'Godrej Properties will soon become our fastest-growing business'
Business Standard, November 2, 2009, Page 2
Q&A: Adi Godrej, Chairman, Godrej Group
The slowdown is behind us and the country will grow at around 9-10 per cent, believes Adi Godrej, chairman of the Godrej Group. This, he adds, spells good news for his fast moving consumer goods (FMCG) business and properties venture, as well as for Godrej Agrovet. In a chat with Business Standard, he says Godrej Properties will now be a focus area for the group, with an emphasis on affordable housing. Edited excerpts:
Do you believe the worst is behind us?
Definitely. Look at our results. Except for the sales figure of Godrej Industries (GIL), which was affected by the sale of Godrej HiCare, all our businesses have done well. The other point is that Godrej Sara Lee gets consolidated with Godrej Consumer Products and not with GIL, further bringing down the sales growth. However, the consolidated net profit of GIL jumped 240 per cent in the reporting quarter, as compared to the figure of the corresponding quarter a year ago. On a standalone basis, it was 350 per cent.
Meanwhile, the other subsidiaries, Godrej Agrovet and Godrej Properties, have done very well in the reporting quarter. While last year the commodity cycle affected our core business, this year it's doing well, with the prices of commodities like vegetable oil (the raw material for GIL's oleochemicals business) becoming reasonable once again.
Could you expand on your plans for Godrej Properties?
We have filed a draft red herring prospectus (DRHP) with Sebi to divest 13.5 per cent stake. The pre-IPO stake sale (of 4 per cent) and IPO should happen by the year end. Money from the IPO will be used for the expansion of Godrej Properties, in which we will continue investing, since we see a strong revival in residential property. Our focus will be on residential -- especially affordable housing -- and commercial properties. Godrej Properties will soon become our fastest-growing business.
Did the monsoon season disappoint you this time?
Had the monsoon season been good throughout, it would definitely have helped us in bettering our results. However, it wasn't all that bad. The latter part of the monsoon season was good, and hence I do not see the kharif crops doing too badly. Besides, the rabi season should be good. In fact, our Godrej Agrovet business thrives even in a bad monsoon, since the need for animal feed grows if the rains aren't good. And we are the leaders in compounded animal feed.
Which means rural demand remains good.
Yes. Look at Godrej Consumer's results, wherein rural sales have grown by 40 per cent in the past six months, double of that in urban areas. We have also increased our penetration in rural markets. The rural segment contributes 42 per cent to our total sales and we expect to increase it to 50 per cent in three years.
Will this translate into increased marketing spends?
Very much. In fact, we have been investing a considerable amount of money on marketing and our advertising budgets have almost doubled.
You appear bullish about the overall economy. But the stock markets are reacting differently...
True. We expect India's gross domestic product figures to rise to 9-10 per cent. I wonder why the markets are reacting differently.
Is it because they've factored in all the positives?
Probably.
Monday, November 2, 2009
'Godrej Properties will soon become our fastest-growing business'
DLF plans ‘value’ housing to expand market reach, unlock land banks
DLF plans ‘value’ housing to expand market reach, unlock land banks
The Hindu Business Line, November 1, 2009, Page 3
Our Bureau, New Delhi
Real-estate major DLF Ltd plans to launch ‘Value’ housing projects under a distinct brand, joining the growing list of industry players that are eyeing the affordable housing segment to boost demand. The company will launch 3-4 million sq ft under this new category, which it has classified as a lower extension of premium housing. According to a presentation by the company to analysts, its value housing projects will come up in Chennai, Bangalore, Hyderabad, Chandigarh and Gurgaon. While the company has kept the pricing under wraps, industry sources said it could be in the range of Rs 1,700 per sq ft. However, this could not be independently confirmed with the company.
During the analyst call, DLF is learnt to have said that Value housing will enable it to expand its market reach. The company is eyeing margins of 25-30 per cent for this new product category, sources said, adding that it also saw this as a great way to unlock land parcels.
“We have significant land parcels available for value housing projects. We are not saying that value housing is not profitable for us… It will be an extension of premium housing segment,” the Vice-Chairman, Mr Rajiv Singh, said in a conference call to discuss July-September results.
According to the analyst presentation, its net debt stood at Rs 12,135 crore (Rs 11,686 crore). Outlining its debt de-leveraging plan, the company said it had already received Rs 1,064 crore in Q1 and Q2 from unlocking non-core assets, and another Rs 4,436 crore was expected through similar action during the remainder of the year. It is also expecting Rs 1,000 crore operational surplus during the second half of the current fiscal and Rs 500 crore from DLF Assets Ltd in FY10. These would combine to bring down the net debt to Rs 6,199 crore, the company said.
The Hindu Business Line, November 1, 2009, Page 3
Our Bureau, New Delhi
Real-estate major DLF Ltd plans to launch ‘Value’ housing projects under a distinct brand, joining the growing list of industry players that are eyeing the affordable housing segment to boost demand. The company will launch 3-4 million sq ft under this new category, which it has classified as a lower extension of premium housing. According to a presentation by the company to analysts, its value housing projects will come up in Chennai, Bangalore, Hyderabad, Chandigarh and Gurgaon. While the company has kept the pricing under wraps, industry sources said it could be in the range of Rs 1,700 per sq ft. However, this could not be independently confirmed with the company.
During the analyst call, DLF is learnt to have said that Value housing will enable it to expand its market reach. The company is eyeing margins of 25-30 per cent for this new product category, sources said, adding that it also saw this as a great way to unlock land parcels.
“We have significant land parcels available for value housing projects. We are not saying that value housing is not profitable for us… It will be an extension of premium housing segment,” the Vice-Chairman, Mr Rajiv Singh, said in a conference call to discuss July-September results.
According to the analyst presentation, its net debt stood at Rs 12,135 crore (Rs 11,686 crore). Outlining its debt de-leveraging plan, the company said it had already received Rs 1,064 crore in Q1 and Q2 from unlocking non-core assets, and another Rs 4,436 crore was expected through similar action during the remainder of the year. It is also expecting Rs 1,000 crore operational surplus during the second half of the current fiscal and Rs 500 crore from DLF Assets Ltd in FY10. These would combine to bring down the net debt to Rs 6,199 crore, the company said.
Mid-market segment spurs revival
Mid-market segment spurs revival
The Hindu Business Line, November 1, 2009, Page 17
Bangalore developers shift focus to the Rs 35-45 lakh residential segment as they see growing demand.
Anjana Chandramouly
The mid-market segment could again be driving Bangalore’s residential market. Developers now believe that this is where demand could be in the immediate future.
“Today, there is a lot of opportunity in high-rise projects. There is a huge demand in the Rs 35-45 lakh price bracket,” says Mr N. Anantha Naarayanan, Head – Homes (Karnataka), DLF Homes. And who are the customers? IT professionals with an annual income of about Rs 12 lakh. “There are more people who can afford a Rs 35-45 lakh home now than those who would want a Rs 80-lakh home,” he adds.
This is clearly the thought that is even forcing the company to take a fresh look at another project in Bangalore. A row-house project in Jigani Industrial Estate, 12 km from Electronics City, which even has almost all approvals in place, could be converted into a high-rise apartment project “if that is where the demand is”, says Mr Naarayanan.
The decision, he adds, would be taken in a couple of months “as we are trying to feel the pulse of the market now.”
What he feels works in the favour of high-rise projects is the easy saleability factor. With another project in the city from the same company having tasted success, being a high-rise apartment project with about 1,100 units out of the total 1,962 units planned being sold, the company wants to get the choice of segment right. “In today’s market, you cannot afford to go wrong. If the probability of success is higher with high-rise projects, we would want to go with the market,” he says.
Now, affordable villas
A little over a year ago, the mid-market segment in Bangalore meant the Rs 50-70 lakh price category. But today, as Mr Naarayanan points out, the mid-market is way below the Rs 50-lakh mark. It’s not just the mid-market where the price definition has changed.
The accent is on the affordable segment clearly, it seems, even if one were to be talking about villas! How else would one explain a villa in the Rs 50-70 lakh segment?
FIRE Luxur, a joint venture between FIRE Capital Fund and Mr Prabhu Ramachandran of the Nilgiris Group, recently launched an affordable villa project in the city — The Empyrean. Located on the outskirts, near Whitefield, the project will have two-bedroom and three-bedroom apartments starting at Rs 27 lakh and Rs 30 lakh, respectively. The row-house prices start at Rs 47 lakh, while villas have been priced above Rs 50 lakh and go up to Rs 1.6 crore for a 5,500-sq-ft property.
Mr Om Chaudhry, CEO, FIRE Capital Fund, says that the market for villas has evolved now from what it was in 2005 or 2006.
“In the last year or so, villas have become more affordable and the distinction between villas and apartments has blurred a bit,” he adds.
While affordable villas are “still a dream, that’s where we would like to be,” says Mr Chaudhry. Describing the Rs 50-70 lakh price bracket as a “sweet spot”, he adds that a bulk of the project’s offerings “is in this bracket”.
Demand picking up
Some developers feel that even in a recession-hit residential market such as Bangalore, the demand for villas has been quite strong.
“The valuations though have dropped just as other valuations. The market is not as large as before as the rental market for villas has come down quite a bit,” says Mr Koshy Varghese, Managing Director, Value Designbuild Private Ltd.
Mr Prakash Gurbaxani, CEO and Managing Director, QVC Realty, says his QVC Hills project, offering a gated community of single-family homes or villas, has seen enquiries picking up in the past two-three months. “Demand is also picking up,” he says.
He admits that villa prices have come down by 20-25 per cent from the peak pricing that Bangalore witnessed. “There is clearly a market for villas in most cities, not just Bangalore. Villas or gated community offer the community living and security option that apartments offer — and, at the same time, the privacy of an independent house.”
The silver lining, Mr Varghese adds, is the fact that villas are now being purchased by end-users mainly. “However, there are also investors trying to cash in on reasonable deals in this segment,” he adds.
Presence of speculators
Though those in the realty sector claim that speculator demand is waning, he says that speculators are already in the market.
“Many of them came in and picked up units that were going at low prices or distress sales. Even today, prices are worth the time of the investor.
“Many units will appreciate in time. Attractive investment opportunities are still available,” he adds.
And would an aggressive pricing strategy as adopted by FIRE Luxur bring back investors into the market? Mr Chaudhry of FIRE Capital says that as long as developers know who they are selling to, speculators could be avoided.
“We have deterrents in place to ensure that re-sale is avoided in a short span. The lock-in period would depend on the stage of construction that a buyer comes in and the price. We are also selective about our channels of distribution,” he adds.
Mr Sandeep Trivedi, Director - Development Consulting at Cushman & Wakefield, says that an aggressive pricing strategy does enable the investor community to consider the projects seriously and “from a long-term perspective the projects are likely to earn a fair return.”
The Hindu Business Line, November 1, 2009, Page 17
Bangalore developers shift focus to the Rs 35-45 lakh residential segment as they see growing demand.
Anjana Chandramouly
The mid-market segment could again be driving Bangalore’s residential market. Developers now believe that this is where demand could be in the immediate future.
“Today, there is a lot of opportunity in high-rise projects. There is a huge demand in the Rs 35-45 lakh price bracket,” says Mr N. Anantha Naarayanan, Head – Homes (Karnataka), DLF Homes. And who are the customers? IT professionals with an annual income of about Rs 12 lakh. “There are more people who can afford a Rs 35-45 lakh home now than those who would want a Rs 80-lakh home,” he adds.
This is clearly the thought that is even forcing the company to take a fresh look at another project in Bangalore. A row-house project in Jigani Industrial Estate, 12 km from Electronics City, which even has almost all approvals in place, could be converted into a high-rise apartment project “if that is where the demand is”, says Mr Naarayanan.
The decision, he adds, would be taken in a couple of months “as we are trying to feel the pulse of the market now.”
What he feels works in the favour of high-rise projects is the easy saleability factor. With another project in the city from the same company having tasted success, being a high-rise apartment project with about 1,100 units out of the total 1,962 units planned being sold, the company wants to get the choice of segment right. “In today’s market, you cannot afford to go wrong. If the probability of success is higher with high-rise projects, we would want to go with the market,” he says.
Now, affordable villas
A little over a year ago, the mid-market segment in Bangalore meant the Rs 50-70 lakh price category. But today, as Mr Naarayanan points out, the mid-market is way below the Rs 50-lakh mark. It’s not just the mid-market where the price definition has changed.
The accent is on the affordable segment clearly, it seems, even if one were to be talking about villas! How else would one explain a villa in the Rs 50-70 lakh segment?
FIRE Luxur, a joint venture between FIRE Capital Fund and Mr Prabhu Ramachandran of the Nilgiris Group, recently launched an affordable villa project in the city — The Empyrean. Located on the outskirts, near Whitefield, the project will have two-bedroom and three-bedroom apartments starting at Rs 27 lakh and Rs 30 lakh, respectively. The row-house prices start at Rs 47 lakh, while villas have been priced above Rs 50 lakh and go up to Rs 1.6 crore for a 5,500-sq-ft property.
Mr Om Chaudhry, CEO, FIRE Capital Fund, says that the market for villas has evolved now from what it was in 2005 or 2006.
“In the last year or so, villas have become more affordable and the distinction between villas and apartments has blurred a bit,” he adds.
While affordable villas are “still a dream, that’s where we would like to be,” says Mr Chaudhry. Describing the Rs 50-70 lakh price bracket as a “sweet spot”, he adds that a bulk of the project’s offerings “is in this bracket”.
Demand picking up
Some developers feel that even in a recession-hit residential market such as Bangalore, the demand for villas has been quite strong.
“The valuations though have dropped just as other valuations. The market is not as large as before as the rental market for villas has come down quite a bit,” says Mr Koshy Varghese, Managing Director, Value Designbuild Private Ltd.
Mr Prakash Gurbaxani, CEO and Managing Director, QVC Realty, says his QVC Hills project, offering a gated community of single-family homes or villas, has seen enquiries picking up in the past two-three months. “Demand is also picking up,” he says.
He admits that villa prices have come down by 20-25 per cent from the peak pricing that Bangalore witnessed. “There is clearly a market for villas in most cities, not just Bangalore. Villas or gated community offer the community living and security option that apartments offer — and, at the same time, the privacy of an independent house.”
The silver lining, Mr Varghese adds, is the fact that villas are now being purchased by end-users mainly. “However, there are also investors trying to cash in on reasonable deals in this segment,” he adds.
Presence of speculators
Though those in the realty sector claim that speculator demand is waning, he says that speculators are already in the market.
“Many of them came in and picked up units that were going at low prices or distress sales. Even today, prices are worth the time of the investor.
“Many units will appreciate in time. Attractive investment opportunities are still available,” he adds.
And would an aggressive pricing strategy as adopted by FIRE Luxur bring back investors into the market? Mr Chaudhry of FIRE Capital says that as long as developers know who they are selling to, speculators could be avoided.
“We have deterrents in place to ensure that re-sale is avoided in a short span. The lock-in period would depend on the stage of construction that a buyer comes in and the price. We are also selective about our channels of distribution,” he adds.
Mr Sandeep Trivedi, Director - Development Consulting at Cushman & Wakefield, says that an aggressive pricing strategy does enable the investor community to consider the projects seriously and “from a long-term perspective the projects are likely to earn a fair return.”
Thursday, October 29, 2009
World Bank to partner Centre in urban renewal mission
World Bank to partner Centre in urban renewal mission
The Hindu Business Line, October 29, 2009, Page 21
G. Srinivasan, New Delhi
Buoyed by the tangible success of the Jawaharlal Nehru National Urban Renewal Mission (JNNURM) in improving civic amenities across the country in urban areas, the World Bank has come forward to partner in the ‘unique urban initiative” of the Government of India.
Disclosing this to Business Line here, the Ministry of Urban Development, Secretary, Dr M. Ramachandran hoped “a $5.2 billion loan from the Bank should work out” soon. He said this would be an additional measure as the Ministry has moved the Planning Commission, seeking more allocation of funds in the backdrop of growing demands from cities. He said as the Plan panel is fully “appreciative” of the huge resources for the tasks on hand, it would be able to signal further resource support sometime during this year itself along with the mid-term appraisal it would be making.
The resources allocated for seven years from 2005 to 2012 would not be sufficient since all of that already stands committed, he said adding that cities were asking for more support. This plea for further scaling up the unique scheme is understandable, given the fact that it has proved to be “a big boon to the cities as the hitherto neglected urban infrastructure.
With the main remit of the implementation of reforms under JNNURM being to foster enabling milieu for the growth of cities by augmenting urban service delivery effectively, land management, financial management and stakeholder participation in governance, Dr Ramachandran said that now cities get used to the much-needed reform agenda, finding additional resources is getting due importance and organised city transport and shift towards use of improved public transport were the notable outcomes of the mission.
He pointed out that when the Mission was approved in 2005 with a provision of Rs 50,000 crore as Central assistance implying thereby about Rs 1 lakh crore of projects would be taken up in the country’s 65 mission cities and some towns out of the total 5161. Now, he said, projects worth Rs 1 lakh crore were under implementation.
Infrastructure projects
As many as 467 infrastructure projects worth Rs 50,339 crore with Additional Central Assistance (ACA) commitment of Rs 23,856 crore with about 81 per cent being in water supply, sewage, drainage and solid waste management were under implementation in mission cities, he said adding another 753 projects worth Rs 12,824 crore with Rs 10,340 crore committed as ACA have been taken up in 636 small towns.
To a specific query about reforms being undertaken under the mission, he said some cities have done well on this. Andhra Pradesh, Gujarat, Kerala figure in this, while cities of Andhra Pradesh, some cities of Gujarat, Maharashtra, Kerala, Tamil Nadu were able to do better compared to other cities. More importantly, he said, 59 out of 65 mission cities have been credit rated, most of them for the first time with as many as 36 having investment grading now.
The Hindu Business Line, October 29, 2009, Page 21
G. Srinivasan, New Delhi
Buoyed by the tangible success of the Jawaharlal Nehru National Urban Renewal Mission (JNNURM) in improving civic amenities across the country in urban areas, the World Bank has come forward to partner in the ‘unique urban initiative” of the Government of India.
Disclosing this to Business Line here, the Ministry of Urban Development, Secretary, Dr M. Ramachandran hoped “a $5.2 billion loan from the Bank should work out” soon. He said this would be an additional measure as the Ministry has moved the Planning Commission, seeking more allocation of funds in the backdrop of growing demands from cities. He said as the Plan panel is fully “appreciative” of the huge resources for the tasks on hand, it would be able to signal further resource support sometime during this year itself along with the mid-term appraisal it would be making.
The resources allocated for seven years from 2005 to 2012 would not be sufficient since all of that already stands committed, he said adding that cities were asking for more support. This plea for further scaling up the unique scheme is understandable, given the fact that it has proved to be “a big boon to the cities as the hitherto neglected urban infrastructure.
With the main remit of the implementation of reforms under JNNURM being to foster enabling milieu for the growth of cities by augmenting urban service delivery effectively, land management, financial management and stakeholder participation in governance, Dr Ramachandran said that now cities get used to the much-needed reform agenda, finding additional resources is getting due importance and organised city transport and shift towards use of improved public transport were the notable outcomes of the mission.
He pointed out that when the Mission was approved in 2005 with a provision of Rs 50,000 crore as Central assistance implying thereby about Rs 1 lakh crore of projects would be taken up in the country’s 65 mission cities and some towns out of the total 5161. Now, he said, projects worth Rs 1 lakh crore were under implementation.
Infrastructure projects
As many as 467 infrastructure projects worth Rs 50,339 crore with Additional Central Assistance (ACA) commitment of Rs 23,856 crore with about 81 per cent being in water supply, sewage, drainage and solid waste management were under implementation in mission cities, he said adding another 753 projects worth Rs 12,824 crore with Rs 10,340 crore committed as ACA have been taken up in 636 small towns.
To a specific query about reforms being undertaken under the mission, he said some cities have done well on this. Andhra Pradesh, Gujarat, Kerala figure in this, while cities of Andhra Pradesh, some cities of Gujarat, Maharashtra, Kerala, Tamil Nadu were able to do better compared to other cities. More importantly, he said, 59 out of 65 mission cities have been credit rated, most of them for the first time with as many as 36 having investment grading now.
Core sector growth runs out of steam, slides to 4%
Core sector growth runs out of steam, slides to 4%
The Financial Express, October 29, 2009, Page 1
fe Bureaus, New Delhi
Growth in infrastructure sector output slipped to 4% in September from an upwardly revised 7.8% in August, data released by the commerce & industry ministry showed on Wednesday.
This would likely result in lower growth in the index of industrial production, which grew in double digits--10.4% in August--after a gap of 22 months. The infrastructure sector—comprising cement, coal, steel, electricity, crude oil and petroleum refinery products—accounts for almost a third of the IIP. Growth in the Core Six stood at 4% in September 2008.
“IIP for September will not be in double digits,” confirmed DK Joshi, principal economist at rating agency Crisil. In the first half of the fiscal, though, infrastructure output growth was at 5%, up from 3.4% in the same period last year.
India’s chief statistician, Pronab Sen, said IIP growth in September is unlikely to match the August pace, which was buoyed by a low base-year growth of 1.7% in the same month last year.
Coal and cement, which topped the charts in August with growth rates of 12.95% and 17.6%, respectively, slipped to 6.5% each in September. Electricity generation grew 7.5%, against 4.4% last September, while petroleum refinery product output expanded by 3.45% against 2.8%.
Finished steel production declined by 0.4%, against 2.1%. Crude oil remained in the negative zone with a 0.5% decline in September, compared with 0.4%. Crude oil production in H1 was -1.25%, compared with 0.8% in the corresponding period last year. Petroleum refinery products slipped to -3.6% from a positive 4.5% in the first six months of last fiscal. Coal production grew 11.6% in the first half of the fiscal, up from 8% in the same period last year.
Electricity generation during April-September grew 6.8%, from 2.6%. However, finished steel production declined by 3% from 3.3%. Cement production grew by 12.3% in the first half of the current financial year vis-à-vis 5.5% in the same period of 2008.
The Financial Express, October 29, 2009, Page 1
fe Bureaus, New Delhi
Growth in infrastructure sector output slipped to 4% in September from an upwardly revised 7.8% in August, data released by the commerce & industry ministry showed on Wednesday.
This would likely result in lower growth in the index of industrial production, which grew in double digits--10.4% in August--after a gap of 22 months. The infrastructure sector—comprising cement, coal, steel, electricity, crude oil and petroleum refinery products—accounts for almost a third of the IIP. Growth in the Core Six stood at 4% in September 2008.
“IIP for September will not be in double digits,” confirmed DK Joshi, principal economist at rating agency Crisil. In the first half of the fiscal, though, infrastructure output growth was at 5%, up from 3.4% in the same period last year.
India’s chief statistician, Pronab Sen, said IIP growth in September is unlikely to match the August pace, which was buoyed by a low base-year growth of 1.7% in the same month last year.
Coal and cement, which topped the charts in August with growth rates of 12.95% and 17.6%, respectively, slipped to 6.5% each in September. Electricity generation grew 7.5%, against 4.4% last September, while petroleum refinery product output expanded by 3.45% against 2.8%.
Finished steel production declined by 0.4%, against 2.1%. Crude oil remained in the negative zone with a 0.5% decline in September, compared with 0.4%. Crude oil production in H1 was -1.25%, compared with 0.8% in the corresponding period last year. Petroleum refinery products slipped to -3.6% from a positive 4.5% in the first six months of last fiscal. Coal production grew 11.6% in the first half of the fiscal, up from 8% in the same period last year.
Electricity generation during April-September grew 6.8%, from 2.6%. However, finished steel production declined by 3% from 3.3%. Cement production grew by 12.3% in the first half of the current financial year vis-à-vis 5.5% in the same period of 2008.
Core grows mere 4%, may pull down IIP
Core grows mere 4%, may pull down IIP
The Economic Times, October 29, 2009, Page 9
Just Petro Refinery Products & Crude Oil Segments Show Yr-On-Yr Rise In Sept
Our Bureau NEW DELHI
THE industrial output growth, as measured by the Index of Industrial Production (IIP), may see a drop in September from the 10.4% growth registered in August as the index of core sector industries, which has a weightage of 26.7%, clocked a 4% growth in September, sharply lower than the 7.8% in the month before.
None of the six core industries captured by the index — crude oil, petroleum refinery products, coal, electricity, cement and finished steel (carbon) — showed a month-on-month uptick in production.
Crude oil and petroleum refinery products were the only two segments that showed a higher annual growth rate in September. Analysts are expecting the growth rate in these two segments to gather momentum as the output from Reliance’s KG basin and Cairn’s oilfield in Rajasthan stabilise. Policymakers pointed that this would have an impact on electricity generation as well.
Planning commission member Saumitra Chaudhari told ET: “The gas output from oil fields, which started production recently, will help in keeping the electricity generation high.” He added this was one of the reasons why the electricity generation was relatively high inspite of reservoir levels being low on account of truant monsoon. With the late revival of monsoon, the reservoirs are also recharged, especially in south.
A recent note by Citi economist Rohini Malkani points out that the strong coal production in first half of the year may be due to higher cement production, as coal is an input and a source of power in cement production.
“The delayed monsoon has helped the construction industry and will lead to better yearon-year growth in cement and steel,” Mr Chaudhari pointed out.
On a cumulative basis, the core sector index was up 4.8% during first six months of the year, outpacing the 3.4% growth seen during the same period last year. Growth in coal and cement in the first six months of the current fiscal outperformed growth in same period last year.
The Economic Times, October 29, 2009, Page 9
Just Petro Refinery Products & Crude Oil Segments Show Yr-On-Yr Rise In Sept
Our Bureau NEW DELHI
THE industrial output growth, as measured by the Index of Industrial Production (IIP), may see a drop in September from the 10.4% growth registered in August as the index of core sector industries, which has a weightage of 26.7%, clocked a 4% growth in September, sharply lower than the 7.8% in the month before.
None of the six core industries captured by the index — crude oil, petroleum refinery products, coal, electricity, cement and finished steel (carbon) — showed a month-on-month uptick in production.
Crude oil and petroleum refinery products were the only two segments that showed a higher annual growth rate in September. Analysts are expecting the growth rate in these two segments to gather momentum as the output from Reliance’s KG basin and Cairn’s oilfield in Rajasthan stabilise. Policymakers pointed that this would have an impact on electricity generation as well.
Planning commission member Saumitra Chaudhari told ET: “The gas output from oil fields, which started production recently, will help in keeping the electricity generation high.” He added this was one of the reasons why the electricity generation was relatively high inspite of reservoir levels being low on account of truant monsoon. With the late revival of monsoon, the reservoirs are also recharged, especially in south.
A recent note by Citi economist Rohini Malkani points out that the strong coal production in first half of the year may be due to higher cement production, as coal is an input and a source of power in cement production.
“The delayed monsoon has helped the construction industry and will lead to better yearon-year growth in cement and steel,” Mr Chaudhari pointed out.
On a cumulative basis, the core sector index was up 4.8% during first six months of the year, outpacing the 3.4% growth seen during the same period last year. Growth in coal and cement in the first six months of the current fiscal outperformed growth in same period last year.
Centre to scale down infra targets
Centre to scale down infra targets
The Financial Express, October 29, 2009, Page 1
Surabhi, New Delhi
A sharp decline in highway and port sector investments, coupled with the absence of bankable public-private partnership (PPP) projects, has forced the UPA government to scale down its ambitious plan to invest $514 billion to plug the country’s glaring infrastructure deficit in the 11th Five-Year Plan period.
According to a senior government official, the Planning Commission’s mid-term appraisal in December will admit to this failure in no uncertain terms and revise the infrastructure investment target for the current Plan to $420-450 billion, which many analysts think would still be a tall order.
This clearly shows that the decline in private corporate investment caused by the global economic crisis was barely offset by an expansionary fiscal policy, which saw more government money chasing infrastructure projects.
“The final estimate (of investments) will be in by December, when the Planning Commission will complete mid-term appraisals for the 11th Plan, but it’s unlikely to be any higher than $450 billion. Performance hasn’t been up to the mark, largely because of the road sector lagging behind,” said the official on condition of anonymity.
The 11th Plan targets increasing infrastructure investment from 5% of GDP in the base year (2006-07) to 9% by the terminal year (2011-12). In absolute terms, it required investments to be scaled up from $222 billion in the 10 th Plan to $514 billion (Rs 2,056,150 crore) in the 11th Plan.
“Achieving even a reduced target of $400-odd billion would be welcome news, but will be a challenging task given the economic slowdown, coupled with the massive delays in awarding PPP projects in the last two years,” said PwC ED Amrit Pandurangi.
Financing may have proved to be a cause of concern in the last one year as funds dried up because of the global financial crisis. But a lack of feasible projects on the shelf, together with ministerial inefficiencies, contentious clauses in bidding documents and disputes on land acquisition have made potential investors wary.
For marketmen, who have been betting big on infrastructure sector stocks in recent years as the private sector was expected to pitch in about 30% of investments, this is par for the course. “Everyone had already factored in that the target won’t be met. Getting $514 billion in investments over a five-year period is a very tall order. Even if the government was serious in its intentions, the policies just aren’t in place,” said UK Sinha, CMD at UTI Asset Management Company, which manages infrastructure funds of over Rs 4,500 crore.
At the same time, the appraisal is revealing some surprising facts: for instance, the laggard power sector has shown the best performance among core infra sectors so far.
Though the Plan targets 78,577 mw of new power projects, it is going to do much better than the 10 th Plan, with around 60,000-65,000 mw coming on stream by March 2012.
The largest deficit is expected in the highways sector, which will not meet targets even if work speeds up to the extent promised by UPA-II surface transport minister Kamal Nath. Just about 4,000 km of national highways have been awarded in the three years of the Plan, against a target of six-laning 6,500 km of the Golden Quadrilateral, 1,000 km of expressways and four-laning 20,000 km of highways.
Efforts to upgrade port infrastructure to keep up with India’s growing global trade have largely remained on paper. Few projects were awarded under UPA-I shipping minister TR Baalu and a recent embargo by the environment ministry has further impeded progress. Capacity upgrades underway at the JNPT and Tuticorin ports have been hit by litigation. The Plan envisages new capacity of 485 million metric tonne (mmt) in major ports and 345 mmt in minor ports.
The railways, despite shying away from aggressively using the PPP route, has seen sufficient investments, be it in gauge conversion or building new lines. It has also managed to secure crucial funding from the Japanese government for the dedicated freight corridor. The only delay is seen in modernising railway stations. Of the 22 stations to be modernised under the 11 th Plan, construction hasn’t begun on even one.
The Economic Survey 2008-09 has also highlighted the difficulty in meeting the $514-billion target for investments. “Achieving it is a challenging task. In recent years, tangible progress has been made in attracting private investment in infrastructure. However, such public initiatives are constrained by factors like inadequate shelf of bankable projects and lack of long-term finance,” it said.
The Financial Express, October 29, 2009, Page 1
Surabhi, New Delhi
A sharp decline in highway and port sector investments, coupled with the absence of bankable public-private partnership (PPP) projects, has forced the UPA government to scale down its ambitious plan to invest $514 billion to plug the country’s glaring infrastructure deficit in the 11th Five-Year Plan period.
According to a senior government official, the Planning Commission’s mid-term appraisal in December will admit to this failure in no uncertain terms and revise the infrastructure investment target for the current Plan to $420-450 billion, which many analysts think would still be a tall order.
This clearly shows that the decline in private corporate investment caused by the global economic crisis was barely offset by an expansionary fiscal policy, which saw more government money chasing infrastructure projects.
“The final estimate (of investments) will be in by December, when the Planning Commission will complete mid-term appraisals for the 11th Plan, but it’s unlikely to be any higher than $450 billion. Performance hasn’t been up to the mark, largely because of the road sector lagging behind,” said the official on condition of anonymity.
The 11th Plan targets increasing infrastructure investment from 5% of GDP in the base year (2006-07) to 9% by the terminal year (2011-12). In absolute terms, it required investments to be scaled up from $222 billion in the 10 th Plan to $514 billion (Rs 2,056,150 crore) in the 11th Plan.
“Achieving even a reduced target of $400-odd billion would be welcome news, but will be a challenging task given the economic slowdown, coupled with the massive delays in awarding PPP projects in the last two years,” said PwC ED Amrit Pandurangi.
Financing may have proved to be a cause of concern in the last one year as funds dried up because of the global financial crisis. But a lack of feasible projects on the shelf, together with ministerial inefficiencies, contentious clauses in bidding documents and disputes on land acquisition have made potential investors wary.
For marketmen, who have been betting big on infrastructure sector stocks in recent years as the private sector was expected to pitch in about 30% of investments, this is par for the course. “Everyone had already factored in that the target won’t be met. Getting $514 billion in investments over a five-year period is a very tall order. Even if the government was serious in its intentions, the policies just aren’t in place,” said UK Sinha, CMD at UTI Asset Management Company, which manages infrastructure funds of over Rs 4,500 crore.
At the same time, the appraisal is revealing some surprising facts: for instance, the laggard power sector has shown the best performance among core infra sectors so far.
Though the Plan targets 78,577 mw of new power projects, it is going to do much better than the 10 th Plan, with around 60,000-65,000 mw coming on stream by March 2012.
The largest deficit is expected in the highways sector, which will not meet targets even if work speeds up to the extent promised by UPA-II surface transport minister Kamal Nath. Just about 4,000 km of national highways have been awarded in the three years of the Plan, against a target of six-laning 6,500 km of the Golden Quadrilateral, 1,000 km of expressways and four-laning 20,000 km of highways.
Efforts to upgrade port infrastructure to keep up with India’s growing global trade have largely remained on paper. Few projects were awarded under UPA-I shipping minister TR Baalu and a recent embargo by the environment ministry has further impeded progress. Capacity upgrades underway at the JNPT and Tuticorin ports have been hit by litigation. The Plan envisages new capacity of 485 million metric tonne (mmt) in major ports and 345 mmt in minor ports.
The railways, despite shying away from aggressively using the PPP route, has seen sufficient investments, be it in gauge conversion or building new lines. It has also managed to secure crucial funding from the Japanese government for the dedicated freight corridor. The only delay is seen in modernising railway stations. Of the 22 stations to be modernised under the 11 th Plan, construction hasn’t begun on even one.
The Economic Survey 2008-09 has also highlighted the difficulty in meeting the $514-billion target for investments. “Achieving it is a challenging task. In recent years, tangible progress has been made in attracting private investment in infrastructure. However, such public initiatives are constrained by factors like inadequate shelf of bankable projects and lack of long-term finance,” it said.
City growth:When big is not beautiful
City growth:When big is not beautiful
The Economic Times, October 29, 2009, Page 13
INCREASING CITY SIZE COMES WITH ITS PITFALLS — HIGH COST OF LIVING, CRIME, POLLUTION & CONGESTION
KALA SEETHARAM SRIDHAR
INDIA has 35 cities with million-plus population, with Mumbai leading the pack with a population of about 17 million. The question arises —can individual cities grow forever and whether there is an optimum city size? This is an important question as development plans of cities frequently follow the direction of development rather than guiding them. Is the current size of cities justifiable in terms of greater efficiencies in the production of goods, services and amenities offered to their residents? General equilibrium models of city growth refer to the drawbacks of increasing city size — high cost of living, crime, pollution and congestion costs. For example, in Bangalore, the one-way commute time to work increased from about 24 minutes in 1991 to 40 minutes in 2001. Thus, city population can grow, but the city may or may not grow economically. This happens as a city will experience congestion and decline in its economic output if its population grows beyond a certain limit.
One manifestation of excessive city growth is the suburbanisation and urban sprawl we see in India’s cities. With decentralisation of population and jobs from the dense core of cities to less densely developed suburbs, monocentric cities have evolved into polycentric cities. While such decentralisation is caused by rising incomes, rising land costs at the city centre and problems with the central city (high taxes, poor public services, high crime rates), recent research also attributes urban sprawl to strong land use controls in India’s cities. A research shows that the maximum floor area ratio (FAR) — which refers to the ratio of built area to plot area — permissible in India’s cities is not even five whereas cities across the world have FARs ranging from well above 10. A higher FAR implies vertical city growth. Vertical city growth is more efficient if the infrastructure necessary to support it is in place — it would be poor public economics not to use fully-serviced plots of land with water and sewer networks, roads in the centre of the city. Low FARs lead to inefficient cities.
Efficiency of cities is partly determined by the mobility and access needs of the population as it has a direct relationship with the city’s economic activity such as commute to school, jobs and shopping trips. While Indian cities’ decentralisation has been caused by rising incomes and the use of the automobile, one direct outcome of the urban sprawl has been that Indian cities have become automobileoriented with little space for pedestrians and cyclists. For instance, Indians bought 1.5 million cars in 2007, more than double than that in 2003.
Delhi, Mumbai, Kolkata and Bangalore have 5% of India’s population but 14% of its registered vehicles. Pedestrians and cyclists account for a substantial part of urban population. In Delhi, pedestrians and cyclists account for around 55% of the population. Pedestrian accessibility in Indian cities is poor – there are no sidewalks, and where they exist, they are taken over by parked vehicles, uncollected garbage, or encroachment by local businesses.
Rightly, a recent research points out that policymaking related to urban transport has focused predominantly on road infrastructure development such as the construction of flyovers. However, given the fact that pedestrians and cyclists are the most vulnerable road users, budgets for the provision of infrastructure for them have been minuscule. This is not consistent with their number. A 3.5 metre lane has a carrying capacity of 1,800 cars per hour while it can carry 5,400 bicycles per hour. Providing segregated infrastructure for pedestrians and cyclists would not cost much, but would greatly improve the efficiency of cities by facilitating the mobility of masses.
The above does not imply that we do not need highways or expressways of international standards. We need them for long distances and for facilitating movement of public transport that is affordable, convenient and safe to use. Highways are efficient if they are used for high occupancy vehicles such as public transport as compared to cars.
What the above implies is that decentralisation and sprawl have occurred in India’s cities, with economic growth, rising incomes, rising land costs, and land use regulation playing a role. With rising incomes, the sprawl has also brought about increased usage of cars with poor access for pedestrians and cyclists. We have to consciously decide what kind of cities we want. Only innovative city planning and better infrastructure to support them, better space and planning for pedestrians, cyclists and public transport will ensure that we have efficient and equitable cities whose costs do not outweigh their benefits.
(The author is senior research fellow, Public Affairs Centre. Views are personal)
The Economic Times, October 29, 2009, Page 13
INCREASING CITY SIZE COMES WITH ITS PITFALLS — HIGH COST OF LIVING, CRIME, POLLUTION & CONGESTION
KALA SEETHARAM SRIDHAR
INDIA has 35 cities with million-plus population, with Mumbai leading the pack with a population of about 17 million. The question arises —can individual cities grow forever and whether there is an optimum city size? This is an important question as development plans of cities frequently follow the direction of development rather than guiding them. Is the current size of cities justifiable in terms of greater efficiencies in the production of goods, services and amenities offered to their residents? General equilibrium models of city growth refer to the drawbacks of increasing city size — high cost of living, crime, pollution and congestion costs. For example, in Bangalore, the one-way commute time to work increased from about 24 minutes in 1991 to 40 minutes in 2001. Thus, city population can grow, but the city may or may not grow economically. This happens as a city will experience congestion and decline in its economic output if its population grows beyond a certain limit.
One manifestation of excessive city growth is the suburbanisation and urban sprawl we see in India’s cities. With decentralisation of population and jobs from the dense core of cities to less densely developed suburbs, monocentric cities have evolved into polycentric cities. While such decentralisation is caused by rising incomes, rising land costs at the city centre and problems with the central city (high taxes, poor public services, high crime rates), recent research also attributes urban sprawl to strong land use controls in India’s cities. A research shows that the maximum floor area ratio (FAR) — which refers to the ratio of built area to plot area — permissible in India’s cities is not even five whereas cities across the world have FARs ranging from well above 10. A higher FAR implies vertical city growth. Vertical city growth is more efficient if the infrastructure necessary to support it is in place — it would be poor public economics not to use fully-serviced plots of land with water and sewer networks, roads in the centre of the city. Low FARs lead to inefficient cities.
Efficiency of cities is partly determined by the mobility and access needs of the population as it has a direct relationship with the city’s economic activity such as commute to school, jobs and shopping trips. While Indian cities’ decentralisation has been caused by rising incomes and the use of the automobile, one direct outcome of the urban sprawl has been that Indian cities have become automobileoriented with little space for pedestrians and cyclists. For instance, Indians bought 1.5 million cars in 2007, more than double than that in 2003.
Delhi, Mumbai, Kolkata and Bangalore have 5% of India’s population but 14% of its registered vehicles. Pedestrians and cyclists account for a substantial part of urban population. In Delhi, pedestrians and cyclists account for around 55% of the population. Pedestrian accessibility in Indian cities is poor – there are no sidewalks, and where they exist, they are taken over by parked vehicles, uncollected garbage, or encroachment by local businesses.
Rightly, a recent research points out that policymaking related to urban transport has focused predominantly on road infrastructure development such as the construction of flyovers. However, given the fact that pedestrians and cyclists are the most vulnerable road users, budgets for the provision of infrastructure for them have been minuscule. This is not consistent with their number. A 3.5 metre lane has a carrying capacity of 1,800 cars per hour while it can carry 5,400 bicycles per hour. Providing segregated infrastructure for pedestrians and cyclists would not cost much, but would greatly improve the efficiency of cities by facilitating the mobility of masses.
The above does not imply that we do not need highways or expressways of international standards. We need them for long distances and for facilitating movement of public transport that is affordable, convenient and safe to use. Highways are efficient if they are used for high occupancy vehicles such as public transport as compared to cars.
What the above implies is that decentralisation and sprawl have occurred in India’s cities, with economic growth, rising incomes, rising land costs, and land use regulation playing a role. With rising incomes, the sprawl has also brought about increased usage of cars with poor access for pedestrians and cyclists. We have to consciously decide what kind of cities we want. Only innovative city planning and better infrastructure to support them, better space and planning for pedestrians, cyclists and public transport will ensure that we have efficient and equitable cities whose costs do not outweigh their benefits.
(The author is senior research fellow, Public Affairs Centre. Views are personal)
India moves up, turns world’s third-largest steel producer
India moves up, turns world’s third-largest steel producer
Hindustan Times, October 29, 2009, Page 25
The country has consolidated its position as the third-largest steelmaker in the world behind Asian rivals China and Japan, jumping three spots in the pecking order for steel producers in the first nine months of this year.
With the global downturn still impacting the steel industry worldwide, United States and Germany are the two biggest victims of the downturn, with the former slipping two positions.
China and India were the only two countries to report growth in the sector this year so far. All others — including developing countries like Brazil and Ukraine — have declined in high double digits. The extent of the downturn is such that of the 66 countries that together make up for over 98 per cent of world's steel production and consumption, only 8 have been able to grow.
"It shows the strength of the economy that we are now the third largest steelmaker in the world even as most other countries are still fighting the downturn," said steel minister Virbhadra Singh. "Our per capita consumption of steel is still very low and vast chunks of rural market is still untapped. It is my endeavour to increase the penetration of steel in rural markets and have urged the private sector to open up more steel processing units in those areas."
Further, this may not be the end of the Indian fairytale as industry experts are of the opinion that India would overtake Japan eventually.
"There are clear indications that China and India are the countries that have come out of the recession the fastest and there is an uptake in demand in construction related industries and automobiles in India," said Bishwanath Bhattacharya, Associate Director (KPMG Advisory). "Though Japan is still ahead of India, there is no disputing the fact that it is not likely to grow much further while India is definitely on an upward trajectory. In around 6-7 years time India would be only behind China."
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