Sunday, July 31, 2011

Stuck for space

Mobile 3G services could run into network congestion, warn industry watchers. It is time to think of wider roads for faster speeds.
If you thought that your 3G mobile connection was bad, here's some more disquieting news.
In two-three years' time, 3G services — which allow video calls, high-speed data exchange, and mobile TV — could get worse. Thanks to the Government's decision to allocate only 5 Megahertz (MHz) of spectrum to each operator, 3G may not live up to the hype when it comes to actual delivery of these services, warn industry watchers.
Compared with developed nations such as the US or even emerging markets such as China, where mobile operators use a 15-20 MHz spectrum, Indian operators have to make do with 5 MHz of spectrum. Essentially, this means painfully slow downloads of bandwidth-guzzling applications such as video streaming or mobile gaming.
‘Buffering' of videos or sites will be common and the time taken to download a page, longer – killing off much of the promise that 3G initially held out.
Think of it as manoeuvring a Ferrari along narrow bylanes, instead of vrooming on a six-lane highway.
At the time of launch of 3G services, operators had promised Internet TV, video-on-demand, audio-video calls, high-speed data exchange, et al. But those who jumped on the 3G bandwagon experienced frequent call drops and inconsistent Internet speeds. Connectivity, complain many users, is poor, especially while on the move.
3G had promised to deliver as much as 3 Mbps but in reality it is not offering more than 400-500 kbps on an average. Indian operators claim to offer a maximum speed of 2 Mbps ‘in ideal conditions'.
In contrast, 3G consumers in countries such as Japan and Korea got 5-6 Mbps speeds when 3G was launched in these countries. Japanese operator Softbank last year announced 3G connections with speeds of 42 Mbps.
Gradual uptake
The Indian telecom operators, however, don't appear too worried right now.
Deepak Gulati, executive director, Tata Teleservices, says 3G is the “new buzzword” in the telecom circles and is already hitting the right note. Citing research reports, he says that 3G will definitely catch the fancy of the Indian audience and shift to a higher gear by 2015.
“A new Wireless Intelligence study suggests that the number of 3G subscriber connections in India will touch 400 million i.e. a 30 per cent penetration,” Gulati says. That is a lot of headroom for growth, considering that 3G services had garnered nine million consumers in the first four months of launch.
Admitting that Indian operators function on a much smaller bandwidth compared with developed nations, Gulati, however, is quick to point out that congestion issues are not much of a concern at this point, since the uptake of 3G services in different circles is “gradual”.
According to Gulati, there will be a need for 3G innovations in the “long run” as it will enable mobile broadband access of several Mbps to smartphones and mobile modems in computers. “Over the next couple of years, the Indian telecom industry is expected to witness a surge in demand for a wide range of multimedia services that can be facilitated by high-speed data throughputs,” he adds.
Tata Teleservices has got spectrum in nine of the 22 telecom circles and its GSM division, Tata Docomo, was the first operator to roll out 3G services in the country.
Its rival, Vodafone, says it is too early to comment on the 3G situation. Other operators such as Reliance, Idea and Airtel did not respond to queries sent out by Business Line.
Not too far in the future
But while operators may play down concerns around congestion at this point, analysts caution these will have to be addressed sooner than later. Deepak Kumar, Research Director – Telecom, at market research firm IDC, says while small spectrum blocks may not cause major concern in early days, things can change if the number of subscribers rises “above a threshold.”
Kunal Bajaj, partner and director – India, at Analysys Mason, echoes similar views: “If you compare the Indian spectrum with that of the developed countries, then it definitely makes sense to say that congestion is bound to happen once the services become popular.” That situation, he predicts, will arise after mid 2013.
Already, congestion issues have started to creep in, in certain circles, Bajaj adds. And that is resonating in the 3G ads being aired. Remember the little girl singing “I'm a little teapot” rhyme in Reliance 3G ad. In the ad, the visual gets ‘pixelated' the moment she moves towards the left half of the screen tagged “Just 3G” and resumes without a glitch when she shifts to the right half of the screen onto Reliance 3G platform.
The operators' problems are further compounded due to existing congestion in the 2G network, which, in turn, is putting pressure on the operators to use 3G spectrum for voice instead of data services.
Analysys Mason, in its December 2010 report, “Assessment of Economic Impact of Wireless Broadband in India,” says that almost all GSM carriers are already facing 2G spectrum congestion in metro areas. Since 85 per cent of the operators' revenues still come from voice, they are forced to use some 3G bandwidth to accommodate nearly 800 million subscribers. Although this will provide relief from voice congestion, the fact is that this is hindering availability of wireless broadband services.
Another factor that 3G operators will have to bear in mind is the surging demand for smartphones and tablet PCs. Rising smartphone sales will increase the appetite for data downloads and video streaming.
Gartner in a recent report pegged the worldwide mobile device sales at 1.6 billion units for 2010 — a nearly 32 per cent jump from the 2009 figures. Smartphone sales alone leapt up over 72 per cent compared with 2009.
On a similar note, the industry predicts a sharp rise in demand for tablet PCs. Handset and computer makers, such as Research in Motion (Blackberry), Apple (iPad), Samsung (Galaxy tab) and Acer have already launched tablet PCs in the country. Others, such as Nokia, Motorola (Xoom), Huawei and Lenovo are expected to follow suit in the coming days.
The impact of the burgeoning smartphone users is already being felt in overseas markets in spite of their having larger chunks of spectrum.
US telecom operator AT&T, for instance, has reportedly been at the receiving end of subscribers' ire for slow downloading speeds. In the UK too, data speed claims have come under question — Ofcom, the country's independent regulator and competition authority for communications industries, has, in a recent survey, pointed to the growing chasm between the country's real data speeds and advertised ones.
Rise in Capital expenditure
According to Bajaj of Analysys Mason, once congestion on 3G networks becomes a reality, moving to long-term evolution solutions (LTE) would be the next option. This would mean an increase in capital expenditure through increased investments in base stations. “Releasing more spectrum is the ideal solution…But in its absence, increasing capex and improving network by setting up more base stations is the only viable option,” he says.
Equipment manufacturer Huawei reckons that as consumer requirements and bandwidths increase, Indian operators will resort to “innovative” ways that include spectrum farming — changing the frequency usage.
Equipment vendors and device makers are already developing solutions that will allow easier shifts from 3G to LTE, for operators.
Chipset maker Qualcomm, for example, has developed a chipset that will allow subscribers to use the same handset to move between 3G and LTE networks.
That said, operators will have to craft out strategies and walk the extra mile to comfort users.
And they would have to do so quickly. Consumers do not really care about the technical challenges the operators face. They just want a smooth transition to better-quality services on the communication highway. Are Indian operators and policy makers listening?
(Source: Business Line)

A curious diagnosis of inflation

By arguing that inflation is driven by demand pressures, the RBI is making out a case for applying the brakes on growth, even as investments are declining. This runs against New Delhi's visions of totting up a growth of above 8 per cent.
At a time when most policymakers are prone to knee-jerk responses to charges of aimlessness — witness the Finance Minister's stout denials of inaction — it is refreshing to see the Reserve Bank of India take decisive steps, however debatable, in the execution of its mandate to combat inflation.
Raising the repo rate by 50 basis points put the FM on the back foot, forcing a reluctant and weak defence of the central bank's position at a time when New Delhi policy pundits would like to believe in the magic of an economic expansion well above 8 per cent.
While the RBI's action is clear and unambiguous, what is not is the justification for the move. The baneful presence of inflation is beyond argument; what is debatable are the causes of its persistence. What the RBI does, in its first quarter review, is to offer a skilful if ingenious taxonomy of inflation that at times almost sounds like a justification for its actions.
When the RBI tells us that inflation has become more “generalised” since May 2010 and particularly after December 2010, shifting its loci from food to non-food, manufactured goods, it introduces a complexity, the ramifications of which go beyond the mere fact of inflation.


So far, inflation was considered a cost-push phenomenon, owing its origins and force to supply constraints. Now we hear that its perpetuation over the past seven months is on account of pressures in the manufacturing sector. As the RBI described it: “Non-food manufactured goods inflation persisted at very high levels compared to its historical average and may persist as cost pressures and pricing power remain significant.”
For the central bank the “underlying drivers of the WPI have changed considerably…” Prices since December 2010 reflect the “dominant contribution of non-food manufactured products inflation.” The RBI rounds off by reminding us: “Without the presence of demand pressures the generalisation process (of inflation) would not have sustained over successive months.”
What this does is to add a greater purposiveness to the central bank's war on inflation; so far it seemed a quixotic battle, as supply constraints that caused food prices to rise could hardly be addressed by monetary tightening. It still cannot, but at least now the RBI can take comfort that its weapons will work to dampen demand pressures.
In its monetary review and the subsequent credit policy statement, the central bank admits the rate hikes have had only a marginal effect on the demand pressures and dourly notes they will persist into the second quarter. But the RBI also adds that growth that had already moderated will do so further.


In the bargain, a diagnosis that includes the added disease of demand pressures does something else. It offers us a glimpse into the nature of economic expansion since May 2010. If the RBI's explanation of inflation is right, then the economy has been overheating. The prescription is meant to bring prices down by reducing the pace of growth. When the RBI informs us that growth is moderating and that it will do so right through the second quarter it means that the economy will cool off.
If lending rates move up, then the impact of a tighter monetary policy will be felt well into the second half of the year and beyond, leading to a general reduction in consumption. The RBI prepares the reader for this when it warns that private consumption that has been more robust than investments will now start to slow down.
In a dead-pan sort of way the apex bank warns us that there are “chances of further moderation in investment and consumption as high inflation erodes real consumption and monetary policy actions to restrain demand in the short run work through the system”.
Thus, private final consumption may feel the heat down the road but investments, the other component of GDP has already been singed; aggregate investments declined in the second half of 2010-11 and have not recovered.


The RBI finds that “Corporate investment intentions in projects that received financial assistance dropped by 43 per cent sequentially during the second half of the year.” And why is this? Investments are driven by the power sector, metal and metal products' growth followed by telecommunication; interest rates may have dragged sentiment down a bit, as the RBI admits, but “better implementation can help in improving investment”.
The RBI hastens to add that the government is on the job — some of the long pending legislation, for instance the Land Acquisition Amendment Bill was introduced in Parliament last weekend. But from a diagnostic point of view what the RBI has done is to point a finger at the government for tardy investment growth.
The first quarter review of the RBI thus says a great deal about the economy and government without saying too much. What we can infer from a search for clues is an idea of overheating and a prognosis of slowing investments and consumption in the months to come as it tightens the screws even more to skim off the extra demand pressures.
For New Delhi policymakers, the RBI's review should come as a reality check and force the pruning of growth expectations.
Such an exercise would encourage a closer look behind the GDP numbers at those widening cracks — slack regulatory environment, slowing corporate investments — into which the economy seems to be falling.
(Source: Business Line)

More dishes brewing in packaged foods

Parampara looks at offload route; Orkla, McCormick in initial talks.
Inbound acquisitions in domestic packaged foods are set to continue. Following the sale of family-owned MTR Foods and Kohinoor Foods, another such Indian ready-to-cook company is on the block. The Chillal family of the Pune-based Parampara Ready Mix is considering selling the company.
It has begun negotiations with potential buyers. The deal is expected in the range of Rs 80-100 crore. Parampara was looking for a strategic investor who could take the business to the next level, as it has not been to expand successfully, sources in the know said. Also, the mounting interest shown by foreign companies in India’s packaged food sector makes the promoters feel this is the right time to offload, they added.
According to sources, Norwegian major Orkla ASA and US-based McCormick have started initial talks with the promoters. A few private equity firms and domestic companies have also shown interest. However, the names could not be ascertained. Parampara Foods has asked Deloitte, the consultancy major, to find potential buyers. The market for the organised or branded packaged foods in India is estimated at a little over Rs 10,000 crore and growing at 15 per cent yearly. The ready-to-eat market is worth about Rs 300 crore.
The Chillal family consists of Gurunath Chillal, his wife, Meena, and their son, Amit. The three together hold all the equity. The company’s revenue is not known. Amit Chillal refused to comment.
Parampara has a wide range of non-vegetarian products such as butter chicken, prawn masala, tandoori chicken, chicken moghlai and fish fry. The 60-year-old company has a product range of seven starter and 26 main course variants. According to data from VCCedge, a financial research firm, the size of merger and acquisition deals in Indian packaged foods till date this year has risen by 200 per cent as compared with last year. There have been six deals worth $120 million so far, against five deals worth $37 mn last year.
The $10.6-billion Orkla, a potential buyer, entered India in 2007 by acquiring the Bangalore-based MTR Foods for $80 mn (Rs 364 crore) from the latter’s promoters, the Maiya family. In May this year, Orkla had acquired Pune-based Rasoi Magic Foods, maker of spice mixes and ready-to-eat foods, through its Indian subsidiary MTR Foods. Rasoi Magic’s product portfolio comprises spices, spice mixes and ready-to-eat foods such as paneer tikka, veg kadhai, dum aloo, paneer makhanwala, malai kofta, palak paneer and methi mutter malai.
According to a source close to the development, Parampara’s non-veg products will fit into Orkla’s Indian portfolio, filled with mostly vegetarian products of the recently acquired Rasoi Magic.
When asked, Hakon Mageli, director (corporate affairs), Orkla, said, “I cannot comment, except saying we are positive to the Indian food and beverage market. It is a growth market. We are very satisfied with the development for our promising Indian business.”
Last month, McCormick acquired 85 per cent in Kohinoor Speciality Foods India Pvt Ltd, a joint venture with the Arora family-owned Kohinoor Foods Ltd, to market and sell the latter’s food products in India, by investing $115 mn.
Satish Rao, McCormick’s vice-president, business development, in an earlier interview with Business Standard , disclosed the company’s plans for further buyouts in India.
(Source: Business Standard)

Cotton yarn stock has eased: industry

Spinning Mills across the country, which had a stock of more than 500 million kgs of cotton yarn following last year’s restrictions on exports, have reported significant easing of the cotton yarn stock position. This was due to cut in the production by the Mills across the country.
Shishir Jaipuria, chairman, Confederation of Indian Textile Industry (CITI) stated from May 23, 2011, onwards spinning mills all over the country had resorted to significant production cuts. Presently, 25-30 per cent of capacity for cotton yarn production in the country is lying closed. Meanwhile, restriction on export of cotton yarn has been lifted by the government and current cotton yarn exports are comparable with those of the same period last year.
“There has also been some positive movement in domestic demand for cotton yarn and he expects this trend to continue,” he said.
Jaipuria stated that from a peak level of 500 million kilo grams, cotton yarn stocks with the mills have now come down to around 350 million kilo grams and he expects these to come down further in the coming months.
He added that the festival season in the country starting from September onwards is expected to see significant improvement in demand for all textile products and this would also help the spinning sector to dispose of their accumulated stocks of cotton yarn.
Meanwhile, CITI has requested the government for a comprehensive relief package for the spinning industry in order to tackle the losses suffered by the industry in recent months because of restrictions in cotton yarn exports, fluctuation in cotton and cotton yarn prices and accumulation of stocks both of fibre and yarn.
With the improvement in the demand position, spinning industry is expected to come out of its present problems during the second half of the current fiscal. However, the mills will find it extremely difficult to repay loans and find working capital in the coming months because of the huge losses they suffered during the first half of the fiscal, Jaipuria said.
CITI has sought a two year moratorium or repayment of loans and interest and a few other facilities from the Reserve Bank of India, in order to avoid the accounts becoming Non Performing Assets and added that the industry is confident that the current challenges can be met with the help of the relief which the industry has sought fromgovernment and the RBI and this will help the industry to revive its operations in full during the coming months and to avoid retrenchment of any workers.
(Source: Business Standard)

Rupee most undervalued currency in the world: Big Mac index

Q1FY2012 results: Robust revenue growth, but profit under pressure for India Inc

Indian corporates continue to report robust revenue growth going by the quarterly results so far, but profits are under pressure due to rising interest rates and input costs. The good news is despite inflationary pressures, operating profits have not fallen much in the quarter to June.

An analysis by the ET Intelligence Group, based on the performance of 612 companies that have announced results so far, shows aggregate revenue grew 23.5% during the June quarter over the year-ago period. Operating profit before depreciation rose 19.4%, compared with 12.5% in the same quarter previous year. However, net profit growth slowed to 13% from 21% in the year-ago quarter due to higher depreciation and interest outgo.

Two-wheeler players Hero MotoCorp and Bajaj Auto, metals and mining major Sterlite, and software exporters TCS andHCL Technologies led the overall sample growth. The sample excludes companies from the banking, finance, and oil and gas sectors.

The early results yet again reflect resilience on the margin front during the quarter. Operating margin shrank just over 60 basis points to 19.3% despite double-digit increase in raw material costs and salary expenses from the year ago. This validates the Reserve Bank of India's assessment last week that manufacturers still have pricing power. The central bank last week raised interest rates for the 11th time to cool inflation, making loans costlier by 325 basis points in a span of over two years.

Some economists feel such a steep increase in input costs may not necessarily have impacted corporates this time around due to their ability to pass it down the value chain.

"A key worry is manufacturing non-food inflation, which is at 7.3% compared with around 4% during the last six years. This indicates that producers are passing on rising input prices and wage costs," Citigroup Global Markets said in its latest report. While margins have compressed a bit during the first quarter of FY12, producers still have pricing power, Rohini Malkani and Anushka Shah said in the report.

Despite rising prices of goods and services, over 600-odd companies in the sample have recorded double-digit topline growth in each of the last seven quarters. This shows demand continues to be robust, and vindicates the RBI's belief that growth may not decelerate in the near term.

Rising Borrowing Costs a Worry

In its policy review last week, the central bank had indicated that trends in indirect tax payment, merchandise trade and bank credit growth revealed demand might moderate but not sharply. It has retained GDP growth forecast at 8%.

However, rising borrowing costs may be a concern for India Inc in the near term. Interest outgo for the sample companies rose 19.4% year-on-year during the three months to June 2011, compared with just 7.7% in the year-ago quarter. This also led to their net margin shrinking 100 basis points to 11.7%.

Companies in sectors such as consumer durables, FMCG, infotech and metals have reported double-digit growth in sales, much higher than the year-ago quarter. But this hasn't come at the cost of profits. Operating margin growth of FMCG and metal players ranged between 30 basis points and 290 basis points. However, mining and minerals, automobiles and auto ancillaries, pharmaceuticals and capital goods players have reported slower growth in revenues at aggregate levels.

(Source: Economic Times)

Road Ministry plans to invest Rs 2.64 lakh crore on highways

Amid concerns raised by Prime MinisterManmohan Singh on highways deficit in the country, the government is looking at an investment of over Rs 2.64 lakh crore in the road sector in the next five years, over 65% of which will come from the private sector.

"The pace of infrastructure development needs acceleration if the gaps are to be bridged. We are looking at an investment ofRs 2.64 lakh crore in the highways sector in the 12th Five-Year Plan (2012-17)," Road Transport and Highways MinisterC P Joshi said. Joshi said thatNational Highways Authority of India (NHAI) will shell out Rs 87,000 crore while the remaining Rs 1.77 lakh crore is envisaged from the private players.

The development came after the Prime Minister, while reviewing the progress of highways last month, expressed concerns that the country is deficient in terms of the quality as well as length of road network. "We have to make an intense and sustained effort to ensure that this deficit is bridged," an official document said quoting Singh. Joshi said all efforts are being made to accelerate road building process and during January-June period this year, the work has been completed in a length of 1,042 km.

"The NHAI has achieved award of 5,058 km of highways in 2010-11, which is the highest till date," he said. The Transport Ministry has set a target of awarding 7,300 km of roads in the current fiscal. India has a large network of 3.3 million km roads out of which national highways constitute only 70,548 km. To augment it the government plans to build 35,000 km of roads by 2014.

Meanwhile, growing interest by corporates in infrastructure sector amid reform measures like transparency in road sector has resulted in award of major projects this month. The NHAI has managed to award three mega road projects, which would fetch the national highway authority hefty annual premium ofRs 683 crore from players like GMR. Overall, the NHAI awarded four projects worth Rs 9,500 crore on July 29. Till now, NHAI virtually used to provide grants on schemes to road developers to make the projects viable.
(Source: Economic Times)

Saturday, July 30, 2011

Debt fears lead to demand for Swiss franc and Japanese yen

The Swiss franc rose to record levels and the yen surged higher this week, amid concerns over US and eurozone government debt.
Haven demand for both currencies intensified, as continued wrangling by policymakers in the US over raising the country’s debt ceiling heightened concerns that the country might lose it triple-A debt rating.
In addition, worries that European plans to bail out Greece would not contain the eurozone debt crisis also undermined confidence.
Lee Hardman, of Bank of Tokyo-Mitsubishi UFJ, said: “The traditional safe haven currencies of the yen and Swiss franc continue to outperform, as investors seek shelter from the building global sovereign debt storm.”
The Swiss franc hit a series of record highs against the dollar, climbing 3.5 per cent to SFr0.7894 over the week, while the yen gained 2.1 per cent to Y76.90, its strongest level since Tokyo intervened to counteract strength in its currency in March.
The Australian and New Zealand dollars also rose to record highs, as investors sought sanctuary from worries over fiscal sustainability on both sides of the Atlantic.
The Australian dollar, which was also boosted when inflation data came in higher than expected and dashed forecasts that the country’s central bank would move to cut interest rates, hit a 29-year high of $1.1080 against the dollar, while the New Zealand dollar hit a 30-year peak of $0.8670.
Jens Nordvig, of Nomura, said the US dollar was facing a new reality because of the increasing risk that rating agencies would downgrade Washington’s debt.
“In this unusual environment, investors are likely to continue to search for smaller pockets of security in safe triple-A countries,” he said.
Indeed, the currencies of other countries assured of their top triple-A debt status also prospered, with the Canadian dollar rising to a three-and-a-half year high of C$0.9403 against the US dollar and the Singapore dollar hitting a record peak of S$1.1986.
The euro also outperformed the dollar, rising 0.2 per cent to $1.4386 on the week, losing what analysts described as the “ugly contest” for the title of the world’s least favoured currency.
The single currency was undermined elsewhere, however, as Italy had to pay elevated yields at a government bond auction and Moody’s, the rating agency, put Spain on review for a possible downgrade, citing the stress caused by Madrid havaing to provide extra funds to the second Greek bail-out.
Over the week, the euro dropped 0.5 per cent to £0.8751 against the pound, was 1.9 per cent weaker at Y110.62 against the yen, and lost 3.8 per cent to a record low of SFr1.1298 against the Swiss franc.
(Source: Financial Times)

World Population Hits 7 Billion After Boom in Developing World

The world’s 7-billionth person will be born Oct. 31 in India, according to a projection by researchers working with data from the United Nations.
Medical advances, more effective vaccines, antibiotics and improvements in public-health conditions has boosted life expectancy in developing countries, where most of the population growth is taking place, according to the UN data reported tomorrow in the journal Science.
The number of people globally reached 1 billion in 1800, then 2 billion in 1925, the report said. Within the last half century, the population boomed to just under 7 billion from 3 billion. By 2050, the population will reach 9.3 billion, and 97 percent of the growth will be in less developed regions, said David Bloom, an economist at Harvard University in Cambridge, Massachusetts, who wrote the report.
“In the 1960s and 1970s, people expected a population bomb,” Bloom said in a telephone interview. “Now, we have mini-bombs going off in the most fragile parts of the world. Issues of inequality and poverty may spill over from less- developed countries, which will not be good for their neighbors or the rest of the world.”
Since 1970, population growth has slowed to 1 percent per year from a little over 2 percent, according to the U.N. date. Still that means that by 2050, India will overtake China as the most populous country in the world, and the U.S. will be the only developed nation among the ten most populated.
(Source: Bloomberg)

Automakers Agree to Double Fuel Economy in U.S. Cars to 54.5 MPG by 2025

Automakers agreed to double the fuel economy of the vehicles they sell in the U.S. to a fleetwide average of 54.5 miles per gallon by 2025, President Barack Obama said.
The White House negotiated the proposal, which will take effect in 2017, with automakers including General Motors Co. (GM), Ford Motor Co. (F) and Toyota Motor Corp. (7203) The administration proposed a 56.2 mpg requirement last month, up from a fleetwide average of 27 mpg today for cars and light trucks.
“This agreement on fuel standards represents the single most important step we’ve ever taken to reduce our dependence on foreign oil,” Obama said today at an event in Washington with auto executives.
Obama is seeking to limit the amount of fuel used by U.S. vehicles as part of a pledge to reduce oil imports by a third by 2025. The agreement with automakers, which also curbs greenhouse-gas emissions, comes as his administration negotiates with Congress on raising the U.S. debt ceiling to avoid default.
Obama used the event to promote his energy priorities and to highlight some of the issues being weighed in the standoff over raising the federal debt ceiling.
The agreement on higher standards “is only possible because we made investments in technology,” Obama said. A “sensible and balanced approach” is needed to make sure the U.S. is able to sustain economic growth in the future, he said.

National Debt

In the wrangling over the nation’s debt, Obama has argued that relying solely on cutting spending will sap research and education budgets. He also said the administration’s talks with automakers should serve as an example for Congress because they provided benefits for all parties.
“These standards are going to be a win for consumers, for these companies, for our economy, for our security and for our planet,” he said.
Ford, GM, Chrysler Group LLC, Bayerische Motoren Werke AG (BMW), Honda Motor Co., Hyundai Motor Co. (005380), Jaguar Land Rover, Kia Motors Corp. (000270), Mazda Motor Corp. (7261), Mitsubishi Motors Corp. (7211), Nissan Motor Co., Toyota and Volvo Cars, which represent 90 percent of vehicles sold in the U.S., agreed to support the proposal, according to a statement from the White House.

Trucks, Cars

Some Japanese and European companies that manufacture mainly cars instead of trucks complained during the talks that the rule favors GM, Ford and Chrysler, because the fuel-economy standards for light trucks will increase more slowly than for cars, said people familiar with the talks.
Volkswagen AG (VOW) didn’t sign the agreement to support the Obama administration’s proposal, the Wolfsburg, Germany-based carmaker said in an e-mailed statement. The “positive impact” of so-called clean diesel, used by the company’s mid-size Passat TDI, which can get 43 mpg on the highway and travel almost 800 miles on a tank of fuel, doesn’t receive consideration in the proposal, Volkswagen said.
“The proposal encourages manufacturers and customers to shift toward larger, less-efficient vehicles, defeating the goal of reduced greenhouse-gas emissions,” Tony Cervone, a Volkswagen spokesman, said in an e-mailed statement. “We are committed to the ongoing negotiations with the White House on reaching maximum achievable fuel economy and/or greenhouse-gas reduction standards.”
Daimler AG (DAI), the Stuttgart, Germany-based maker of Mercedes- Benz vehicles, also hasn’t agreed to support the proposal.
U.S. Vs. Europe
“The construct of the law is one that meets the needs of the American market for the next 15 years in the same way that the Europeans set their standards regardless of how Americans view the EU standard for fuel efficiency,” Representative Ed Markey, a Massachusetts Democrat, said in an interview. Markey helped write the law requiring more frequent fuel-economy increases.
While vehicle prices will increase, it’s too early to tell by how much, said Jim Lentz, head of Toyota’s U.S. sales unit. The “million-dollar question” is what type of technologies will sell best, Lentz said in an interview.
The proposed rule requires annual fuel-economy increases of 5 percent for cars. Light trucks like pickups and sport-utility vehicles can raise fuel economy at 3.5 percent for the first five years the rule will be in effect. Then, unless regulators decide differently in a midterm review, trucks also would have to boost fuel economy by 5 percent a year.
By 2025, U.S. fuel-economy standards will save a total of 12 billion barrels of oil and reduce oil consumption by 2.2 million barrels a day, about half of the oil the country imports from OPEC a day, the Environmental Protection Agency said in a statement.

Fuel Savings

The rules will also save consumers more than $8,000 a vehicle, on average, in fuel costs, the EPA said.
U.S. Representative Hansen Clarke, a Michigan Democrat, said automakers can meet the overall standard because of the allowance for light trucks to improve fuel economy more slowly during the first five years of the rule. Making smaller, more fuel-efficient cars may help U.S. automakers compete with Asian competitors.
“This standard will also help promote more U.S. manufacturing jobs like in the city of Detroit by allowing the fuel-economy standards for cars to rise faster than those standards for light trucks and SUVs,” Clarke said in an interview. Clarke said his father immigrated to the U.S. from India to work at a Ford foundry.
A separate rule issued in 2009 takes effect next year, and requires automakers to increase average fuel economy to 35.5 mpg by 2016.
Changes to the 2017 to 2025 proposal can be made before the first draft is published by Sept. 30. The final rule will be published next year.

Clean Air

The EPA and National Highway Traffic Safety Administration will issue the rule. The state of California, which has the authority to regulate greenhouse-gas emissions from vehicles, helped write the regulation to ensure one national standard.
Under the 1970 Clean Air Act, California can opt out of national rules to establish more stringent requirements to clean its air, particularly in the Los Angeles area. U.S. states can choose to accept a federal standard or California’s.
“Auto companies are accepting these numbers and they are not suing,” Mary Nichols, head of California’s Air Resources Board, which sets state rules for automakers, told reporters on a conference call today. “That is a big deal.”

Carmaker Lobbying

Environmental groups including the New York-based Natural Resources Defense Council had asked the administration to raise fleetwide fuel economy to 62 mpg. The rule “was weakened by auto-industry lobbying,” Dan Becker, head of the Washington- based Safe Climate Campaign, said in an interview.
Automakers had initially argued that the technologies may not be in place in time to allow them to meet the standards within the administration’s timeframe. The proposed rule provides the “right balance,” said Sue Cischke, Ford’s vice president of environmental and safety engineering.
“It gives us certainty for the next 14 years that we can invest in technologies,” Cischke said in an interview.
(Source: Bloomberg)

U.S. Economy Vulnerable, Short of Pre-Recession Peak

The world’s largest economy has yet to regain the ground it lost during the recession and may be vulnerable to a relapse.
Gross domestic product expanded at a 1.3 percent annual rate in the second quarter, after a 0.4 percent pace in the prior period, the worst six months since the recovery began in June 2009, Commerce Department figures showed yesterday. Economists said the slowdown leaves the recovery susceptible to being knocked off course by shocks at home or abroad.
“We are in a fairly risky situation,” said Nariman Behravesh, chief economist at IHS Inc. in Lexington, Massachusetts, the only firm polled by Bloomberg News to correctly forecast last quarter’s figure. “Growth is weak and there are some possible problems out there: our own fiscal situation, Europe’s debt crisis, and there is always a risk that oil prices could shoot up.”
The slow recovery left GDP at $13.27 trillion in the second quarter, below the $13.33 trillion peak of the fourth quarter of 2007, after a recession that was about 25 percent deeper than previously reported. That puts pressure on Federal Reserve policy makers to explore additional steps to boost the economy, including another round of bond purchases.
“This raises some very difficult issues for the Fed,” said Julia Coronado, chief economist for North America at BNP Paribas in New York. “They will certainly have to put all options on the table and see what they can do. One more shock and we could tip over into recession.”

Debt Ceiling

Congress may deliver that shock. With three days left until the Treasury Department runs out of borrowing authority, Republicans and Democrats are still at odds over what budget cuts they should make before raising the $14.3 trillion debt ceiling.
The squabbling is a “confidence hit” for both U.S. and international businesses and casts a pall over the economy in the second half, said Mohamed El-Erian, chief executive officer of Pacific Investment Management Co.
“We have signaled that we can create a crisis out of thin air,” said El-Erian, whose Newport Beach, California-based Pimco runs the world’s largest bond fund. “This will create a headwind to growth.”
Congressional agreement on budget cuts could cause troubles of its own. Less spending by the Federal government would be “a real problem” for the economy, Guy LeBas, chief fixed income strategist at Janney Montgomery Scott LLC in Philadelphia, said in a July 29 interview on Bloomberg Television.

Recession Risk

“We could see a growing risk of recession in the fourth quarter, early 2012, if in fact the federal government gets it together and makes aggressive budget cuts,” LeBas said.
Economists are lowering forecasts for second-half growth in the wake of the latest GDP numbers and the stalemate in Washington. Behravesh of IHS said growth would at best reach 2 percent this quarter and could come in as low as 1 percent. In early July, he was projecting 3.4 percent.
Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities in New York, reduced his estimate by 1 percentage point to 2.5 percent for the third quarter, and trimmed it to 3 percent from 4.3 percent for the final three months of 2011.
Dean Maki, chief U.S. economist at Barclays Capital in New York, cut his projections by a full percentage point for this quarter and the following five. He expects GDP to grow 2 percent from July through September and 2.5 percent in the fourth quarter. Maki also wrote in a note that the Fed will keep interest rates near zero through the end of 2012.

Stocks Decline

Treasuries rallied, sending yields on 10-year notes to the lowest level this year, and stocks fell as economic growth trailed forecasts amid speculation lawmakers will reach a compromise to avoid a government default.
The yield on the benchmark 10-year note decreased to 2.79 percent at 4:21 p.m. yesterday in New York from 2.95 percent on July 28. The Standard & Poor’s 500 Index fell 0.7 percent to 1,292.28.
Revisions to GDP figures going back to 2003 showed the 2007-2009 recession took a bigger bite out of the economy than previously estimated and the recovery lost momentum throughout 2010. GDP shrank 5.1 percent from the fourth quarter of 2007 to the second quarter of 2009, compared with the previously reported 4.1 percent drop.
Growth in the first quarter of 2011 was revised down from a 1.9 percent prior estimate, reflecting fewer inventories and more imports, the Commerce Department’s report showed.

Consumers Pull Back

Much of the weakness last quarter came from a pullback in consumer spending, which accounts for about 70 percent of the economy. Household purchases rose 0.1 percent, the smallest gain since the April-June quarter of 2009. The slump reflected a 4.4 percent plunge in purchases of durable goods like automobiles.
Higher expenses for food and energy may have curtailed spending on less essential items. The cost of a gallon of regular gasoline climbed in May to about $4 a gallon, the highest in almost three years, according to AAA, the nation’s biggest auto group.
The absence of faster job growth is also weighing on Americans. The unemployment rate climbed to 9.2 percent in June while payrolls grew by 18,000, the fewest in nine months, Labor Department figures showed on July 8.
Purchase, New York-based PepsiCo Inc., the world’s largest snack-food maker, said profit this year will increase more slowly than it previously projected because of rising commodity costs and cooling customer demand.
“It’s the consumer and competitive picture that has become more difficult than we expected,” Chief Executive Officer Indra Nooyi said on a July 21 conference call.

Employment Outlook

The employment outlook remains dim. Whitehouse Station, New Jersey-based Merck & Co., the second-largest U.S. drugmaker, said yesterday that it plans to cut an additional 12,000 to 13,000 jobs by 2015. Earlier this month, announcements showed Cisco Systems Inc. (CSCO) will trim about 6,500 jobs worldwide; Goldman Sachs Group Inc. may reduce staff by about 1,000, and Lockheed Martin Corp. (LMT) will offer a voluntary separation plan to 6,500 employees.
Other reports yesterday indicated a weaker start to the second half. Business activity cooled in July from the prior month, and consumer sentiment tumbled to the lowest reading since March 2009.
“The risk is that you’ve slowed down to the pace where the economy stalls,” said Michael Carey, chief economist for North America at Credit Agricole CIB in New York. “Frankly, that’s a bit of a scary prospect.”
(Source: Bloomberg)

Spain in ‘Danger Zone’ on Europe Crisis: IMF

Spain is still in “the danger zone” and must keep up momentum in restructuring its economy to stave off contagion from Europe’s sovereign-debt crisis, the International Monetary Fund said.
“The outlook is difficult and the risks elevated,” the Washington-based IMF said in a report yesterday after a visit by staff to Spain. “The policy agenda remains challenging and urgent -- there can be no let up in the reform momentum.”
The assessment coincided with Prime Minister Jose Luis Rodriguez Zapatero’s decision the same day to call early elections on Nov. 20 and Moody’s Investors Service’s warning that it may downgrade Spain. The euro-region’s fourth-biggest economy is trying to rein in surging borrowing costs that have pushed the yield on its 10-year bond above 6 percent, hindering efforts to stoke growth as unemployment stays above 20 percent.
“Many of the imbalances and structural weaknesses accumulated during the boom remain to be fully addressed,” the fund said. “Spain is not out of the danger zone” and “scenarios of negative spillovers from Spain indicate a substantial impact on the rest of Europe and indeed globally, given the country’s systemic importance.”
The report, a so-called article IV assessment, praised Spain for its “strong and wide-ranging” response to economic challenges in the last year. The country met its 2010 budget deficit target, forged ahead with efforts to curb the cost of its pension system and reshaped its banking industry by forcing lenders to meet minimum capital requirements, the IMF said.

‘Potentially Severe’

Spain still needs to do more, the fund said. “Downside risks dominate” the outlook for economic growth in the near term because of rising concerns about sovereign risks in the euro area, according to the report.
“Risks are tilted to the downside and potentially severe,” the fund said.
The IMF said Spanish banks that need capital should raise it “promptly from the market” to help allay concerns about the health of the financial system. The Bank of Spain, which said in March that 12 lenders would need to raise 15 billion euros ($22 billion) to meet new capital requirements, said this month the process of recapitalizing the system is now almost complete.
“In light of the uncertain operating environment and comparing with other jurisdictions, staff sees merit in further building capital, liquidity and provisioning buffers in the system over time,” the fund said.
The IMF said that in terms of Spain’s efforts to cut its budget deficit, the “larger risk” to the 2011 target is that some regional governments may not keep to spending limits.
“All levels of government should deliver on their commitments,” the report said. “Bold strengthening” of changes to labor laws are also needed to reduce the scope of collective bargaining and the practice of indexing wages to inflation, while severance payments should be cut to at least average European Union levels, the IMF said.
Meanwhile, Spain should make an early commitment to balancing its books over the medium-term, while meeting medium- term fiscal requirements “will likely require further action,” the IMF said.
The fund’s staff predict the deficit will narrow to 4 percent of gross domestic product by 2014. Taking into account the risk of a potentially weaker outlook and the possibility that the regions will miss their targets, additional measures of about 2 percent of GDP would be needed to reach the government’s goals, the IMF said.
In its report, the fund maintained its predictions for Spain’s economic growth, forecasting expansion of 0.8 percent in 2011 and 1.6 percent next year.
(Source: Bloomberg)

Cement prices rule higher despite lower demand

Cement offtake hasn't shown signs of revival even in the latest June quarter. After a lacklustre performance in 2010-11 with 4.5 per cent growth in despatches, the cement industry closed the first quarter of 2011-12 with despatches that were flat compared to last year's numbers.
All-India average cement price was Rs 270/bag in end-June, up 10-15 per cent from the price in June last year. Now, what helped prices despite poor despatches growth and lower consumption in most parts of the country remains a question.
Dealers say cement manufacturers tightened supply despite new capacities getting on stream. Overall capacity utilisation of cement companies have dropped to less than 75 per cent.

Revival signals not seen

Though the March-2011 quarter saw players reporting encouraging numbers with 6-7 per cent despatches growth year-on-year, the June quarter has disappointed investors.
With monsoon rains in the quarter at a low-ebb compared to last year, expectations were that the construction activities would pick up leading to higher offtake in the April-June quarter this year. But, numbers reported by the Cement Manufacturers Association don't support this view. Despatches for the period April-June were at 42.16 million tonnes, lower than 42.43 mt reported for the same period last year.
UltraTech Cement's despatches were lower by two per cent at 9.46 million tonnes and Ambuja Cement's despatch was lower by 2.2 per cent at 5.29 mt. ACC appears to have made an aggressive push to get a higher share of the cement market in the South with its new plant in Wadi, Karnataka - its despatches reported a 11 per cent growth at 5.93 mt.

Input prices weigh

Steep increase in price of input materials that include fly ash, coal and transportation fuel have eaten into operating margins of the cement manufacturers. Higher prices didn't fully compensate manufacturers for the rising cost of input materials.
International coal prices though they fell by eight per cent from the highs of $130/tonne, still continue to be 20 per cent higher over the June-2010 levels.
Power and fuel costs as a percentage of sales have risen to 26 per cent from 22 per cent a year earlier for Ambuja Cements. The company's operating margin stood at 27.5 per cent, down from 31 per cent in the corresponding quarter last year.
ACC also saw a sharp increase in costs and its operating profit margin dropped to 19 per cent from 25 per cent in the June quarter last year.
UltraTech Cement however managed to improve margins at the operating level despite higher fuel costs by cutting down on employees cost and other operating expenses. The company reported an operating margin of 29 per cent, up two percentage points, year-on-year.
Cement companies may see the higher realisation turning to their favour and help them grow PAT if coal prices subside further from the current levels.
(Source: Business Line)

Non-voice to account for 51% of mobile operator's revenues by 2015

Mobile Value Added Services (MVAS) has the potential to become a Rs 67,100-crore market by 2015 contributing to 31 per cent of overall wireless revenues according to a report from Analysys Mason.
This growth will be driven mainly by mobile data (both on handsets and dongles/connected computing devices) contributing 54 per cent of the overall MVAS market by 2015.
Non-voice revenues are expected to contribute 51 per cent to the overall incremental wireless revenues in 2015, according to the IAMAI-Analysys Mason Vision Document on Mobile VAS.
Mr Kunal Bajaj, Partner and Director India, Analysys Mason, said, “Carriers are under tremendous pressure from competition and declining ARPUs, leading to stunted revenue growth. Based on recent trends in the sector, now is the right time for them to increase focus on the VAS space to find new opportunities for differentiation and earnings.”
The report stated that off-deck VAS providers face issues from the lack of an alternate billing mechanism and delays in allocation and implementation of short codes. Off-deck providers are VAS companies that use carrier infrastructure and billing for their products and services, but the marketing and branding is independent of the mobile operators.
“We recommend a premium number policy that can potentially provide an alternate payment mechanism by allowing the flexibility to control end user pricing of their services, be aware of their share of the end user revenue and be guaranteed that their services will work across all carriers,” the report said.
According to the report SMS penetration remains constrained due to the lack of standards based solutions for local language text on devices.
“We recommend the standardisation of a character set and incorporation of local language support on devices to drive SMS uptake and utility,” it said.
(Source: Business Line)

Major banks hike lending rates sharply

Loans will get costlier from August 1 as a slew of banks, including Punjab National Bank (PNB), Bank of Baroda (BOB), IDBI Bank and Oriental Bank of Commerce (OBC), announced separately on Friday that their base rate will go up to 10.75 per cent. All these banks have also raised their benchmark prime lending rates (BPLRs) from this date.
A hike in the base rate and the BPLR means that home loans, car loans and personal loans would turn expensive both for existing and new borrowers. This move of the public sector biggies comes on the heels of the RBI's July 27 hike of its policy rates by 50 basis points.
Faced with increased cost pressures impacting their net interest margins, PSBs are now resorting to of increasing their lending rates to get themselves out of the thorny situation, banking industry observers point out.
For PNB, the latest move would mean a 75 basis point increase in the base rate from the existing 10 per cent to 10.75 per cent. BOB has raised its base rate by 50 basis points. IDBI Bank has gone in for a 75 basis point hike to get to a level of 10.75 per cent. PNB had last hiked its base rate by 50 basis points to 10 per cent on May 5.
OBC, a mid-size lender, also announced a 50 basis points hike to 10.75 per cent with effect from August 1.
While PNB has hiked BPLR by 75 basis points to 14.25 per cent , BOB has increased its BPLR by 50 basis points to 15 per cent. After the 75 basis point hike, IDBI Bank's BPLR will go up to 15.25 per cent. OBC has gone in for a 50 basis point hike in BPLR to 15 per cent from 14.5 per cent.
Punjab & Sind Bank will take a call on revising its base rate and benchmark prime lending rate on Saturday, its Executive Director, Mr P. K. Anand, said.
The cost-side pressure for banks is emanating from two fronts — increase in cost of term deposits and the RBI move to hike its policy rates. The pace of growth in cost of deposits has been higher than the increase in yield on advances for most banks, putting pressure on their margins.
While the bigger banks have been able to withstand the storm of increased cost of funds and more regulatory directions on provisioning, smaller banks are taking it on their chin during the first quarter this fiscal.
(Source: Business Line)

Brands cashing in on children making more mature decisions

It's not just about buying backpacks or books or even bicycles. While a few years ago, children decided which brand of chocochip cookies to buy or the exact shade of burgundy that should go on the drawing room walls, today's kids are potential decision-makers about adult decisions such as where their parents can park their money or where families can live. School contact programmes in India are getting more ‘adult' in the products/services that they are helping sell.
For instance, in a school contact programme, real estate company Shriram Properties in Bangalore reached out to parents through children studying in a local school that was located close to one of their upcoming residential projects. Brochures talking about the facilities the complex would offer, like a park for children, a swimming pool and a club house, were distributed in the school. This, the builder hoped would reach the parents and result in some firm deals.
Mr M. Murali, MD of Shriram Properties, explains that this is one way to reach out to clients. “The company has supported concerts and other events at schools. Although many schools do not permit us to commercialise the sponsorship, some of them let us reach out to children.”
A few months ago, ICICI Bank reached out to 3-5 year-olds in a Montessori school through a fun-filled exercise and urged parents to open savings account at its nearest branch. Berger Paints launched a range of paints (Berger Kidz and Galaxy) in schools expecting them to influence parents to make the purchase.
Pester power
Traditionally, marketers have used the pester power of children to reach out to parents. FMCG giant Britannia has used school contact programmes extensively for its Treat brand. The programme, called Treat Quest, was kicked off three years ago with a target of reaching 500 schools in six metro cities. “Today we run this programme directly over 1,100 schools across 14 cities, and we touch 18 lakh kids,” says Ms Shalini Degan, Category Director, Delight & Lifestyle, Britannia. Nestle launched its flavoured milk, Funshake, in a school contact programme and Dabur to popularise Chyawanprash among school children in Bihar. Therefore, reaching out to a large audience such as school children in a concentrated manner has become a science with instances of repetitive low-engagement activities fast diminishing.
Handling Parents' concern
Marketers say they are aware of the concern of a growing sense of consumerism among children. According to Ms Degan, “We are cognisant and appreciative of the concern of both teachers and parents towards brand conversations being linked to commercial gain. Treat sincerely believes in making lives of children happy and fun. This cannot happen if teachers and parents are unhappy with the brand.” A child's mind is questioning and open to experiences. Brands, when introduced at this stage, make a big impact, says Mr Harish Bijoor, CEO of brand consulting firm Harish Bijoor Consults. He cites the example of brands such as Bournvita that have used this to good advantage through their quiz contest. But, he clarifies, brands which have a very slender connection to kids have also misused this space in the past, which he thinks is an unhealthy trend.
“It is important to maintain a very clear and delicate ethical balance when choosing schools for brand promotion. It is important to be sensitive to the child audience of this country.”
(Source: Business Line)

Supreme Court bans mining in iron-ore rich Bellary: Steel companies to be hit

The Supreme Court's exasperation with the Karnataka government's response to the fast-spreadingmining scandal turned into outright anger on Friday with the court banning all mining across the iron ore-richBellary region.
The ban will be effective in Bellary, nearby Hospet and Sandur, a region accounting for a third of the iron ore produced in India. Production of about 25 million tonnes of steel across the country is expected to be affected, including operations at JSW, India's biggest private sector steel firm.

Companies are likely to either cut production, or scramble to find iron ore from other parts of the country, knocking down margins and profitability. India's steel production, which lags behind that of China and Russia, is also likely to be affected.

"We are of the view that the mining of iron ore in Bellary be suspended immediately till further orders," a special bench headed by chief justice SH Kapadia said. The order is expected to put enormous pressure on the beleaguered Karnataka government to act swiftly and decisively against rampant illegal mining.

Just two days ago, the Karnataka Lokayukta, a quasi-judicial body, issued a report laying bare the activities of businessmen and politicians indulging in illegal mining. The report called for the prosecution of chief minister BS Yeddyurappa and the sacking of some ministers from the state cabinet.

The court has been consistently taking a tough stance against illegal mining in Bellary. In May this year, it asked the central empowered committee, an arm of the forest bench of the court tackling environmental issues, to examine the illegal mining and submit a report. Friday's order was based on the committee's findings.

Steelmakers Stunned

Steelmakers, who depend on ore from these areas, have been left stunned. "The worst has happened," JSW joint managing director Seshagiri Rao told ET. "Today the options for us are limited. Since iron ore for steelmaking is not replaceable by any other mineral, we are working on supplies from alternative arrangements."

JSW shares fell 5.5% to Rs 774.20. On Thursday, the stocks had fallen 5% after the Lokayukta accused them of paying bribes to the family of chief minister Yeddyurappa in return for government favours.

The ban is expected to affect about 100 iron ore mining leases but mining from 45 of these leases had already been banned by the court through an earlier order.

Companies that will be affected include JSW Steel, which recently expanded its capacity to 10 million tones, making it India's largest by capacity. Others such asKalyani Steel,Jindal Saw,Tata Metaliks,Kirloskar Ferrous Industries will also be hit.

The Bellary district contributes close to 80% of the total iron ore output from Karnataka. The state's annual output of iron ore is around 45 million tonnes with around 70-75% of it being exported. About 6-6.5 lakh are employed by the industry.

Earlier, before making arrangements from Chitradurga and Tumkur,JSW Steel CEO Vinod Nowal had said the company's daily iron ore requirements was 53,000 tonnes. Since the company has stock of 150,000 tonnes, operations at the plant could be stopped.

The same was the situation at Tata Metaliks, India's largest producer of foundry grade pig iron which supplies to automobile and engineering companies. "Abrupt closure of mining in Bellary will result in complete stoppage of production at the plant," vice-president Sudhin Mitter had written in a representation to central empowered committee chairman PV Jayakrishnan.

The situation is likely to impact steel production from India. In the first half of 2011, production totalled 35.636 million tonnes, which is a tenth of China's production for the same period. India's steel production in the first six months, according to figures released by the World Steel Association, increased by 4.8% to 35.636 million tonnes from 33.994 mt in the corresponding period of 2010. China grew 9.6% to 350.543 mt in the same period.

India has already lost its fourth place to Russia. During 2010, India was the fourth-largest producer which was again a fall from the position in 2009 when it was the third-largest producer.

India's steel secretary said that the government has received a copy of the order. "The court has asked for the steelmaker's requirement and we will be providing that to the ministry of environment and forest. TheSupreme Court has said it will take into consideration the requirements of the steelmaker," P K Misra, said.

"The situation will lead to a cut in production as availability of ore will be restricted," said Abhisar Jain, a steel analyst with Centrum Broking. "The ban will result in just 10-15 million tonnes of iron ore from Karnataka, which will not be sufficient to meet steel production," he added.

According to the Lokayukta report, which was released on July 28, 29 million tonne of illicit iron ore, valued at Rs 12,200 crore, was exported between 2006-07 and 2010. The report further states that, out of the five financial years (between 2006 and 2010), the highest quantity of exports of illicit iron ore was in 2009-10, which is approximately 12.7 million tonnes.
(Source: Economic Times)

Marico eyes beauty and wellness segment in Asia, Africa

FMCG firmMarico which posted a consolidated net profit of Rs 85 crore for the quarter ended June 30, 2011 today said it was tapping business opportunities in the beauty and wellness segment in the emerging nations.

"We are interested in expanding our footprint in the beauty and wellness segment in developing countries, especially in Asia and Africa. We believe this segment will grow significantly in future," Marico CEO,Consumer Products Business, Saugata Gupta, told PTI here.

The FMCG firm today posted a 15.28 per cent rise to Rs 85 crore in its consolidated net profit compared to Rs 73.73 crore in the same quarter in 2010.

During the period under review, the firm's net sales rose 33.17 percent at Rs 1,048.61 crore from Rs 787.40 crore in the corresponding quarter last fiscal.

"We performed well mainly due to healthy sales growth across all our franchise business and the acquisitions we made in the last one year," Gupta said.

Despite the positive growth in profit and revenue, the company's margin declined during the quarter due to a surge in input cost of raw materials, especially in the segment of hair oils, he said, adding the FMCG firm was aiming for double digit volume growth in FY12.

"The company has chosen a temporary contraction in operating margins to ensure long term growth," added Gupta.

Marico is also planning to enter into health food segment in the country this fiscal.

"We are planning to test market products in the health food segment in a couple of months and launch them during this fiscal," he said.

The FMCG company is also planning to expand its portfolio in Bangladesh in FY12, the CEO added.
(Source: Economic Times)