May 26, 2008

life in financial markets: corporate social responsibility


As a journalist, I have never done any reporting on the petrochemical and oil refinery industries until recently when I was asked to write about Reliance Industries' (RIL's) corporate social responsibility (CSR) initiatives. My take on CSR is that while companies would always strive to produce more and profit more products that may or may not be hazardous to the society or the environment it is ultimately for urban educated consum
ers to apply their minds in using a little or more of the end-products of any company.

As an aside, for the first time, as a small part of my working on the CSR story on RIL I had a look at petrochemical manufacturing. Poly vinyl chloride (PVC) is one of the petrochemical products and it is made from the mixing of chlorine and ethylene and is used in many products. Some find PVC hazardous.

Other petrochemical products include polyethylene and polypropylene that are used in products similar to those in which PVC is used. Then, you have the polyester products from petrochemical plants that are used in textiles and other things. More about these and other petrochemical products can be read in the 5-6 pages around page 25 of RIL's annual report for the financial year 2007-08 that can be downloaded from their website.

Anyway, I visited the Hazira industrial belt (near Surat in Gujarat) where RIL has one of its petrochemical plants in India. Impressions from just one visit might not be wise to rely upon but I can at least share two photographs I took when I was there. The one to the right is a daytime (1110 hours) picture taken on 8 May and it shows a small part of the Hazira industrial area (that stretches from the western outskirt of Surat right upto Hazira port that lies on land reclaimed from the Arabian Sea). The photo above to your left is a nighttime (0133 hours) picture taken on 9 May of RIL's glittering petrochemical plant.

Coming back to the CSR story, here is what I contributed:

CAN IT BE RELIED UPON?

RIL has taken steps in CSR but it is early days yet to conclude whether these are baby steps or giant steps.

Sometime in March this year, Amisha (name changed), a young woman in her early twenties, staying on her own in a shanty in Silvassa was noticed by Gujarat State Network of People Living with HIV (GSNP+). She was HIV+ and even though her husband, working in a government authority body, had infected her, he threw her out of his home after she delivered a baby child (who was not HIV+). In a state of shock and hurt, she took to small-time work and earned a meagre sum of Rs 500 a month.

When she also developed tuberculosis and fell severely ill she was noticed by GSNP+ who immediately bought her to Reliance Industries' (RIL's) health centre at Mora village near its Hazira petrochemical plant at Surat district in Gujarat. This well-equipped health centre provides free treatment for tuberculosis treatment based on the strategy recommended by the World Health Organisation, known as Directly Observed Treatment, Short-course or DOTs in short. It also gives free treatment for phase I AIDS-affected people.

Amisha got swift treatment from RIL-appointed chief medical officer, Dr Ashok Mewara, and his team at the Mora health centre. "But she did not want to go back and insisted to us that she be allowed to work at the centre for just food and accommodation and no salary," says Dr Mewara. But Dr Mewara gave her the job of a cook as well as a salary. "She is now aiming to seek qualification as a nurse and we will support her."

This young woman might very well represent another side of RIL's tough corporate image of doing all that it takes to grow its businesses and profits year after year. The company, last year, even got the TERI (The Energy and Resources Institute) Corporate Award for Business Response to HIV/AIDS.

Other companies in India, who cover AIDS in their CSR initiatives, limit themselves to spreading awareness of risks and protection measures but RIL goes further and funds full-fledged treatment with the expertise of its NGO partners GSNP+ and Lok Vikas Sanstha. "RIL believes in doing it differently," says Dr. Shrinivas Shanbhag, group medical advisor at RIL. "We started the Mora centre in May 2004 on the back of a World Economic Forum request to join them in their fight against tuberculosis across the world."

Later that year, when many TB patients were getting diagnosed as HIV+, RIL upscaled the entire centre to include treatment for AIDS. RIL has started duplicating the Hazira model at its Jamnagar plant at Saurashtra and will soon go live with an AIDS-treatment at its Patalganga. According to a World Bank case study on corporate responses to HIV/AIDS, RIL spent Rs 75 lakh on the Hazira initiative providing active antiretroviral therapy to 330 patients and treatment to 166 tuberculosis patients and monitoring 626 HIV+ cases.

But RIL's CSR is not about fighting TB and AIDS though. Its annual report of 2006-07 lists several other projects encompassing healthcare, education, workforce safety and environmental health. These encompass initiatives at and around its plants such as Jamnagar, Dahej and Patalganga.

For instance, the 9-year old Dhirubhai Ambani Hospital, at Lodhivali in Raigad district on the old Bombay-Pune highway, provided free treatment to 453 highway accident victims during 2006-07 as well as free or subsidised treatment to other patients from poor families in the surrounding areas. In another case, RIL has tied up with the National Association for the Blind to fund corneal transplant surgeries, at Rs 5,000 per surgery, on those blind people who come from the poorest sections. Till date, it has funded 5600 surgeries.

Hardev Singh Kohli, executive director at RIL and a member of the company's health, safety and environment committee, recalls the time 20 years ago when Dhirubhai Ambani had invited him to join the Hazira unit when it was being set up. "He told me to ensure that if the villagers face any problem the company should take care of it." Kohli lists the initiatives.

In mid-90s, RIL contributed to the about Rs 25-30 crore cost of building of the Wier-cum-Causeway dam on upstream Tapi that supplies water to the industrial units at Hazira. Before this, the state government was diverting millions of litres of water from an irrigation canal to Hazira's industries and depriving farmer of water for crop cultivation. "Environmental concerns were raised but I told them that if any damage occurs RIL will take care of it," says Kohli.

Kohli also highlights RIL's initiatives in innovatively using polyester products. "Subsequent to the incidents of fire in train compartments, from the polyester plant we recently started making a product blended with bico fibre that is now being used by the Indian Railways in the cushions of seats of their coaches as an improved safety feature." The company recently started a project involving rag pickers who get PET bottles for it that is then recycled and converted into a fluffy fibre that is used filling in pillows and brings down their cost by half.

In a community initiative, Surat, two years ago, it constructed a new school building for physically disabled children for Disable Welfare Trust of India that provides free education to disabled children, and currently funded and got government approval for the school to extend their classes from 10th standard to 12th standard.

RIL's Corporate Sustainability Report (CSuR) for 2005-06 states the company's investment in various community initiatives across locations was Rs 36.45 crore in 2005-06. It was less compared to Rs 45.08 crore spent in 2004-05 because as the report stated "we believe in developing self-sustaining financially independent ventures for communities, like public schools and hospitals."

As with every major company in the country setting up large industrial units RIL has had its fair share of criticisms regarding environmental issues and acquisition of land from villagers that have their lands within the company's chosen factory sites. But it is also believed to the one company that pays a generous value for the land acquired for its projects.

Environmental issues remain. "The real risk is of what a single deadly mishap can do because at any given day the large manufacturing units of companies like Reliance are consuming crores of litres of water and tons of other hazardous raw materials into their manufacturing process," says Darshan Desai, a chemical engineer and member of Prayas Team Environment India, a Surat-based NGO into animal welfare and environmental protection.

New green technologies have helped RIL bring down emission levels at its various plants. The company's CSuR for 2005-06 stated that data on air emissions of sulphur and suspended particulate matter are captured via online monitors at each manufacturing location.

The report also lists other measures such as recycling 23,000 tons of packaging material, reverse osmosis plant at Jamnagar reducing overall water consumption there by 3 per cent, a 26 per cent reduction in hazardous waster generation over previous year from 27.46 thousand metric tons (tmt) to 20.43 tmt, a flare gas recovery system at Jamnagar reducing emissions of carbon dioxide, nitrogen and sulphur and only a marginal increase in total wastewater generated from 11.65 million cubic metres (mcm) in 2004-05 to 12.16 mcm in 2005-06.

Surprising it is therefore that RIL finds it name in the list of non-responding companies to the Carbon Disclosure Project (www.cdproject.net) that was launched in 2000 at No 10 Downing Street in London. The project that has institutional investors as its members, asks all large companies to disclose detailed information on greenhouse gas emissions. In 2006 and 2007, RIL and many other Indian companies, who were asked by the CDP, did not respond.
RIL has come a long way. The changing dynamics of the global marketplace is also making it fine-tune its CSR strategies. How much of it translates into real value and sustains, only time will tell.


May 22, 2008

life in general: tender coconut water!


Last month, I worked on a story on tender coconuts for the magazine I work for. It was an idea that came to me in March when I was drinking tender coconut water, as I often do, at one of the
street-side retailer near my office. The final outcome of all that is what I share below. The story talks of coconut orchards (or coconut groves as some would prefer to call it). To your left is a photo I clicked of one such large coconut orchard when landing at Coimbatore airport last month (when I had gone to report on Tirupur and Coimbatore for an industrial slowdown story... see the second post prior to this one). I can't say for sure whether this orchard had trees bearing tender coconuts or hard coconuts but I know that after landing at Coimbatore and heading to Tirupur by road I halted near a village to drink tender coconut water at a street-side vendor and he said it came from one of the local orchards in Coimbatore district itself.


Here is the story I wrote:

TENDERLY TOUCH

The business in one of nature's most valuable gifts has exciting dynamics.

In the hot afternoon sun of 11 April, the steady summer breeze was swaying about 180 trees in Krishna Prakash's five acres of coconut palm orchard in Mandya district in southern Karnataka. At that exact moment, a bright orange-coloured truck carrying about 6,000 tender coconuts was nearing Bombay in its 28-hour and 1,200 km long trip from the Maddur APMC (agricultural produce market committee) mandi in Mandya to green tender coconut wholesaler K.B. Beeravunni's area of operation in Andheri in Bombay.

The truck reached Beeravunni at midnight. Two of Beeravunni's men boarded it and in the next four hours of the night they took it for delivery along seven western suburbs from Bandra to Goregaon covering 20 kms. They unloaded all the 6,000 tender coconuts at 30 streetside retail outlets. Beeravunni caters to around 100 retailers but that day he had got phone calls from 30 for replenishment of their stock. Some of them retail outlet were delivered 100-150 tender coconuts while some got 200-250, and it took 5-10 minutes to unload at each outlet. In the night golden lights of Bombay's streets, none of the retailers were present at the time of delivery but Beeravunni's men would cover the unloaded fruits with the retailers'tarapaulin sheet.

In the morning the 30 retailers came to their outlets and sold 60-90 per cent of their tender coconuts by late evening. The sweltering humid heat of Bombay's summer ensured that. These retailers' stock got replenished next night by Beeravunni or some other wholesaler's truck that came from Maddur.

BW takes a look at the business of tender coconuts in the country. Due to their concentrated populations the cities are the largest market for tender coconuts. Green coconuts of Kerala and Tamil Nadu are best suited for extracting oil while that of Karnataka are tender and has more water content.

Bombay is the largest market in the country currently accounting for around 170,000 tender coconuts every day during the peak months of March to June and mid-September to mid-November and between 80,000 and 130,000 during other months. At an estimated average per-coconut retail sale price of Rs 15-16 during the peak months and Rs 11-12 during the other months the total turnover in a year in Bombay would currently be between Rs 53 crore and Rs 69 crore. Maddur APMC agents and Bombay's wholesalers further estimate that Bombay accounts for 40-50% of all India sales. The estimated national retail sales of tender coconut in a year, therefore, would be between Rs 106 crore and Rs 172 crore.

There are 45-50 tender coconut wholesalers in Bombay catering to 2,000-3,000 retailers. Beeravunni gets his hired truck every second day during peak season and twice at other times. Some of them deal in quantities like Beeravunni while some of them are bigger transporting in 1-2 trucks every day during the peak season. There are two types of trucks used – the regular sized one that are licensed to weigh maximum 10 tons carry 5,600-6,000 tender coconuts and the longer truck that have a maximum licensed capacity of 15 tons carry 8,500-9,300 pieces.

The dynamics. "The last few years have not seen much growth in income but it has been steady," says Beeravunni. "The business has been recovering from a slump two years ago when a pest attack caused extensive damage to the coconut palms in Mandya and other places." Mandya APMC's figures bear this out – 49,560 metric tonnes were transported out in 2005 while it was lower at 43,003 in 2006. It picked up only last year at 56,568 metric tonnes.

The Mandya district's hundreds of acres of coconut palm orchards not only grow the most number of tender coconuts in the country but also figure in the top growing regions in Asia. At an estimated average weight of 1.6 kg per tender coconut (big-sized ones weigh around 1.9 kg while the small-sized ones weigh around 1.1 kg) Mandya's 2007 produce translated into 35.35 million pieces. Of this, about 26 million got transported to Bombay, and the rest to Bangalore, Hubli, Pune, Thane and elsewhere in Karnataka and Maharashtra.

"Nine out of every 10 trucks during December to June come from Mandya and the one remaining truck comes from Mangrol in Junagadh district in western Gujarat," says Beeravunni. Herein, lays an interesting twist in the story. The Mandya tender coconuts plucked from the orchards in end-June and upto September-October tend to loose their green skin colour and become black from the outside within 2-3 days of storage.

The water inside, however, does not spoil. "But consumers think the black-skinned ones are spoilt and don't buy them and so we shift our purchases to Gujarat at that time," says Beeravunni. The tender coconuts from Mangrol do not suffer from this problem. From July to October, therefore, Bombay's consumption demand, which anyways reduces by 25-40 per cent, is met from Mongrol. From November to February, the winter months, the demand is half.

Conscious tender coconut water drinkers can notice the difference in taste – the ones from Mandya are sweet and contains more of tender milky kernel (or malai) while the Mongrol ones are mildly salty and has much less malai content. It is not surprising because Mandya district in central Karnataka far away from the coast while Mongrol is right along the Porbandar coast of the Arabian Sea in western Gujarat. Soil conditions cause the change in taste.

But some factors are secular in nature. A severe pest attack in 2005 and 2006 on tender coconut palms was from an airborne pest and it coconut palms across the states of Kerala, Karnataka, Gujarat, Tamil Nadu and others.

Mongrol is about 1,000 kms away from Bombay. When Bombay is picking its tender coconunts from Mandya, Mongrol supplies more to its regular markets in Gujarat, Delhi, Punjab and Haryana.

The economics. At the coconut palm orchardist's end the cost-dynamics are noteworthy. Each tree in Krishna Prakash over 180 fruit-bearing trees in his five acre orchard in Mandya yields fruit three times in the year. "In this region, one coconut palm seedling takes seven years to grow into a proper fruit-bearing tree," says Prakash. One seedling costs Rs 100. The costs an orchardist like Prakash incurs during these years are on manure (organic at times and chemical at times) and labour, and these can add up to Rs 250 per month.

The cost of fertile land would vary across states but most orchardists like Prakash own their land since the last 30-40 years at the least. "From a matured tree I get 50-70 tender coconuts in every fruitation," says Prakash. "The highest I have ever got from the local APMC agent who comes to collect the tender coconuts directly from my land is Rs 3.50 per fruit." Prakash's 180-odd trees yields fruits three times a year but there are orchardists whose trees gives yield upto six times a year.

A big-sized tender coconut costs the Bombay consumer anywhere between Rs 15 and Rs 20 currently, up by 30-50 per cent from Rs 9-13 just two years ago. But in this period Prakash has seen his per fruit realisation fluctuate between Rs 3 and Rs 3.50 only, that is, in a range of 10-20 per cent only.

The largest margins in the tender coconut business are made by the APMC agents some of whom, depending on the state and the district, are also politically connected. This is partly because they receive their APMC agent licenses from the state government. That is also the reason why no one hears the orchardists' plea with the state governments to hike the government-determined minimum prices at the various mandis. There are 15-20 agents in Maddur APMC and about 20-25 agents in Mongrol that make up for more than 75 per cent of all tender coconut trades in the country.

The relationship between APMC agents and the orchardists vary depending on size and need of the latter. If an orchardist is small having one acre or less and in need of advance money for personal expenditure or a marriage in the family then a APMC agent would pay him a lumpsum of Rs 1-10 lakh and fix in advance the rate at which he will buy future harvests of the orchardist. This rate is invariably a low rate and worse, the orchardist gets the same lower rate for 3-7 years, depending on the original agreement, even if the rate to the Bombay consumer doubles.

The next powerful element in the business chain is the city wholesaler who also needs to have strong local contacts, some of them political or municipal, to survive in the business. They took make a neat packet from the business although the growth in income has not been much for them either in the last few years. Streetside retailers take their relevant cut too in the chain, but are generally not as well placed as the wholesalers. "Even on the hottest days when there is a rush of people to drink the tender coconut water, there is a limit to how much I can earn," says Anna, a retailer in Kandivli who, interestingly, puts 50-70 tender coconuts on his bicycle at a time and roams from area to area to sell. "The cutting of the hard nut and then fleshing out the malai takes a fixed amount of time."

The cash-flow management is interesting. At times the city wholesaler has to pay the APMC agent upfront for the produce that is loaded by the agent in the trucks. At other times credit is offered for 1-2 months and is usually a continuous rolling process. The wholesalers, in turn, collect payment from the retailers days, sometimes weeks, after a delivery.

No books of accounts are prepared except for some loose sheets of papers in which the wholesaler details the number of tender coconuts supplied to each retailer at different days. The payments made are in cash, except in the case of some wholesaler-APMC agent dealings where the wholesaler deposits cash directly in the bank account of the APMC agent. "Most of us have been in this business for around 30 years and the trust between all of us is good," says Beeravunni.

The good and the not-so-good. In the end, the tender coconut water business is among the most dynamic in the un-organised sector. It is also the only trade in fruits where the end-produce is in liquid form. The end-consumer does not have to do anything to extract the juice out of the fruit. The juice is in ready form ready to be drunk.

Tender coconut is also perhaps the only fruit that is recommended the most by nutritionists and doctors, and one of the major factors in the large consumption demand in the ailing populations of cities.

But there is a flip side. The weight of the water and the malai inside the tender coconut is less than a quarter of the weight of the outer shell. These heavy shells, in millions of quantity, go to the cities' garbage dumps and add to the problem of land requirement for those dumps. The government nor the private industry has thought it fit to manufacture from the husk of the empty tender coconut shells an end-product that can be used as soft wood.

The transportation from more than 1,000 kms away by diesel trucks also leads to a high carbon footprint. However, it is still ok if one compares the carbon footprint of other nutritious fruits that too travel thousands of kms to reach the cties.. Let's drink tender coconut water to that!


May 18, 2008

life in general: this week's bomb blasts in jaipur

The city of Jaipur in the state of Rajasthan in India experienced tragedy this week (13 May 2008) when 5-6 bombs went off at different places in the city, mostly near Hindu temples. More than 70 persons were killed and many more were grivously injured. It is sad -- the got caught in the vicious cycle of violence affecting many parts of Earth today. May the killed ones' souls get healed in the astral world.

Jaipur clearly has been targeted this time because it is a major destination and transit point for tourists visiting India and June-August is the time when most tourists from Europe take their annual/bi-annual holidays. A newsreport or two also seems to suggest this.

The planners and executioners of the bomb blasts is very likely to be from Pakistan. It is not surprising but in recent weeks the level of activity from Pakistan's extremists camps has increased. The infiltration and firing incidents at the India-Pakistan border at Jammu & Kashmir has also gone up. This increase in extremists' activity coincides with the end of elections in Pakistan and the formation of a government by a coalition of political parties who won the contested seats. The military no longer has all the say in the government and so those divisive elements within Pakistan's military who are connected with the ISI (intelligence agency of Pakistan) appear to have decided to up the ante with regard to formenting trouble in India as well within their own country against the democratic system.

Pakistan's military's divisive elements and their ISI have in the last 2-3 decades, time and again, created trouble across the border in India.

But what is a new phenomenon is the rise of Hindu terrorism in India. And I am not just talking of the mini-genocides carried out by Hindu extremists in 1984 against Sikhs in Delhi and in 1993 and 2002 against Muslims in Bombay (1993) and Gujarat (2002). I am talking of a group that is carrying out bomb blasts similar to what Pakistan's extremists do.

The September 2006 blasts near a mosque in Malegaon in Maharashtra state and the May 2007 blasts in a mosque and other places in Hyderabad in Andhra Pradesh state were, in my view, the work of Hindu extremists. 99 out of 100 mainstream media publications/channels attribute these two to Muslim extremists from Pakistan. But they do not ask the question as to why will Muslim extremists carry out bomb blasts near their own religious places. There is also no precedent of their doing such a thing in US, UK, Lebanon or any other country where Muslims are not in a majority.

May 11, 2008

life in general & financial markets: tirupur and coimbatore


I visited Tirupur and Coimbatore (in the southern Indian state of Tamil Nadu) during 22-25 April to report on an industrial slowdown story in the magazine I write for. This was not the first time I was visiting these two cities (Tirupur in particular, Coimbatore I had not seen the main city and had just travelled from its airport to Tirupur that is 60 kms away). See here and here
for two blog posts on my earlier visit to Tirupur.

This time around I split the three days I was there equally between Tirupur and Coimbatore. Landing at Coimbatore airport very early in the morning (8 am) I headed straight for Tirupur. On the way, when I was 4-5 kms near Tirupur, I had tender coconut water at a lonely streetside vendor (see photo alongside). He said he stocks the tender coconuts from the nearby orchards itself. The coconut water was sweet and the most delicious I have ever had.

Tirupur is the larges
t knitwear textile industrial hub in India (see the photo alongside of the inside of a garment company where beyond a display room a woman and her fellow colleagues are sewing or applying other final touches to a textile garment). But lets not talk about work -- at least not yet.

The one thing I love the most as a traveller to Tirupur is its food. The
dosas, the sambhar, and the mint chutney are yummy. If you happen to visit this small city do not fail to go to Annapoorna restaurant near Kumaran Road to have its south Indian fare. The thing I hate the most about Tirupur is its maddeningly crowded arterial roads, particularly the Kumaran Road where I stayed at a hotel. You can not cross the road at all unless you take a risk and make a dash for it. Worse than Bombay because there are no traffic signals at the key junctions and hardly any traffic discipline. Also, the rickshaw drivers fleece you, charging a fare that is 2-3 times what you would pay for a similar dis
tance in Bombay.

The rickshaw driver problem was only worse at Coimbatore (se
e the photo alongside of a Coimbatore rickshaw driver with whom I had a major fight because he was quoting outrageous fare for a small distance ride). But the roads are wide and traffic is less chaotic here than in Tirupur. I had some spare time one evening and went for a giantwheel ride at an annual summer fair going on at a place not too far from the hotel where I was staying.

Now, back to work-related matter. I present below the two write-ups I contributed based on the visit to Tirupur and Coimbatore.


1) Tirupur - doshas afflicting the land of dosas

The statistic was all that everyone was waiting for in Tirupur in the first and second week of April – the approximate figure of Tirupur's exports during the 2007-08 financial year. As soon as Tirupur Exporters Association (TEA) got an estimated figure from the banks and released it there was a headline in southern India's business daily soberly stating a fact 'Tirupur knitwear exports show 10% dip in growth'.

From Rs 11,000 crore in 2006-07 the exports of knitwear ready-made textiles from Tirupur came down to about Rs 9,950 crore in 2007-08. The net effect was more than 10 per cent because the annual growth rate was 30 per cent for two consecutive years—2005-06 and 2006-07. If the momentum had to sustain then the 2007-08 figure ought to have been Rs 14,300 crore. The Rs 9,950 crore, therefore, reflected a fall of 30 per cent. The slowdown had arrived.

You do not see it on its heavy traffic arterial roads nor do you see any decline in the exorbitant rates charged by its auto-rickshaw drivers but Tirupur has taken a breather from being a 24x7x365 throbbing industrial city. And it is not just due to the one-day-a-week electricity holiday imposed by the power-deficit Tamil Nadu State Electricity Board on all the industries in the state. The rupee appreciation of 2007, the tough competition with Chinese, Bangladeshi and Pakistani companies and the slowdown in the US consumers demand has rattled the over 5,000 textile unit strong Tirupur hub like never before in its 30-year old history.

"Tirupur's entrepreneurs have had to face a lot of challenges right from inception," says Raja Shanmugham, partner in Warsaw International, an Rs 60 crore turnover textile export company in Tirupur. "But the sudden attack on dollar last year made us very vulnerable." Shanmugham is referring to what more than one-third of the 3,000-odd exporter companies experienced from July-August last year lasting till recently.

Orders from international buyers were committed to by many of Tirupur's exporters in late 2006 and early 2007 when the rupee-dollar rate was over Rs 44 started getting processed in the months following May when the rupee-dollar rate had crashed below Rs 40.

More than two-thirds of all Tirupur's exports were invoiced in dollars even though only about 30 per cent, the largest proportion though, went to the US. "Buyers told us that if we increase the purchase price they will take their orders to textile companies in Bangladesh, PakistanChina," says P. Vidhyaprakash, director of Styleman Textiles, a medium-sized exporter. "The price of a T-shirt that is fixed at $2 could not even be raised to $2.20 because other countries are able to deliver at $2." and

Exporters had little choice but to comply and take a hit on their bottom line. Says Shanmugham, "We could not refuse as relationship with international buyers takes much time to establish and so we went ahead and executed the orders at a loss to retain the customer."

Small-sized companies, however, could not keep doing this beyond a couple of weeks. With the economics becoming unviable they stopped taking new orders. "Committed orders are also going down because of the downtrend in the US economy," points out Shanmughan.

"Around 10 per cent of all textile and ancillary units have shut shop and 10-15,000 textile workers lost their jobs," says S. Sakthivel, executive secretary of TEA. "Of these 6 per cent will be ready-made garment companies and 4 per cent will be the companies doing job work such as knitting, dyeing and bleaching, fabric printing, and embroidering for them," says Dinesh Kumar, partner in Thirumalai Knit Designs, a medium-sized that deploys imported knitting machines in its design job work for Tirupur's garment exporters.

Sakthivel points out that increasing global competition had already made the going tough for every one. "In the last one year Vietnam has joined the global market as a textile garments supplier."

But the real run for exporters' money is coming from Bangladesh and China. "Under the Free Trade Agreement that Bangladesh has with the US and European countries and in its capacity as an under-developed country it can claim to a waiver of 12-13 per cent import duty imposed on its supplies to them," says Shanmugham.

In fact, Bangladesh's textile companies imports the raw material cotton entirely from India. "It also has the cheapest labour," says R. Gopalakrishnan, chairman of Tirupur-based Royal Classic Mills that sells half it wares to the world and the other half to the consumers here in India.

As per estimates, India's share in global knitwear market is about 3 per cent, Bangladesh's is 4-5 per cent, China's is 25-30 per cent and the rest is taken by other countries such as Greece, Italy, Turkey, Thailand, Singapore and Cambodia.

China too scores over India on its infrastructure. Shanmugham says that it takes 11-12 hours for him to just transport his stock from Tirupur to the port at Madras or Tuticorin. The same distance in China would be covered in just 3 hours at an average 100 km per hour. The roads there are so much better. "I pay the trucker Rs 5,000 but in China the same trucker would charge about Rs 2,000 because he can make twice the trip in the same time as my trucker does," says Shanmugham.

Exporters in Tirupur are quick to point out that the textile industry works on wafer-thin margins unlike the software services industry where the mark-ups are high. They also claim that textiles is the only industry after agriculture that employs the most labour in the country. And they are facing internal competition with regard to manpower too. "You don't need big educational qualifications here but BPO companies are enticing those educated youth from the villages who would otherwise work in our units," says R. Sivaram, executive director of Royal Classic Mills.

Royal Classic has escaped the wrath of the exporters' turmoil because it consciously decided to target the domestic market as far back as 20001. Today its sales to domestic are a little over 50 per cent of its total sales. It has 56 shops all over the country—some owned and many franchised—that sell their Polo T-shirts, trousers and other ready-made garments for the youth. As a result, it managed to increase its sales turnover from Rs 30 crore in 2006-07 to Rs 50 crore in 2007-08.

All the banks, public or private, have their branches in Tirupur. But Tirupur's textile units are having a tough time negotiating with the banks for working capital requirements in the face of decline in sales and hit on margins. As such the interest rates charged by banks to businesses have shot up in the last two years from 7-8 per cent to 12-13 per cent.

A recent move by the government has helped them in getting government assistance in the bearing of that amount of interest that is over 7 per cent base. Some are seeking rescheduling of long-term loans as well. "We have got our loans rescheduled from five years to eight years," says Gopalakrishnan.

But Tirupur exporters, who are expecting another fall of 10 per cent in sales in the current financial year, are braving it out. They are cutting costs wherever they can and even if they can save 2-5 per cent they are going for it. "In cutting the cloth if the earlier wastage was 18-20 per cent then we are bringing it down to 16-18 per cent by prudently applying automated machines," says Shanmugham.

Royal Classic management claims the quality was already there and they are currently focussing on improving efficiency. "For instance, we want to bring down the turnaround time in converting yarn to ready-made garment from 90 days to 45 days," says Gopalakrishnan.

Tirupur lives and breathes on its textile units even if the air and water has gotten polluted in the process. You can even smell the chemicals in the air at times if you are out there roaming the city and its outskirts. Mansoor Ali, an owner of a medium-sized footwear shop at the heavy traffic density Kumaran Road in Tirupur was seeing his business grow rapidly till last year. "But my two children—one six years old and one just six months old—have developed respiratory trouble and the doctor tells me to take them out of Tirupur," says Ali.

His business this year has not fallen but he has had to sell his stock at discounts because the customers are bargaining for lower prices of late. This sentiment is echoed by G. Ananda Kumar, branch manager of a large retail shop 'Bharath Electronics & Appliances', "I give more discounts and only then am I able to sell." His sales are down 5-10 per cent this year compared to last year.

Risk-taking entrepreneurs, hard working labour, zealous commitment to quality and international customers' deadlines, lack of governmental interference at the state level and governmental financial subsidies at the centre level, and a magnetic attraction for all types of units connected to textile industry, have been behind Tirupur's success story in the last two decades. That will perhaps see it ride the choppy waves.

2) Coimbatore - dharnas on wide roads against narrow margins

It was an unprecedented sight. On 12 April the presidents and senior officials of 16 industry and manufacturers' associations came out on the streets of Coimbatore in the hot April sun. Normally it is the labourers who come to the streets. But industrialists doing a dharna on the streets?

Coimbatore is famous for its high-technology finished engineering products such as machine tools, printing presses, pump sets, castings for automotive sector. But the current state of affairs with the small and medium industries in Coimbatore is such that their representative associations came out on the street.

Exporters among them were hit by the rupee appreciation last year. But what was the last straw for all of them was the sudden price in their raw materials, particularly the prices of iron and steel products. These have shot up by 25-40 per cent in the first three months of this year itself.

In a 5 March 2008 letter sent to Bangalore-based Kudremukh Iron & Steel Company, the Coimbatore chapter of The Institute of Indian Foundrymen (IIF) wrote "you have increased the prices very often which uprooted the viability of the foundry units and had a devastating effect on them." The letter gave instances of how Kudremukh had revised the prices of pig iron it was selling to Coimbatore's steel foundries from Rs 15,600 per ton in April 2007 to Rs 19,650 per ton in January this year, and then again to Rs 21,150 per ton in February and once more to Rs 23,400 per ton.

In Coimbatore city and at its outskirts there are 150 steel foundries. In a good year they produce 100-250 tons a month. There are additional 350 units that are into production of engineering goods such auto components, and castings. Of these, 150 units are directly or indirectly into exports producing 500-1,000 tons in a good year. The balance 200 units are small catering to the domestic market and producing around 100 tons a month.

"In the last three months there has been a slump in production to the extent of 25 per cent across all the sectors in the engineering industry here," says S.V. Jagadesan, IIF chairman and managing director of Indo Shell Cast that manufactures for export and domestic end-products such as market automobile levers, yokes, shafts, piston ring cylinder castings and brake application parts. "Pig iron apart, we use raw materials like manganese and other chemicals and their costs have also shot up by 50-100 per cent in the last one year."

Copper prices of LME are also quoted by a section of Coimbatore's companies. It was $2,600 in mid-2006 and presently it is around $8,200. Says C.R. Shanmughasundaram, president of Southern India Engineering Manufacturers' Association whose 250 members comprise of a large number of pump set manufactures, "Companies who started exporting in last 2-3 years have stopped now."

Coimbatore's non-textile industries are saved from one threat – that of intense global competition from China and other countries that Tirupur's textile units encounter on a daily basis. "In engineering products the Chinese are not a major threat yet," says D. Balasundaram, chairman and MD of CPC that is into exports of gray iron, castings and other components. "The Indian engineer understands the world standards and conventions used in engineering language far more better than his Chinese counterpart." His company's turnover has been affected by 3-5 per cent due to the recent price hikes in raw materials and last year's rupee-dollar fluctuation.

Coimbatore's exporters highlight the fact that the dollar depreciation affected even the Chinese companies. "Somewhere along the line the difference was neutralised," says K Ilango, joint MD of RSM Autokast that exports and sells domestically components such as brake drums, hubs, spring and equaliser brackets and clutch pressure plates for heavy duty trucks and trailers. RSM Autokast that had 40 per cent of its production exported has managed to survive the dollar-rupee turmoil due to the 60 per cent sales to domestic market.

Unlike Tirupur's exporters, Coimbatore's engineering companies are not greatly in favour of exporting at a loss. Ilango points out to his company's strategy, "whatever we are able to sell at least at a zero profit we are going ahead; but we won't sell at a loss as otherwise our financial health will be ruined."

Most companies in Coimbatore incur raw material cost of 50-60 per cent and the recent past price hike has dented their profitability. As in Tirupur, therefore, they fear going to the banks for loans. "Now we have to stock minimum two months of raw material stock as we do not how the prices will move," says Shanmughasundaram.

Companies with sales above Rs 8 crore ($2 million) are doing a smart thing though to bring down their borrowing costs. "I have taken dollar loans through SIDBI's assistance and the interest rate was LIBOR (around 2.75 per cent) plus 3 per cent," says Ilango. This is also designed to protect the company from dollar-rupee fluctuations.

Some others peg their non-American buyers to base the orders in Euros. "We have pushed European, African and European customers to convert to Euro," says C.N. Ashok, director-commercial in Autoprint Machinery Manufacturers. "To American customers I am trying to quote the prices in rupees directly though they will remit the equivalent of rupees in dollars on the day of remittance."

The slowdown in Coimbatore is going to be felt more acutely in this financial year. "How we handle this year will be a litmus test," says Ilango. "We opened the champagne bottle too soon; we had seen growth stories for only 2-3 years."

Outside the factories, on the streets, the effect of slowdown is not visible to the eyes. But big retail shops are finding it in their sales. "TVs and other appliances' sales is down by 30-40 per cent," says K. Balakrishna Shetty, partner in a large electronic appliances shop 'KS Shetty & Company' at a prime locality Gandhipuram in Coimbatore. "The new year sales on 30-31 December last year flopped for the first time."

May 10, 2008

life in general: (part 2) the myth of rehabiliation


In November last year I had blogged about how I felt that rehabilation in development projects was nothing but a myth. I had visited some villages in the Narmada valley in December 2005 and in my few interactions with the villagers I was pretty much sure that the so-called rehab of people getting displaced by the mighty Narmada Dam was only on paper.

Imagine this: There are, say, 15 planets like Earth in our universe where there is life form similar to humans. Now, say, 2-3 of them have become very powerful and they can do inter-galactical travel fairly easily. Now, suppose that these 2-3 find their existing habitats very restricting -- they want to grow and develop further and believe it is only good for other living planets also that such growth and development takes place. But for that they would want some large companies that have massive industrial complexes to vacate their lands because these lands would be needed for that inter-galactic development project. So, say, they select the Surat-Hazira industrial belt in India where you have major industrial houses like Essar, Reliance, ONGC, Kripco, Gujarat Fertilser, L&T and others. Say, they also select some areas in the US where Dupont and Exxon have their factories.

Now, how would these companies feel? Say, those planets' rulers create some rules concerning rehab and tell the companies that they will be given some alternate land in the Sahara Desert and for some even on the Moon. When they find it difficult to even do that they will just give some piddly few dollars and tell these companies 'Thats it, now the chapter is closed." How would these massive industrial houses react? No doubt, they will be furious about it and tell in a court in those planets that their property rights should be respected and they should not be forced out of their lands. But the judges in those inter-galactic planets' courts won't be sympathetic to their arguments.

I would like the big industrialists to think about how they would feel if they are on the receiving end of the same thing they inflict on others.

Anyway, back here in our country, a current court case initiated by the Narmada Bachao Andolan highlights the issues of myth of rehab and brings out the massive corruption involved.

See this press release:


NARMADA BACHAO ANDOLAN
62 Mahatma Gandhi Marg, Badwani, M.P. Ph. 07290-222464, 09424855042,
nba.badwani@gmail.com
Maitri Niwas, Tembewadi, Dhadgaon, Nandurbar, Maharashtra. Ph: 02595-220620

Press Release: 8th May 2008

CHIEF JUSTICE OF THE HIGH COURT OF MADHYA PRADESH, AT JABALPUR, TO HEAR CASE OF CORRUPTION WORTH CRORES OF RUPEES IN REHABILITATION OF FAMILIES AFFECTED BY THE SARDAR SAROVAR PROJECT ON THE 13TH OF MAY, 2008

The Chief Justice of Madhya Pradesh High Court, at Jabalpur would hear the case of corruption worth crores of rupees in the rehabilitation of the families affected by the Sardar Sarovar Project on the 13th of May, 2008, in which notices and interim orders were issued by the Chief Justice on March 3rd 2008 and was yet to come for hearing. The Govt. of M.P. is yet to file a reply petition and documents.

On behalf of NBA, it was, therefore, pleaded that the matter was very urgent as lakhs of rupees worth rehabilitation funds are being misappropriated by the officers of the NVDA and their touts. The corruption is also rampant through manipulated records of oustees and in allotment of house plots.

The Govt. of M.P., NVDA, NCA and none of the other respondents, seven in all, submitted reply within 4 weeks, the time stipulated by the Chief Justice, while issuing the notices in March.

Yesterday on May 7th, NBA urged for an early hearing and in spite of the Deputy Advocate General, M.P. requesting for further time and hearing after the May vacation, upon submission of few more documents, and describing the fiery situation, NBA, through Medha Patkar, stated the fear of the affected persons cheated, yet recorded as rehabilitated and submergence of thousands of families would be imposed, if an early hearing is not held.

The CJ fixed the hearing of the case on May 13th, 2008 at Madhya Pradesh High Court, at Jabalpur.

FOR FURTHER DETAILED READING:

The Public Interest Litigation filed by NBA, Writ Petition No: 14765/2007 filed on 15th October 2007 in Jabalpur High Court, was again heard on 7th May 2008. The Case is regarding the huge and unprecedented Corruption in all aspects of Rehabilitation process of Sardar Sarovar Dam affected families in Madhya Pradesh.

During the last hearing on March 3rd, the bench consisting of Chief Justice A K Patnaik and Justice Prakash Shrivastava had heard the plea by Medha Patkar and gave the order, issuing notices to the respondents which included Chief Secretary, State of Madhya Pradesh, Chairman, Narmada Valley Development Authority, Chairman, Narmada Control Authority (NCA) (who is also Secretary to the Ministry of Water Resources, Secretary, Revenue Department, GoMP, Director General of Police, M.P., Inspector General, Stamps and Registration, M.P., District collectors of 5 districts such as Badwani, Dhar, Jhabua, Khargone and Dewas, to file their replies within a month.

But since that has not happened even after two months, Medha Patkar raised a question regarding this. Mr. Shukla, the Deputy Advocate General of Madhya Pradesh, who pleaded for the respondents informed the court that the government will soon file the reply petition!

Meanwhile NBA has submitted more documents to substantiate the lack of rehabilitation as well as the unprecedented corruption by officials and dalals, on the rehabilitation front. This includes the Report of the Public Hearing by Anna Hazare, Arvind Kejriwal, S M Mushrif and Anand Kothadia during February 2008, the latest Minutes of the NCA and R&R Subgroup and other materials.

Though the Madhya Pradesh Government pleaded to postpone the next hearing till after the vacation, the Court has ordered to have the next hearing on May 13th, admitting the plea from Medha Patkar that the issue demands urgency and cannot be postponed that long.

The nexus between the Narmada Valley Development Authority (NVDA) officials and contractors in the establishment of the rehabilitation sites has resulted in shoddy and uninhabitable preparation of R&R sites, thousands of eligible PAFs are left undeclared where as a few fraudulent persons got declared, the nexus between officials, agents and advocates leading to huge corruption and swindling of Public money meant for rehabilitation were pertinent issues raised by NBA.

The Madhya Pradesh government policy has twisted and subverted the land and house based rehabilitation directives of the Narmada Water Disputes Tribunal Award (NWDTA) and made room for huge corruption. While there is no formal approval from Narmada Control Authority for the so called SRP, the NVDA proceeded with absolute neglect and contempt for legal and constitutional norms and rights of the PAFs.

The case was filed through Senior Adv. N S Kale, who is the same person who pleaded the case of the illegal arrest of the Taloon Satyagrahis, where on 25th September 2007, the Jabalpur High court ordered the Govt. of M.P. to pay compensation of Rs.10,000/each to all the 91 activists arrested. Till date the government has not obeyed that order. In the current case, Medha Patkar herself is standing, pleading for Justice.

The SRP-induced fake registries, where PAFs who were given cash for buying lands actually ended up giving commission to officials and dalals (middlemen), signing fake registries, facilitated a process where crores of rupees were amassed by officials and agents as commission, depriving PAFs of basic resource security and a better living condition after resettlement. The alarming fact is that all this money is from public exchequer and hence this illegal enrichment of government officials is not just a matter of routine corruption, but crime against the People and State both.

While FIRs were filed against PAFs and about 35 of them were arrested and later bailed out, except one, no action was taken against officials and their stooges, though notices were issued to 30 NVDA officials early on, but no action taken till date.

Out of a total of 2600 land registries claimed by NVDA as part of SRP, 758 are already officially accepted by the government as fake registries, after preliminary enquiry by special departmental officers. NBA has demanded a CBI enquiry into the same.

However both NCA and NVDA have not yet understood the gravity of the situation as hundreds of fake registries are yet to see light. Out of the 2600 plus claims of land registries by NVDA only a few hundred are factually correct and legally valid ones. This means that SRP was an absolute failure with only a few hundred PAFs actually purchasing land with SRP. This is the reason why NBA always opposed SRP and demand land for land rehabilitation.

There are more stories of corruption in House Plot distribution as well as in the procedure of declaring PAFs. Thousands of genuine PAFs are still not declared while some illegal and fraud persons were declared and got PAF benefits.

This huge and unprecedented corruption is deplorable and is in utter violation of the Article 21 of the Constitution as also the NWDTA and Supreme Court orders. We pledge to continue to expose and tackle any form of corruption or misappropriation of public funds earmarked for rehabilitation of the PAFs.

Ashish Mandloi, Clifton Rozario, Kamla Yadav

May 04, 2008

life in general: enough bushism among indians

The US president George Bush Jr has attracted a lot of flak here in India for his statement the other day that India's middle class is responsible for rising food prices.

There are many Bushisms that are outrageous and this one too at first sight seems to be the same. But except for the fact that only India and only middle class has been targetted and that only food prices are being shown concern about I agree with the underlying thrust. Many of blog posts here have talked about the mindless and excessive consumerism but I recognise the fact that it is a global phenonmenon.

All countries' affluent people (that would cover the rich and the middle class) are responsible for so many things -- forced displacement of rural/remote/tribal communities from their habitats, ecological devastation, excessive industralisation's pollution of air, water and soil etc.

But what is more hypocritical about Indians criticising Bush for this statement are two things:

1) There are enough affluent Indians themselves who think that the poor people of India are getting prosperous and so the foodgrain production is being consumed more by such peope. I can vouch for this myself – a month ago, at the end of a seminar on Indian financial markets I was speaking with a senior official of the Forward Markets Commission (the regulatory for the commodity spot and derivative exchanges in the country) and I posed before him the fact how excessive use of chemical-fertilisers and chemical-pesticides have depleted the soil and caused a decline in agriculture yields.

I also asked him the potential future effect on agricultural production in the country of the land grab in rural India going on by a politician-company nexus in the implementation of the farcical Special Economic Zones Act. He evaded these issues and instad told me that he believed that it as the income levels of non-affluent people were going up they were eating more food. I was shocked to hear this. He was actually touting the views of mainstream economists and government officials. Now, how much different are these from what Bush said? What is middle class of India to Bush is lower-middle class for Indian economists and government officials.

So, it is hypocritical for Indians to go hammer and tongs at Bush on this particular issue.

2) And where they should go hammer and tongs at Bush these very Indians are cowardly silent. And that is on the issue of the dubious and illegal war on Iraq and Afghanistan by Bush and his cronies.

life in general: keeping head cool!

It is not only some of the negative things happening around us that raises the temperature in my head but come summertime in Bombay from late March to mid-June it is our star Sun's rays that roasts the head. While the former's solution depends on external factors and how I intepret them the latter problem can be handled to an extent by just removing all the hair from the head. And that is what I did 2 weeks ago!

Check the end result alongside as clicked by my colleague during an editorial meeting in office.

Going bald once or twice a year (the second time in a city like Bombay can be during the hot autumn months of September and October) can keep your head cool as otherwise the hair traps the heat and makes you perspire heavily on both the sides of the head above the ears. There are fringe benefits too -- (i) the hair grows back fully in 2 months time, but for a month I do not even to worry about using a comb and (ii) if you have a recurring dandruff problem then it is significantly kept in check when there is less or no hair on the head.