India, Gulf ties now look beyond oil, gas

DUBAI: Energy is not the sole area driving India's ties with the Gulf countries, trade and investment relations are also set to multiply, seeing the response of two high-level visits from India to the region in the last fortnight.

From free trade agreement being negotiated with the six Gulf Cooperation Council (GCC) countries to easier visas for their corporate chiefs, the two sides have begun to recognise that their bilateral potential remains to be fully tapped.

If Indian External Affairs Minister Pranab Mukherjee's visit to Saudi Arabia got assurances that business leaders of the two sides will get multiple-entry visas fast, Commerce Minister Kamal Nath's meetings here got entrepreneurs interested in India's infrastructure that needs $500 billion over the next few years.

"I requested that the relationship be transformed from buyer-seller level," said Mukherjee after meeting Saudi King Abdullah Bin Abdul Aziz, in what was clearly a paradigm shift in New Delhi's thinking even in energy ties with the oil-rich Gulf nations.

"We want to participate in exploration and exploitation and development of gas-based and petrochemicals-based industry in Saudi Arabia," Mukherjee said during what has been hailed as the highest-level visit from the Indian side to Saudi Arabia since King Abdullah's historic visit to India in January 2006.

The focus of this partnership had been stressed in the Delhi Declaration signed by King Abdullah and Indian Prime Minister Manmohan Singh two years ago, where they agreed to build on strategic ties based on their respective strengths.

The highlights of the declaration include cooperative joint ventures in upstream and downstream oil sectors, both in their respective countries and outside third countries and Indo-Saudi gas-based fertilizer ventures in Saudi Arabia.

The idea was to take the ties to greater heights that has seen India emerging as the fifth largest trading partner of Saudi Arabia with bilateral trade of $3.67 billion in 2006-07, and the Gulf country becoming the 12th largest market for India, accounting for 2.05 percent of its exports.

"Our economy is growing at over eight percent and we require huge investments. Our infrastructure sector particularly can absorb $500-600 billion more," said Mukherjee, seeking to take the growing ties beyond India' quest for energy.

When Kamal Nath visited the UAE, he picked up from where Mukherjee left off and even sought to take the level of engagement to another scale - he not only spoke of the specific projects in infrastructure but also on the free trade pact.

"UAE investors are very keen on the Indian market," he told reporters here after meetings with Vice President and Prime Minister of UAE and Ruler of Dubai Sheikh Mohammed Bin Rashid Al Maktoum.

"We would like to have them investing in infrastructure," said Kamal Nath, who also met UAE' Minister for Economy Sultan Bin Saeed Al Mansouri. "We would like to draw investments, particularly in the Delhi-Mumbai Industrial Corridor."

Stating that $92 billion was proposed for the corridor, the Kamal Nath said it would include six mega investment regions of 200 sq km each, in Delhi, Uttar Pradesh, Haryana, Rajasthan, Gujarat and Maharashtra.

He also gave his personal assurance on the free trade pact with the GCC nations - comprising UAE, Saudi Arabia, Kuwait, Oman, Bahrain and Qatar. "We will push this forward. We expect to make substantial progress this year."

The UAE side was equally enthused. "We currently maintain very healthy relations with India," Al Mansouri said in a statement after Nath's visit, while giving a rundown on the quantum of bilateral trade between the two sides.

"Bilateral trade between our countries, excluding India's crude oil imports, is currently at 69.78 billion dirhams ($19 billion) and is expected to grow further by 30 percent in 2010," said the Saudi minister.

"Both our countries are witnessing rapid economic growth - so forming a strong partnership to leverage our unique strengths will help us attain our mutual goal of sustainable development."

In fact, some Indian industry chambers like the Associated Chambers of Commerce and Industry (Assocham) feel India's total trade with the GCC countries that is estimated at $28 billion during 2007-08, could top $40 billion by 2010.

The feel that the GCC - already the third largest trade partner for India after European Union and the US - has the potential to attract more exports from India after the free trade agreement.

China, India can rewrite Asia-Africa unity story

While we followed the progress of the Beijing Olympic Games torch relay earlier this month, the first India-Africa Summit was held with great fanfare on April 8-9 in India's capital, New Delhi. Heads of state from 14 African countries, including South Africa, Algeria, Uganda, Ghana and Tanzania, attended the inaugural gathering. They passed two documents of vital importance - the New Delhi Declaration and the Framework Agreement on India-Africa Cooperation - that will pave the way for the future development of India-Africa relations.

It has been said that India's decision to hold this African summit was inspired by the China-Africa Summit of 2006. Indeed it is not hard at all to see the link between the two summits. The Indian academic community and the media have made no efforts to deny the link.

Some Indian and other media organizations made no bones about comparing the New Delhi summit to the one held in Beijing two years ago. Quite a few foreign media channels gave prominence to the view that India is competing against China to influence Africa, stepping up efforts to corner more African resources and market before China does, and so on.

There is no denying that fast economic growth of both the Asian giants and their growing influence in Africa gave rise to comparative studies on the development patterns of the "Chinese dragon" and the "Indian elephant" and on their impact on Africa's development.

The Organization of Economic Cooperation and Development published a study in May, 2006, titled The Rise of China and India: What's in it for Africa. The World Bank followed with a similar report - Africa's Silk Road: China and India's new economic frontier - the next year.

Both papers are considered authoritative and professional. And they both agreed the rise of Chinese and Indian economies is having a positive impact on Africa's development. They argued that the fast economic development of China and India is boosting that of Africa much quicker than most people expected and has helped Africa maintain unprecedented and close contacts with the world economy through exports of resources and raw material.

Of course, apart from numerous analyses and commentaries, there have been painstaking efforts by ill-meaning people who see things through tinted glasses to play up China-India rivalries and conflicts as well. Such writings invariably try to sow distrust between the two Asian neighbors by flattering India, while belittling China.

Some Indian observers pointed out publicly that such mentality is born of a desperation prompted by the fast-approaching end of Western colonial influence in Africa as well as by the fear of and objection to the reality that rising nations such as China and India are changing the world order Western powers prefer. And, by sowing discord between China and India, the detractors wish to see the two Asian neighbors fight till they are both too hurt to react when the West takes control of Africa.

As a matter of fact, it is not important to know which summit inspired the other. What is important is the fact that emerging Asian economies such as China and India and Africa's rising economic potential and international clout have been drawing the two developing continents closer in the past 10 years or so. We should hail the coming tide of Asia-Africa cooperation, because it is fueling what we call South-South cooperation and contributing to the international cooperation that will help Africa attain the United Nations' Millennium Development Goals.

Africa has been drawing the world's attention in the past decade as the situation on the continent gradually improved and its resources and market potential showed growing significance. Take a closer look and one will see that the "Africa fever" was not the result of its own rising status alone but of increased cooperation with emerging Asian economies and its "look-east" policy as well.

Since the end of the colonial era in the 1960s, Africa has largely remained a supplier of raw material for developed Western countries, while Western nations' aid for Africa has failed to lift the continent out of poverty and backwardness.

That is why African nations have come to the consensus to "look east" for development models in Asia.

African countries seem to identify with India's development pattern, which combines democracy organically with its developing country status - very different from the patterns in Western nations. African nations are also interested in India's experience in handling conflicts between castes and clans and preventing the gap between rich and poor from worsening.

The eastward movement of African countries not only helps them learn from Asian countries' advanced experiences but also raises their stakes in South-North talks and negotiations. Such engagements should help them protect their natural resources, while developing the economy, emphasize environmental protection.

Thus, when we look at the India-Africa Summit, which has been billed as "India's top event in foreign affairs", it is necessary to recognize the relationship of mutual example and certain amount of competition between China and India in their cooperation with African nations. Even more important is that we need to see from a broad human development point of view the mutually-complementary nature of the two Asian giants' assistance to African development and Africa's absorption of different "nutrients" from Chinese and Indian development patterns.

The roles that China and India play to strengthen Asia-Africa unity and South-South cooperation are of historic significance. There is no reason why the world's top two developing nations, with matching populations, cannot play joint catalysts in taking Asia-Africa cooperation into a new era.

The author is a researcher with the Institute of West Asian and African Studies of the Chinese Academy of Social Sciences

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Mercedes registers whopping 50% growth in India

The E-Class Mercedes marks 20,000 made in India cars for the company and this is perhaps fitting that it is an E-Class because almost half of all Mercedes cars sold in India are E-class.

For Mercedes, the Indian drive has been one of the most special. The company says it will grow more than 50 per cent in the next 2-3 years.

Mercedes Benz India MD & CEO Wilfried Aulbur says, "With the current developments, we are on a very good path and I am sure this path will continue for the next 5-10 years."

Last year, Mercedes sold 2,500 cars, which is more than half of India's luxury car market of 4,500 units. This year the company says it will sell more than 4000 units.

And it's not just cars, Mercedes has introduced the Actros range of trucks which will also contribute significantly to volumes.

"Our task is to get significant and enough volumes in the market. It is currently not a demand problem we are having," Aulbur added.

And to satisfy this robust demand Mercedes is moving out of its current facility to a plant that is five times larger.

This present facility has a capacity of 4000 units annually but the new plant at Chakan will start with a capacity of 5000 units.

And its not the only the popular cars that will be assembled there. The company will also assemble the Actros range of trucks along with bus chassis. Mercedes benz buses are expected to hit Indian roads in the second half of 2008.

The new plant will come up at an investment of Rs 250 crore and can be ramped up to a capacity of 20000 units over the next 5-8 years.

Opening new frontiers: Story at the bottom of the pyramid

Rural India seems to be the latest flavour in town. From finance ministers to corporate India across industries, everyone seems to be shifting focus to the bottom of the pyramid. All boardroom discussions are getting centred on finding ways and means to grab a share of this lucrative pie. Numbers look seductive with statistics and data giving enough evidence of volume potential...smaller ticket sizes but more buyers, making it eminent for most industries to ignore this segment at their own peril.

With near saturation and cut-throat competition in urban markets, there is almost no debate left on the potential of the rural population whose incomes are rising and mindsets are changing. While certain industries like FMCG have made an early entry, others are learning the ropes with each passing day. Most industries are trying to test the waters through various forms of pilots and test launches, with no clear indicators of gains in the short run. But there is no denying that the long term potential is vast, but so are the challenges.

Till recently, a large part of marketing was done targeting the urban consumer, and with most marketers having no prior exposure to the rural audience, they are applying the same rules to connect with this completely different segment. The mistake that most companies make while chalking their rural strategies is to treat the rural consumer as an extension of their urban counterpart.

The other common mistake is to treat rural consumers as a homogeneous mass without segmenting them into appropriate segments. The most relevant point to note is that this segment is extremely fragmented and spread out over a large geographical base. The cultural and behavioural differences vary not just from state to state but from village to village. Mapping out this difference in consumer behaviour is the key to any successful rural strategy.

A recent insighting exercise in India's villages has revealed some interesting trends:

From buffaloes to beauty parlours

Farmers verging on retirement, sensing the decline of their own profession, are encouraging their children to enter different vocations. Around one-fifth of rural households now generate their primary income from a salaried job or a small business. Besides small village shops, loans are being taken for novel business ideas like beauty parlours, popcorn machines, spice factories, tailoring shops et al. A villager equals farmer is true no more as life has moved beyond farming and agriculture.

Don't just sell dreams, tell them how to live their dreams

Thanks to the television having made substantial inroads into rural homes, villagers have also learnt to dream. Everyday they are exposed to images of ordinary people scaling extraordinary heights. This has given them enough hope about their own future, but where they flounder is the way to go about it. It is here that measured approach consisting of small actions, one step at a time, finds better acceptance and credibility. Actions where outcome can be measured from time to time and results are visible in the near future. So, go ahead and sell them dreams, but at the same time give them a solution and a formula for it to materialise.

Not just economic but emotional security

Even though they are receptive to new ideas, they do not readily dash into new ventures. They do not only want economic security but also emotional security. They are likely to welcome innovation that satisfies their sense of security. If they feel that a particular idea will help them improve their economic position or their social relationship, they will accept it. Selling a product to them is not a cold commercial transaction (but) an agreement of trust between the marketer and the consumer. And companies that live up to the trust that this consumer places in them will benefit immensely in the long run.

Their children are like stocks in a portfolio

It's always known that family ties are very strong in hinterland, but the difference is in the proportion of family budget that is being allocated to children, especially the male child and his education. Son's education in a private school is like a stock market investment that is bound to yield returns far greater than any other investment. Any marketing effort that appeals to this agenda is bound to catch his immediate attention.

Sharing risks and rotating savings

This insight is the basis for the success of all micro finance ventures in rural India. A simple model that lends on the back-up commitment of small groups has minimised risks and reduced bad debts to near zero percent (certainly doesn't need the intervention of the finance minister to help institutions recover their money)! Some of the other industries that can leverage this to their advantage are insurance schemes that offer group products and innovative saving schemes.

Community empowerment & inclusion

The rural communities have not been empowered in the past. So they do not participate in the development process. A participatory model that mobilises the community and makes it responsible for its own well-being is bound to find greater success. The attempt should be to turn villagers into entrepreneurs and keep the ownership of the various projects with the community. Given the vastness and diversity of the geographies involved, marketers would do well to leverage the potential of villagers themselves by creating entrepreneurial communities. Make them an extended team of your business and let them grow with you.

A last word of caution, the companies entering the rural markets must do so for strategic reasons and not for tactical gains. The rural consumer is still a closed book and it is only through unwavering commitment that companies can hope to make a dent in this market. Not to forget that it has to be a revolutionary and not just an evolutionary business approach that will open new frontiers of consumer demand and create an emerging market within a developing market.

Senior V-P (marketing),
Max New York Life Insurance

PCs have an ‘Intel Inside’ logo, BT should have ‘India Inside.’

Globalisation starts and ends at India'

UK's dominant fixed line telecom operator, BT Group (British Telecom firm) has rejigged its operations dramatically over the past three to four years. And the global services division is clearly emerging as the bright spark in this transformation journey. BT Group CEO, Francois Barrault is now leading the £9.1 billion division to become a fully global software driven services organisation, meeting the needs of global customers around the world. Earlier, he led BT International for three years and built up BT's activities in 170 countries outside the UK. India seems to hold the key to BT's growth and the company is targeting revenue of $250 million here by 2009. A French national, Barrault seems enthused about India's contribution to their growth and is clear that BT has an 'India Inside'. He narrates his success story and India's role in a chat with Pragati Verma. Excerpts:

BT contributes about 2% to India's $50-billion software exports. Will India continue to be big on your offshoring plans?

India has created a lot of brainware. When you visit China, everyone talks of India's growth story and wants to create a new Bangalore. You have local Companies as well as multinationals trying to use the Indian brainware. India, of course, is the central point of the entire globalisation efforts. Globalisation today starts and ends at India.

We have been working successfully in India for many years with partners, who handle some of our non-core but mission critical activities. We are expanding in India and have just opened a global operations centre in India. The new centre in Gurgaon will employ up to 300 people to run systems and processes for BT's various lines of business worldwide. The centre will also support business functions such as procurement, legal, finance, and human resources.

Tomorrow, others can replicate India's success story but it will take time. It takes nine months to deliver a baby; you can't do it in a month.

And what about the Indian market? Is the focus on India increasing as developed Markets like the US seem to be moving into a recession?

We started with some five people in a room and today we have more than 3,200 employees and 16 ports. In fact, we keep saying that just as your PCs have an 'Intel Inside' logo, BT should have 'India Inside.'

For more updates visit   India Growth Story

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Betting big on India, Soros terms Ambanis' growth spectacular

NEW YORK: In their bid to outdo each other after dividing their family empire, two Ambani brothers -- Mukesh and Anil -- have created India's most spectacular growth story in the recent past, believes one of the world's most renowned investor George Soros.

Putting India on a higher trajectory than China in terms of an investment destination, the legendary investor says in his latest book that the economic growth rate has more than doubled since his visit to India in late 2006, with the rise of Ambani brothers emerging as the most spectacular one.

"The most spectacular has been the rise of the Ambani brothers. When their father (Dhirubhai Ambani), the founder of Reliance Industries, died, the brothers divided his empire among them and are now trying to outdo each other," he says.

The book, titled 'The new paradigm for financial markets: The credit crisis of 2008 and what it means', is available in electronic format and print edition would come out on May 19.

Talking about the two Ambani brothers, Soros says that the two groups are present in businesses ranging from oil refining, petrochemicals, and offshore natural gas production, to financial services and cellular telephone.

"Mukesh Ambani is using the cash flow from its oil and gas business to set up Reliance Retail, bringing food directly from the grower to the consumer," Soros notes, while terming it as a "bold project that seeks to cut the differential between consumer and producer prices by more than half".

Incidentally, Soros has invested in about half a dozen ADAG firms, but none of the Mukesh-run companies are known to have any such investments.

The investment in various ADAG firms is estimated to be worth about one billion dollar and is said to account for over half of the total for all Indian companies.

We are bullish about India: Paul

UK'S Caparo Group is bullish about India. Chairman Lord Swraj Paul on Saturday indicated plans to step up Caparo's presence in the country by setting up more automobile component plants, including the one coming up at Singur near the Tata Nano facility.
    "We are very bullish about India. Caparo has 22 plants in the country and 16 are under construction. Our manpower has risen from 600 to 4,000 including 1,400 qualified engineers," said Lord Paul, who is leading a four-member Commonwealth Parliamentary Association (CPA) delegation told newsmen here.
    Replying to newsmen on further investments by the Caparo group in West Bengal, Lord Paul said: "Kolkata has a special attachment to our family and if the opportunity comes, Caparo will make further investments in the state."
    Unfolding his group's business plans, Lord Paul said the Caparo Group was in the process of designing a city car for the European market. Incidentally, it has also built the fastest car Caparo T1, which was showcased at the recent Delhi Auto Expo earlier this year.
    Lord Paul, who had a series of meetings with political leaders and the state chief minister Buddhadeb Bhattacharjee in the last few days, said people in Singur have lot of expectations and he had not come across anybody in West Bengal who is not in favour of industry.
    About the role of opposition parties in Singur, Lord Paul said the government's job was to govern and the opposition's to oppose. "We are used to seeing such opposition in Britain. It happens in any democracy," he said.
    He, however, warned: "It is dangerous to mix business with politics. It is not in the interest of the common man. We should regulate industry and not politicise it."

Top global retailers say India is most sought-after market

Top global retailers say India is most sought-after market

PTI LONDON

INDIA has been identified as the most sought-after market in a major survey of 300 global retailers seeking to expand outside their domestic markets. New research by C B Richard Ellis, a leading Londonheadquartered real estate services firm, reveals that 40 per cent of retailers expect emerging markets to provide their main source of growth over the next five years.
    The research report said that India was identified as the most sought-after emerging market. Twenty seven per cent of international retailers surveyed have opened their first store in India in the last year or are planning to do so soon.
    "India is considered particularly attractive because of the size of its market compared to its low presence of international retailers. With foreign ownership rules being gradually relaxed, foreign investment is also now possible, allowing single-brand retailers to own up to 49 per cent of their India operations," the report said.
    The Global Emerging Markets Survey (GEMS) explores the views of some 300 retailers worldwide, representing a global portfolio of 25,000 stores, and provides the latest insight into retailer attitudes towards the world's emerging retail destinations.
    Ukraine and Russia also ranked highly in the survey, in second and third positions respectively. Ukraine, in particular, benefits not only from its own rapid economic growth but also from its proximity to Russia.
    "Rising interest and growing expansion into emerging markets globally is being fuelled by rapid growth in consumer spending and the 'emerging middle class' in many of these countries. We believe India will maintain its position as a popular new location for retail expansion as further trade restrictions are lifted," said Peter Gold, Head of Cross Border Retail at CB Richard Ellis, said.

India's spectacular story in petroleum refining

India has witnessed a spectacular growth in the refining sector over the years. In 1947, there was only one refinery located in Digboi with a capacity of 0.25 million tonnes per annum.

Subsequently, Standard Vaccum Oil Company put up a refinery in Bombay in 1955: and Caltex at Visakhapatnam in 1957.

Today, there are 14 refineries in the country, 13 in the public sector and one in the joint sector, with an install capacity of 60.4 million tonnes per annum.

Out of the 13 PSU refineries, 6 are owned by Indian Oil Corporation Limited (IOCL), while the other 7 are owned by Hindustan Petroleum Corporation Limited (HPCL) (2).

Madras Refineries Limited (MRL) owns two while one each is owned by Bharat Petroleum Corporation Limited (BPCL), Cochin Refineries Limited (CRL) and Bongaigaon Refinery & Petrochemicals Limited (BRPL).

The one refinery in JVC is the 3 million tonnes Mangalore Refinery & Petrochemicals Ltd.

Demand for petroleum products

The demand for petroleum products is linked with the energy requirements of the country, which is a function of the country, which is a function of the level of economic activity as a measured by the GDP.

Presently India is undergoing major economic and industrial reforms for integrating its economy with the global economy. In the liberalised scenario, the hydrocarbon sector has been identified as one of the main areas of the focus.

Major policy changes are planned for the vital sector to make the oil industry globally competitive. With the reforms package formulated and expected high growth in all economic sectors, the demand for petroleum products is expected to show a compound growth of about 7%.

In absolute terms, the demand for petroleum products by the year 2006-07 is expected to increase from the present level of 80 million tonnes to 155 million tonnes per annum.

Challenges

The challenges for the refining sector are threefold:

• To build up adequate refining capacity; new refineries, expansion and replacements.
  
• To update/implement the emerging technologies to meet the predominant demand for middle distillates
  
• To improve the quality of India's petroleum products to make them environment-friendly and globally competitive

In the liberalised scenario, the Government has opened the refining sector to 'Joint Sector' as well as to the private sector for achieving faster growth. About 27 million tonnes per annum additional capacity is planned to come up under PSUs.

Under joint venture, 43 million tonnes per annum capacity will be added in the next 54-6 years. Out of this 43 million tonnes per annum capacity will be added in the next 5-6 years.

Out of this 43 million tonnes per annum capacity, IOCL have tied up with Kuwait Petroleum Company for one refinery, HPCL with Oman Oil Company and Saudi Aramoco for two refineries and BPCL with Oman Oil Company and Shell International for two refineries.

In the private sector, Letters of Intent (LOIs) have been issued for about 41 million tonnes per annum refining capacity.

The companies to whom LOIs have been issued are Reliance (15 MTPA), Essar (9MTPA), Ashok Leyland (2 MTPA), Nippon Denro (9MTPA) and Soros Foud (6 MTPA).

Under the EOU category, about 29 million tonnes per annum capacity has been approved. In sum, additional refining capacity of about 110 million tonnes per annum excluding EOUs is planned for implementation during the next 5-6 years.

Opportunities

Creating additional refining capacity of about 110 million tonnes per annum during the near future will require an investment of over US $ 22 billion. With such phenomenal growth in this sector, there is ample scope and opportunity for the transfer of technologies required and exports of capital goods, etc., to India.

The technologies required will be for upgrading the bottom of the barrel and to meet the predominant demand for middle distillates and also to improve the quality of petroleum products to make them environment-friendly and globally competitive.

Most of the new refineries will be located on the coasts while the major centres of demand for the petroleum products are in the inland locations, particularly in North/North-West regions.

Therefore, there are opportunities for building inland refineries in the country. The refineries in the country are also allowed forward integration in the fields of petrochemicals, etc., for better value-addition, which opens up another vast area for investment.

India has a strong commitment to pursue an energy policy which will take due account of the environmental considerations.

Accordingly, the country is adopting more environmentally benign measures with regard to usage and quality of fuels. Lead phasing-out and benzene reduction in gasoline, sulphur reduction and cetane improvement of diesel are amongst the prominent measures that are under implementation/consideration.

Such quality upgradation of fuels will call for adopting latest/state-of-the-art technology requiring huge investments of the order of  $ 2500 million by way of providing reformulated gasoline producing units, hydrocrackers, hydro-treaters, hydrodesulphurisers, etc.

India's advantages

India has large reserve of trained and highly skilled manpower at a relatively much lower cost compared with advanced countries. Further, with a large population base and a currently very low per capita consumption of petroleum products, India is amongst the fast emerging markets.

The country has also acquired enough experience in the installation and efficient operation of petroleum refineries in the last 35 years.

It is, therefore, considered that the operating cost will be low and the value-addition in Indian refineries will be of a very high order and that the setting up of refineries in India for the domestic market as well as for exports would be economically attractive.