News: Attracting foreign investors to Indian retail business

(EB 30/01/2006) New Delhi - The Central Government’s decision to allow FDI in ‘single brand’ retail is a well thought-out initial step for opening up the entire retail sector in the long run, writes Aditya Raj Das.

The Congress-led UPA government’s decision to push forward big-ticket liberalisation of policy on Foreign Direct Investment (FDI), no doubt, has injected fresh momentum to economic reforms, which, of late, has virtually slowed down due to intense pressure of coalition politics.

Just one day before the beginning of the high profile World Economic Forum meeting at Davos the government as part of is strategy to showcase India’s forward movement in the reforms front decided to allow FDI of up to 51 per cent for retail trade in ‘single brand’ products and permit 100 per cent FDI through the automatic route in key areas like power trading, development of green-field airports, petroleum marketing infrastructure, and processing and warehousing in coffee and rubber industry.

The most significant aspect of the government’s latest policy liberalisation of FDI is that despite the mounting pressure from the Left Parties, the UPA coalition government, whose very survival is dependent upon their (Left’s) support, decided to allow FDI in retail outlets meant exclusively for ‘single Brands’.

What it means?

The move will allow multinational companies, big or small, to invest in setting up production facilities, distribution network and retail outlets of their own. Experts believe that this will attract premium brands like Nike, Louis Vuitton, Gucci, Reebok etc, into the country. Foreign companies will be allowed to invest up to 51 per cent in ventures and the rest will have to come from Indian investors.

However, retailing of goods of multiple brands, even if such products are produced by the same manufacturer, would not be allowed. Similarly, the entry of resellers (mainly multibrand stores) is also barred.

While on one hand this decision, as expected has evoked sharp criticism from the Left Parties and the BJP, it has prompted mixed reactions from the trade and industry lobby, ranging from enthusiastic to guarded.

As Commerce Minister Kamal Nath says, “This is aimed at attracting investment, technology and best global practices as also catering to the demand of such branded goods in India.” Brushing aside Left Parties’ apprehension that the move would lead to job losses, Mr Kamal Nath claims that the step would provide a significant fillip to job creation in India.

He argues that the decision to allow 51 per cent FDI in ‘single brand’ retailing would lead to the creation of at least 10,000 jobs in the coming financial year itself. He strongly feels that allowing limited FDI in single brand retailing posed no threat to the neighbour-hood grocer, the ‘mom and pop store’ or the small kirana stores.

Similarly, the Finance Minister too is of the view that opening up the retail sector would create huge job opportunities for thousands of under graduates who are unable to complete higher education.

Opposition as usual

The Left parties, who have been criticising almost all economic reform measures of the central government, have threatened to organise protests across the country. They say the opening up of the retail sector would lead to the entry of big retail chains and multinational giants that would wipe out small retailers.

But the Left Front-ruled West Bengal’s Chief Minister Bhudhadev Bhattacharjee is understood to have no serious objection to allowing FDI in various sectors of the economy including retail. Analysts say that the move to allow 51 per cent FDI in ‘single brand’ retailing is part of the government’s step-by-step approach to deal with the overall issue of allowing FDI in retail. The first step would help the government test the waters in gradually opening up major segments of retail to FDI.

Prior to taking this step the government had allowed FDI of up to 51 per cent in ‘Cash and Carry’ wholesale trade where the licensee was allowed to sell anything only to businesses, shopkeepers, resellers etc who in turn would sell to consumers or use the good as inputs for their businesses. Under this scheme the German giant Metro Cash and Carry has opened two outlets in Bangalore and one in Kolkata.

ASSOCHAM, however, feels that allowing ‘single brand’ is too small a step and the government should have allowed multibrand outlets. Says ASSOCHAM President, Anil K Agarwal, “The Chamber has for long been demanding the opening up of retail to MNCs as it would create job opportunities for lakh of people, as also help India accelerate its exports.”

The Chamber is of the view that the opening up of retail trade to multiple brands will not pose any threat to ‘kiranawalas’ and on the contrary create competition that will eventually lead to benefits of the consumers.

Echoing similar views FICCI President, Saroj Kumar Poddar says the decision to permit up to 51 per cent FDI in ‘single brand’ retailing marks a small but significant step forward in attracting large inflows of foreign capital into India and improving the efficiency and cost-effectiveness of the retail sector.

He says besides giving a fillip to manufacturing of branded goods in the country, the move would attract leading international players to India and create huge opportunities for employment.

Clarity needed

Despite euphoria the retail industry is eagerly waiting to get the actual shape of things to come, after the government’s decision to allow FDI of up to 51 per cent in ‘single brand’ retailing at the ground level. The government is yet to announce detailed guide-lines, that clearly define the terms and conditions.

It is learnt that the guidelines to be issued by the Department of Industrial Policy and Promotion would specify that foreign companies would not be permitted to source goods locally and then retail these in India by using their brand names.

This would mean that they will have to get into manufacturing and selling these products in the retail outlet.

The government’s intention clearly is to induce asset creation through investments in manufacturing and in the supply chain. This would also silence the main criticism against allowing FDI in retail — that it is merely a trading activity having no contribution to manufacturing.

At the same time there are concerns that out of over protectiveness the guidelines may impose stringent riders on foreign companies willing to bring FDI into ‘single brand’ retailing.

The world famous sportsgear brand Nike, for example, outsources its entire requirement from suppliers all over the world. It may not be willing to set up manufacturing here just because the Indian law would demand so. But industry expert J H Mehta, President Spencer’s Retail (a RPG group company investing heavily in to retail) is of the view that allowing ‘Single Brand’ retail to begin with is the right move. Most developed countries in the world, including China and Japan, had adopted a very cautious approach at the early stage and gradually opened up.

Optimism around

Despite the shortcomings the new new decision has enthused many. Leading apparel brands like Benetton are now exploring scope for further expansion by setting up their own retail entities. As Gagan Singh, Managing Director, Benetton India has said, “the government decision allows brands like us to invest in India now. It has opened up one more channel to expand our operations through joint ventures.”

The overwhelming view is that this is the first concrete step towards allowing FDI in various sectors of retailing including grocery, garments and lifestyle stores. Over a period of time all sections of retailing will be opened up to FDI with necessary checks and balances.

As Commerce Minister Kamal Nath says, “it is the domestic retail giants, who are eyeing the lucrative openings in the retail sector. It is not really about domestic versus foreign. It is the big against the small. We have to evolve a model suitable to Indian conditions so that our small retail shop owners are not displaced.”

The basic reason why India’s retail sector is generating so much interest among both domestic and foreign investors is the mind boggling business potentialities in the retail industry. As of now, India is witnessing an unprecedented consumption boom.

The economy is growing between seven and eight per cent and the resulting improvement in income dynamics along with factors like favourable demographics and growth in aspirational consumption are the drivers. India’s average consumer today is richer and younger. They value convenience and choice at par with getting value for their hard-earned money. This builds up pressure to allow foreign players, who can bring in new technology and management skills.

Advantages

Besides, as the FICCI President says, “India has intrinsic advantages in terms of inputs, skills, design, and a huge domestic market with growing spending potential. All these factors make India an attractive hub to outsource manufacturing of high-end fashion, design and lifestyle goods for supplying to the global markets.

Foreign companies can capitalise on these advantages and set up flexible manufacturing systems in India for their sourcing requirements.

As far as the retail format is concerned, analysts say, it will be difficult to transplant any international format, however successful it may be, directly in India and expect similar performance. Local conditions and insights into the local buying behaviour have to shape the format choice.

The Retail Detail

The government has allowed 51 per cent foreign investment in ‘Single Brand’ retail

Investors will have to deal with only one brand even if they have more

FDI will be allowed with no ‘local sourcing’ rider

It means goods to be sold will have to be self manufactured/assembled

The intention is to induce investment in assets

The possibility of large job creation

FDI not opened for multi-brand resellers

Industry welcomes the move, Left parties oppose it

Interview: RK Pachauri - Tata Energy Research Institute

(HT 30/01/2006) New Delhi - India needs to tap the abundant gas available in Iran, Myanmar and Central Asia and should quickly overcome the political compulsions to meet its energy requirements, says RK Pachauri, director general of Tata Energy Research Institute (TERI). In an extensive conversation with M Rajendran, he also stressed the need for India to give a clarion call to the world on the issue of climatic change.

Excerpts:

Despite numerous policy interventions, gas based energy has not truly taken off in India. What is the reason?

I think there is a historical reason. A committee set up by the government in the 1980s had said that natural gas should not be used as a fuel, but only for high value applications and petrochemicals. That mindset went against the use of natural gas as a fuel. But, indications are that we will soon become a large importer of both coal and other fuel. So in order to diversify our sources of energy it is absolute ly essential that we use natural gas on a larger scale. There is lot of fuel in our neighbourhood like Iran, Myanmar and Central Asia. There has been some tardiness in our thinking and in the actions that we have to take. I can understand the political compulsion vis-a-vis Iran and India, but nations and leaders and governments that are able to think beyond the immediate generally catch the early worm.

Can nuclear energy become a future fuel solution for India? What are the impediments?

Nuclear energy can be one of the solutions if one can ensure enough raw material. We have limited uranium reserves and are still sometime away from the use of thorium which we have plenty of potential supplies of. Currently, nuclear energy constitutes less than three per cent of our total power capacity. We have to move aggressively for use of nuclear energy, but that would need India being accepted by the nuclear suppliers group. In this context, the US-India deal is significant. But India has to be recognised as a nuclear weapon state and accepted by the global community even though we have not signed the non proliferation treaty.

Currently, India’s energy requirements are primarily met by thermal production. Is this not an unhealthy trend?

I agree, but with hydro confined to only some parts of the country and a few other constraints it has not taken off. In the past we have been insensitive to the environment problems, rehabilitation and social impact due to hydro projects. This led to a great deal of resistance being built up for hydro power projects. There is also an element of financial risk due to long gestation period, increase in time and cost of project due to geological surprises. My belief is that if private sector had been involved early perhaps there would have been some positive results. This would have to be supported by a strong regulatory mechanism that would have ensured speedy clearance and redressal of environment, forest and social aspects.

What about mini hydel projects as a solution in the Northeast and other hydro power potential states in India? What has been TERI’s experience?

TERI has been involved with a project in Northeast to produce power on a local basis and dis tribute locally. It makes sense since the population there is highly dispersed. The problem in Northeast is that there has been lack of institutional capacity and capability. Uttaranchal is a good example where mini hydro projects have been successful.

There has been a lot of dependence on kerosene in India. What can be done to reduce this dependence with alternative energy sources?

We have recently brought out a paper with a detailed analysis. Kerosene subsidy should be targeted only for those who are below poverty line. This is essential since a large part of the kerosene that goes into the market is used for adulteration of petroleum products. Kerosene is primarily used for lighting in rural areas and this could be exchanged by use of subsidised photovoltaic solar lanterns. This technology is perfect and the products are durable. We need a major innovation in our system.

There has been sudden change in the climatic conditions across the world. Tata Energy Research Institute has been involved with the environment related projects. What role in you opinion India can play on this issue?

The world is not following the path of sustainable energy. It is important for a country like India to give a clarion call to the world to change the manner in which we have functioned with regard to protecting our environment.

The footprint of human activity on this planet has grown far larger than this earth can really tolerate.

This is manifested in the climate change. From the developing countries’ point of view, it is necessary that we need to chart out a new path of sustainable development.

Our annual Delhi sustainable development summit is one such attempt. We are getting a galaxy of people drawn from various profession and organisation to this event.

News: Forbes Store launched in Chennai

(PTI 30/01/2006) Chennai - US-based Forbes Group, which has interests in shipping, engineering, travel services and textiles, on Monday launched the 'Forbes Store' to sell garments manufactured by Forbes Gokak Ltd under the "Campbell" brand.

Forbes Store is the first in the chain of stores planned by the company to offer world class fashion apparel products to the Indian consumer, a company release said.

The direct sale outlet launched today will offer superior quality apparel, comprising knitwear and woven garments.

This is the first time that Forbes, a company mainly focussed on export of yarns and garments, will be offering their products to the domestic customers.

Artikel: Onverwachte investeringen

(DWT 28/01/2006) Paramaribo - Bij beleggingen denkt men al snel aan aandelen, opties en futures die gerelateerd zijn aan bedrijven of onroerende goederen. Er bestaan echter een scala aan andere zaken waarin belegd kan worden.

In een voorgaand artikel hebben wij het gehad over groene beleggingen zoals teak hout. In een land als Suriname waar men de waarde van hout kent, is dit geen rare stap. Bij producten als wijn denk u wellicht anders. Toch zijn er fondsen die beleggen in wijn die al meerdere jaren een positief rendement laten zien zoals het Orange Wine Fund of het Vintage Wine Fund.

Ogenschijnlijk zijn deze fondsen niet erg verschillend van elkaar. Echter, het Orange Wine Fund investeert in wijnproducenten en andere wijn gerelateerde bedrijven, terwijl het Vintage Wine Fund daadwerkelijk haar geld in flessen wijn stopt. Nu zult u wellicht denken: “Hoe kunnen flessen wijn geld opleveren?”. Het simpele antwoord daarop is: vraag en aanbod.

Met name in Frankrijk zijn er beroemde wijnhuizen, zoals Margaux en Lafitte Rothschild, die maar een beperkt aantal flessen per jaar produceren welke ook nog eens jaarlijks van kwaliteit verschillen. Het steeds toenemende aantal wijnliefhebbers doet de vraag naar goede wijnen stijgen met als gevolg dat de prijzen stijgen. Daarnaast kunnen de fondsen ook beleggen in unieke flessen die in trek zijn bij verzamelaars zoals een fles die eigendom is geweest van Napoleon of Thomas Jefferson.

De bovengenoemde fondsen hebben het afgelopen jaar rond de 10% groei laten zien. Niettemin betekent dat niet dat alle wijnfondsen goed zijn. Vorig jaar werden in Nederland beleggers hoge rendementen voorgeschoteld door het 'Bordeaux Wijnfonds 2001'. Het fonds bleek echter niet te kunnen leveren wat het beloofde en de beleggers werden gedupeerd. Voorzichtigheid is dus geboden, zolas bij alle beleggingen.

Het beleggen in specifieke producten omdat de prijzen daarvan stijgen is echter niet alleen van deze tijd. In de Hollandse Gouden Eeuw ontstond er een bloeiende tulpenmarkt in Amsterdam. De vraag naar de tulpenbollen nam zo erg toe dat beleggers begonnen te speculeren op de prijzen. Verschillende soorten tulpen waren meer in trek dan anderen, sommige kleuren populairder dan anderen. Vergelijkbaar met de internethype van de late jaren negentig begonnen ook de kleine investeerders hun zuur verdiende geld in tulpenbollen te steken. In 1637 spatte de bel uiteen, met dramatische gevolgen voor velen. U zult denken dat men hun les had geleerd, niets was minder waar. In 1734 gebeurde precies hetzelfde maar toen met hyacintenbollen!

Beleggen kan in een veelheid van goederen of producten. Wees echter voorzichtig!!

© Drs. Benjamin R.H. Bremmer, InCar Trust (bremmer@incartrust.com)
InCar Trust is het aanspreekpunt voor Sares Invest in Suriname en het Caribische gebied

News: India to liberalise retail market

(BBC 25/01/2006) Mumbai - Foreign retailers will be able to own their own stores in India for the first time as part of a major government liberalisation of business.

Until now, foreign businesses have only been allowed to operate franchises for fear they would harm indigenous firms.

But new regulations will allow foreign retailers to own 51% of outlets as long as they only sell single-brand goods.

The competition drive, also affecting mining, energy and transport, has been opposed by the Communist Party.

Job creation

Nevertheless, the Indian government is determined to press ahead with the reforms which it says will create jobs, while giving sufficient protection to Indian businesses.

Experts believe that retailers such as Nike, Reebok and Marks & Spencer could take advantage of the changes to step up their investment in India, the world's eighth largest retail market.

Trade minister Kamal Nath said the reforms were the first changes to laws governing foreign investment in 15 years.

"This is aimed at attracting investment, technology and best global practices and catering to the demand of branded goods in India," he said.

Under the new regime, only firms selling single-brand products will be able to directly operate their own stores.

This could prevent supermarket giants such as Wal-Mart and Tesco which sell an array of goods from extending their presence in India.

Concerns

The Communist Party, a coalition partner in the Congress Party-led government, said the changes could threaten thousands of small retail concerns.

"We have been opposing it," said D. Raja, the Party's secretary, who warned that the changes would eventually lead to full liberalization.

"I do not know why the government has to take such a decision."

Increased foreign investment will also be permitted in other sectors of the economy including diamond and coal mining, power trading, rubber processing and pipeline manufacturing.

Foreign firms will also to play a greater role in building of new airports, supporting the rapid development of the country's aviation industry.

Artikel: Investeren in eigen land

(DWT 14/01/2006) Paramaribo - In veel landen spelen investeerders een belangrijke rol in de economische ontwikkeling van een land. Kijk bijvoorbeeld naar de grote pensioenfondsen in Nederland die een groot deel van hun opgespaarde miljarden investeren in Nederlandse bedrijven en onroerend goed. Dichter bij huis zien wij de Unit Trust Corporation op Trinidad, in 1981 door de overheid opgericht, die de ingelegde gelden van de Trini’s grotendeels in lokaal genoteerde bedrijven investeert.

Privatisering

Het aantrekken van investeerders in het privatiseringstraject is in beginsel een goede stap. Door meer buitenlands kapitaal binnen te halen kan de economie als geheel een boost krijgen. Met meer buitenlandse investeerders actief in Suriname krijgt het land ook naar de buitenwereld een aantrekkelijker imago. Immers, de afwachtende trendvolgers moeten door de initiatiefnemers geprikkeld worden.

In het privatiseringsproces profiteert de lokale bevolking weinig. Er is nog geen aandelencultuur bij de gemiddelde spaarder en door de geringe liquiditeit op de beurs zijn aandelen in het algemeen weinig aantrekkelijk als spaarinstrument. Pensioenfondsen en beleggingsfondsen kunnen hier uitkomst bieden.

Bij privatisering waarbij een buitenlandse investeerder een bedrijf geheel overneemt, heeft de Surinamer geen profijt anders dan het algemene voordeel voor de economie en de belastinginkomsten die de staat geniet. Indien pensioenfondsen deelnemen in de geprivatiseerde bedrijven, zullen zij, en dus ook degenen die voor hun pensioen sparen, profiteren van het succes van de onderneming.

Inspraak

Belangrijker wellicht dan de mogelijkheid om deel te nemen, is de macht van de aandeelhouder. Als een pensioenfonds deelneemt in een bedrijf heeft het als aandeelhouder ook invloed op het bedrijf en dus een controlerende functie. Als belegger die verantwoordelijk is voor de pensioenen van velen, moet een pensioenfonds haar investering beschermen en zorg dragen dat het de verwachte rendementen oplevert. Dit kan een positief effect hebben op het management. Nu privatisering van succesvolle staatsbedrijven aan de orde is, is de noodzaak voor deelname van lokale investeerders groter. De vraag is echter: is dit mogelijk?

De overheid moet een actieve rol spelen in het zorgen dat op zijn minst een deel van de inkomsten van geprivatiseerde bedrijven weer terugvloeit in de economie. Dit kan door een deel van de aandelen in het privatiseringsproces te reserveren voor de lokale investeerders, maar ook door consolidatie van de pensioenfondsen te stimuleren. De pensioenfondsen, publiek en particulier, moeten zich gaan bundelen om het voordeel van schaalgrootte te genieten.

Door het creëren van grotere potten met geld kunnen de nieuwe grote pensioenfondsen niet alleen meer en betere internationale beleggingsoplossingen aanspreken, zij kunnen ook lokaal een grotere invloed uitoefenen op de bedrijven waarin geïnvesteerd wordt. Hierdoor kunnen zij een positieve rol spelen in de verdere opbouw van Suriname en een controlerende functie vervullen op het management. Daarnaast hebben grotere fondsen minder kosten, hetgeen al direct een positieve invloed heeft op het rendement.

© Drs. Benjamin R.H. Bremmer, InCar Trust (bremmer@incartrust.com)
InCar Trust is het aanspreekpunt voor Sares Invest in Suriname en de Cariben

News: CMSE critical first towards making Caribbean viable

(TE 13/01/2006) Port of Spain - For the past week I have been travelling in the Caribbean. Meetings apart, I have been trying to understand the prospects for the Caribbean Single Market and Economy. I have been asking those that I have met if this vital aspect of the regional integration process can be made to work.

Almost everyone I spoke to agreed that the creation of a CSME was a necessary Caribbean response to the forces of economic globalisation and competition that threaten to overwhelm the region’s largely insignificant economies.

They argued that by unifying the Caribbean into a single market and enabling the free movement of goods, capital, labour and services between all states, a critical economic mass will be created. Economic theory, they reminded, suggests that this should then enable economies of scale and allow the region over time to become globally competitive and to thrive.

They also noted the widespread and sometimes emotive belief that the single market is a first step down the road to satisfying the long-standing and deep-seated political and cultural vision of a single integrated region. It is as one senior individual commented, a step towards the commonly held belief that the Caribbean is a single homogenous region.

But when I can to probe just a little deeper, it became apparent that this desire for a regional identity and integration was not matched to any significant extent by the private thinking of some of those who are actively engaged in trying to shape the future.

The more I discussed the issue the more difficult it was to reconcile the contradictions between the genuine commitment to the ideal of regionalism and the reality of the Caribbean of today. What emerged were a number of issues that seemed to require urgent intellectual and practical resolution if the concept of a single market and economy is ever to become a sustainable reality.

The first related to whether there is anywhere a successful economic integration movement that involves nations without contiguous borders. The point was made that the fragmented nature of the region with its very small and physically separated nations suggested that the economies of scale that ought to arise from integration were not likely to be present in the Caribbean. As a consequence it may not be possible to rationalise and reduce the costs associated with everything from utilities to manufacturing. Moreover, the inadequacy of inter-Caricom transport systems resulted in high transactional costs of doing business between small island states.

The second was whether a region of economies at very different levels of development stands any chance of achieving the consensus necessary to make a single market work. There was widespread concern about the vastly differing levels of development of the CSME’s members and a fear about the possibility that the larger and wealthier may take over the smaller. It was noted that one solution had been proposed to address this: the creation of regional development fund supported financially by all, that could float less developed economies up to something closer those of the more developed. However, there was a concern that the proposed fund seemed likely to be stillborn because smaller Caricom nations were reluctant to contribute.

The third was a real doubt about the ability of the private sector to deliver a single market and whether the majority of companies in the region have any taste for the competition implied by economic integration. It seemed to be little understood in some parts of government that for a single market and economy to work, a vibrant private sector able to mobilise and risk capital for investments is required. Yet much of the private sector remains locked into a form of xenophobic protectionism while a significant part of the rest, the large and successful companies that are able to consider risk, now only invest outside of the region. To further confound the possibility of a single economy the absence of a regional stock exchange made investment across the region and from beyond difficult.

The fourth was whether the construction of a single market was politically viable when much of the Caribbean electorate remains sceptical, limiting governments room for manoeuvre.

And a fifth was the suggestion that the region’s key institutions that should be leading the way had lost touch with the reality of the region. The absence of substantially endowed chairs at the University of the West Indies in crime and security and tourism, both now key components in the region’s future were cited as examples. The absence of common policies on regional energy security or food security were cited as other examples that raised questions about the extent to which regional integration can be achieved.

What all of this seemed to indicate was a regional integration movement at best moving at a pace that bears no relationship to the rapidly changing global economy, presided over by regional institutions designed for an age that has passed. What was also striking was how many senior figures privately shared these thoughts, yet despite their creative and new ideas could see no easy way forward.

Much the same can be said about thinking in Europe.

Seen from beyond the region the single market is regarded as being an essential prerequisite for economic development. The European Commission’s trade negotiators see the creation of a CSME as the critical first step towards making a fragmented region viable. They regard it as providing the enabling environment for the proposed Economic Partnership Agreement (EPA) that is meant to be established in 2008 between the Caribbean and Europe.

They too feel frustrated but for different reasons. They are worried about the growing number of caveats that are being introduced into a possible future arrangement. They question how they are meant to contend with a single regional unit that contains nations that require special treatment within their own customs union and consequently an arrangement with Europe. They wonder in private whether such variable geometry will defy the benefits of economic integration.

In the region and beyond some suggest that generational and political change may provide answers. But the lack of any mechanism able to generate regional homogeneity implies that the uniqueness of each Caribbean nation’s problems will remain. If this is the case it suggests that a moment will come when policies have to be designed that accept this difficult fact.

News: Ride the waves to work

(DNA 10/01/2006) Mumbai - It sounds too good to be true. Instead of choking and sweating your way to office in a crowded Churchgate-bound local, you will be travelling across the placid waters of Arabian Sea—the gentle sea breeze lifting your spirits before the start of a hectic day.

The Union Ministry of Environment & Forests (MoEF) has finally granted clearance to the Maharashtra government to operate a ferry service from Borivali to Nariman Point. The clearance, coming two years after the project was launched, has been granted to four of the six locations selected for erecting jetties. They are: Bandra, Juhu, Versova and Borivali. The ministry has asked for detailed geo-technical studies like sub-soil analysis to be carried out at the two remaining sites of Marve and Nariman Point.

A senior official of Maharashtra State Road Development Corporation (MSRDC), the implementing authority, said: “The studies at these two places will not take much time. Hopefully, we will get the clearance by the year-end and begin the services soon.”

The project—expected to become functional in 2006—had got stuck in the mesh of central environment and coastal regulation rules. Interestingly, before getting the final environmental clearance, MSRDC had given the rights to run the ferry service to a consortium led by M/s Satyagiri Shipping Company ltd. The consortium partners— IDFC, Dena Bank, Videocon International, Hiranandani Group, KSMC Financial Services Ltd, ABS Hovercraft Ltd, UK and Gammon India Ltd—had won the rights by quoting the highest lease rent of Rs1000 crore.

Dinesh Joshi, director of Satyagiri Shipping, said: “It is a positive step. However, Nariman Point is the master passenger terminal. Unless that starts, it will not be possible for us to start services in bits and pieces. Hopefully, we would get this environmental clearance in a few months’ time and start constructing jetties.”

MSRDC has already given Satyagiri the conditional letter of intent. Once the remaining two environmental clearances are received, MSRDC and Satyagiri will formally sign the contractual agreement.

The state is also planning to start a similar water transport system along the east coast. Starting from the Gateway, the water transport will travel to Ferry Wharf and to Nerul via Uran and JNPT.

Bonne Voyage

Ferry service will run from Nariman Point to Borivali via Bandra, Juhu, Versova and Marve

Environmental clearance given for jetties at Bandra, Juhu, Versova and Borivali

MSRDC has already given conditional letter of intent to a consortium led by M/s Satyagiri Shipping Company Ltd, which won the bid in 2004

It is expected to take 1 hour to travel from Borivali to Nariman Point by the sea route

Catamarans and hovercraft will be used.

Jetties to have basic facilities and amenities like waiting halls and cafes.

News: Benetton opens an exclusive outlet in Chennai

(RetailBiz 06/01/2006) Chennai - "Benetton India, which has opened 20 outlets across India in 2005, will expect to do the same in the following year," said Gagan Singh, MD, Benetton India.

Speaking at the launch of Benetton's 4,500 sq ft store, she said that Benetton India has had a growth of 30 per cent in terms of revenues in the year 2005. The store is the company's first exclusive outlet in Chennai and the first mega store in South.

"Benetton will look to open four to five new stores in the South next year," she added. M Lankalingam, Chairman and Innovation Head, Lanson – the owner of the franchisee in the Chennai store, said that an investment of Rs 1 crore went into the store. He also added that within the next eight months, one store would be opened in Pondicherry and two in Kerala, one of which would be in Kochi. Another one would be opened in Chennai in Ampa Mall – the upcoming retail centre, with two levels- one for adults and one for children.

The megastore showcases eveningwear and casuals for adults and children and also the Autumn Winter 2005-06 collection of Benetton, which caters to all age groups.

News: Barista Coffee plans major expansion

(RetailBiz 06/01/2006) Mumbai - "Barista Coffee Company Limited (BCCL) has chalked out a major expansion plan involving an investment of over Rs 25 crore during the current year to set up around 40 new Barista Espresso Bars and Espresso Corners and five new concept stores called Barista Crème," said Partha Dattagupta, CEO, Barista.

The company plans to take the total network to around 170 outlets by the year-end from the present 130. "The premium cafe Barista Crème offers a wider range of food and beverages, apart from luxurious comfort," said Mr Dattagupta. Stating that the company's revenue mix currently comprised 30 per cent from food and 70 per cent from coffee, he said that the Barista Crème outlets aim to increase revenue contribution from food.

The company plans to set up Barista Crème outlets in Mumbai, Bangalore and Indore this year.

News: Indian retail talent hunt

(RetailBiz 05/01/2006) Mumbai - There is an acute 'shortage of talent' in the Indian retail industry, says Sonny Iqbal. The industry needs to prepare executives for critical roles if they have to compete with MNCs.

Today, the rising star of the Indian economy is the retail industry. India is amongst the top five global destinations for retail investment, which employs more than 21 million people and contributes 13 per cent to the country's GDP. The ongoing retail boom is expected to translate into eight million new jobs over 5-6 years. This is in addition to the 21 million jobs already generated and sustained by retailers, including 'mom & pop' stores. The industry has highlighted India's potential as a consumer economy and demonstrated the sheer consuming power of the urban Indian populace.

Exponential growth is expected with the opening up of Foreign Direct Investment (FDI). Though, at present, most of the retailers are Indian companies, multinationals are beginning to focus seriously on the country in anticipation of friendlier regulation. While this is great news, it also poses several challenges and questions. The most important of these is the accelerating shortage of talent and how companies will overcome this, especially Indian companies, as they prepare to compete with multinationals.

According to an ICICI report, the Indian retail industry (organised and unorganised) is pegged at US$ 286 billion and is expected to grow at 8.3 per cent during 2003-08. Food and beverages followed by apparel and footwear are the largest components and together account for 60 per cent of consumer spending. Although at 12 million retail outlets, India has the largest concentration in the world, its share of organised retailing is a mere two per cent. It compares quite poorly with other countries -US is at around 80 per cent, Brazil is at 40 per cent and China is at around 20 per cent. This however is changing. Driven by changing consumer demographics including a young population, growth in income and consumption, access to low cost consumer credit and increasing literacy levels, the organised retail segment is growing at almost 40 per cent annually. Also the retail boom, 85 per cent of which has so far been concentrated in the metros, is slowly penetrating to smaller cities and towns and the contribution of these tier-II cities to total organised retailing sales is growing.

It is important, however, to look at this growth in the right perspective. Like any other industry, the Indian retail industry comes with its share of challenges.

Today, a real challenge facing Indian retail CEOs is how to deliver true value to the customer, of which service is a crucial component. Service quality standards and brand strength will drive customer loyalty to a large extent. Product and price-based value differentiation in the retailing industry is short lived as it can be replicated quickly. While most of the major Indian retailers are investing in building brands, the brand promise isn't usually translated into service delivery at the shop floor level.

For those who can offer good service, consistency becomes the key challenge and companies get trapped in a vicious circle. Importantly, the international retail majors are likely to come with deeper investment pockets, access to a global supply chain and an experience of a diverse customer base that translates into greater product variety at attractive price points. More significantly, they will come in with invaluable experience of competing with a variety of retail There is an acute 'shortage of talent' in the Indian retail industry, says Sonny Iqbal. The industry needs to prepare executives for critical roles if they have to compete with MNCs chains/formats/brands in the organised retail sector in developed as well as developing markets.

News: Indian Retail Scenario

(CB Retail in India is still at a very early stage. Most retail firms are companies from other industries that are now entering the retail sector on account of its amazing potential. There are only a handful of companies with a retail background. One such company is Nilgiri’s from Bangalore that started as a dairy and incorporated other areas in its business with great success. Their achievement has led to the arrival of numerous other players, most with the backing of large groups, but usually not with a retail background. Most new entrants to the India retail scene are real estate groups who see their access to and knowledge of land, location and construction as prime factors for entering the market.

New retail stores have traditionally started operations in cities like Mumbai and Delhi where there has been an existing base of metropolitan consumers with ready cash and global tastes. The new perspective to this trend is that new entrants to the retail scenario should first enter smaller cities rather than focusing entirely on the metro’s. Spending power in India is not concentrated any more in just the 4 metros (Delhi, Mumbai, Chennai, Kolkata). Smaller but upcoming cities like Chandigarh, Coimbatore, Pune, Ahmedabad, Baroda, Trivandrum, Cochin, Ludhiana, Simla etc will fast be catching up to the metro’s in their spending capacity.

Cities in south India have taken to the supermarket style of shopping very eagerly and so far the maximum number of organized grocery and department stores are in Chennai, Bangalore and Hyderabad. The north has a long way to go to come up to par. International stores now prefer to gauge the reaction of the public in these cities before investing heavily in a nation-wide expansion. Milou, the Swiss children’s wear retailer, recently opened up its first store in Chennai, bypassing Delhi and Mumbai.

Besides the urban market, India’s rural market has just started to be seen as a viable option and companies who understand what the rural consumer wants will grow to incredible heights. The bulk of India’s population still live in rural areas and to be able to cater specifically to them will mean generating tremendous amounts of business.
Business, specifically retail business must focus on the most important factor in the Indian mind-set----Value for Money. Indian consumers are ready to pay almost any amount of money for a product or service as long as they feel they are getting good Value for Money. This is often misconstrued as being tight fisted or interested in lower priced and/or lower quality products.

In the past decade, international companies entering India (Levi’s, Pepe, Tommy Hilfiger, Marks and Spencer, Mango) have generally offered moderately priced to expensive items. They have aimed for the upper-middle and rich classes of Indian society. These are consumers who travel abroad often and can buy these items overseas quite easily. Instead, international companies should be focusing on the lower and lower-middle classes of India. This is where the real potential is, the aspirational class of consumers who want to lead a better lives and believe in education, hard work and absorb knowledge from every possible angle. The phenomenal success of Big Bazaar, Pantaloons version of Wal-Mart, is proof that there is enormous potential in providing products and services to this class of consumers.

Indians are very curious by nature and will try everything at least once before rejecting it. The initial success of KFC in India proved that Indians could make a success of most new ventures entering India but reject a concept once they have tried and tested the offering and found nothing worth going back for. The menu at KFC was rather boring and insipid to the Indian consumer who is used to the innumerable combinations and permutations of street food. For their second run in India, KFC re-thought its menu and has been very successful marketing at specific groups within India, like the Punjabi’s who have quite a history of loving the Chicken leg and have made the Chandigarh outlet a huge success!

A company entering India cannot have just one game plan to apply to the entire country as the people, their tastes, the lifestyle, the budgets etc are all too divergent. International entrants must enter each market specifically focusing only on that area to be successful.

Metros: Delhi, Mumbai, Chennai and Kolkata

Second rung but will soon outpace metros: Hyderabad, Bangalore, Ahmedabad, Gurgaon, Pune, Baroda

Small and developing fast: Chandigarh, Coimbatore, Trivandrum, Faridabad, Ludhiana, Cochin, Simla, Mysore.