19 may 2010

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Fortuneteller of the untended – Rakesh Singh,Dean, School of Economics,NMIMS

The business management community has lost one of its greatest thinkers with the death of CK Prahalad lastmonth. It was Prof Prahalad along with his colleague Prof Stuart Hart who coined the term “the fortune atthe bottom of the pyramid”. He had realised that low-income markets can present enormous opportunities for the world’s wealthiest companies to seek their fortunes, while helping to alleviate poverty. Together, the duourged multinational companies worldwide to invest and rethink a risk and reward structures for thesemarkets.

Prahalad has contributed significantly to the world of management. His book “Competing for the Future” isreferred to by every management strategist. But it is his work on “The Fortune at the Bottom of the Pyramid:Eradicating Poverty Through Profits” that helped corporate think rural and build a sustainable businessmodel. The impact of his theories can be seen and felt in many areas, and this is most visible in indian anddeveloping markets.

Most corporate, in order to reap the benefits from the rural markets have adopted the base of the pyramid or the BOP theory into their business strategy. The rural retail market, estimated at 40 per cent of the Indianretail market, is a difficult market because rural penetration is only about 19 percent on an average. Low

penetration is primarily because of low income, lack of infrastructure (electricity or roads) and acombination of the two in various areas. The difficulty further increases when we see the geographical

dispersion of the rural villages. Only 13.3 percent of the total villages have a population of 2,000 or more.

In such a scenario reaching the hinterland of such villages will mean a higher supply chain cost and one thatmight not see equal benefits. In retail, the theory law of gravitation says that any organised effort wouldrequire a catchment area of around 50,000.

Crop circles

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In India, a number of experiments like Tata Kisan Kendra, Godrej’s Aadhar, DsCL’s Hariyali, Mahindra’sShubhlabh and ITC’s Choupal Saagar have emerged in the rural market space. These experiments have onethread in common i.e. they are attempting to integrate the supply chain by removing the inefficiencies in therural as well as the agricultural supply chain, a true application of BOP philosophy.

The business model is simple. Aggregate rural demand can help attain economies of scale in terms of ruraldistribution through rural retail. Here it is imperative that agri produce of the farmer is strategically sourcedand then sold to agri producers thus reducing the uncertainty for farmers to find buyers on their own, whilecreating a win-win model for both farmers and the processors. It is necessary that farmers are also offeredadvisory support so that they can adopt better farming practices and increase their yields to world levels. Thekey objective of these experiments is to provide a one-stop “total farm solution” to the Indian farmers so thatfarm income as well as farm prosperity improves. at these retail malls, the rural consumer can get what hewants, as well as sell his produce at the best price.

But in their pursuit of reaping harvests in this large bottom of pyramid, all these experiments operate withintheir sphere of influence. Most of them are too small in scale to make their marketing efforts in rural India

profitable. All of them compete with each other in the same market, making dispersed and poor market moredifficult to serve. Even the much talked about ITC e-chaupal has not been able to break even after nine yearsof operation. Their marketing of agri-input has come in conflict with traditional supply chain which is creditdriven. The talk of providing advisory services has not even taken off.

But it is this rural India, which has been kept outside the purview of economic reforms, is bailing out theIndian economy from the aftereffect of the global financial crisis. The rural economy has benefitted

primarily from the largesse of the Congress government rather than any well thought out strategy or public policy. The much hyped national Rural employment guarantee scheme (nRega) as well as loan waiver hastemporarily increased the buying power of the rural workers and farmers, which cannot be sustained for along run given the state of the fiscal deficit. at best nRega can be used to create complementary infrastructurein the rural economy. Considering the low income and lack of appropriate infrastructure bringing aboutinclusive growth is a daunting task. it is in this context that Prahalad’s Fortune at the bottom of the Pyramidassumes significance.

Despite the drawbacks these experiments have the ability to move to the next level. For this to happen,companies need to collectively set up a rural retail segment broadly classified into three parts. The first partis rural consumer retail segment. The second part is agri-commodity segment which buys agri-produce or

provides warehousing facility. The third segment would be agri-input segment including seeds, fertilisers,farm equipment and an agri-clinic for providing advisory services. Partner companies can share the burden

of running these clinics. But the transition to this new collaborative experiment will require experimentation,reflection and learning. It is a matter of time before companies with similar interests collaborate to makeindia’s bottom of the pyramid a profitable and sustainable business zone.

NEWS ROUNDUP

Ports / Shipping

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Mundra port and MPSEZ records 10pc growth in traffic

Mundra Port and Special Economic Zone’s (MPSEZ) volume of cargo traffic handled grew by nearly a 10%Y-o-Y to 10.5 million tonne in the March ’10 quarter, which was broadly lower than a 13.7% Y-o-Y growth

in the company’s cargo traffic during the first three quarters of FY10.

During the fourth quarter of FY10, the company benefited from a tight check on operational costs, mprovingits standalone operating profit margin by 170 basis points Y-o-Y to 59.9%.

The company’s total operational income in the quarter under review also grew by 47.8% Y-o-Y to Rs 420.5crore.

Essar Oilfields bags first contract outside India

Essar Oilfields Services Ltd (EOSL), a wholly-owned subsidiary of Essar Shipping Ports & Logistics, has

won its first contract outside India, valued at USD 40 million.

The contract from Vietsovpetro JV (VSP), an oil exploration and production company in Vietnam-is for drilling a 4,800-meter offshore well.

The company has deployed its semi-submersible rig Wildcat for drilling the well and the deal is valued atapproximately USD 40 million, EOSL said in a statement.

"This contract demonstrates the confidence of international companies in the capabilities of Wildcat inmeeting their HPHT drilling requirements. A six-member team from Vietsovpetro JV (VSP) visited theEssar Wildcat in March and found the rig meeting its stringent requirements," said EOSL CEO Ankur Gupta.

The Essar Wildcat has recently completed drilling in Gujarat State Petroleum Corporation's (GSPC) oil andgas block in Krishna-Godavari basin.

Tata-NYK to expand 11-ship fleet with eight newbuildings

The Tata Group’s shipping business, which is run on a 50:50 joint venture (JV) with NYK Line, proposes to beef up its 11-ship fleet with 8 newbuildings so as to strengthen its supply chain requirements.

The ships have already been contracted for, either as owned or long-term charters, Mr Rajiv Mukerji,Managing Director of Tata-NYK Shipping.

Three Capesize ships, two Panamax ships and three Supramax ships, all new, would be added to the fleet byApril 2011, he said. The company would give up one Supramax carrier once this fleet expansion wascompleted.

The Singapore-headquartered JV handles the dry bulk and break-bulk cargo requirements of Tata Steel,

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which includes transport of coal, which the company imports, besides exporting steel.

The JV intends to acquire a dominant share in the Indian market besides servicing Tata’s entire dry bulk and break-bulk cargo

By servicing third-party cargo, the JV hopes to keep the rates for the Tatas competitive. "Tata Group’s shareof cargo to the total cargo we carry is 46 per cent as on March 31, 2010," Mr Mukerji added.

The company is buying three tugs for Rs 120 crore as a prelude to its entry into port management services, itis learnt. It initially acquired the right to operate Berth 12 at Haldia. Later, it extended operations to Paradipas well.

Coastal security to get beefed up

Giving due prominence to coastal security, the State Government has decided to launch 47 state-of-the-art patrolling boats to undertake round-theclock surveillance of coastal areas and inland waterways.

The boats will be officially launched by Home Minister Kodiyeri Balakrishnan here on Friday. Officialsources said the boats would be used by specially trained police team for patrolling the coastal areas andmain inland waterways.

“The 6.8-metre-long boats will be powered by a 40 horse power (HP) engine. It will have a seating capacityof six. The navigation and communication equipment are imported from the US,” sources said.

The computer-controlled boats can be manned by a remote device. The officials said the specially designed boats can cruise through shallow waters. The State Government had taken the initiative to strengthen coastalsecurity considering the growing investment climate in Kochi and neighbouring places.

“A lot of new projects are coming up mainly on the coastal belt. The Vallapadam International Container Transshipment Terminal (ICTT) is one among the major projects taking shape in the state. With the CochinPort attracting more international container traffic, the State Government is keen on protecting andcontrolling its coastal waters,” officials said.

The boats would closely monitor the areas in the proximity of vital installations mainly the ICTT, Shipyardand the Port. “Oil pipeline installations will also be brought under surveillance,” officials said.

Western India Shipyard completes repair of 9th Jack Up Oil RigWestern India Shipyard Ltd has announced that the Company has completed the major repair order of its 9thJack Up Deep Water Oil Rig 'JUR Noble Charlie Yester', of rated depth of 300 meters, of the value of Rs.810 lacs within the agreed time.

MPSEZ plans expansion projectAdani Group company Mundra Port and Special Economic Zone (MPSEZ) is planning to have 175 milliontonne of cargo handling capacity in the next three years from 70 MT .

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MPSEZ is in the final stages of designing blue prints for its expansion projects at an investment of about Rs2,000 crore. It is also exploring opportunities to set up port facilities on east and south shores of the country.

With this and the new ports being develop at Mormugao and Hazira, MPSEZ would add another 40-50

million tonne by 2013, thus aggregating about 175 million tonnes by 2013," MPSEZ CFO B Ravi said.

INFRASTRUCTURE/NEW LAUNCHES/OPERATIONS

Agarwal Packers and Movers introduces TV box

Agarwal Packers and Movers, a leading logistic service provider in India has many inventions to its credit. Itis also ahead of the rest because it has a team of dedicated researchers, who gift the logistic industry withinteresting innovations at regular intervals. Agarwal Packers and Movers have to their credit a long list of innovations; few of them are the dry cargo container, perfect box and coat cartoon. A recent addition to thislist of innovations is the T V Box.

The compact and strong TV Box discovered by Agarwal Packers and Movers is very handy for protection of televisions, computers and even microwave ovens. The researchers at Agarwal Packers and Movers haveused strong hardboard in order to make the outer cover of the box. This prevents the monitor from breakingor crashing. In today’s age of plasma monitors and TV screens its all the more necessary to pack them safely,since they are very precious. Agarwal Packers and Movers continuously thrive to offer value added serviceto its esteemed clients

Renault revs up India plans

After announcing its intention to make an independent foray in the Indian market, Renault is movingaggressively to set the stage for the launch of their cars in India. Renault has announced plans to launch theFLUENCE (luxury sedan) and the KOLEOS (4×4 Crossover) in 2011, followed by a full range of cars fromits global portfolio, including a small Hatchback.

The sales & after-market service of its cars will be handled by Renault branded dealerships, with the initialdealerships being operational by mid-2011 in Tier-I cities. As part of the first phase of its India plans, postthe initial launch in mid-2011, Renault plans to open 70 dealerships across the most important Tier-I andTier-II cities by end-2013.

“We are extremely happy with the response that we have got from entrepreneurs who are eager to associatewith us in driving the change that Renault intends to bring in the Indian automobile space. What is especiallyheartening is that the flood of dealerships enquiries has been coming to us ever since we made the firstannouncement in January. It definitely speaks volumes about thestrengths of the Renault brand” said Marc

NASSIF, Country General Manager and MD of Renault India.Renault is also evaluating agencies that willhandle its advertising, media and online activities for its range of cars entering India mid next year. Pitch

preparations are already under way as top agencies are being asked to submit their credentials.

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“Renault has a detailed ramp up plan for 2010, which essentially sets the base for the products to come between 2011 and 2013. Branding becomes one of the key pillars to this challenge and we are looking for agencies that can work with our Marketing team to come up with the most innovative and out-of-the-box

ideas to build the Renault brand in India.”, Mr. Nassif went on to add. Renault already has a very strong presence in India, with investments of about Rs. 5000 crores (jointly with Alliance partner Nissan) in settingup a greenfield facility to manufacture 400,000 cars per year and a global engineering and procurementcentre, in Chennai.

Volvo Construction Equipment invests in Indian facility

As part of the company’s objective of supporting customers in the growing BRIC (Brazil, Russia, India &China) markets, Volvo Construction Equipment has announced a strategic investment in its existing facilityin Bangalore, India.

The investment, which totals around SEK 144 M, will allow Volvo Construction Equipment to producemedium sized excavators at the plant. These machines will primarily be models for use on the Indian market.

Eberhard Wedekind, President of Volvo Construction Equipment’s Region Asia comments: “Thisinvestment will allow Volvo Construction Equipment to fulfil the needs of customers in the large Indianmarket much more effectively than we could do in the past. It is a strong sign of our commitment to thegrowing Indian market.”Production of the first machines is expected to start by the end of 2011.

Running short of reefer boxesThere are concerns that a worldwide shortage of refrigerated containers could hit movement of perishablesthis year, says ThePacker.com of the US. While the business of fresh produce is picking up, the supply of reefer boxes is not increasing as much. This is presumably because fewer orders were placed for refrigeratedshipping containers last year — an estimated 50,000 in 2009 against 100,000 in 2007.

According to the companies that make reefer units for trucks, rail cars and ocean shipping, the situation isslowly changing for the better and the orders for such units are showing an upward trend. Yet everybodyfeels there could to be a shortage as few are replacing old equipment. The shipping companies, it is pointedout, remain reticent. One reason could be that they are not sure about the economic outlook. The questionthat haunts them is if the trend persist even as there are signs to suggest that the business has started pickingup since late 2009.

Shree Shubham Logistics signs MOU with SBIShree Shubham Logistics limited, a subsidiary of Kalpataru Power Transmission limited (KPTL) and leading

player in Agri-Logistics sector which manages warehouses at more than 68 locations with a storage capacityin excess of 6 Lacs Metric Tonnes, today announced the signing of Memorandum of Understanding (MoU)with State Bank of India, largest Bank in the country. SSLL will now provide Collateral Management andReferral Services to State Bank of India for extending post harvest credit facilities to farmers, traders etc.

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Commenting on the agreement, General Manager, Agri Business Unit, State Bank of India, CorporateCentre, Mumbai, said “The tie-up between SBI and SSLL will focus on the producers at the start of thesupply chain. Farmers can secure post harvest credit facilities by keeping their produce in SSLL owned andcontrolled warehouses so that they do not have to resort to distress selling of their produce”.

Earlier SSLL has also signed agreements with Union Bank of India, Axis Bank, IndusInd Bank andDevelopment Credit Bank.

RAILWAYS

East Central Railway's coal loading hits roadblock

East Central Railway's coal loading has been hit by the critical law and order situation in certain mines under Central Coalfields Ltd (CCL).

On April 30, two supervisors employed by private loading contractors were killed, reportedly by theMaoists, leading to suspension of coal loading in Ray Khalari area under CCL, a major coal loading point for the railway. For over a week from May 1, the loading was suspended. East Central Railway (ECR) loads 18-20 rakes a day at Ray Khalari.

With the CCL authorities and local administration swinging into action and with the deployment of policeforce, coal loading in Ray Khalari is limping back to normalcy – but only 50 per cent loading has beenrestored. ECR is keeping its fingers crossed, more so because it lost an estimated 5.30 million tonnes of coaltraffic last year due to the difficult law and order situation in the areas served by it. The present disturbancehas entailed a loss of nearly 200 rakes of coal traffic.Coal accounts for more than 90 per cent of ECR's traffic. In 2009-10, the share of coal was 72.5 mt in thetotal traffic of 79.2 mt. In terms of rakes, the daily loading comes to about 62 rakes a day – 26 rakes a day inmines under CCL, 13 rakes a day in mines under Bharat Coking Coal Ltd, 18 rakes a day in mines under

Northern Coalfields Ltd, about 3.5 rakes in Tata Steel's West Bokaro colliery and one rake or so a day inSAIL's mines at Chasnala near Dhanbad.

Mismatch situation at Gangavaram

At Gangavaram port, ECoR has no other option but to place empties because of the mismatch betweenexport and import traffic. The volume of coal imported through the port is much larger than the volume of iron ore exported through it. As a result, only one rake of iron ore arrives at the port every day as against the

requirement of four to five rakes a day for backloading of imported coal. This means ECoR is required to place at Gangavaram on an average three to four empties a day for backloading.

At Visakhapatnam port also, ECoR is required to place empties but fewer in number, one to two empties per day.

Meanwhile, the iron ore movement along the 450-km long Kirandul-Kottavalasa line has been normal, the

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average daily throughput being 14/ 15 rakes, going up to even 16 on some days.

Train services disrupted

Train services were hit for several hours on Thursday morning on the Midnapur-Adra section of the SouthEastern Railway following detection of red flags, posters and electric wires on the railway track betweenGodapiasal and Midnapur stations by a patrol special train, according to a SER release. However, no bombwas found on the track. A number of long-distance and passenger trains were detained for several hours as aresult, the release added.

East Coast Rly awaits Orissa directive on iron ore loadingEast Coast Railway (ECoR) is looking to the Orissa Government for fresh guidelines to resume rake loadingof iron ore in the State's Nayagarh and Daitari areas. The validity of the temporary guidelines issued earlier expired on April 30 with no fresh guidelines being available since then. ECoR loads on an average threerakes of iron ore a day in those areas – two in Nayagarh and one in Daitari.

However, the resumption of iron ore loading in some of the private sidings as well as Government goodssheds, particularly in Sundergarh district of Orissa and in Jharkhand, served by South Eastern Railway, hashelped ECoR, in that more rakes carrying iron ore for exports are now arriving at Paradip port than beforeand to that extent ECoR is not being required to move the empty rakes to facilitate backloading of coalimported through the port.

Normally eight to 10 rakes are needed at the port every day for backloading of imported coal. Two of theserakes are generally BOBR rakes which bring thermal coal to the port for coastal shipment and six to eightothers are Box-N type.

IRFC raises Rs 1,100 crore via longest-tenure bondsIndian Railways Finance Corporation (IRFC) has raised Rs 1,100 crore by issuing the longest tenure non-government bond in the domestic market.

The paper will mature after 25 years and offer semi-annualised coupon of 8.83%. Until now, long-tenure bonds were issued by commercial banks since they lend long-term money to the infrastructure sector.

Even the bonds issued by banks — known as perpetual bonds — have a call option after 10 years, whichmeans that the issuing bank can decide to repay the bond after 10 years. The IRFC bonds did not have any

put and call option, making it the longest tenure bond in domestic market.

The government-owned IRFC managed to get its issue fully subscribed despite the 25-year lock-in. Sourcessaid the interest payment will be in equal instalment staggered over the last five years of the bond. Thus for a25-year bond, the payment will start from the 20th year and continue till the 25th year.

The annualised return on the bond works out to 9.01%, which is around 90 basis points over 20-year government bond. In February, rating agency Crisil has assigned triple A rating to Rs 9,120 crore borrowings

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of IRFC in the form of bonds and term loans.

ROAD TRANSPORT

NHAI board clears Rs 6,500 cr road projects

The National Highways Authority of India (NHAI) board today cleared eight road projects worth Rs 6,500crore for construction and upgradation of highways in eight states, including Haryana, Uttar Pradesh, AndhraPradesh and Bihar.

"The projects cleared by the NHAI board include six-laning of 179 km of the Delhi-Agra section on NationalHighway No. 2 in Haryana and Uttar Pradesh," a Road Ministry official said.

"The construction of the Delhi-Agra section will entail an investment of Rs 1,928.22 crore and will be builtunder the National Highways Development Project (NHDP) phase V on a build, operate and transfer (BOT)

basis," the official said.

The board, comprising Road Secretary Brahm Dutt and NHAI Chairman Brijeshwar Singh, among others,agreed on a concession period of 26 years for the project.The board also approved six-laning of a 183 km section of National Highway No. 5 in Andhra Pradesh at anexpenditure of Rs 1,535 crore.

The other projects are in the states of Bihar, Orissa, Maharashtra, Madhya Pradesh and Chhattisgarh.

NHAI to award contracts through 91 projects

NHAI will be awarding contracts to build 12,000 km roads in 2010-2011 through approximately 91 projects,which is more than double of what it did last year.Contracts for 1,600 km will be awarded in May itself, said the Chairman.

The authority aims to award contracts for construction of around 34,000 km roads in the next four to fiveyears to achieve the target of 20 km a day, he added.

In 2009-2010, the authority awarded 38 projects for 3,361 km of road construction, said the GeneralManager-Finance, Mr Pradeep Kumar Agarwal.

“This is because we started awarding contracts only after September last year. There was only 391 km tillSeptember. Between April and November 2009, 14 projects were awarded and between December 2009 andApril 2010, further 24 projects were awarded,” he said.

The subscriber need not physically surrender the bonds on redemption, it will be automatically redeemed ondue date, said the NHAI Chief General Manager (Finance), Mr Nihar Ranjan Dash.

“The tenure for these bonds will be three years at an interest rate of six per cent against 6.25 per cent offered

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last year,” said Mr Dash.However, he added, the authority is in the process of finalising details for issuinglong-term bonds as well, which will be for the tenure of 10-15 years.

“We will appoint a financial consultant for the same soon for which RFP has already been put on our Web

site,” said Mr Dash.

CAG moots agency to plug highway toll revenue leakageThe Comptroller and Auditor General of India (CAG) has come up with an idea to check cheating onhighway tolling.

He has written to the Finance Ministry on the need to have a single, professionally managed, independentagency that will be responsible for monitoring the actual traffic plying on the national highways.

This is because there are concerns that on many highway stretches, the actual toll collection is much higher than what is being reported to the Government.The CAG, Mr Vinod Rai, said that the (estimated) traffic projections (of vehicles plying on highways) gohaywire.

Speaking at a conference organised by the CII, he said that on the same road and the same area, two differentconcessionaires report widely varying toll revenues. “Why not have a single, professionally managed,independent toll monitoring agency,” Mr Rai said.

When asked whether this proposal is aimed at preventing toll leakages, Mr Rai said, “Yes.” The CAG is alsoasking the Government to inform the developers taking part in public-private partnership (PPP) projects thatthere is every likelihood of his (concessionaires') books being questioned.

There have been cases when the Highway Ministry and National Highways Authority of India have hadagencies evaluate the actual traffic data on a stretch and the agencies have come with widely varying results.

Also, there are cases where on a single highway stretch, the Government is receiving a certain level of revenue through contractors who are responsible for collecting tolls.But, when a nearby stretch on the same highway is competitively bid out, the bids received indicate that thelevel of toll collection is much higher.

“When we extrapolate the data arrived at through the bidding process on the nearby stretch, we realise theactual toll collection on the stretch (where there are no bids) could be 300 per cent or even 800 per centhigher in some cases,” an official source said.

The CAG has demanded an automatic legal mandate to audit PPP ventures. The proposal is under “activeconsideration” of the Government, the Finance Minister, Mr Pranab Mukherjee, had said recently.

If such a mandate were to be provided by law, the CAG would then have an unfettered access to the recordsof the PPP ventures and also to the books of the private operators that had entered into contracts involving

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revenue share with the Government.

There are indications that the Government may bring in Parliament a Bill to redefine the mandate of theCAG in tune with changed pattern of governance.

India targets building 2,500-km highways in 2010-11India plans to build 2,500 km of new highways in 2010-11, which means 7 km will be added to the network every day - well below the revised target of 12 km.

Last year, only 2,008.93 km highways could be constructed against the target of building 3,165.55 km.

The government had last year set a target of building 20 km of highways everyday as part of its plans toimprove infrastructure.

But recently, Road Transport Minister Kamal Nath said the target had been lowered to 12-13 km per day.

The country Monday set targets for the infrastructure sector, critical to its economic growth, for this fiscal.

The government targets to award contracts for 9,000 km highways in 2010-11.

It plans to spend Rs.35,680.86 crore on construction of roads and highways. Of this, Rs.21,256 crore will becontributed by the private sector.

Under the Pradhan Mantri Gram Sadak Yojana, an outlay of Rs.22,000 crore has been provided to theministry of rural development.

The amount will be spent on constructing 19,090 km of new roads and upgrading the existing 15,000 km.

L&T wins Rs 1,450 cr NHAI contractEngineering and construction major Larsen & Toubro has bagged an order worth Rs 1,450 crore from the

National Highways Authority of India (NHAI) for a road project in Tamil Nadu.

L&T Krishnagiri Walajahpet Tollway, a SPV incorporated by L&T, has signed an agreement with NHAI for widening of a stretch of Krishnagiri-Walajahpet Highway in Tamil Nadu. The scope of the work includessix-laning of the Golden Quadrilateral on build, operate and transfer basis. The project is slated to becompleted within 30 months.

NHAI to borrow Rs 33k cr by 2013 for BOT road projects

The National Highways Authority of India (NHAI) today said it needs to borrow up to Rs 33,000 crore over the next three years to implement road projects on build, operate and transfer (BOT) basis.

The borrowing requirement for the current fiscal, in which the Authority has set a target to award 12,000 km

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of road projects, is up to Rs 7,000 crore.

"Our fund requirement in the next three years will be Rs 32,000-33,000 crore for BOT projects. We arelooking to raise Rs 5,000-7,000 crore from various options this fiscal. We are discussing with the World

Bank also, but this is at a preliminary state," NHAI Member Finance, JN Singh, told reporters here on thesidelines of Construction Summit."We are planning to award 12,000 km of roads this financial year and investment required will be roughlyRs 1.20 lakh crore," Singh said.

The borrowing requirement for the next fiscal is Rs 11,000 crore, while for 2012-13, the Authority plans toraise Rs 15,000 crore, he said.

At present, 54 EC tax exemption bonds are the main source of funding for the government's portion in thehighways project.

The Authority responsible for implementing National Highways Development Project (NHDP) in seven phases, has already made it clear that it needs to borrow up to Rs 20,000 crore per year for the next 15 yearsto implement Rs 9 lakh crore-worth of road projects in the public-private-partnership mode till 2031-32.

"NHAI would need Rs 10,000-Rs 20,000 crore annually as borrowing from the domestic and internationalmarket for a period of next 15 years," NHAI Chairman Brijeshwar Singh said earlier this week.

As per the government's target of building 20 km road every day, NHAI plans to complete award process for construction for 36,000 km of roads in the next three years.

AIRWAYS

Indian units help DHL cut carbon emissions 19%

Indian units, with a significant contribution, helped DHL, the world's leading express company, achieve anoverall improvement in CO2 efficiency or carbon reduction by 19 per cent year-on-year in the Asia-Pacificregion.

Overall, the company reduced CO2 emissions by 13 million kg for FY 2009, representing a nine per centreduction of carbon emissions and yielding a saving of €10 million in overall energy and ground vehicular fuel costs in the region.

Mr John Pearson, CEO of DHL Express, Asia-Pacific, Eastern Europe, Middle-East & Africa, said these arethe first results of the carbon footprint assessment and abatement programme which was started by DHLExpress in 2008 covering over 1,000 facilities in 27 markets across Asia-Pacific. The purpose of theassessment was to measure and reduce DHL Express' carbon footprint from energy consumption in realestate and its transport fleet.

Within Asia-Pacific, India registered one of the best scores for the reduction of CO2 emissions, accounting

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for a reduction of 1.7 million kg of CO2 emissions across 150 sites of operations. It reduced its per unit CO2emissions by 40 per cent year-on-year in ground transport and registered a 24 per cent reduction per unitCO2 emissions in its real estate energy consumption. The reduction in ground transport led to savings in fuelconsumption by 6 per cent. Blue Dart, part of the DHL Group, saw an improvement on CO2 efficiency by 10

per cent year-on-year.

“Fleet optimisation was one of the key areas for emission improvement in India. DHL Express reviewedareas where we predominantly delivered documents and replaced over 60 vehicles with 75 motorbikes,thereby increasing fuel efficiency. Blue Dart, which operates over 5,000 vehicles, worked on substituting air routes with inter-city road line haul. We have also implemented pick-up and delivery optimisation measuresto further enhance our operational efficiency and service levels for customers,” said Mr Malcolm Monteiro,Senior Vice-President and Area Director, South Asia for DHL Express.

Mysore Airport inaugurated

Chief Minister B.S. Yeddyurappa, officially inaugurated the Mysore airport, at Mandakalli, built anddeveloped by the Airports Authority of India (AAI) at an estimated cost of Rs. 82 crore.A subsidy of Rs. 25crore to facilitate flight operations by airlines would be released immediately.

The Mandakalli airport was constructed a cost of Rs. 82 crore under the first phase, to enable the landing andtakeoff of ATR-72 type aircraft. In the second phase, the airport will be upgraded to accommodate Boeing737 or A-320 sized passenger crafts.

The expansion of the airport hinged on realigning National Highway 212, for which about 162 acres of landwas required. Once land acquisition was completed and the highway realigned, the length of the existingrunway could be increased to facilitate operations of Boeing and Airbus aircraft.

Mumbai Airport plans Rs 2,280 cr investment this fiscal

Mumbai Airport said it will invest Rs 2,280 crore this fiscal on modernisation and development work againstRs 1,306 crore in FY10.

A Mumbai International Airport (MIAL) spokesperson said the company had targeted a Rs 2,280 croreinvestment this fiscal. In comparison, MIAL had targeted a Rs 2,300-2,500 crore capital expenditure for theMumbai airport in the last financial year.

The country's busiest airport is being modernised and developed by MIAL, a joint venture between AirportsAuthority of India (AAI) and a GVK-led consortium, with 26 per cent and 74 per cent equity, respectively.

While Rs 570 crore and 412 crore of the projected Rs 2,280 crore investment are expected to be incurredduring the first two quarters, the remaining two quarters would entail an investment of Rs 663 crore and 635crore, respectively, according to a Planning Commission report on the civil aviation sector.

MIAL envisages a total investment of Rs 9,800 crore on the airport project, which is likely to be completed

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by 2012.

The modernisation and development work includes construction of a new integrated passenger terminal atSahar, which is likely to be completed in three phases by 2012.

The first phase of the new building is expected to be completed by 2010 and the second by 2011.

The terminal building will have a total floor area of around 4.3 million sq metres across four levels. Thehighly flexible gating plant and terminal arrangement aims to accommodate 40 million domestic andinternational passengers every year.It would also offer 184 check-in counters, 14 baggage claim belts and 52contact positions with passenger boarding bridges.

About 7,00,000 lakh sq ft will be reserved for retail shops, food and beverage outlets, lounges and other travel services.

AAI may invest Rs 100 cr more in Mangalore airportMangalore is all set to get the facilities from new integrated terminal building of the airport with the UnionMinister of State for Civil Aviation, Mr Praful Patel, and the Karnataka Chief Minister, Mr B.S.Yeddyurappa, inaugurating it on Saturday.Addressing presspersons here on Friday, Mr V.P. Agarwal, Chairman of the Airports Authority of India(AAI), said that around Rs 250 crore has been spent on the development of the new terminal building and therunway. Another Rs 100 crore will be invested in developing other infrastructure such as parallel taxiwayand air traffic control block.

Giving break-up of the investments made, Mr Agarwal said that nearly Rs 180 crore has been spent on thenew integrated terminal building and another Rs 12 crore on fire tenders and other fire safety measures. Anamount of around Rs 50 crore was spent on developing the second runway during 2006.“We are contemplating further investments in parallel taxiway, and the new air traffic control-cum-technical

block. This investment may be to the tune of Rs 100 crore,” he said.

The new integrated terminal building with all the facilities would reduce the distance between the city andthe airport by 7 km.

Stating that AAI is committed to doing more for Mangalore airport, he said with better facilities, moreairlines can be accommodated. The moment traffic increases, more connectivity will be there internationallyand domestically, he said.

The airport has recorded a growth rate of 9 per cent. This is good sign, and better facilities will result infaster growth, Mr Agarwal said.

Asked when the airport will get international status, he said AAI has provided all the facilities required for an international airport at Mangalore. A proposal has been submitted to the Union Government in thisregard, he said.

Asked whether user development fee (UDF) will be levied at the airport, he said the development of the

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table-top runway and terminal building at the airport is a cost-intensive process. The levy becomesunavoidable in such circumstances. “We intend to levy some UDF in Mangalore airport. But, this is yet to bedecided by the Government,” Mr Agarwal said.

APPOINTMENT

Pawan Kapil is new executive director at RIL

Reliance Industries (RIL) has appointed Pawan Kumar Kapil, 64, as executive director on its board.

Mr Kapil replaces Mr Kohli, who has stepped down after a long term of service on the board of petroleum-torefinery major. His appointment comes into effect from May 16.

Mr Kapil — who was a director on the board of the former Reliance Petroleum, which has been merged intoReliance industries — is a chemical engineer and has more than 40 years of experience in different facets of

petroleum refining industry.

This former executive director of Indian Oil Corporation joined RIL in 1996 to lead the commissioning of the Jamnagar refinery.

CII gets news VPB. Muthuraman, the Vice-Chairman of Tata Steel, has been elected Vice-President of the chamber.

Mr. Muthuraman, a B.Tech in Metallurgical Engineering from IIT Madras, holds an MBA degree fromXLRI Jamshedpur.

He is recipient of several prestigious awards like the Distinguished Alumnus Award of IIT Madras, TataGold Medal of the Indian Institute of Metals and the 2009 IIM-JRD Tata Award for 'Excellence in CorporateLeadership'.

Further, the board has appointed Manoj Jha as managing director of the company with effect from 19 May2010.

Yusuffali joins AI board

Yusuffali M.A. has been appointed as one of the directors on Air India's board, by the Manmohan Singhgovernment.

His appointment is part of the Indian government's move to restructure the national carrier run by the National Aviation Company of India (NACIL).

Yusuffali joins the Air India board with significant prior experience in the Indian aviation industry. Yusuffaliearlier served as the special invitee to the board of directors of Air India and Indian Airlines in 1997-98. Heis the director of Cochin International Airport Ltd., the first airport to be set up with private sector help in

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India.

He is the managing director of Emke Group that runs Lulu hypermarkets and shopping malls across the Gulf countries.

Hari Bhartia is new CII presidentJubilant Organosys Co-Chairman and Managing Director Hari S. Bhartia was elected as President of apex

business chamber Confederation of Indian Industry (CII) for 2010-11.

Mr. Bhartia succeeds Venu Srinivasan of TVS Motors.

INTERNATIONAL NEWS

FedEx Trade Networks Opens Three New Offices in Europe and the Middle East

FedEx Trade Networks, a subsidiary of FedEx Corp. and growing international ocean and air freightforwarder, announced today that it has opened three additional offices in its Europe, Middle East and Africa(EMEA) region. This latest step in the company’s ongoing global expansion plan includes new operations inWarsaw and Gdynia, Poland and Dubai, United Arab Emirates.

“Our customers tell us that they prefer doing business with providers that have a physical presence in theregions in which they trade,” said Fred Schardt, president and CEO of FedEx Trade Networks. “This is whywe will continue to enhance our infrastructure and expand our international presence in key markets.”The addition of its newest offices in Poland and the United Arab Emirates is another strategic move for theMemphis-based global freight forwarder. The strength of the Polish economy, in addition to its centrallocation in Europe and on the Baltic Sea, enables significant intra-European trade via the offices in Warsawand Gdynia. As one of the fastest growing cargo hubs in the world, Dubai’s strategic location half way

between the Asia-Pacific and European markets better connects FedEx Trade Networks customers to both of those regions.

Since initiating its worldwide expansion plan in 2008, FedEx Trade Networks has opened a total of 25 newfreight forwarding offices across the globe. Staffed locally by a country manager and dedicated teammembers, each new office tailors its support services to meet the unique needs of its customers in eachindividual location.

“We strive to provide our growing international customer base with the most flexible and reliable freightforwarding solutions possible,” said Schardt. “Providing our customers with access to regional support intheir local language and time zone is yet another example of how we continue to do just that.”

The offices in Poland and the United Arab Emirates join a growing global support system of FedEx Trade

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Networks freight forwarding operations. Other locations include Belgium, United Kingdom (Manchester andLondon), The Netherlands, France, India (Mumbai and Chennai), Mexico, Brazil, Singapore, Taiwan, HongKong and the Chinese cities of Shanghai, Beijing, Guangzhou, Shenzhen, Qingdao, Tianjin, Xiamen, Dalianand Ningbo. The company also has a representative office in Vietnam.

Air France-KLM to Report $614 Million Cargo Loss

Air France-KLM’s cargo business is set to report an annual $614 million operating loss this week, accordingto French newspaper Le Figaro.The cargo unit, Europe’s largest, will account for more than a third of theFranco-Dutch carrier’s projected annual loss of around $1.6 billion, Le Figaro said.

Air France-KLM declined to comment on the report ahead of the release of its fiscal 2009/2010 results.

Air France-KLM’s cargo unit lost $459 million in the nine months to December 31 compared with a year earlier loss of $70 million while revenue shrunk 26 percent to $766 million from $1.07 billion.Air France-KLM is downsizing its freighter operations following heavy loss in the past 18 months.

The airline is transferring some of its 29 cargo aircraft to its Amsterdam-based Martinair subsidiary, andmaximizing the use of cargo capacity on its passenger aircraft and “combi” passenger/cargo planes.

Air France-KLM recently sold two yet-to-be delivered 777 freighters to Federal Express. It also leased three747-400 freighters to Russia’s Air Bridge.The carrier’s closest European rival, Lufthansa, lost $210 million on its cargo operations in 2009 but says itcould return to the black this year if the steep rises in volume and freight rates continue.

Lufthansa Cargo increased April traffic by 13.8 percent in April from a year ago while Air France-KLM’sfreight volume declined by 2 percent.

Samsung Targets Seven-Fold Jump in Offshore OrdersSamsung Heavy Industries Co. expects offshore-equipment orders to jump almost seven-fold this year as aglobal economic recovery offsets concerns of project delays in the Gulf of Mexico following an oil spill.

The world’s largest maker of drill ships may exceed its $4 billion order target for offshore platforms and production structures this year, having already reached more than half that tally, said Harris Lee, its vice president of marketing. Last year, the Seoul-based company won $600 million of orders.

“We are bidding on a considerable number of projects,” Lee said in an interview yesterday in Geoje, SouthKorea. “We are getting a lot of inquiries from potential clients.”

The company is set to announce a second floating liquefied natural gas platform contract this year, followinga Royal Dutch Shell Plc order, Lee said, without naming the customer, as energy companies ramp upexploration off Australia and Brazil to replace depleting reserves. Gulf of Mexico projects face delays after regulators halted new drilling following the April 20 oil rig explosion.

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“The offshore business is the one bright spot for shipyards at the moment,” said Lee Sokje, an analyst atMirae Asset Securities Co. in Seoul. “Still, the Gulf of Mexico spill could dampen the offshore business at atime when things are looking good.”The oil-rig explosion killed 11 workers and spewed millions of gallons of oil into the Gulf. The rig was

owned by Transocean Ltd. and operated by BP Plc. BP subsequently postponed some meetings withSamsung Heavy, Lee said.

BP, ConocoPhillips, Petroleo Brasileiro SA, Cobalt International Energy Inc. and Plains Exploration &Production Co. are among oil explorers with projects now on hold in the Gulf of Mexico or coastalCalifornia after the drilling halt.

Samsung Heavy plans to deliver nine drill ships this year, Lee said. Stronger demand for deep-water drillingships, combined with a rising Korean won and higher steel costs, should push up the $550 million price tagfor such ships, Lee said.Samsung Heavy fell 1.3 percent to close at 22,650 won in Seoul trading. The benchmark Kospi index gained0.1 percent.

The shipyard’s two floating LNG plant orders this year are worth a combined $2.5 billion, Lee said. Thecompany, the world’s second-largest shipbuilder, may also sign a deal early next year for a similar facilityfor the Sunrise project in the Timor Sea, Lee said.

Woodside Petroleum Ltd., Australia’s second-largest oil and gas producer, and Shell are among companies backing the Sunrise project. The plant would be the second to be built by Samsung Heavy under a 15-year contract with Shell, Lee said.The project still needs approval from the government of East Timor, which has said it opposes plans to

process gas offshore instead of on land.

In Brazil, Samsung Heavy is considering raising its 10 percent stake in Estaleiro Atlantico Sul at the Ipojuca- based company’s request, Lee said. Samsung Heavy bought part of the shipyard in 2008 to help it wincontracts from state-controlled Petrobras, which plans to invest $174.4 billion through 2013 to tap offshorefields and order 58 drilling rigs, mainly from domestic yards, through 2018. Hyundai Heavy Industries Co.said in March that it agreed to purchase a 10 percent stake in EBX Brasil SA’s shipyard.

Spain and Morocco Re-Open Airports as EU Proposes New Ash RulesSpain, Portugal and Morocco have reopened their airports after being closed due to a cloud of volcanic ashhanging over the region, which was affecting airline safety.

Valencia airport in Spain was closed along with NAV air traffic authority airports in Portugal. Morocco’sCasablanca airport was also affected by the ash cloud.

Ash monitoring service Eurocontrol said ash concentrations at lower altitudes are still causing problems for transatlantic flights, as well as flights in the mid-Atlantic islands of Madeira and the Azores.

The European Aviation Safety Agency said, on 12 May, that it wanted to bring in new rules to shrink the no-

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fly zone around volcanic ash particles to decrease future airspace closures and travel delays.

This will be based on the US practice of imposing a 120-mile no-fly buffer zone for all aircraft in the areasurrounding visible ash cloud.The Association of European Airlines has welcomed the new proposal, saying

it will be hundreds of miles smaller than the current no-fly buffer zone used throughout Europe.

GAC opens Oslo Airport office to expand services in NorwayThe GAC Group has opened it newest logistics office at Oslo International Airport in Norway as part of organic growth to offer a wider range of integrated services to its clients.

Located in the Oslo Air Cargo (OAC) building, the new office is well placed to provide a wide range of warehousing, logistics and air freight solutions. It is manned by a team headed by Logistics Manager Alexander Olsen, who has more than a decade of logistics experience including three and a half years withGAC in Singapore.

Gunnar Lundgren, GAC’s Regional Logistics Manager for Europe, says GAC’s geographical expansion in Norway has been driven by increased business opportunities from existing and new customers: “We expectto see a continuous positive trend in the Norwegian market, with greater demand for shipping and logisticsservices – especially from clients involved in oil & gas operations.”

The opening of the GAC Oslo Airport branch brings the total number of its branches to 12, from Oslonorthwards to Spitsbergen in the Arctic Circle. Managing Director Ahmet Ozsoy says the next step willexplore further opportunities in the energy sector, as well as for ships spares logistics, together with other GAC offices and partners worldwide

Disclaimer: All information contained in this report has been obtained from sources believed to beaccurate by DVV Media India Pvt Ltd. While reasonable care has been taken in its preparation DVV

Media and CIIL make no representation, warranty, express or implied as to the accuracy, timeliness or completeness of any such information. All information should be considered solely as statements of opinion and neither DVV Media nor CIIL will be liable for any loss incurred by users from use of thecontents of this report.

© 2008 Confederation of Indian Industry. All rights reserved.

19 may 2010

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