last chance. The
crown prince is standing alone.
He is asking you to come and ne-
gotiate.’”
On March 15, the showdown
took an ominous turn, with the
government calling in troops
from neighboring Saudi Arabia
and declaring a state of emer-
gency. Security forces forcibly
cleared demonstrators and
launched a brutal crackdown.
Sectarian tensions flared.
At Salmaniya Hospital, the
country’s largest medical facility,
the Shiites and Sunnis on staff
had never payed much attention
to religious differences. Doctors
who work there say it was a secu-
lar workplace.
Dr. Hala Abdul-Wahab, a
34-year-old Sunni who has
worked at the hospital for eight
years, recalls that when clashes
reached the hospital gates and
the number of wounded protest-
ers escalated, “we were just do-
ing our best to deal with whatev-
er was at hand. No one at the
hospital knew what was about to
happen, the gravity of it.”
But as wounded protesters
streamed in day after day, the
workplace rapidly became politi-
cized. Some medical staffers be-
gan demonstrations inside the
hospital wards, echoing the rhet-
oric on the streets.
Sectarian tensions began to di-
vide the staff. Senior doctors
were calling for the resignation
of government ministers. Some
Sunni doctors objected to the
role the hospital was playing in
the Shiite-led protest. Sunni and
Shiite staffers began discussing
events in segregated groups.
“For us it was very disturbing,”
says Dr. Abdul-Wahab. “There
were tents and press conferenc-
es, pictures of the injured, slo-
gans on the walls.” Sunni doctors
who didn’t support the protests,
she said, faced mounting pres-
sure. Shiite doctors, she said,
bullied staffers to sign petitions
calling for the resignation of the
Sunni health minister. “They
said our names would be includ-
ed on a shame list and on Face-
book—and that was an open
threat,” she says.
Shiite staff members say some
Sunnis refused to treat wounded
demonstrators. Sunnis counter
that some Shiite staffers refused
to treat Sunnis.
On March 15, the hospital was
stormed by police. At least five
Shiite doctors are under arrest or
missing, human-rights groups
say. Some have fled the country.
Masked gunmen from the mili-
tary and government-security
COPYRIGHT © DOW JONES & COMPANY, INC. ALL RIGHTS RESERVED
forces remained in the hospital
wards for weeks. Shiite doctors
have decried the government
presence at the hospital, as well
as the overall crackdown on
demonstrators. Some Sunni
medics have praised them.
The drama at Salmaniyah has
ushered in a much darker chap-
ter for Bahrain, and perhaps for
the region as a whole. Commu-
nities that have lived in relative
harmony have turned against
each other along sectarian lines.
Many protest leaders have
gone into hiding, and more than
800 are being held without
charges, human-rights groups
say. Thousands of protestors
have been fired by state-owned
companies for missing work, op-
position groups say. The Pearl
Roundabout is being dismantled
and will be reopened as a simple
intersection with traffic lights,
the government says.
Yemen: coping with
a crackdown
In January, only a few dozen
students were assembled in front
of Sana’a University calling for
the end of President Al Abdullah
Saleh’s 32-year rule. Now, the
area is known as Change Square
and is home to a sprawling tent
city of thousands of students,
Islamists, tribesmen, opposition
party members and defecting
members of the armed forces.
The result has been a cacoph-
ony of opposition voices, many
with their own ideas about the
terms under which President
Saleh should leave, the shape of
a transitional authority and the
pace of democratic change. Es-
tablished political parties have
fought to dominate negotiations
with the government, which cur-
rently are at a stalemate over
terms of Mr. Saleh’s departure.
Mr. al-Surabi, the student
leader, helped organize the
street protests after years of dia-
logue between the president and
opposition parties failed to result
in any political reforms.
“In the beginning, we thought
we would be able to follow the
same path as Tunisia and Egypt,”
he says. “But we’ve come across
many things we did not expect.”
From the start, protesters in
Yemen faced logistical and or-
ganizational challenges that
their counterparts in other na-
tions didn’t: The nation’s power-
ful tribal groups are far-flung and
independent, the political oppo-
sition is fractured, and the na-
tion’s technological infrastruc-
ture is lacking.
Yemen’s opposition has strug-
gled to win more than token sup-
PHOTOS BY AFP/GETTY IMAGES
port from Western countries.
Yemen is home to a well-organ-
ized and entrenched branch of al
Qaeda, which has made allies
such as the U.S. and Saudi Ara-
bia wary of abandoning Presi-
dent Saleh and some of his rela-
tives, who head the counter- ter-
rorism forces. The Obama ad-
ministration has thrown its
support behind negotiations
with opposition groups, talks
guided by Saudi Arabia.
On March 18, the standoff
turned violent. Government sup-
porters on rooftops opened fire
on thousands of demonstrators
after Friday prayers, killing at
least 50. Maj. Gen. Ali Mohsen
al-Ahmar defected to the opposi-
tion, deploying armored cars to
face off against units loyal to the
president, creating a standoff in
San’a, the capital.
The sudden support from the
military, says Mr. al-Surabi, was
a point of contention among
protesters. Prior to his defection,
Gen. Ahmar had been labeled a
war criminal on opposition flyers
distributed at protests.
Mr. al-Surabi contends the
voices of the students who start-
ed the uprising are being drow-
ned out. “Right now, I’m worried
that we’re losing control to…the
opposition parties, and I’m not
convinced that’s the best way
forward,” he says.
Large pro-government dem-
onstrations in recent weeks may
have stiffened Mr. Saleh’s re-
solve. The president has said that
any attempt to unseat him would
result in civil war. An aide to
Gen. Ahmar says that his forces
are intent on avoiding war. “We
don’t want to be Libya,” he says.
“We don’t want violence.”
On April 4, violence flared
anew with police killing at least
11 protesters in Taiz. Instability
spread to other southern regions
where al Qaeda is strong. More
than 100 have been killed. Inter-
national support for Mr. Saleh
eroded, and pressure grew from
Arab neighbors for him to trans-
fer power.
Despite the uncertainty and
tension, Mr. al-Surabi and his
colleagues say the revolutionary
movement has already won a
small victory by uniting Yemenis
in a way he would never have
imagined.
Libya: going to war
Nothing has been easy for the
revolutionaries in Libya. Ayman
Abu Shahma knows that as well
as anyone.
Dr. Abu Shahma, 42, lives in
Misrata, a rebel-held coastal city
that has been under siege by Lib-
yan armed forces for two
months. When the protests be-
gan in Tunisia and Egypt, he was
leading a quiet life with his wife
and four children. He worked in
the intensive-care unit at a hos-
pital and he owned a medical-
equipment import company.
“We were watching Tunisia
and Egypt and feeling sorry for
ourselves and wondering when
our turn will come,” he said in a
recent interview.
When protests began in east-
ern Libya, Col. Moammar Gad-
hafi’s regime countered on Feb.
17 with a bloody crackdown in
Benghazi. Two days later, in
many Libyan cities and towns,
including Misrata, residents
came out to demonstrate in soli-
darity.
Dr. Abu Shahma’s cousin and
best friend, Khalid Mustafa Abu
Shahma, was the first protester
shot dead in Misrata, he said.
“He was my best buddy. We used
to do everything together,” he
said, breaking into tears.
On the day of the funeral, he
said, the regime sent representa-
tives to try to appease the family,
partly by offering money. Dr.
Abu Shahma said his cousin’s fa-
ther responded that the family,
which belongs to one of the city’s
most prominent and influential
tribes, wanted nothing, that “it’s
Misrata that wants.”
After two more days of fighting
that left at least two dozen peo-
ple dead, Misrata fell into the
hands of rebels. Col. Gadhafi’s
forces pulled back and began
shelling, laying siege to the city.
Rebels formed military and
political councils to run the city’s
affairs and communicate with
rebels and the Interim National
Transitional Council in the east.
On March 6, the regime
launched an assault against Mis-
rata involving thousands of sol-
diers, militiamen and African
mercenaries, but the rebels held
their ground, said Dr. Abu Shah-
ma.
Since then, coalition air strikes
against Col. Gadhafi’s forces
have offered some help, but
street battles and shelling con-
tinue. Dr. Abu Shahma said this
week that hundreds have been
killed in Misrata so far.
Throughout the siege, Dr. Abu
Shahma has been describing the
situation in Misrata to reporters
all over the world, asking that his
name not be used. Recently,
he told The Wall Street Journal
that he wants to shed his ano-
nymity. “I have nothing to lose,”
he said.
He said rebels had no choice
but to fight. “If we stayed peace-
ful,” he said, “they would have
pillaged the city and slaughtered
us one by one.”
Tunisia: unrealistic
expectations
Of all the Arab nations con-
vulsed by unrest, Tunisia may
stand the best chance to become
a democracy. A transitional gov-
ernment is preparing for elec-
tions on July 24 to install a Con-
stituent Assembly that would
draft a new constitution and
election laws. A free democratic
election to chose a new legisla-
ture and executive could take
place next year.
In Tunis, the capital, where
economic opportunities have al-
ways been better than in the in-
terior, there is guarded opti-
mism.
“We are already winners. We
gained liberty of expression and
liberty of the Internet, which al-
lows us to protest—and that’s
important,” says Slim Amamou,
a 33-year-old blogger who was
jailed during the revolution and
is now secretary of state for
21
MONDAY, APRIL 25, 2011, DELHI
youth and sport. “We could have
much more, of course…We know
we have years of work ahead.”
In Tunisia, secularism is rela-
tively entrenched and the main
Islamist party, Ennahda, is con-
sidered one the region’s most
moderate Islamist groups. En-
nahda has yet to publish a politi-
cal program.
Yet in the country’s interior,
the mood is far less sunny. Peo-
ple there have discovered that
the fall of former president Zine
Al-Abidine Ben Ali hasn’t im-
proved their economic lot. Pro-
tests and strikes over working
conditions and pay are still com-
monplace.
The revolution crippled Tuni-
sia’s economy, and it’s only just
starting to recover. In Redeyev,
the local phosphate mine
couldn’t get its minerals to mar-
ket for 24 days after the revolu-
tion, according to workers there.
Jobless protesters demanding
work had camped out on the
railway lines. A textile factory
built by a Ben Ali ally has been
idle since January, its expensive
new presses still wrapped in
plastic. The owner fled and sala-
ries haven’t been paid, according
to security guards at the build-
ing.
“This period is quite danger-
ous for the country, as people are
impassioned and they want their
rights right now,” says Moncef
Marzouki. He blogged about the
revolution as a dissident in exile,
then returned to form a political
party—one of about 50, most of
them new, registered to date.
One day recently, protesters in
Sidi Bou Zid burned tires outside
the governor’s office, calling for
his ouster on the grounds that he
isn’t doing anything to improve
the town’s economic plight.
Members of the old ruling party,
the Constitutional Democratic
Rally, or RCD, still have their
jobs in the governor’s office and
have to go, they said.
The protesters were gathering
at the spot where Mohammed
Bouazizi set himself afire on De-
cember 17, sparking the revolu-
tion. According to his family, he
had just been slapped by a local
female official, who confiscated
his weighing scales so he
couldn’t sell vegetables from his
cart.
The townspeople are impa-
tient for change, and some hold
the governor responsible for not
creating jobs immediately. Faisal
Feleh Naji, who lost his 24-year-
old brother during the uprising,
complained that the latest gover-
nor, in office for a month, had
failed to sign a single contract
with investors to build new fac-
tories. “Nobody in Tunis listens
to us,” he said. “Every governor
who comes here, we’ll do the
same.”
Others worry that this kind of
permanent revolution is danger-
ous. “This is chaos,” said Wahid
Dhahri, a 27-year-old unem-
ployed teacher, a day after the
tire-burning protest. He accused
Tunisia’s political parties of stir-
ring up protests for their own
ends. “The youth are going out
today against troubles, triviality
and political parties. We’re going
to resolve this now!” he said,
leading his own crowd to the
governor’s office.
The governor has since re-
signed and was replaced by a lo-
cal candidate, who is proving
more popular.
Ali Bouazizi, who was eventu-
ally tracked down by the police
after secretly publicizing his
cousin’s death online, says it
galls him that so little has
changed in Sidi Bou Zid. “The
machine is the same,” he says.
“How can they guarantee free
and fair elections while [mem-
bers of the former president’s
party] still run the regime and
still control the funds?”
Says Mr. Marzouki: “What we
got was the departure of the dic-
tator, not the departure of the
dictatorship. We are winning by
points, not a knockout.”
—wsj@livemint.com
22 VIEWS mint
mint
MONDAY, APRIL 25, 2011, DELHI ° WWW.LIVEMINT.COM
1314

ourview
First published in
February 2007 to
serve as an unbiased
and clear-minded
chronicler of the
Indian Dream
EDITORIAL
LEADERSHIP TEAM
R. SUKUMAR
(EDITOR)

NIRANJAN RAJADHYAKSHA

The end of a
global trade in agricultural com- (EXECUTIVE EDITOR)

modities. Developing countries ANIL PADMANABHAN

TAMAL BANDYOPADHYAY
fear for the livelihood of their
PRIYA RAMANI
farmers if trade in these com- NABEEL MOHIDEEN
modities is liberalized. Both po- MANAS CHAKRAVARTY

deal in Geneva
sitions are of doubtful validity. MONIKA HALAN
Since 2001, when the Doha VENKATESHA BABU
Round was launched, the global SHUCHI BANSAL
SIDIN VADUKUT
food scenario has changed dra- JASBIR LADI
matically. Today, galloping food

T he prognosis for another
round of trade liberaliza-
tion was never good.
One summit after another wit-
nessed “collapse” of trade talks,
almost always on the same set of
issues. When late last week, Pas-
cal Lamy, the director general of
the World Trade Organization
said that “this is a grave situa-
tion for the (Doha) Round and
for all of the efforts and aspira-
tions it embodies,” he was only
saying what has been evident for
many years now.
The proximate cause for the
dead end is the issue of tariffs
on chemicals, industrial goods
and electronics. The US has
complained that developing
countries such as India, China
and Brazil are not reducing
these sufficiently. The latter say
they’ve already done enough—
and that too unilaterally. This is
nothing but an excuse to finish
and already asphyxiated deal.
All sides are to be blamed.
In retrospect, one can say the
world was not prepared for such
a deal even if its need has never
been more evident. Agriculture
is a good example of how hard
held positions are meaningless
in the face of changing circum-
stances. Rich countries are will-
ing to cut subsides for their
farmers. Even then, subsidies
would amount to billions of dol-
lars and would certainly distort
prices have the potential to im-
part an economic shock on poor
countries. If anything, cheap
subsidized foodstuffs will benefit
poor countries. And the world
hardly able to keep up produc-
tion of food to match demand.
Cheap US and European food
can douse inflationary fires that
have been lit across the world.
It is fine for developing coun-
tries such as India to harp on
the survival of their farmers. But
have they done anything to end
the structural crisis that plagues
agriculture? The slow pace of
agricultural growth in India
since 2001 and the sclerotic level
of public investment in the sec-
tor clearly shows that farmers’
welfare has only served as a
good excuse at fora where trade
negotiations are held.
In the absence of a multilater-
al, rule-based, trading agree-
ment, it will be every country for
itself. Bilateral and regional
trade agreements will become a
norm. This will be an asymmet-
ric contest of wills in which the
losers will be the poor countries.
FOUNDING EDITOR
RAJU NARISETTI
PUBLISHED/PRINTED BY
VIVEK KHANNA
ON BEHALF OF
HT MEDIA LTD
18­20 Kasturba Gandhi
Marg, New Delhi ­ 110 001
Printed at HT Media Ltd
presses at
SHYAMAL BANERJEE/MINT
•B­2, Sector 63, Noida,
There is no doubt that the US Distt Gautam Budh Nagar,
Uttar Pradesh &
and other countries too are cul- •Plot No. 8, Udyog Vihar,
pable in bringing down the Greater Noida, Distt Gautam
Doha Round. The purpose of Budh Nagar,
Uttar Pradesh ­ 201306;
this round was to make poor •Plot No.6, TTC Industrial
countries partners in global Area, Thane­Belapur Road,
trade. The niggardly behaviour Navi Mumbai ­ 400708;
•MNS Printers Pvt. Ltd,
of rich countries has ended that #345/4, Bhatrahalli, Near KR
dream. Puram RTO, Old Madras Road,
Is the Doha Round dead? Tell Bangalore ­ 560049;
•Texmaco Ltd, BT Road,
us at views@livemint.com Panihati, 24 Parganas
(North), Kolkata ­ 700058;
•MNS Printers Pvt. Ltd, 76/1,
Poonamallee High Road,

Islamabad confidential
division of labour in Islamabad
prevents a meaningful dialogue.
Afghanistan and Kashmir are
two areas where the assent of
Velappanchavadi,
where. The reason for this Chennai ­ 600077;
is simple: Over the decades, •Bhaskar Print Planet,
Survey No. 148P, Changodar
public opinion in that country Bavla Highway, Sanand (Tal),
has been inflamed to such an Distt Ahmedabad, Gujarat.

I t does not require much ef-
fort to realize that India’s
relations with its western
neighbour are icy. There are pe-
riodic bouts of effusion and
warmth—over cricket, the so-
called track II diplomacy, “unof-
ficial” envoys, people-to-people
contact and a host of other un-
orthodox efforts—but overall,
the political temperature be-
tween New Delhi and Islamabad
remains, to put it mildly, in the
sub-zero range.
One important reason for In-
dia’s inability to take fruitful
steps has been its studied shun-
ning of a vital constituency in
that country: the army. Recent
news reports suggest that Prime
Minister Manmohan Singh has
appointed an unofficial envoy to
reach out to the Pakistan’s chief
of army staff General Ashfaq
Parvez Kayani. The prime minis-
ter’s office denied the report
promptly. Even if no such step
has been taken, talking to Kaya-
ni would a right step.
It has been more than three
years since a civil government
came to power in Islamabad.
For two countries with difficult
relations, that is sufficient time
to initiate dialogue. That has not
happened. In practice, the talks
keep getting derailed on trivial
matters: the names by which
these go and non-existent issues
being raised during meetings
are two examples. In reality,
however, the problem is that
New Delhi’s civil counterparts
dare not cross the red lines
etched by the army. An internal
the armed forces is essential be-
fore the elected government can
do anything. India will need to
do some heavy lifting if this state
of affairs is to be changed. Talk-
ing to the army is part of this
process.
It has been suggested that
reaching out to Kayani would
undermine the democratically
elected Yousaf Raza Gilani
government. When it comes to
democracy, our dealings with
Pakistan fall in a different league
compared with what we do else-
extent that a democratic •Jagati Publications Ltd,
Plot No. D­75 & E­52,
government is bound to run into APIE Industrial Estate,
political problems with its Balanagar,
constituents if it takes creative Rangareddy Distt.
Hyderabad ­ 500037
steps to resolve problems with
*Also available in Chandigarh
India. There are serious limita- and Pune.
tions to what democracy can do RNI Registration
in improving ties. For that rea- DELENG/2007/22485
son alone, no option should be Mint welcomes readers’
ruled out. And that includes responses to all articles and
editorials. Please include your
General Kayani. full name, address and
telephone number. Send in
your views to the editor at
Should India reach out to letters@livemint.com
General Kayani? Tell us at © 2011 HT Media Ltd
views@livemint.com All Rights Reserved

myview A VISIBLE HAND added to the club. (Though at $350 bil-

lion, its economy is a minion compared
NARAYAN RAMACHANDRAN with that of the others, South Africa
owes its inclusion more as a way of in-
cluding the African continent politically
and a window into the rest of Africa
rica initially supported, but later recant-
ed). Though the Libyan operation is
showing signs of fatigue, particularly
from the US, only time will tell whether
the rhetoric from the BRICS has had any
impact on Nato.

REORDERING THE WORLD economically.)

As yet, the BRICS have been long on
words and short on action. But clearly,
muscles are being flexed. All five na-
But before the world settles into a
“positive” multipolarity, we may go
through a phase of what I call global co-
alition politics—a weak form of multiple

B efore he died in 323 BC, Alexander

the Great had overthrown Darius III
to conquer the Persian empire. The con-
quest included Assyria, Asia Minor,
Egypt, Mesopotamia, Persia and the
steppes of Central Asia. The 300 years
that followed this conquest, the so-
called Hellenistic period, are a good ex-
ample of a multipolar political world.
Macedonia, Syria, Pergamon and
Parthia vied with one another for domi-
nation, but no single state could estab-
lish hegemony. In the end, all were left
weakened, to be dominated by a surging
Roman empire from the first century BC
onwards.
Many scholars believe that we have
now entered a similar period in world
history. The economic troubles of the
US, which began during the dot-com
boom-bust, aggravated by political and
economic actions following the 9/11 ter-
rorist attacks, and culminating in the
credit crisis of 2008-09, are cited as
proof by the “declinists” of the US’ erod-
ing influence. The rise of the East, on
the other hand, is evidenced by China’s
rapid economic growth, military build-
up and overall domination of global
manufacturing.
This combination of the US’ decline
and the rise of a new power in the East
has had an on-again off-again quality to
it. Writing for Foreign Affairs in 1988,
Harvard’s Samuel P. Huntington had
As others challenge the
US’ singular status, the
world may go through a
phase of coalition politics
before it settles into a
‘positive’ multipolarity
noted that the theme of “America’s de-
cline” had come in several waves—in
reaction to the USSR’s launch of Sput-
nik, the Vietnam War, the oil shock of
1973, the rise of Japan, and so on. De-
clinists argue that the US has been liv-
ing beyond its means for many years,
weighed down by an expensive military
and a sliding economy. They claim such
“imperial overstretch”, combined with
intensifying social and political prob-
lems at home, has historically led to the
decline of other great powers such as
the UK and Spain.
The recently concluded BRICS (Bra-
zil, Russia, India, China and South Af-
rica) meeting in Sanya on the pictur-
esque Chinese island of Hainan pro-
vides grist for the declinist’s mill. This
was the third annual meeting of the
group, and South Africa has just been
tions are current members of the United
Nations (UN) Security Council (India,
Brazil and South Africa are non-perma-
nent members elected to two-year
terms), and the group is dealing with
several critical issues. These include the
role of the dollar in the international
currency reserve system, reform of the
International Monetary Fund’s (IMF)
role in crisis management, Russia’s ac-
cession to the World Trade Organiza-
tion, India’s and Brazil’s Security Coun-
cil aspirations, and cooperation on food
security. Critics charge the group with
being a toothless organization, with
more rhetoric than action.
Yet the BRICS are not the only group
to challenge the US’ singular status. In
the wake of the credit crisis, the Group
of Twenty (G-20) has already supplant-
ed the traditional role of the Group of
Seven and the Organisation for Eco-
nomic Co-operation and Development
in global economic affairs. In a new
world order, the BRICS could become a
similar political counterbalance to the
US, though its heterogeneity could
make it an unlikely foil for North Atlan-
tic Treaty Organization (Nato). Its politi-
cal clout also has a long way to
go—even as Nato, led by France and
supported by the US and UK, conduct
air strikes on Libya, the BRICS have
been powerless spectators despite their
opposition to the use of force (South Af-
power centres. Lots of give and take,
confusion, acceptance of alternative
views and courses of action will proba-
bly dominate the world order for a few
years. As the globe builds/rebuilds mul-
tilateral organizations focused on the
next 50 years, this confused state should
give way to a more balanced power
structure. My bet is that such an archi-
tecture will be governed by a modified
UN (with Brazil and India as permanent
Security Council members), a reformed
IMF that is less bureaucratic and more
flexible, a more purposeful Nato, and a
more cohesive and influential BRICS
that forms the political core of the
G-20’s economic powerhouse.
P.S.: Mahatma Gandhi said: “A policy
or governance structure (my italics) is a
temporary creed that is liable to be
changed, but while it holds good it has
to be pursued with apostolic zeal.”
Narayan Ramachandran is an
investor and entrepreneur based in
Bangalore. He writes on the interaction
between society, government and
markets. Comments are welcome at
narayan@livemint.com
To read Narayan Ramachandran’s
previous columns, go to
www.livemint.com/avisiblehand
 VIEWS 23
MONDAY, APRIL 25, 2011, DELHI ° WWW.LIVEMINT.COM

theirview
Saurabh Tripathi
is partner and director at
Boston Consulting Group.
Building India’s villages better
Throwing more money at state governments is not an
answer to the problem of creating rural infrastructure
D iscussions on infrastructure
are typically dominated by
large projects such as power,
airports or national highways. Rural
infrastructure, which serves 70% of
the population, doesn’t get the atten-
tion it deserves. As the Planning
Commission sets out to draft the
country’s planned investments for
the next five years, it is important to
take note of this gap, and the innova-
tive solutions needed to fill it.
Rural infrastructure comprises
small local projects—roads, bridges,
local irrigation, creation of market fa-
cilities, and so on. Such projects have
long gestation periods and are rarely
commercially viable on the basis of
user charges. Public-private partner-
ship (PPP) models based on such
charges tend to break down. As a re-
sult, the onus of managing the pro-
jects ends up with state governments,
which often do not have the required
administrative apparatus. The mid-
term appraisal of the 11th Plan and
progress updates on Bharat Nirman
show that the flagship scheme for ru-
ral infrastructure investment has a
60-65% achievement rate on planned
targets compared with 85-90% on
non-rural infrastructure development
programmes.
There is another, more fundamen-
tal difference. Infrastructure projects
have massive indirect economic ben-
efits in the form of development of
the local area. But results come only
with concurrent deployment of mul-
tiple programmes. For example, a ru-
ral road leads to quicker develop-
ment when it is complemented with
power supply, extension of agricul-
tural technology, and warehousing
facilities. (In urban centres, market
forces quickly complement public
funded infrastructure such as a fly-
over or road). This requires coordina-
tion between different departments
of the state government. It involves
bringing together knowledge about
other things besides road construc-
tion—the local economic dynamic,
HARIKRISHNA KATRAGADDA/ MINT
animal husbandry, soil conservation,
irrigation techniques, water conser-
vation, cropping pattern, and more.
Even the most progressive state gov-
ernments find it difficult to break si-
los between ministries and depart-
ments. Coordination is sacrificed on
the altar of inter-departmental turf
battles.
India’s planned investment on ru-
ral infrastructure in the 11th Plan was
`4.4 trillion. At about 1.5% of the
gross domestic product, it is one-
third of China’s. Should India want
to match China, its absolute planned
expenditure in rural infrastructure
has to go up by more than five times.
That is a lot of money. Unlike urban
infrastructure, this money has to
come from the government. Private
sector contribution cannot be
counted on to fill the gap. But since
the government itself may not be now lends the RIDF money to state and deployed in bankable-infrastruc-
able to come up with such funds, it is governments and state-owned ture projects. The fund manager—an
important that whatever money is corporations for rural infrastructure institution such as the India Infra-
allocated to rural infrastructure is projects. It has multidisciplinary structure Finance Co. Ltd or a bank—
spent efficiently. Doling out even technical capabilities in over 25 areas is expected to enhance the debt
more funds to state governments in related to rural infrastructure and raised by these funds. It makes sense
the form of Bharat Nirman grants will agriculture productivity improve- to earmark a segment of IDF for rural
not be the answer. We need a value- ment. It has manpower deployed in infrastructure. Unlike the IDF for
added intervention in the process of each district of the country to moni- urban infrastructure, the rural IDF
deploying such funds to get higher tor the projects that it finances, and would need to be able to lend at
returns on the investment. This inter- in state capitals to liaise and coordi- subvented rates (due to commercial
vention has three objectives—(1) to nate with different state departments. non-viability of projects) to state
ensure coordination across state gov- It is an ideal institution to scale up governments, state-owned corpora-
ernment departments; (2) to bring the government’s rural infrastructure tions involved in rural infrastructure
together multidisciplinary knowhow funding. However, RIDF’s outstand- creation, and PPPs created on an
for each small rural project; and (3) ing is only about `65,000 crore, annuity basis.
to create annuity-based PPP where almost like a “pilot” compared with The government has placed a pow-
possible. what is required. But it is a pilot that erful emphasis on financial inclusion,
In 1982, The National Bank for Ag- can be scaled up. The government and the results will show in some
riculture and Rural Development could channelize a portion of the time. It’s time to provide the comple-
(Nabard) was set up as a premier Bharat Nirman funds through mentary infrastructure to leverage fi-
state-backed institution to play a fa- Nabard to ensure higher develop- nancial inclusion. People need to
cilitative role in agriculture and rural mental returns. have money to put in those no-frills
development, refinancing agriculture Where could additional funds accounts that banks are opening for
loans provided by commercial and come from? The latest in the govern- them. They need to have the basic in-
cooperative banks. Over time, Nab- ment’s well-intentioned initiatives in frastructure before they can take
ard came to manage the Rural Infra- infrastructure development is the loans to invest in their farms or small
structure Development Fund (RIDF) proposal to create Infrastructure local factories.
made up of money from commercial Debt Funds (IDF). These long-term
banks that did not fulfil their priority funds are to be raised from the mar- Comments are welcome at
sector lending commitments. Nabard kets, including international ones, theirview@livemint.com

yourviews
Growth in India is skewed
The pirates of Somalia as the services sector has
grown to the extent that
The United Nations (UN), navies and the govern- it accounts for over 60%
ments surrounding the Arabian Sea should pool of the country’s gross
their resources to tackle Somali piracy (Re: To Davy domestic product (GDP)
(Re: A large dent on pover-
Jones’ Locker, Mint, 19 April). The UN Security
ty, Mint, 19 April). Much of
Council should pass a resolution to seal off Somali this growth excludes the in-
coast, creating a sea barrier with the help of navies volvement of unskilled
of the countries surrounding Arabian Sea. The action workers and the rural pop-
against pirates should be forceful. In fact, naval pow- ulation. As a result, this im-
pressive growth has failed
er should be used to eliminate them as they are a
to make a dent on poverty.
threat not only to commerce and trade, but also to The per capita income fig-
the maritime security of the countries in the region. ures derived from the GDP
Pirates are criminals who forfeit human rights. It is numbers are misleading
also essential to find out if there are any persons/ and hence the estimates of
the below poverty line
groups who provide resources and logistic support to
(BPL) population will be
the pirates. They, too, need to be dealt with severely. wrong.
With the very high rate of
—GILBERT D’SOUZA
inflation the BPL numbers
would surely have
increased and not
decreased as you have
YOUR TURN TO TALK claimed in your editorial.
Economic growth has to
We thank our readers for some very interesting letters in response to our stories be “inclusive”. In the
and columns. Do continue to write to us at yourviews@livemint.com absence of inclusiveness,
skewed growth leads to in-
creased consumption by a
small fraction of the coun-
try’s population. This stra-
tum is the immediate bene-
ficiary of growth and
spending on its part con-
tributes to inflation. By the
time the fruits of growth
percolate down to the poor,
their earnings lose purchas-
ing power.
The answer to your poser
“growth or redistribution:
what is the key to removing
poverty?” is neither of the
two. The key is inclusive
growth, taking care that it
generates employment for a
cross section of the society.
The key is to make the en-
tire adult population pro-
ductive and make it less de-
pendant on subsidies.
The key is “rurbanisa-
tion”—strengthening of ru-
ral infrastructure to ensure
that growth reaches the ru-
ral areas of the country.
—SHIRISH AMIN
In the editorial “Confusing
the role of Lokpal,” (Mint,
14 April), it has been rightly
pointed out that one way
of derailing an institution
is to overburden it. The
suggestion of the Congress
general secretary, Digvijay
Singh, has been made with
an intention to confuse
the role of the proposed
Lokpal.
This is a panic reaction
from the “official” side
and indicates the fact that
every method will be
adopted to confuse the
public with new and
untimely brownie points.
Opinion on the subject
should be framed after a
detailed study of the facts
and issues and should be
made in a democratic way.
Just issuing an idea to
dilute the issue will not fool
all those who have strug-
gled with Anna Hazare.
Corruption can be
compared with the salt for
which Gandhi started his
satyagraha. All people use
salt and all are affected by
corruption.
As far as role of Lokpal in
investigating private sector
is concerned, at this stage it
is not necessary to invest it
with such powers. The cor-
ruption cases that have
emerged in last two years,
highlight the culpability
of the government. Our
governance structures are
such that some in the gov-
ernment promote corrup-
tion and private sector
makes use of loopholes for
its benefit.
If corruption among
politicians and civil
servants is checked, the
private sector will automat-
ically desist from trying to
make money by dubious
means. Therefore, the
suggestion to enlarge the
mandate of the Lokpal is
mischievous.
—S.R. MISHRA