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From the Editor Will ‘Rajanomics’ erase economic pessimism?
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Editor & Publisher
Varghese Paul
Kannur Srikanth P 9846274973 Chennai Augustine Joseph Ph: 09381000534 Bangalore Jayachandran 0988699331 Manager-Marketing Sajan K 09895344485
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eople who are sitting in North Block, including the Finance Minister, were repeatedly saying, “We do not have a magic wand in our hand to put the economy back on the rail. Like any other economy, the Indian economy is also vulnerable and driven by global sentiments”. They repeated the chorus whenever the rupee and the market slid. Everyone believed that there are people who have a magic wand with them who could revamp the market and bring it back to life. Raghuram Rajan, the young and the 23rd Governor of the Reserve Bank of India, who took charge on September 4, can be listed in that category. An academic, engineer and economist, who predicted the 2008 global recession, will be ideal for it. The improving market trends and the strengthening of the rupee since he took over have substantiated this belief. On September 12, the day this column was being written, the Indian currency appreciated to 63. 84 against the dollar, a whopping gain of 140 paise, making the rupee Asia`s best performer in relation to the US currency. The stock market was on fire, the Sensex crossing the 20,000 mark and making investors richer by a staggering Rs 2 lakh crore. The condition was appalling in all the parameters of the economy at the time when Rajan assumed office with the rupee having depreciated to the level of 68.85/$.The manufacturing sector and export orders were sinking to new lows. The GDP had come down to the 4.1 level in the financial year from 5% earlier. Forex reserves remained bare enough to pay for just seven months` imports and the current account deficit came down to 4.8% instead of the Finance Minister’s targeted rate of 3.7%. Rating agencies had also scaled down the growth of the country. The Rajan magic is indeed working, and how! Until a week ago, the rupee had lost almost 20% against the dollar and as the currency touched a record low almost every other day, there seemed to be no end in sight to the situation. The world’s worst-performing Asian currency has now become the best in just a week, appreciating 5.55% since Rajan took charge . Though market observers are sceptical of the surge on a long-time basis, his presence at the helm of the RBI and the positive speeches he made and the measures he took last week have made people confident about the Indian market. His measures like revision of controls on companies` investments offshore, exchange risk cover for banks’ US dollar deposits and doubling overseas borrowing limits etc are important. This could be done even by D Subbarao, the former chief of the apex bank. Except allaying fears over war threats over Syria, all other measures were possible for him before relinquishing office. Instead he left behind a grim situation prevailing in the economy. What prevented him from doing things he could remains a mystery. At this juncture it is worthwhile recollecting the statement Ranjit Sinha, the CBI chief, made in the Supreme Court during the coal scam trial that his agency is a caged parrot . Caged parrots will always sing according to their masters’ wishes. Is the RBI too acting to the tune of its political masters?
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Varghese Paul Sept 15 - Oct 15, 2013
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I
INBOX Lime against cancer
magine a preparation that is 10,000 times stronger than chemotherapy to fight cancer. Well, what a remedy for the disease! Unbelievable.Here is the preparation. Just cut two or three thin slices of lemon in a cup/container and add drinking water. It will become ‘alkaline water’. Drink it for the whole day every day. It is also good for all.Perplexed about the surprising benefits of lemon? Butthis is the latest in medicine, effective for cancer!Lemon (citrus) is a miraculous product to kill cancer cells.It is 10,000 times stronger than chemotherapy.Why do we not know about that? Because there are laboratories interested in making a synthetic version that will bring them huge profits. You can now help a friend in need by letting him/her know that lemon juice is beneficial in preventing the disease. Its taste is pleasant and it does not produce the horrific effects of chemotherapy.How many people will die while this closely guarded secret is kept, so as not to jeopardize the beneficial multimillionaires, large corporations?The lemon tree is known for its varieties of lemons and limes. You can eat the fruit in different ways: you can eat the pulp and press it and prepare drinks, sorbets, pastries etc and drink it.It is credited with many virtues, but the most interesting is the effect it produces on cysts and tumors. This plant is a proven remedy against cancers of all types.Some say it is very useful in all variants of cancer. It is considered also as an anti-microbial spectrum against bacterial infections and fungi, effective against internal parasites and worms. It regulates blood pressure which is too high and as an antidepressant combats stress and nervous disorders. The source of this information is fascinating. It comes from one of the largest drug manufacturers in the world, which says that after more than 20 laboratory tests since 1970, the extracts revealed that it destroys the malignant cells in 12 cancers including colon, breast, prostate, lung and pancreas. The compounds of this tree showed that it is 10,000 times better than the product Adriamycin, a drug normally used as chemotherapeutic in the world, slowing the growth of cancer cells.
Raghuram Rajan new RBI helmsman
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aghuram Govinda Rajan, 50, has been appointed next Governor of the Reserve Bank of India. Rajan, an economist, is also a visiting professor for the World Bank, Federal Reserve Board and Swedish Parliamentary Commission. He formerly served as the President of the American Finance Association and was the Chief Economist of the International Monetary Fund (IMF), who had predicted the 2008 global economic recession. Rajan’s previous work with the Indian Government includes his helmsmanship of a Planning Commissionappointed committee on financial reforms and as Honorary Economic Adviser to Prime Minister Manmohan Singh. His term as the 23rd RBI Governor is for three years. His appointment comes at a challenging time when the economy is battling industrial slowdown, the rupee nosedive, rising prices and the alltime-high current account deficit(CAD). ``This is a challenging period for the Indian economy and the RBI and the Government would work together. We
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don’t have a magic wand to tackle the crisis. But absolutely we would deal with it,” the ace economist said shortly after the announcement. Raghuram Rajan was born in Bhopal to an IFS officer from a Tamil family. He was abroad till his seventh year of school, having lived in Sri Lanka, Indonesia and Belgium, and in 1974, he moved back to India from Belgium. He did the rest of his schooling in Delhi. In 1985, he graduated from the Indian Institute of Technology, Delhi, and completed the Postgraduate Diploma in Business Administration at the IIM, Ahmedabad, in 1987. Rajan won the Director’s Gold Medal for the best all-round achievement at IIT, Delhi, and was also a gold medallist at IIM-Ahmedabad. He received a PhD in management from the MIT (Massachusetts Institute of Technology) in 1991 for his thesis titled
Sept 15 - Oct 15, 2013
And what is even more astonishing is that this type of therapy with lemon extract only destroys malignant cancer cells and it does not affect healthy cells. Dr Vipla Puri, Consultant-RIA Department of Lab-Medicine, P D Hinduja Hospital, Mumbai.
Clarity needed
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t is over six decades since India got Independence. Yet, every new scheme/programme the Government introduces for the wellbeing of the people creates a hullabaloo for some time. This is an age of identity cards. The latest in this series is the Aaadhar Card which is being issued after much fuss over it. Even a person of Cabinet rank was put in charge of the Unique Identification Authority. Today the validity of the card, mainly for cooking gas subsidy, food subsidy, pension, scholarship etc and other sops for the people from the Government, is at stake as the Government and the Petroleum Ministry were on a war of words over the validity of the card for subsidies. While the Communications Ministry said there is no need for submitting the card details for getting LPG, the Petroleum Ministry/oil companies stressed that they are a must. Finally, people opted for opening accounts in banks. Gas agencies endorsed it. It is high time the Government or the ministers announced a scheme after making it foolproof and transparent lest the public should be put in a dilemma. Is it that ministers make announcements of schemes without consulting the ministries/parties concerned? In the LPG subsidy issue, the Communications Ministry should have consulted the Petroleum Ministry. However, the efficacy of the scheme will be known when the delivery of gas cylinders takes place. T P Rajasekharan, Thiruvanmiyur
Varghese Kurian receives P V Sami Award
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l Namal and VKL Groups of Companies Chairman and Managing Director Varghese Kurian was presented with the P V Sami Trust’s P V Sami Memorial Industrial and Socio-cultural Award for his invaluable contribution to the industrial sector by Finance Minister K M Mani in Kozhikode on September 1. Overseas Indian Affairs Minister Vayalar Ravi inaugurated the function. In 2012, Mani had presented to Varghese Kurian the Human Rights 2012 Award in Kochi for his philanthropic activities which include his contributions to 300 homeless people to build their own houses and financial support to 300 poor families for the marriage of their daughters, both in Kerala. “By such kind acts he has clearly endorsed Human Rights Foundation’s (HRF) views on people’s right to live,” the citation said. Varghese Kurian arrived in the Kingdom of Bahrain in 1986. A Civil Engineer by trade, Varghese combined his education and experience in his father’s construction company in Kerala to build a different business conglomerate in Bahrain--- the VKL and Al Namal Groups. Varghese is
also a Director of INKEL (Infrastructure Kerala Limited). INKEL has been established by the Kerala Government to develop the state’s infrastructure facilities.
Al Namal Contracting & Trading Co, one of the pre-eminent construction companies in Bahrain, has, since its inception, successfully completed more than 200 projects including luxury villas, high-rise buildings/apartments, hotel complexes, resorts and industrial buildings. Al Namal was granted the Bahrain Government’s approval as Class ‘A’ construction company as a recognition of the high standard and professional services it rendered to its clients
5
ISSUES
Social costs of inflation hit the poor more than the rich
By S Muraleedharan
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nflation, which affects the whole society, is a sustained and general rise in almost all prices. Pocketed or a handful of commodityspecific rise in prices is not treated as inflation. Inflation beyond a limit, say above 5%, has more negative than positive effects. The sum of all the negative effects can be termed social cost of infla-
tion. The most significant cost of inflation is the redistributive effect. A person receives both earned and unearned income, the former emanating from the provision of services of various means of production (labour and capital). The latter is in the forms of subsidy, pension, windfall gains etc. The two forms (earned and unearned) can be either flexible or fixed. Incomes of investors from financial markets (shares and securities), business people, intermediaries (exchange brokers) and salaried classes are flexible. All these groups except the salaried group receive income on a rate basis rather than an absolute amount. For instance, if the rate of profit is fixed at 10%, any increase in the cost of production will increase the absolute amount of profit when the rate remains the same (10%). It connotes that the level of income rises with inflation for those who earn flexible incomes. The flexibility nature in the case of salaried groups is a bit different. If the salaried group has strong collective bargaining power (trade union), salary will increase as a consequence of inflation. A government with a weak fiscal position can lag the salary growth with inflation. Lagging can occur if the leadership of the trade union/employees’ organization fails to anticipate the expected rate of inflation. That is, among the flexible income earners, the most vulnerable group is possibly the salaried group. The serious issue is related to unorganized labour. The unorganized sector is characterized by no formal pay package and social security schemes. Even labour becomes casualized (marginalized) in the organized sector. The share of unorganized labour was
about 88% just before the liberalization in 1991-92. It increased to 92% after that. In the absence of social security schemes and formal pay scales, inflation mercilessly has reduced the real standard of living as the earnings of unorganized labour are fixed. Subsidy is a major component of the fiscal position in India. It was 1.8% of GDP in 2012-13. When inflation was 8.94% in 2011-12 and the subsidy declined from 2.2% of GDP in 2008-09 to 1.8 in the previous year, it can be argued that the real impact of subsidy is reduced. This leads to a fall in the real standard of living. Its impact is great on the poorest of the poor . With the increase in the number of pensioners and those who opt for the voluntary retirement scheme (VRS), a lot of funds have been channelled to banks and other financial intermediaries in the form of fixed deposits and bonds. The annual inflation rate in 2011-12 was 8.94% while the interest on fixed deposit ranges between 6% and 9% in most cases. It implies that real interest accruing to fixed deposits naturally ranges between 2.94% and 0.06% as the real interest rate is the difference between nominal interest and the rate of inflation. This is a major social cost to the aged population.
inequality, ie the Gini coefficient value increased from 0.32 in the early 1990s to 0.38 in 2010. An increase in the Giiy coefficient value represents a rise in inequality. This is reflected in the standard of living too. For instance, the consumption of the top 20% households in India grew by 13% per year in the 2000s compared to 2% in the 1990s. At the same time consumption of the bottom 10% remained at 2%. This gives the idea that the standard of living of the poor declined in the backdrop of inflation. Another major issue relating to the cost of inflation is the real income loss to the lenders. Under inflation, the value of money falls at every moment. The repaid amount in future has a lower value even if the returned amount is the same in absolute terms. Suppose inflation is 10% and the rate of interest is 8%, the actual money repaid is 2% which is less than what had been received by the borrower. In other words,
the lender is a loser and the borrower is a gainer during inflation. In this sense, lending is irrational and borrowing is an act of economic wisdom during inflation. Another dimension of the social cost of inflation is the regressive effect of taxation. There are unauthentic reports that 25% of India’s national income is kept outside the country. When the lower middle class and poor are taxed through direct and indirect taxes, the rich use pulls and pressures to evade tax. The result of tax evasion is more commodity taxes and fiscal deficit. This adds fuel to the burning issues of inflation. Lack of political will is the main reason for this phenomenon. In short, the social cost of inflation affects the poor mainly rather than the rich. Hence any measure to control inflation is pro-poor. (The writer is retired Economics professor of Maharaja’s College, Ernakulam)
The major form of unearned income is subsidies. As noted above, the subsidy as a percentage of GDP declined after the economic slowdown. Further, the spatial distribution of subsidy in India is highly skewed in favour of relatively developed states in India. According to Suneel Gupta (2003: IMR, Kanpur), 26% of subsides flowed to advanced states, viz Punjab, Haryana, Maharashtra and Gujarat. Their share in the total population in the country is 20% while backward states such as UP, MP, Bihar and Orissa where 40 percent of the population dwells got only 31% of subsidies. This inequality in the spatial distribution of subsidies reduces the standard of living of the poorest of the poor in the context of inflation. This needs to be read along with the report (2011) by the Organization for Economic Cooperation and Development (OECD) that inequality increased during the two decades of liberalization in India (1990-2010). According to this report, the wage of the top 10% in recent days is 12 times more than the wage of the bottom 10%. This difference was only 6% during the early 1990s. This is clearly reflected in the Gini coefficient value which is the official measure of Sept 15 - Oct 15, 2013
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COVER STORY
Government by Saritha T
Passline News Services
he economic situation of a state is the measure of its growth. In that sense, the economy of Kerala under UDF rule has gone downhill after six months of the new fiscal year. The expected revenue flow, mainly from taxes, is unprecedentedly low, the budget expectation showing a huge gap compared with the ac-
The huge gap in revenue and expenditure will reflect in its social commitments. Most of the public welfare measures and infrastructure development works benefiting the people will have to be deferred because of the limitation of funds. It will have a doublewhammy effect when Government spending will become indiscriminate, aimless and appeasing particular sections. tual figure. At the same time, expenses have soared. This is perhaps not in conformity with the country’s economic policy but is due to the policy of appeasement of Government employees and other salaried classes, who form just 10% of the total population, by unscientific and indiscriminative ways of salary reforms, aimed at the forthcoming Lok Sabha elections. This cruel joke is being played by the ministry led by the Congress and its constituent parties at the expense of almost 90% of the population. The spiralling prices of
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essential commodities due to the high inflation and ineffective market intervention by the ruling front have made life unbearable and suffocating for the majority of people. The initial 100 days of the UDF’s governance was fast and noteworthy with Chief Minister Oommen Chandy’s mass contact programme proving successful and providing quick solutions to many problems of the people, with even the United Nations recognizing it. Many thought, at that time, that a new chapter in the political history of the state was being opened by a government for the first time in the state. The euphoria created by it, however, died down soon because of the ugly political drama that followed in the form of the solar scandal. The days that followed were ruled by the con woman, Saritha, and her accomplices. There is a bid to implicate the Chief Minister also in the scandal. Whatever the truth, with the onset of the solar scam governance in the state fell on evil days, particularly with the depletion of the wealth of its treasury. This, many say, is due to the administrative stagnation resulting from the misdeeds of fraudsters like Saritha, Biju and their coterie, factionalism among Congress cadres and washing of their dirty linen in the public by other constituents of the UDF. This opportunity is being exploited wantonly by tax evaders, mafia gangs and antisocial elements as they find the situation a windfall for them to carry on their activities with the help of the unholy political and bureaucratic nexus. According to the 2013-14 budget presented by K M Mani, one of the most experienced Finance Ministers Kerala has seen, the state expects a total income of Rs 58,057 crore in this fiscal year. Out of that, the income
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`hundi` shivers fever rate for gold is 5%. If the authorities collect tax arrears properly and timely without default in conformity with the existing norms the scenario will be different. Same is the case with the construction industry. The usage of iron, cement, sanitaryware and other building materials are abundant and ubiquitous in the state. But tax flow from these sectors is minimal. The story is not different in the case of cash crops, especially rubber. Tax evasion is rampant in this area too. There are people who escape the tax It will have a double-whammy effect when net with impunity. This Government spending will become indis- has been particularly so in the last couple criminate, aimless and appeasing particular of months, those consections. Critics of the Government sarcas- cerned exploiting the administrative lethtically say that the prime job of the Kerala argy and the illegal Government is nothing but finding funds for deals unveiled by the salaries and other benefits to its employees. Saritha episode. In short, at present we The Government’s recent salary revision will don’t have any effective mechanism only strengthen their view. to monitor and avert income and Central transfer also may the unlawful business activities taking fall, because during 2012-13 the ear- place by rail, road and air. marked amount was Rs 12,524 crore The existing system is tainted to the and we have received only Rs 12,108 core by the business class- politicianscrore. There is a shortage of about Rs bureaucrats nexus. The only hope and 400 crore. consolation for the Government is the One who analyses the reason for excise income coming from the Beverthis dearth of income flow by way of ages Corporation outlets. As in previtaxes will reach the conclusion that ous years, this year also the Governthere are huge holes in the tax net ment is foreseeing a windfall during through which tax evaders can get the Onam season to fill the gap in tax along in connivance with those in au- and excise collections. But how far this thority. None can say the decline is will be successful is the million-dollar due to the general slowdown that the question. country faces today because Kerala is The Government’s expenditure accepted as a major consumer marearmarked in the 2013-14 budget is ket and our people are infamous for Rs 70,076 crore. The huge gap in revits passion for gold and constructing enue and expenditure will reflect in its mansions for their shelter. If one obsocial commitments. Most of the public serves the brisk business in our jewelwelfare measures and infrastructure lery shops all over the state, especially during the festive season, one will development works benefiting the agree that if the jewelleries legitimately people will have to be deferred beremit taxes this pathetic situation can cause of the limitation of funds. It will be averted. Hundreds of crores worth have a double-whammy effect when of business deals are taking place in Government spending will become our jewelleries and the prevailing tax indiscriminate, aimless and appeasexpected from direct taxes is Rs 38,771 crore and from indirect taxes Rs 4,921 crore. Transfers expected from the Centre during this period are Rs 14,365 crore. Surprisingly, however, even after the completion of about two quarters, income from direct taxes is said to be merely Rs 6,000 crore, shattering all the hopes of the Government. It is evident that the target of Rs 38,771 crore will remain unreachable during this fiscal year. The income anticipated in terms of non-taxable
ing particular sections. Critics of the Government sarcastically say that the prime job of the Kerala Government is nothing but finding funds for salaries and other benefits to its employees. The Government’s recent salary revision will only strengthen their view.
ernment employees are being protected with all the benefits by the system itself till their last breath. Only 10% of people enjoy the fruits of this splurge by the Government, 90% languishing with all their burdens because of the Government’s inefficiency.
Let us take the salary reforms announced by the Government in the last three consecutive years. In 2010-11 expenditure on salaries was Rs 11,068 crore. In 2012-13 it escalated by almost 50% to Rs 16,796 crore, and this year the allocation is Rs 197,10 crore. Within three years the salary burden has almost doubled. The bench mark for salary revision is the pattern of the high-salaried people in the IT sector.
It is obvious that unless the Government spruces up its income by tightening its sources and initiating hard punitive measures as a deterrent to fraudsters and antisocial elements, the situation will become graver soon. We should not allow anyone to sabotage our administration because of the petty scams perpetrated by fraudsters like Saritha. The kalla nanayangal conniving with these people and sitting at the helm of administration should be identified. If a government or a political party ignores the fundamental rights and basic welfare measures of its people, it will be thrown out. That is what history teaches us
Their salaries are kept high because they don’t have any job security, the industry preferring hiring and firing, and also because their remuneration is linked to their working efficiency. Gov-
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COST BURDEN
Price increases A common trend in Kerala K
erala is a land of paradoxes. It is acclaimed to have attained high social development in the midst of low income and is charMartin Patrick acterized by high unemployment as against non-availability of (unskilled) workers especially in the agricultural sector. The list of paradoxes is unending. It is a feather in its cap that it is a state where the price level is continuously going upwards, independent of the positive changes in other parts of the country, another paradox and strictly not in tandem with the traditional theories of economics! Inflation is a worry for our policymakers and gloom for most people. The Prime Minister, the Finance Minister and the RBI Governor continuously express concern about high inflation that persists in the country’s economy. Inflation measured with the consumer price index in India is nearly a doubledigit figure. The reasons are fiscal and current account deficits, wrong policies, high crude price, import of gold and capital goods and, above all, geopolitical factors. The measures the authorities have taken to tackle the phenomenon, not adequate enough in terms of any standard parameters, always result in vain. Adding to this the rupee has depreciated by almost 27% these days, which has put constraints on society, barring the cheer for some Indians working abroad. Any depreciation in the value of the currency coupled with the rise in petroleum and
diesel prices will have an impact on inflation and Kerala is the greatest victim of it. The state is now witnessing price increases in most of the articles the people consume. The prices of rice, vegetables, fish, edible oils and meat are mounting, not at specified intervals but in intermittent periods. The Civil Supplies Minister claims that the price of rice has stabilized because of Government intervention. Yes, he is right in the sense that the prices of different varieties of rice have stabilized at higher levels. They are higher than those of the same varieties in neighbouring states. What is the reality? The prices of almost all articles are mounting on the one hand and goods are scarce in Government-controlled shops (Civil Supplies, Neethi stores and the like) on the other, barring the claim made by the Minister regarding these aspects. No doubt, when the price of coconut goes up, we can be cheerful, provided the farmers are benefited by it. But in Kerala, coconut farmers are not lucky to get these benefits; instead the benefits are reaped by intermediaries. Still we can be happy, for part of the benefit is transferred to the coconut farmers because of the high prices of coconut and its oil. Look at the difference in the prices of loose coconut oil and branded oil to see the exploitation by capitalists. It is clear which group has benefited from the price increase. The Government’s passive attitude to intervene to control the prices is evident from many other events. Take the case of vegetables. Their prices have come down in Tamil Nadu, from where we bring them, because of a good harvest. The prices there are three to four times higher in Kerala. The authorities fail to utilize the opportunity by storing vegetables at least for
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Sept 15 - Oct 15, 2013
the possible shorter periods. The unnecessary strike by the Poultry Farm Association helped to increase
t h e prices of chicken by helping the lobbies in Tamil Nadu. The lack of vision to utilize our small farmers in this area is a lacuna. High fish price has been the norm. Adding to this, the common people are the victims of rotten meat (tsunami meat) and food, poison- ous beverages etc served by hotels. What is really interesting is that every festival is marked by an increase in the prices of essential commodities by 10%-30%. Last Onam began with a price increase of 30%-40% and the delayed intervention helped to contain the inflation slightly. The ultimate result was rise in the prices of commodities by 15%-20%. The story repeated during Deepavali and Christmas. Every time the initial increase is 15%-30%, ending with a trade-off in the increase of 10%-20%. This Onam eve witnessed 20%-30% price increase in most of the items. We really accept the increase in prices during each festival, and Kerala celebrates one or another festival during most of the months. The increase in prices of commodities, especially essentials, gets generalized! Hence the price is revised upward in intermittent periods, largely linked to festivals. As a result of the above phenomenon,the time lag for upward revision (natural) of prices is very short for Kerala; maybe one or two months
whereas it is long for other states, maybe six months or more. This often happens because the Government follows a passive intervention in the place of active intervention. If the Government plans to enter the market for 45-60 days during the main festivals, prices can be arrested to a greater extent. The real situation is the one where the Government actively intervenes in the market for just two weeks. The celebration of Onam will be a difficult affair for the common man. Five hundred rupees will not help him to purchase anything except the meaningless calculations. The chance of inflation coming down to acceptable levels on its own, or by maintaining a hawkish stance, cannot happen in the immediate future in Kerala. The price of petrol per litre will hit a century soon so that the permanent nature of inflation in Kerala cannot be brushed aside. The decision to increase the price of diesel by 50 paise every month and reduce the price differentials between petrol and diesel will further aggravate the problem and the common man will continuously be in chains! (The writer is retired Commerce professor of Maharaja’s College, Ernakulam)
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MANPOWER
Anil Philip
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he impact any business creates depends to a great extent on effective people management skills. The retail business is one where this should be delivered with utmost care. Retail is growing fast and is one of the largest employment providers in the country with a business of $450 billion contributing around 15% of the country’s GDP. Organized retail’s share is about 8% in the growth of this industry. But career opportunities in the sector have not been fully exploited by people as they feel that this is not their area of interest. Why are not people seeing long-term career growth in retail? During the past decade, our middle-class and high-income people have helped the industry to grow tremendously. Recruiters in the industry have also been trying to create an efficient workforce to manage this sector. Customer loyalty is keenly sought by retailers as it converts into consistent sales year after year. Companies are competing with one another to provide better shopping experiences to people. According to a Federation of Indian chambers of Commerce and Industry (FICCI) survey, there will be a sea change in the retail industry in size and format during this decade. India is the most attractive retail destination for global retailers. Consumers now have a wide variety of products and services to choose from, and the arrival of western brands and the growing consumerism have enhanced the quality of their shopping experience. Increase in internal consumption will further fuel the growth of this industry. The mall culture which has developed throughout the country has forced recruiters to find suitable candidates for jobs in the sector, but it has not produced any effective results. High attrition rate is a serious concern for the industry. A majority long-term career of our traditional should come with
of people never see prospects because mindset. Recruiters better packages and
open the door to highly professional and educated classes and thereby control the outflow of talented people to other sectors for jobs. The retail sector gives a huge opportunity to Kerala’s youth to get employment. The State Government should encourage this industry and give training to people to use the opportunity. Over the last few months malls and retail giants like Lulu, the Future Group (Big Bazaar) and Reliance that have come up have shown how effective retail can flourish in the state. There is also huge potential in food and fashion business. Changes are required in the selection process, and human resource departments at store levels should take the initiative in bringing effective manpower and provide them with suitable training and open a new workforce in the industry. The sector should see the potential. HR departments should deliver this message promptly to prospective employees. The business should understand the challenges and support HR for acquiring the best talent in the state. Research suggests that organizations with a culture of fair and transparent practices are more likely to be successful and sustainable in the long run. In promoting brands, different areas like operations, category, administration, sales etc should be given due priority. Buying is the key aspect of retail.
ational skills is another important factor. As we see, western retailers like Tesco focus on giving training for operational improvement in business. Another major challenge HR faces is in recruiting logistical people with trade knowledge. People with multitasking skills are needed for this industry and HR is always in the hunt for the right employees. Women should also find this industry a better place to work in. Right assortment of products and better visibility are key challenges for retailers. A different feel should be created each time a customer visits the store. The customer service desk should be able to answer the queries and resolve the complaints in an efficient way. Retailers grow by suggestions, and special teams should be there to understand local brands should be able to present the products effectively. So even at the selection level there should be effective screening. Department managers should be able to work efficiently and create a positive attitude. Even the security and housekeeping staff who may be hired
from agencies should be supervised for their performance, which also enhances brand images. The diversification in roles increases the retailer’s responsibility to acquire the right candidates. The HR team can even find suitable candidates from far-off places and approach consultancies. They should ensure that every candidate is treated with respect and dignity without any prejudice irrespective of the level for which they are recruited. Younger employees can always be mentored and coached for right behaviour, whereas seniors have the responsibility of leading by example. There should be regular training to make them more competent and able to communicate with customers. HR also has the responsibility of ensuring fair representation of the diverse workforce. There should also be a common platform in areas like increments and promotions. Employee appraisal should be conducted at appropriate times and genuine growth will attract more people to the industry. (The writer is a corporate trainer. can be contacted at stratacoaching@gmail.com)
It’s very important that buyers understand how their role fits within the whole organization and how their buying activity is able to contribute to this business. Selecting the right brain and training them with the necessary operSept 15 - Oct 15, 2013
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JEWELLER
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n its vision and mission statement, Krishna Jewels, Kannur, declares ‘Purity is Divine’ and that to attain purity you have to abide by truth. Krishna Jewels, formerly Kunhikannan Jewellery Gold House, has always envisaged the achievement of perfection in purity of gold jewellery because, it says, gold is an investment of all times with high liquidity. The legion of awards and recognitions Krishna Jewels has won over the years speak for the veracity of its statement and its strict and steadfast adherence to its principles. Kunhikannan Jewellery was founded by M Kunhikannan, popularly known as MKK, in 1984 as a proprietary concern in the name of his son M Pramod Kumar. At that time MKK was the proprietor of M Kunhikannan Jewellery, Poothappara, Azhikode. Kunhikannan, whose family trade (kulathozhil) was goldsmithy, had no basic education but early on he got involved in the work helping his elder brothers. He underwent sheer hardships to establish himself as a trusted goldsmith in Azhikode. Behind his success was his wife Kamala. The birth of Premasudha, their eldest daughter, brought them the first taste of success when MKK established his maiden venture, Sudha Jewellery Works. When the Collector of Customs and Central Excise, Kochi, granted him a gold dealer’s licence, he established M Kunhikannan Jewellery at Puthappara, Azhikode, in 1978.
First BIS-certified jeweller
K
rishna Jewels has many feathers in its cap. It became the first BIS (Bureau of Indian Standards) jewellery in India in 2000 and the first computerized jewellery. Formerly the country did not have any scientific methodology to know the purity of gold. This could be because our goldsmiths were either very truthful or our consumers were ignorant of gold technology. When lakhs of jewellers hesitated and shied away from this new process, Kunhikannan Jewellery came forward to obtain india’s first BIS certification in gold. On April 11, 2000, for the first time, hallmarking/assaying of gold was introduced in India by BIS under the Union Ministry of Consumer Affairs in cooperation with the World Gold Council. Ravindranath says that during 1985-2000 gold merchants had cheated their customers to the tune of Rs 13,000 crore by selling low-purity gold.
PASSLINE
Sept 15 - Oct 15, 2013
The marriage of Premasudha to C V Ravindranath, endearingly called CVR, who had master’s degrees in Hospital Management from the Institute Hotel Management (IHM), Mumbai, and Sales and Marketing from Cornell University, US, saw the birth in 1985 of a new firm, Kunhikannan Jewellery, with six partners - MKK, Kamala, Premasudha, M Pramod Kumar,
M Praveesh and CVR. It started business with a mere stock of 700 gram in a 200 sq ft shop and a staff of five. CVR brought with him immense experience, entrepreneurial skills and business acumen. At the time of his marriage he was Food and Beverage Controller of Welcomegroup’s Windsor Manor Sheraton and had had vast experience from the Taj, Oberoi, Centaur, Holiday Inn and Casino groups of hotels. The new firm started functioning under the charge of Praveesh on December 13, 1985. In 1986, the business was shifted to a bigger showroom on Kannur’s Bellard Road with a stock of 10 kg and a staff of 10. State Bank of India came forward to grant its first-ever loan to a gold firm - Rs 5 lakh. Kunhikannan Jewellery had the blessings of Swami Chinmayananda who advised it to grant scholarships to poor and bright students. Gold medals were instituted at Chinmaya Vidyalaya for students with rankings. In 1987, a plot was bought at Palliyamoola beach for a heritage beach resort, which became a strong collateral asset of the firm for acquiring higher financial assistance from banks. In 1988, CVR became the President of the Cannanore District Jewellery Merchants Association. A new era of business transformation started and clashes between the old and the new styles of business came to the fore. The new styles found great resistance not only from within the firm but also from competitors, the Jewellery Association and the Gold Workers’ Association. CVR withstood all the opposition and faced the controversies, marching ahead towards the goal of purity, consumer and employee rights and social benefits. As competition tightened, CVR went to Bahrain as Quality Controller of Bahrain Airport Services in 1989 to bring in more funds to meet challenges from other jewelleries established in Kannur. By this time Pramod Kumar and Praveesh had taken charge of production and sales, respectively. In 1991 Ravindranath came back to the country, with a stronger financial footing. Nedungadi Bank (which was later taken over by Punjab National Bank) came forward to finance the firm to the tune of Rs 1 crore. Provocative and new marketing strategies were deployed by CVR from 1991 to 2000, making the competitors, many of whom had started pouring in from outside, run for their money. It was
11 11 during this time that Mata Amritanandamayi blessed the ventures and projects. In the name of gold purity, CVR broke up with the association. He re-
signed from it and pledged to fight it out alone to establish new hallmarking and assaying systems in the country. The World Gold Council, the Central Government and the people of North Malabar backed these moves. In 1994, he received awards like Rajiv Gandhi National Unity Award, Udyog Pragati Award and India Forward Award, bringing greater glories to him and to Kunhikannan Jewellery. In 1995, CVR became the Honorary Secretary of the North Malabar Chamber of Commerce and he utilized this position to bring in greater changes in the gold business. In 1996, Kunhikannan Jewellery won the coveted Jamnalal Bajaj Ujit Vyavahar Puraskar, instituted by the Council for Fair Trade and Business Practices, Mumbai, from then President K R Narayanan, which added glory to the firm’s purity awareness drive and marketing strategy. On August 24, 1997, Kunhikannan Jewellery Gold House, the megashowroom, was inaugurated by Swamini Apoorvananda Saraswathi of the Chinmaya Mission. It carried the blessings of Swami Thejomayananda, Swami Purushothamayananda and Swamini Vimalananda of the Chinmaya International Movement and became the most environmentfriendly showroom in the country. In the same year Kunhikannan Jewellery Merit-cum-Means Scholarship for poor students of North Malabar was instituted. In 2000, the jewellery became the first BIS jeweller of the country, a landmark in gold business. In 2001, South Indian Bank provided a loan of Rs 3 crore and the stock of gold ornaments zoomed to 150 kg. The Junior Chamber presented CVR with the Millennium Young Businessman
Award. On March 12, 2002, Shivoham Temple of Consciousness was inaugurated by Swamini Apporvananda Saraswathi with the blessings of Yogiraj
Vetathiri Maharishi and Avadhoot Baba Shivananda. Here 88 students attend free Bharatanatyam classes. Men and women attend yoga classes. Vedic astrology and tantric poojas are also conducted. In 2003, CVR received the
ethics but an institution for promoting education, culture, social welfare and spiritualism. Kunhikannan Jewellery Gold House was rechristened Krishna
Jewels in March 2013 as part of the formation of a business group called Krishna Business Group, a partnership firm. According to Ravindranath, who is the Managing Partner of the group, the transformation results from the
tre are our ventures in the sector. As regards Krishna Beach Resort we are waiting for the commissioning of the Kannur airport,” he says. Krishna Blooms, a 100-room, fivestar luxury hotel in 1.8 acres near Krishna Jewels, is readying for being commissioned. Work on the Krishnaleela Convention Centre is also in progress in seven acres of land. Shivoham Temple of Consciousness is the group’s innovative educational project . The trust is dedicated and committed to working for the betterment of society by promoting ethical and value-based education in business, literature and arts through spiritual intelligence and meditation, to realize creativity, spirituality and universality. The group’s future plan is to establish a business school based on Indian values and ethics, ‘Shivoham Business School’, for creativity, spirituality and universality through spiritual human intelligence of values in the organization for higher aspirations and management at Aramkottam, Kannur. Through this organization it aspires to achieve universal brotherhood and envisages a federation of nations to end war through spiritual intelligence (SQ) and meritocracy.
Many-faceted genius C
V Ravindranath is an alumnus of St Michael’s Anglo-Indian High School, Kannur; P S G College of Technology, Coimbatore; Institute of Hotel Management, Mumbai; School of Hotel Administration, Cornell University, US; Gemological Institute of America, US; Indian Institute of Management, Ahmedabad; and Indian Institute of Business, Hyderabad. He possesses three postgraduate degrees - in Hotel Management, Philosophy and Religion and Peacemaking and Gandhian Thought. He had worked with Holiday Inn Group, Mumbai; Welcomegroup Windsor Manor Sheraton, Bangalore; Casino Group, Kochi; and Bahrain Airport Services, Bahrain. Ravindranath joined Kunhikannan Jewellery Gold House (now Krishna Jewels), Kannur, as Managing Partner in 1985. He received the honorary degree of Fine Jewellery Consultant from the Gemological Institute of America (GIA), US, in 1991 and Life Membership from the Indian Diamond Institute of Surat and GIA. He is the Chief Patron of Shivoham Temple of Consciousness, Krishna Blooms and the CVC Hall of Fame. Ravindranath has held coveted posts like Honorary Secretary of the North Malabar Chamber of Commerce, President of the Cannanore District Gold and Silver Mer-
Chamber of Commerce’s Best Businessman of North Malabar Award. In 2004, Kunhikannan Jewellery joined hands with ISKCON Bangalore for the Akshaya Patra project providing free meals for one lakh school students. The firm was becoming not just a standard for gold purity and business
chants Association, President of the Cannanore District Hockey Association, President of the Rotary Club of Cannanore Seaside and International Chairman of Rotary International Fellowship of Yoga. For excellence in business and social commitments, he received the Rajiv Candhi National Unity Award, Udyog Pragati Award, India Forward Award, Jaycees Millennium Young Businessman Award and the North Malabar Chamber of Commerce’s Outstanding Trader Award-2003. He has life membership in Chinmaya Mission, Kannur; ISKCON, Mumbai and Bangalore; Council for Fair Trade Practices, Mumbai; Jawaharlal Nehru Public Library and Research Centre, Kannur; Shiva Gangapuri Vedic Madam, Kannur; Viswa Hindu Parishad and Paul Harris Fellow of Rotary International, US. An accomplished writer, Ravindranath has published several books both in English and Malayalam. They include My Love unto Thee (poems), The Secret of Secrets (prose), My Feelings unto Thee (poems), The Transcendence of Consciousness to the Highest Realms of Truth and Peace, through Yoga and Meditation, for Universal Harmony (his MPhil dissertation), Ente Premam Ninakkayi (Malayalam) and Rahasyangalude Rahasyam (Malayalam). Ravindranath is married to Sudha, and the couple have three daughters - Sunita, Sanita and Subha.
growth and diversified business interests and is meant “for our next generation”. “Our children are interested in the hospitality industry and they have taken hotel management degrees from renowned colleges in the world. Krishna Beach Holistic Resort, Krishna Blooms and Krishna Convention Cen-
Ravindranath says that because of the gold price crash some months ago his turnover had increased three times and he got advance booking for ornaments worth nearly 150 kg. Krishna Jewels is today housed in a six-storeyed building having 24,000 sq ft of space and 300 kg of stock
Sept 15 - Oct 15, 2013
PASSLINE
12 Tourism
Tourism industry needs responsible projects
T
ourism being a sensitive industry needs a responsible approach for its sustainable growth, long-term survival and success. Kerala has diverse, innovative, eco-friendly and unique tourism products all over. The long-term Abin K I success of any form of tourism depends upon the quality of the natural environment. Tourists always prefer unique, serene and exotic attractions. The success of a particular destination depends upon the quality of its environment and how it is sustainably managed. Destinations can ensure long-term growth and success only if they follow sound environmental guidelines. Unplanned tourism development always creates excessive pressures on the natural environment especially on fragile eco-systems. Therefore tourism needs a responsible approach towards the environment, society
tainability principles. According to the United Nations World Tourism Organization (UNWTO), “sustainability principles refer to the environmental, economic and socio-cultural aspects of tourism development, and a suitable balance must be established between these three dimensions to guarantee its long-term sustainability.” In 2008, Kerala Tourism launched four RT projects in the state -- at Kumarakom, Kovalam, Thekkady and Wayanad. Kumarakom is a small island famed for its houseboat cruises and beautiful palm-fringed backwaters. A cruise on a houseboat through the backwaters is one of the most wonderful and unforgettable experiences one can enjoy during a visit to the place. Among the four it was the Kumarakom model which turned out to be the most successful and distinctive initiative because it is beneficial to the host community, and attractions and activities offered are truly based on the natural resources of the region. There are also effective measures for environment conservation, and it generates a high amount of tourist satisfaction creating employment opportunities for host communities of varying levels ranging from skilled to professional.
The RT model links the local community to the hospitality industry. As part of the RT environmental initiative, Kumarakom bird sanctuary was declared a plastic-free zone, checked backwater pollution in and around with the help of the host community, took steps for mangrove protection and promoted organic farming. The community-based tourism packages such as ‘A day with the Farmers’ and the ‘Village Life Experience’ (VLE) offer the tourist an opporIn 2008, Kerala Tourism launched four tunity to experience and understand responsible tourism projects in the state the local culture, cuisine and way of -- at Kumarakom, Kovalam, Thekkady and living of the host. The VLE package Wayanad. Among the four it was the Kuwas a major success.
marakom model which turned out to be the most successful and distinctive initiative because it is beneficial to the host community, and attractions and activities offered are truly based on the natural resources of the region. There are also effective measures for environment conservation, and it generates a high amount of tourist satisfaction creating employment opportunities for host communities of varying levels ranging from skilled to professional. and tourists in order to achieve balanced and harmonious development. Responsible tourism practices all over the world are gaining momentum as they find solutions and encourage the host community, tourism entrepreneurs and visitors to take responsibility for the changes necessary to make tourism more sustainable and viable in the long run. Responsible tourism (RT) creates better places for people to live in and to visit. RT initiatives everywhere have succeeded in creating awareness about how tourism can act as a mechanism for the socioeconomic development of the host community through conservation of natural resources and as a means of uplifting their livelihood. RT therefore should follow the sus-
PASSLINE
Sept 15 - Oct 15, 2013
As part of the economic responsibility it helped several micro-enterprises, handicraft units, organic vegetable farms and fish and lotus ponds. Linkages to the hospitality industry such as hotels and resorts were created which increased the demand for local products and services regularly. Women self-help groups, preferably Kudumbasree, were major beneficiaries of the initiative. Karshaka samithis (farmers’ groups) were newly formed and encouraged for homestead farming. An area of 168 acres which was left unused with the advent of tourism in Kumarakom is now being used for agriculture. Fish culture is also being promoted here in association with the grama panchayat. The issue of non-availability of land for cultivation was sorted out by the RT project team through discussions with landowners to get the land on lease. Local art and cultural troupes were formed in order to provide effective training and to promote it. The Kumarakom model enables the host community to be aware of the negative impacts of tourism such as child labour, prostitution, drug addiction and alcoholism. Above all, responsible tourism raised the local community’s confidence as well as social esteem apart from raising their income.
13 Kumarakom is one of the two RT models being monitored by the UN World Tourism Organization (UNWTO) whose representatives visited the destination recently to see the RT initia-
experience the diverse skills of village folks besides exhibiting agriculture and agricultural products.
balangi Model Tourism Village project started in 2003 triggered the growth of the local economy and its people
The wildlife- and adventure-based packages offered at Periyar Tiger Reserve (PTR) are also outstanding from the point of view of environment conservation and visitor satisfaction. The Thenmala eco-tourism project needs to be more focused and should be promoted in a more sensible manner. tives. The Kumarakom RT model had won the 2011-12 national and rural tourism awards showcasing the life, art, culture and heritage of rural locations, benefiting the local community economically and socially as well as enabling interaction between the tourists and the locals for a more enriching tourism experience. Its main focus is to
United Nations Environment Programme (UNEP) rural tourism destinations in the state are Kumbalangi, Aranmula, Balaramapuram, Kalady, Anakkara and Clappana. The Kum-
through rural tourism practices. Home stays, local cuisines and village-based activities are provided in Kumbalangi to attract visitors.
The Gavi eco-tourism project administered and promoted by the Kerala Forest Development Corporation (KFDC) is a perfect example of how tourism and nature can be blended together by offering naturebased packages without deteriorating the environment. The wildlife- and adventure-based packages offered at Periyar Tiger Reserve (PTR) are also outstanding from the point of view of environment conservation and visitor satisfaction. The Thenmala eco-tourism project needs to be more focused and should be promoted in a more sensible manner. For Kerala, small tourism ventures such as farm tourism, plantation tourism and home stay are more ideal. Responsible tourism practices should be extended to the other destinations of the state with the support and cooperation of the host community, local bodies and nongovernmental organizations (NGOs). (Abin is Lecturer in Tourism, School of Tourism Studies, Mahatma Gandhi University, Kottayam)
Sept 15 - Oct 15, 2013
PASSLINE
14
ISSUES
Unemployment among Kerala youth: myth and reality generation of lakhs of employable candidates in the job market.
K
P D Johnny
erala being a predominantly consumer-state, the service industry has been growing at a fast pace and can absorb lakhs of young jobseekers. Many of the largesized sales outlets like textile showrooms and jewelleries being opened almost every day, not only in cities and big towns but even in small towns and villages, need workforce in equally large numbers. The employment notices by these newly opened sales outlets indicate the availability of opportunities in thousands in them. It is almost certain that a major portion of the socalled unemployed persons (according to Government records) are gainfully employed in the ever-growing service industry units in the state. It can be logically concluded that almost all those ‘so-called unemployed’ who need a gainful occupation can find, and have found, some job or other within the state. If anyone remains actually unemployed, it is by choice or insistence on a particular job which is not easy to come by. Kerala being the most literate state in the country (literacy percentage according to Census 2011 over 94%) the extent of unemployment as ratio of its population had always been projected relatively high and thus an issue for debate at socio-economic levels. In the past, and to a great extent at present also, the state has maintained its status as a major supplier of educated/skilled workforce to the rest of the country and abroad as well. Universal educational facilities made available by Government and private institutions over the past decades have facilitated
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However, lack of adequate employment potential within the state on account of backwardness in industrial and commercial sectors has forced a good number of educated youth to seek suitable opportunities elsewhere. Most of those who ventured out found placements according to their qualifications and competence and many of them could, step by step, rise even to the top of many private and public enterprises. Since they had to face stiff competition from others, mostly locals in the respective regions/states in particular, they had to put up their best performances to be more competitive which eventually earned appreciation from their employers and therefore
they were considered a ‘sought-after’ workforce. In fact, many Keralites employed outside the state/country became models in work-culture, sincerity and hard work, besides acquiring higher educational and technical/professional qualifications and skills along with employment and thus converting themselves the most employable lot. In the Economic Review document
Sept 15 - Oct 15, 2013
placed in the Assembly on the eve of the presentation of the state’s 2013-14 budget, the State Planning Board had estimated the number of unemployed youth in the state at 45 lakh. How realistic is this estimate and what exactly is the source of this information are debatable points. Presumably, the source must be the rolls of the employment exchanges. It is to be noted that enrolment in the state-run employment exchanges is being done mainly for two purposes – to be considered for Government jobs and for unemployment doles offered to those remaining ‘unemployed’ for a long time. The names of those registered job-seekers will remain on the rolls till they are employed in the public sector, provided they continue to renew
their registration annually. This does not necessarily mean that all those socalled unemployed youth remained so. For, in Kerala, a Government job is the most lucrative one for many reasons. One, the posting is always within the native state and secondly, and more importantly, in addition to drawing fairly good wages during service, an equally attractive pension package is also assured for the rest of their life period. Employment in the private sector may
perhaps offer better wages and other service conditions but the emoluments are available only during the service and generally no post-retirement pension, which is an economic security measure, is offered. For this reason, the eyes of an average Keralite are always on a white-collar Government job which is generally an easy one where accountability and good performance are not always built-in essential conditions. Some of those who do not mind waiting indefinitely for a Government job, usually available by qualifying in the screening by the State Public Service Commission, sometimes after many attempts and at a later age, would secretly attribute one more reason for opting for Government jobs – scope for extra source of income by way of corruption, for which
our Government offices are notorious. Even those elected as people’s representatives in the local self-government institutions do not think twice to quit these respectable positions if they get even a lowest-grade Government job. Many byelections to these local selfgovernment institutions become necessary because of the resignations of such elected people’s representatives on getting Government jobs. A news report comes to the memory of this author – the story of a woman grama
15 panchayat president quitting the coveted post opting for a sweeper’s job in the same panchayat office. Such is the irresistible urge among the people of Kerala for jobs in the public sector. The reported level of unemployment among Kerala youth as a relation to the state’s population also needs to be analysed. According to Census 2011, the total population in the state was around 3.20 crore. Considering the demographic pattern, more particularly the above-average life-span and below-average rate of childbirths in the state, the number of employable persons, between 18 and 45 years, can be roughly estimated at about 1.80 crore – about 60% of the total population. The number of unemployed persons estimated by the Planning Board at 45 lakh is about 25% of such employable persons.
void in availability of the unskilled workforce for manual jobs in Kerala is being filled by the inflow of youth from far-off eastern and north-eastern The void in availability of the parts of the country. Thousands of them land here every day and unskilled workforce for manual jobs find jobs as semi-skilled and unin Kerala is being filled by the inflow skilled workers. In some places of youth from far-off eastern and of the state – Perumbavoor in north-eastern parts of the country. Ernakulam district, for example – Thousands of them land here every you meet more of such migrants day and find jobs as semi-skilled than locals, particularly on Sundays and holidays. Yes, undoubtand unskilled workers. edly they do a yeomen service by helping many sectors where manual The labour camps in the Middle labour is unavoidable to keep uninterEast where the manual labour in the rupted production and services. construction sector are put up are A dispassionate analysis of facts live examples of the above fact. The side the state and abroad, he would do a harder job without any inhibitions and even in worse living conditions.
in this respect should disprove the claim of the Planning Board (presumably based on the statistics provided by the state Labour and Employment Department which runs the employment exchanges) on the unemployment level in Kerala. However, the figures, though far from being realistic, would suit the State Government to prove that the poverty level in the state for which unemployment is a key indicator continues to be higher and, accordingly, enhanced allocation of Central assistance can be sought for povertyeradication
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Though these 45 lakh job-seekers technically remain on the rolls of the employment exchanges, a good number of them must be gainfully employed in the private sector. Kerala being a predominantly consumer-state, the service industry has been growing at a fast pace and can absorb lakhs of young job-seekers. Many of the large-sized sales outlets like textile showrooms and jewelleries being opened almost every day, not only in cities and big towns but even in small towns and villages, need workforce in equally large numbers. The minimum education and skill required for placements in these sectors is school education and ability to interact with customers. The employment notices by these newly opened sales outlets indicate the availability of opportunities in thousands in each of them. It is almost certain that a major portion of the socalled unemployed persons (according to Government records) are gainfully employed in the ever-growing service industry units in the state. The financial sector (mainly banks) also recruits thousands of suitable candidates for clerical and officer-level jobs. There is however a rider – the relatively low educational standards in Kerala would be an impediment to entry into these sectors. In other words, it can be logically concluded that almost all those ‘so-called unemployed’ who need a gainful occupation can find, and have found, some job or other within the state. If anyone remains actually unemployed, it is by choice or insistence on a particular job which is not easy to come by. It is well known that Keralites, after passing out of schools with plus-two level and colleges with graduation, generally offer themselves for employment only of their choice – with a definite preference for white-collar jobs. The youth in Kerala shun manual jobs although, in reality, the wages for such jobs are higher than those for the white-collar ones. The psyche of an average Keralite would not permit him to do such jobs in his own state – but out-
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Sept 15 - Oct 15, 2013
PASSLINE
16
IMPUNITY
‘God’s own crime and punishment’ “G
od’s Own Country’ is presently being scandalized by stories of crime. The solar scam, because of its links with people in high places, has eclipsed all other recent crimes. The solar drama whose cast includes women of suspect track record has provided enough grist to the political and media mill. In the olden days, theft, frauds and similar crimes were the monopoly of men. Now we have to concede that Kerala has achieved gender justice in crime.
the word rational means scientific and sane. It has a positive connotation. But in rational choice theory, the word rational is used in a very narrow sense. It has no positive or moral connotation. Even immoral activities are rational. Any action for a personal gain or to satisfy a want is rational. Illegal actions for money, sexual gratification, excitement etc are criminal activities. Criminals are rational beings who analyse the costs and benefits of an action. If the benefits are higher than costs, that criminal activity is likely to happen. In the words of
Cost of crime is a deterrent. It follows from this that criminal activities can be reduced by raising the cost. Punishments for crime have to be substantially increased. Driving licences of drivers, who cause accidents due to their negligence, after a couple of warnings, should be cancelled. This is the practice in many developed countries. In a Dr V.K. Vijayakumar recent incident in Kerala a woman accused in the solar scandal was found travelling in a car fitted with sun control films. A case was booked. She pleaded guilty, paid a fine of Rs 500 and got away. A fine of Rs 500 for violating the judgment of the Supreme Court of India! How absurd! Why not raise this to Rs 25,000? Crime is, perhaps, as old as humanity. There are very old texts that deal with the motives of crime and the methods to contain them. Chanakya, in his celebrated work Arthasasthra, written around 2,300 years ago, argued for regulation of brothels and drinking centres without prohibiting them. Arthasasthra clearly laid down the punishments for different forms of crime. Crime is a complex issue: it has psychological and sociological dimensions. Here is a humble attempt to analyse crime from the economic perspective only. Criminal activities are those that are illegal. They may or may not be immoral. Crime may be classified as: crimes against persons, crimes against property, trafficking in illegal goods and services and other crimes. Economists use two principles to analyse crime. These are: rational choice theory and cost-benefit analysis. According to the rational choice theory, criminals are rational beings who weigh the pros and cons of crime. In ordinary parlance,
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the famous economic thinker Jeremy Bentham, “The profit of the crime is the force that urges men to delinquency; the pain of the punishment is the force employed to restrain him from it. If the first of these forces is the greater, the crime will be committed; if the second, the crime will not be committed.” According to the famous economist and Nobel laureate Gary Becker, criminals look for ‘soft targets’. Soft targets are those that provide high benefit with very low costs. Chain-snatching, widely prevalent in Kerala now, belongs to this category. A woman wearing an expensive gold chain, in a place suitable for crime, is a soft target. The possibility of getting caught is limited; even if caught the possibility of conviction is still more limited. Even if convicted, the sentence is very light, say, imprisonment for a few months. On the other hand, if the crime is successful the criminal walks away with a bounty. In brief, the cost of crime is very low; the benefit is sub-
Sept 15 - Oct 15, 2013
stantial. Crime explodes and criminals flourish in such an environment. Desire for conspicuous consumption can be a motive for crime. A recent crime involving a 24-year-old TV serial actress and her boyfriend is a classic case. These two, according to police reports, defrauded a bank of Rs 19 crore. When they were caught they were living in a luxurious farmhouse paying several lakhs as rent for a month, had nine luxury cars and were escorted by armed bodyguards. The famous economist James Duesenberry calls this type of ostentatious extravagance ‘conspicuous consumption’. Those who indulge in this kind of consumption are driven by vanity and seek to show off their ‘superior social status’ thereby deriving a strange form of satisfaction. If the benefits of crime are substantial, and criminals succeed in their activities, this will serve as an incentive for further crime. The kingpin in the solar scandal raging in Kerala now has been accused of murdering his first wife. Press reports say that he has confessed to the crime. It is important to note that the accused succeeded in suppressing the crime in a hyper-vigilant society like Kerala with its alert civil society, TV channels always on the lookout for ‘breaking news’ and active political parties. If a criminal commits a murder and gets away with that, it is only rational for him to pursue more crimes. Why? The possibility of getting caught is low. Even if the accused is caught, he/ she can hire good lawyers and get bail. Many criminals jump bail. Even those who are convicted can come out of parole and disappear. Where is Sabarinath (Total for You Ponzi scheme), who swindled crores of rupees, now? Bity Mohanthy, convicted of raping and murdering a foreign tourist, not only jumped parole, but also arranged a fake passport and certificates; got admission to an MBA institute, passed and got a job in a nationalized bank. Criminals, who are cool calculating rational beings, are aware of all these possibilities. Cost of crime is a deterrent. It follows from this that criminal activities
can be reduced by raising the cost. Punishments for crime have to be substantially increased. Driving licences of drivers, who cause accidents due to their negligence, after a couple of
Society at large and the media in particular have to be vigilant. Parents should be careful about juvenile delinquencies and nip the problem in the bud. Above all, utmost emphasis should be given to value-based education. Remember the famous words of Victor Hugo: “He who opens a school closes a prison.” warnings, should be cancelled. This is the practice in many developed countries. In a recent incident in Kerala a woman accused in the solar scandal was found travelling in a car fitted with sun control films. A case was booked. She pleaded guilty, paid a fine of Rs 500 and got away. A fine of Rs 500 for violating the judgment of the Supreme Court of India! How absurd! Why not raise this to Rs 25,000? Similarly, the punishment for serial thieves, burglars, molesters etc has to be substantially increased. Political parties should also share part of the blame for shielding criminals and often using them for achieving their goals. The media has an important responsibility to expose the nexus between criminals and those wielding financial and political power. Tackling crime needs a multipronged strategy. Raising the cost of crime should be an important plank in this strategy. The society at large and the media in particular have to be vigilant. Parents should be careful about juvenile delinquencies and nip the problem in the bud. Above all, utmost emphasis should be given to valuebased education. Remember the famous words of Victor Hugo: “He who opens a school closes a prison.” (Dr Vijayakumar is Investment Strategist, Geojit BNP Paribas)
17
RETIREMENT SECURITY
Implications of national pension system objectives: to provide old-age income; to ensure safe and reasonable marketbased returns over the long term; to extend old-age security coverage to all citizens.
T
Prof Job K T
NPS’ important features are: to save for retirement and allotment of a unique
he Pension Fund Regulatory and Development Authority (PFRDA) Bill 2011 has been passed by Parliament to provide statutory backing to the pension authority. PFRDA was established by the Government of India on 23 August 2003 to promote oldage income security to protect the interests of members. The authority has formulated a National Pension System (NPS, earlier known as New Pension Scheme). NPS is an effort of the Union Government to find sustainable solutions to the problem of providing adequate retirement income. The Government moved from a ‘defined benefit pension’ to a ‘defined contribution-based pension system’ by making it mandatory for its new recruits (except armed forces) with effect from January 1, 2004. To encourage people from the unorganized sector to voluntarily save for their retirement, the Government
Contribution along with the application form for opening the account to any POP–SP has to be made subject to the following conditions: minimum amount per contribution - Rs 500; minimum contribution per year - Rs 6,000; minimum period of contributions - one per year. has expanded the scope of the pension scheme. It would allow a member to monitor his/her investments and returns under NPS and the choice of the pension fund manager. The investment option would also rest with the member. As on August 14, 2013, the number of members under NPS was 52.83 lakh with a corpus of Rs 34,965 crore. Twenty-six states (except West Bengal and Tripura) have already signed agreements with PFRDA for carrying forward the implementation of NPS. NPS has the following broad
permanent retirement account number (PRAN) which will provide access to personal accounts. The tax benefits under NPS will be according to the provisions of the Income Tax Act, 1961 as amended from time to time. Points of presence (POPs) are the first points of interaction of the NPS member. The authorized branches of a POP, called point of presence service providers (POP-SPs), will act as collection points and extend a number of customer services to NPS members. There will be an option to shift from one to another branch of a POP at the convenience of the member. The record keeping, administration and customer service functions for all members of the NPS are being handled by NSDL e-Governance Infrastructure Limited, which is acting as the central record-keeper (CRA) for NPS. The six pension funds (PFs) appointed by PFRDA would manage the retirement savings under NPS. There will two pension fund managers (PFMs). The trustee bank (TB) appointed under NPS shall facilitate fund transfers across various entities of the NPS system, viz PFMs, ASPs, members etc. Axis Bank has been appointed the trustee bank. Annuity service providers
(ASPs) are responsible for delivering a regular monthly pension after exit from NPS. The NPS Trust has been set up and constituted for taking care of the assets and funds under the NPS in the interest of the members. Contribution along with the application form for opening the account to any POP–SP has to be made subject to the following conditions: minimum amount per contribution Rs 500; minimum contribution per year - Rs 6,000; minimum period of contributions one per year. There are tier I accounts and tier II accounts., Under tier I account, subscribers contribute savings for retirement into a non-withdrawable account. Tier II is a voluntary savings account from which members are free to withdraw their savings up to 25%, whenever one wishes, subject to certain conditions. An active tier I account will be a prerequisite for opening a tier II account. The benefits of NPS are: it is voluntary and is open to every Indian citizen between the ages of 18 and 59. A member can choose a minimum amount of Rs 500 per month to save every year; it is simple. All a member has to do is to open an account with any one of POPs and get a PRAN; it is flexible. Members can choose any investment option and pension fund and see how the money grows; it is portable. Members can operate the account from anywhere in the country; it is regulated. NPS is regulated by PFRDA, with transparent investment norms and regular monitoring and performance review of fund managers by NPS Trust; it allows withdrawals not exceeding 25% of the contribution made by member subject to the purpose, frequency and limits. The major implications of the Pension Fund Regulatory and Development Authority (PERDA) Bill 2011 are: The pension system is based on the ‘you save while you earn’ principle, which will encourage the saving habit of the citizens for future. The bill, creating a modern pension system with a statutory regulator, is expected to attract the unorganized 460
million workers and the total corpus could rise by $60 billion in the first year of its full launch. About half a billion workers in the country still have little or no access to social security and stick to buying gold and real estate. The built-in safeguards in the bill will attract such investment to productive sectors. Eighty-eight percent of India’s workforce has no access to old-age security. Thus the scope of membership to NPS is unlimited. Members will have complete control of their contributions and savings in their personal retirement accounts. They can not only choose their pension fund manager but can also take a call on where they want to allocate their funds—Government debt, corporate debt and equity. Thus, members have total freedom to decide on the investment. Withdrawals not exceeding 25% of the contribution made by member would be permitted with certain conditions. This will enable the member to meet pressing demand for money. The foreign investment ceiling in the pension sector is 26% or such percentage as may be approved for the insurance sector. The cap will be increased to 49% when the Insurance Laws (Amendment) Bill is passed by Parliament. This is expected to channelize further flow of FDI to pension schemes. With the active support of individuals, the NPS corpus could reach $60 billion in one year and $300 billion over the next 10 years. The bill could help channelize funds into building long-term assets for the country. The Government wants to ease rules for insurance and pension sectors to allow them to invest in infrastructure, where it is seeking $1 trillion investment till 2017. A study says that by 2015 the pension assets under NPS scheme may grow to over Rs 10 lakh crore. This indicates the flow of money into the productive sector. The legislation also provides for establishment of a Pension Advisory Committee (PAC) with representation from all major stakeholders to control and ensure the liquidity of the investment. The bill will encourage the expansion of the pension products, which will allow the members to select a wide range of pension schemes according to requirements. (The writer is a senior faculty member at the Centre for Management Development, Thiruvananthapuram. He can be accessed by email:jobkt012@ gmail.com)
Sept 15 - Oct 15, 2013
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ENERGY
Solar eclipse and dramatic changes in politics as well as science and technology, including photovoltaic technology.
K Vijayachandran instein was awarded the Nobel Prize in 1921 for his discovery of the law of the photoelectric effect. But practical photovoltaic devices had been developed and used much earlier than this by German scientists even by the end of the 19th century. None of them could have imagined that their inventions would ultimately lead to novel scandals and agitations in a far-away country like ours.
E
The first photovoltaic device I personally handled was a photometer manufactured in East Germany for use in conjunction with a Flexaret box camera made in socialist Czechoslovakia. That was in the early 1960s. During the past half a century there have been
Photo films have disappeared and film cameras been replaced by digital cameras that produce quality images even without the help of light meters. And the photovoltaic industry, targeted at electricity generation, has been growing tremendously during the last two decades thanks to the Kyoto protocol for containing the so-called global warming by limiting the use of fossil fuels like coal and oil. With the developed countries as a bloc refusing to honour their commitments to reduce carbon emission by 2012, the Kyoto protocol is dead. Now as the US is playing the nuclear card and the European Union led by Germany the solar card for substituting fossil fuel electricity, developing countries like India which do not have technology options of their own seem to be helplessly falling in line with
Union Bank
these developed countries. The power sector working group for our 12th Fiveyear Plan has recommended a capacity addition of 20,000 MW each by way of nuclear and solar electricity, using equipment and systems imported from developed countries. India has signed its nuclear deal with the US for opening up its market for imported nuclear power plants, while its own nuclear power development programme is left to stagnate because of funds constraints. And the Indian Prime Minister, during his recent visit to Germany, had contracted a Rs 7,000-crore loan for importing solar PV equipment from that country. Germany has been investing heavily in solarrelated R&D during the past decade as part of a national discipline, and presently it accounts for 47% of the output of the global solar PV industry. Underperformance of the highly capitalintensive solar PV sector as a whole is alleged to be the major reason for the recent Eurozone financial crisis. Despite such difficulties and dissent notes by the US energy industry, the European Union is going ahead with its solar-PV programme led by Germany. A massive international event is planned in Paris, under the banner of Twentieth European Photovoltaic Solar Energy Conference and Exhibition, scheduled for September 30 to October 2. Over 4,000 delegates from 76 countries and 656 research institutions and industries had participated in the 27th conference held in Munich last year. With its less than 1% share in the global solar PV industry, India was nowhere in the picture. China has an 8% share and is placed above the US (5%), the Netherlands (4%), France (3%), Switzerland (3%), Italy (3%) and Japan (2%). This was my own personal experience when
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I visited a similar show in Noida organized by the Ministry of New and Renewable Sources of Energy (MNRSE) some three years ago. The solar PV industry in India, dominated by the MSME sector, had deliberated at that time on what need ed to be done to improve the national capabilities in the solar sector. Its recommendations are valid even today. The theme paper, prepared at that time, had stressed the need for evolving a comprehensive research roadmap in collaboration with universities and national labs, with clearly defined, timebound technology and cost goals. These recommendations were aimed at “creating a plan to develop and strengthen the entire PV supply chain from silicon feedstock, wafer manufacturing, materials and equipment to end systems�. Nothing much has happened by way of in-house R&D and technology development, and India’s solar PV programme continues to be dependent on imported equipment and systems even today. Nehru was a great proponent of technological selfreliance, a policy that had paid rich dividends for the country, as in sectors like nuclear and space technologies. However, programmes and projects launched by the Jawaharlal Nehru National Solar Mission as well as the other numerous agencies and public sector undertakings organized under MNRSE are apparently dedicated to solar power development based on the strength of imported equipment and systems. The solar PV value chain diagram, given elsewhere in this article, is a quote from a well-produced recent handout, titled India Solar PV Report by Energy Alternative India (EAI-www. eai.in), a professional consultancy
darkness at noon body financed by Indian big business and manned by experts drawn from the alumni of IITs and IIMs. This document just does not talk about any Indian R&D programme on solar PV, un-
try should be brought under legal compulsion to source certain percentage of electricity sold by them from the so called eco-friendly solar power plants, even at higher prices and even on a
non-solar power plants are facing irrational shutdowns.
Policymakers of our MNRES are insisting that similar policies as in the EU should be implemented in India as well, in support of the solar PV industry. In Europe and Germany, possibly, there is some logic for such policies, because the subsidies go to the local industry. But in our case, we will be subsidizing the solar PV industry of Germany, the US or China because we do not have any national plan to develop our own industry. MNRES is insisting that the EU policy of compulsory buying of energy at higher costs from solar power plants should be implemented, irrespective of the source of technology and equipment. State-level agencies ,like ANERT in Kerala, operate under the supervision and dictates of the Central ministry.
like the industry document, brought out a few years ago. Perspectives and prescriptions in this EAI document are seen reflected in the programmes sponsored by Central and State Government organizations. Even the programmes of Solar Energy Corporation of India, the Central public sector unit, recently constituted with Dr Anil Kakodkar, retired Chairman of the Atomic Energy Commission, are no different with regard to its commitments and loyalty to imported technologies and equipment. Based on its own interpretation of the Electricity Act 2003, MNRES is insisting that power utilities in the coun-
19
MNRES was planning to implement, jointly with ANERT, an online solar PV power plant of one MW capacity at Kanjikode. KSEB will be under legal compulsion to purchase energy from this plant at a prefixed price of around Rs 15 per unit, according to the current norms laid down by MNRES. It is an attractive proposal and promises a goldmine for a small rural investor with plenty of black money. True, Saritha, Shalu, Biju and Co have jumped in and dirtied the entire solar programme with all sorts of scandals and pay-offs, as alleged by our Opposition leader and fully endorsed by the Chief Minister. But neither of them seems to be aware of the larger issues involved, and the real issues of governance that affect the life and development of our people.
cost plus basis, in support of the infant solar-pv industry and on moral considerations around global warming. German policy experts, who dominate the EU policymaking process, argue that these apparent subsidies will disappear within 15 to 20 years’ time when solar PV will break even with conventional electricity. Such policies are naturally welcomed by the German industry and their R&D but are not convincing enough for the people of other EU countries. The ongoing recession and consequent fall in demand are further complicating the economics of power utilities in Spain and Italy. The low-cost
A bouquet of 80 flowering `krishnatulasi` plants being presented to the founder- mentor of Vaidya Ratnam Oushdalayam Ashtavaidyan ET Narayana Moos on his 8oth birthday celebrations by Tomyas Advertising Proprietor, Thomas Pavaratty. Eminent lyricist and poet Yusaf Ali Kechery is also seen. Sept 15 - Oct 15, 2013
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B
COMMODITY
Upsurge in bullion; oisterous
moves
were
witnessed in August in global commodities with
the prices of bullion, base metals and energy escalating either to a record high or to multi-year peak levels. This one-sided movement towards the north was not accompanied by similar moves in the major international markets, with the exception of crude oil. Apart from the currency front, there are certain other factors which have also influenced
commodities
during
this period.
Bullion: Bullion prices witnessed an extreme upsurge with gold on MCX posting its record high of Rs 35,074 per 10gm. Taking cues from gold, silver prices too went up during this period. However, overseas gold was rather steady with a mild positive bias. The major pricedriving factors of bullion during this period were: Weak Indian currency: The rupee hit a record low of Rs 68.80 versus the dollar following the parliamentary approval of the $20b plan to provide cheap grain to the poor, raising concerns that the fiscal deficit would blow out of proportion. Since India is the top importer of gold, the landing cost of the commodity would be a central point while determining local prices. A weak currency always lifts up the landing cost of bullion that leads to skyrocketing prices in the domestic market.
Geopolitical tensions: Enduring geopolitical tensions in Syria and Egypt were another major factor behind the recent increase. The war-like situation in Syria escalated gold’s safe haven buying. Usually, inflation fears in an economy prompt investors to invest in the yellow metal. Holdings of Exchange Traded Fund: Holdings of gold ETFs, the barometer of investor interest in the commodity, which had been steady for a couple of weeks, indicate augmenting investment interest. Earlier, constant drop in holdings of exchange traded funds triggered panic selling in bullion. Support from financial turmoil in emerging countries: Even though positive economic releases have been coming from the US and Europe, the economic developments in the emerging countries are not encouraging. Economic uncertainties probably direct buyers to rush into safe-haven investments. Anticipation that selling by institutional investors is mostly over: It was earlier reported that a few major gold investment firms were liquidating their gold reserves. Worries over major selling in the overseas market piloted traders and investors to sell out their physical gold. However, conditions are now favourable as recent reports reveal that investment firms are bullish about their gold outlook. Expectations of increased physical demand from top consumers, India and China: A forecast of a rise in physical demand from the world’s top consumers, India and China, are also lifting the sentiments. According to recent reports, China will overtake India this year in gold consumption. Meanwhile, the World Gold Council anticipates Indian consumption would be the prime one in the coming year. Anyhow, domestic gold traders in the country foresee high physical demand in the coming period due to a good monsoon as that could lead to high-surplus rural income in the economy. Usually, high rural income elevates the demand for gold in India. The upcoming peak marriage and festive season may also lift up the demand from the country. Speculative trading on concerns over US Fed’s tapering of prevailing bond buying programme: Positive economic releases from the US have raised
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worries over tapering off of their prevailing $85 billion bullion-friendly bond buying scheme. A strong economy might lead the US Fed to taper or wind up the economic stimulus packages that will be negative for bullion. However, speculative trading in bullion was seen in the past couple of months which made the commodity volatile. C e n tral Bank buying: Gold buying from any of the central banks would have a positive impact in the market. The World Gold Council had reported gold buying from several central banks in the previous quarter which supported gold as well. Energy and base metals: In the energy segment, crude oil prices in the domestic market created a new high of Rs 7,784 a barrel in August. In Indian bourses, futures had gained by more than 50% since the last week of April. In international markets, prices recovered from their recent low of $85.61 a barrel last month and tested a high of $111.76 posting a gain of more than 31%. Worries over Syrian and Egyptian political issues escalated concerns over supply tightness in the market. Involvement of Iran, OPEC’s sixth largest oil producer, in the conflicts was also a major talking point during the period. Shrinking US crude inventory levels and positive economic releases from both the US and China also supported the northbound move. Base metals: Despite subdued trends being seen in the key London metal market, barring nickel, base metals on MCX surged to multi-year high with copper and lead making a new lifetime high of Rs 512.70 and Rs 155.35 a kg respectively last month. On LME as well as SHFE, the broad trend in base metals is still looking frail. However, copper, nickel and aluminium are in the vicinity of their weakest level in about three years on the LME. Presently, uncertainty lingering in the market over tapering off of the US Federal Reserve’s massive bond buying programme is being pondered over in the market. Mounting worries over geopolitical
crude at new high tensions in the Middle East are affecting sentiments. However, fundamentally, most of the base metals are currently on a surplus. The recent rally in MCX was probably due to the steep depreciation of the local currency against the US dollar. The Indian rupee has depreciated rapidly and this year so far it had lost about 18% versus the dollar. Considering the trend of commodities for the last few sessions, it is noticeable that wide swings are being witnessed in the market even after the rupee stops trading at 5 pm in domestic markets. Trading of the Indian rupee in the NDF (non-deliverable forwards) market that operates outside the country seems to have potentially a lot to do with the current developments in the local currency and upon the commodities. The southwest monsoon rains in this season have so far been above average in most parts of the country perhaps leading to a bumper kharif crop, making 235 million of indigenous farmers cheerful. During this monsoon, the major kharif-producing belts in the country have all received plenty of rainfall and improved prospects of Indian foodgrain production would beat its two years-earlier record of 257 million tonnes. However, during this period the performance of key Kerala-based commodities was rather steady with a mild positive bias. Rubber: Tight supply crunch due to extreme climatic conditions propped up rubber prices domestically, pushing the RSS4 grade near to a one-year high in August. Due to successive heavy rains in major growing areas in Kerala entire tapping activities were halted, leading to deficiency in supply. Unlike previous years, in this monsoon season, the use of rain guards has been on the lower side as growers desisted from rain-guarding the trees due to a subdued trend witnessed during the initial months of the quarter. However, conditions are now suitable and planters have restarted tapping though it is yet to resume in full swing. In the ready market, RSS4 prices are currently quoted around Rs 187 a kg while in the futures market, the most active contract in NMCE is trading around Rs 185. Until two years
ago, rubber prices in both domestic and overseas markets were held firm but renewed concerns over the global growth outlook forced the commodity into negative territory. Besides the US and Eurozone, economic developments in the emerging countries are also affecting the commodity broadly. Mounting inventories and weak demand outlook are the major price drivers in the overseas market. Huge inventories have been reported in Chinese warehouses. Mounting stocks at China’s closely watched bonded warehouses in Qingdao make up the bulk of China’s inventory and are placed well above their usual levels of 2,50,000 tonnes. Due to the burgeoning inventory, imports into the top consumer, China, have plunged significantly also threatening the prices.
Recently, the ongoing supply crunch and high local prices are prompting tyre manufactures to import from other countries where rubber is more economically available. Indian RSS4 continued to trade at a premium to Malaysian SMR20, Thai RSS4 as well as Indonesian SIR20 grades and the gap recently widened significantly after the recent jump in prices in the domestic market. The wide gap between domestic and overseas prices too encourages them to make use of imported rubber. Apart from the monetary advantage, the quality of the ribbed smoked sheets available is also a reason why the tyre manufacturers relied heavily on imports. However a weak rupee is making imports costlier and less attractive.
the reports that around 900 tonnes of adulterated pepper locked up by the Food Safety and Standards Authority of India in warehouses would be destroyed. Earlier, the Food and Safety authorities had sealed around 7,000 tonnes of pepper which were held in NCDEX warehouses due to reports of adulteration. According to reports, Vietnam has already sold 75%-80% of its crop this year and remaining inventory will be tightly controlled. Pepper export from the other top producer Indonesia is also estimated to be lower due to a significant drop in production during the year. Market sources say that Indonesian harvest is still continuing and is expected to be completed soon. Cardamom prices have traded extremely weak for the last few months due to rising arrivals and diminishing physical demand. Arrivals in the auction market were relatively high as compared to earlier periods. In the ma-
21
jor spot market the average price of the commodity is quoted at Rs 631 a kg. Cardamom exports from India in AprilJune 2013 stood at 505 tonnes, up from 198 tonnes a year ago, whereas shipment of large cardamom declined to 130 tonnes from 241 tonnes, according to the latest data from the Spices Board of India. Heavy rains in key producing areas of Kerala have washed away hopes of the bumper cardamom crop, with traders now expecting production of the spice to be around 30% lower in 201314. Reports of quality of the crop and high stock levels weighed down prices as well. Growth of fungus in cardamom crops has damaged the quality of the spice. Cardamom stocks in the MCXcertified warehouse were also held steady, pressuring prices. (Inputs from Geojit Comtrade Ltd)
Since Kerala is contributing around 90 percent of the total natural rubber production in the country; their productivity will remain a central point while determining domestic prices. Performance of Indian currency would be another talking point of importers as high landing cost would curtail imports. Anyhow, feeble global demand outlook remain a threat in the international prices in the coming period. Pepper and cardamom: Pepper traded higher on reports of a rise in demand from the major spot markets. It has been traded steady with positive bias for the last couple of months amid marginal daily arrivals. Prices have been trading in a range of Rs 405-Rs 420 per kg for the last couple of months. Concerns over quality were also raised because of improper crop processing. Due to prolonged wet weather conditions, domestic pepper production was perhaps affected and propped up prices. Prices were also supported by Sept 15 - Oct 15, 2013
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Tech Vision
Cheque truncation in tune with tech age
B
anking in the country has recently gone through a paradigm shift in its services. The industry is providing speedier and safer services to its customers. The mundane style of services is history, thanks to the technological advancement and proactive approach of the Reserve Bank of India to uplift the industry on a par with the peers in advanced countries. The latest in the series of reform is cheque truncation system (CTS) for clearing cheques. It has now been implemented in select circles, but is being introduced throughout the country from September 1, 2013.
KS George
Earlier the sorting of cheques for presentation at clearing houses was done manually. By introducing MICR (magnetic ink character recognition), sorting could be easily done through machines. However cheque movement continued as earlier.
According to the norms for getting payment of a cheque, the instrument is to be presented physically. The system of stopping the movement of physical cheques by bankers and presentation of those cheques as electronic images in clearing is understood as cheque truncation. This would effectively reduce the time required for clearance, the associated cost of transit and delay in processing etc. A major complaint of bank customers had been the delay in collection of cheques, both local and outstation. If there are sufficient bank branches in a locality, the RBI used to allow a clearing house to be managed by the State Bank of India or the State Bank of Travancore (except where the RBI is managing the clearing house). The representative banks could assemble there at the prescribed time and get the local
cheques presented and cleared. However, the geographical area is very limited (usually the corporation/municipal-panchayat limits). So cheques drawn on banks in other places are treated as outstation and sent to the branches at those places, which present them at their clearing houses and get payment and advise the presenting bank. No doubt, in this process delay can occur at various points. The time for realization of outstation cheques used to be 5 to 15 days depending upon the distance between the payee’s bank and the drawee’s. Earlier the sorting of cheques for presentation at clearing houses was done manually. By introducing MICR (magnetic ink character recognition), sorting could be easily done through machines. However cheque movement continued as earlier. Of late, though faster methods of payment and settlement systems like RTGS (realtime gross settlement), NEFT (national electronic fund transfer) and NECS (national electronic clearing service) are in vogue, the volume of cheques used for settlement of payments is still very high. So it has been the RBI’s endeavour and that of all concerned to put in place a better system which also could conform to the international standards.Contrary to perceptions, cheque truncation is a more secure system than the current one in which the
cheque moves from one point to another, thus not only creating delays but inconvenience to the customer if the instrument is lost in transit or gets manipulated during the clearing cycle. In addition to operational efficiency, cheque truncation has several benefits to banks and customers including introduction of new products, up-to-date receipts and payments mechanism for customers, human resource rationalization, cost-effectiveness etc The new system was introduced in Chennai In September 2011. Since April 2002 Chennai clearing has been covering some banks in Bangalore and Coimbatore. In the next stage it will cover Kerala, Karnataka, other parts of Tamil Nadu, Andhra Pradesh and Pudussery under a grid-based approach. The next stage will be a single clearing zone for the entire nation. CTS has already been implemented partially in Kerala since April 2012 at Thiruvananthapuram, Ernakulam and Thrissur. All the member banks in Thiruvananthapuram have started using CTS and the clearing house there has been merged with the Bankers Clearing House, Chennai, from June 6. 2013. Other centres in Kerala are expected to join the CTS shortly. Section 6 of the Negotiable Instrument Act (NIA) relating to cheques was amended in 2002 to include the electronic image of a truncated cheque and a cheque in electronic form. Section 81 of NIA will also give legal validity to electronic cheques. According to Section 6b of NIA, a truncated cheque means a cheque truncated during the course of the clearing cycle either by the clearing house or by the bank whether paying or receiving payment immediately on generation of an electronic image or transmission, substituting the further physical movement of the cheque in writing.
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23 As and when the cheque in the physical form is tendered by the customer, the presenting banks will keep the physical cheque in their custody, giving a unique identifier to the instrument, capture the image of the instrument by using their capture system (comprising a scanner, core banking or other application) which is internal to them, but conforming to the specifications and standards prescribed for data and images.
is provided to the presenting banks for processing. The clearing cycle is treated as complete once the presentation clearing and the associated return clearing sessions are successfully processed. The image files messaging and transmission across the banks and clearing house could be ensured through structured financial messaging system (SFMS) and INFINIT of the
The clearing house will arrive at the settlement figure and do the image routing and processing to send image files of cheques to the drawee bank .This is called the presentation clearing. The drawee bank receives the data and images from the clearing house through its CHIs for payment processing and the branch will follow imagebased inward and outward return on verification of signature of drawer already held in electronic form with the drawee branch.
To ensure security, safety and non-repudiation of data/images, endto-end public key infrastructure (PKI) has been implemented in CTS. As part of the requirement, the collecting bank (presenting bank) sends the data and captured images duly signed and encrypted to the central processing location (clearing house) for onward transmission to the paying bank (destination or drawee bank). For the purpose of participation the presenting and drawee banks are provided with an interface/gateway called the clearing house interface (CHI) that enables them to connect and transmit data and images in a secure and safe manner to the clearing house. The clearing house will arrive at the settlement figure and do the image routing and processing to send image files of cheques to the drawee bank .This is called the presentation clearing. The drawee bank receives the data and images from the clearing house through its CHIs for payment processing and the branch will follow image-based inward and outward return on verification of signature of drawer already held in electronic form with the drawee branch. In the outward return, the returned instrument is allocated a fresh unique identifier and a return reason (image return document; which if necessary can be used to present the cheque again). The drawee CHIs also generate the return file for unpaid instruments, if any. The return file/data sent by the drawee banks is processed by the clearing house in the return clearing session in the same way as presentation clearing and return data
RBI which is public key infrastructure (PKI)- enabled. CTS benefits issuers of cheques, especially big corporates and Government organizations, who used to take back the paid cheques from their bankers. They can be provided with images of cheques by their bankers for internal requirements, if any. As only the images move, the time taken for receipt of paid cheques is reduced which also gives an early opportunity to the issuers of cheques to detect fraud or alterations, if any, in terms of what (and to whom it) was issued and what (by whom it) was realized. CTS brings elegance to the entire activity of cheque processing and clearing. Cheque frauds can be greatly reduced with introduction of minimum security features prescribed under CTS Standards 2010, with embedded verifiable features such as bar-codes, encrypted codes, logos, watermarks, holograms etc for early interception of altered/forged instruments. To meet legal requirements, the presenting banks which truncate the cheques need to preserve the physical instruments for 10 years. CTS is a right RBI step to make the clearing system very efficient at the same time saving the banks from a lot of complaints from customers about clearing. When the system functions in full swing the realization of a cheque can be received in 24 hours in any part of the country and the customer can use the funds thereafter (The writer is former General Manager of South Indian Bank)
Sept 15 - Oct 15, 2013
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BANKS
UBI home loans at best rates O
submit their applications online through the banks’ website www. unionbankofindia.co.in. Loan will be sanctioned in five days on receipt of the complete set of required documents. Moratorium of 18 months is also provided during construction period. Loan can be re“There are no hidden paid in EMI extending to charges. Bank also al30 years. Options are also lows prepayment, pre cloavailable for graded EMI, sure without any penalty. flexible EMI with differing More over the bank is EMI in tune with increase T C John having all the technology in salary per year, and bullinked products to comlet payments. For renovapete with any other public sector tion, the bank is extending financial and new generation banks”, says T assistance up to Rs 10 lakh repayC John, Deputy General Manager, able in 10 years. Margin requirenodal regional office, Union Bank ment for loans up to Rs 75 lakh is of India, Ernakulam. The bank is only 20%. Top up facility up to Rs having its own marketing manag5 lakh against 50% of the amount ers ready to help the beneficiaries repaid is also available to prompt to complete the formalities, and repayment parties. Bank also ofhas focal points called Union Loan fers credit card facility to home loan Points, specially designed to meet borrowers free of annual charges. the retail customers especially in UBI is one of the largest pubthe home loan sector. lic sector banks having presence In tune with the new era of techacross the country spread over nology, intending beneficiaries can ne of the leading nationalized banks, Union Bank of India(UBI), is offering home loans up to Rs 75 lakh at their Base Rate which is only 10% at present. This is one of the best rates offered by any other banks.
3500 odd branches. They are the Lead Bank in fourteen districts in the country including Ernakulam and Idukki districts in the state. Union Bank has established its presence in Ernakulam district with more than 63 branches spread across the district and played a key role in declaring Ernakulam as the first district in the country having achieved 100% meaning financial inclusion as envisaged by the Reserve Bank of India. They are in the forefront in lending to retail sector especially to the home loan sector. Ernakulam District is being led by the Nodal Regional Office at Ernakulam. Many new projects like Smart City are going to be a reality in Kochi necessitating huge demand for shelter. Many reputed builders within and outside the state are starting new housing projects in the city resulting greater competition among builders and the lenders. And the Union Bank of India is all set to assist the aspiring minds with the lowest interest rates
O
Yusuff Ali buys stake in Dhanlaxmi Bank too
A
fter holding the stake in the two Kerala –based scheduled private banks—the Federal Bank and Catholic Syrian Bank, MA Yusuff Ali, the Managing Director of MK group of companies, is to buy stake in Dhanlaxmi Bank too, a private sector lender headquartered in Thrissur. He is also seeking the possibility to own shares in South Indian Bank (SIB), another Thrissur-based bank. Yusuff Ali, the Kerala - born NRI businessman having business network in Gulf countries and Kerala, has invested Rs 1,600 crore in Lulu Mall, Kochi. MK Group, a $6-billion asset- holding conglomerate, is indulging mainly in retail business. Dhanlaxmi Bank is the oldest private sector bank in Kerala having presence in other Indian states also. Yusuff Ali will become the first Indian to have shareholdings in four private banks, if his wish for SIB share is fulfilled
Federal Bank introduces e-passbook
nce again Federal Bank has proved that it is customercentric and innovative: it has come out with another novel product - electronic passbook for its customers. The e-passbook, FedBook, introduced at a media meet in Kochi on August 30, is a first-of-its-kind in the country’s banking industry. No more queues in bank to update the passbooks, no more query over the phone or waiting for SMS alerts, no more unnecessary visits to the bank.
FedBook is a fine solution to all these time-consuming practices. Customers can freely download and install it on their smart devices such as mobiles and tabs and access it through a simple registration process. They can view all their transactions in their multiple bank accounts online and even offline 24/7. At present it is available only on the Android platform, but will soon be accessible on other platforms. The application is user-friendly and secure. It enables real-time access to transactions; free from the restriction of business hours and bank holidays. “Federal Bank has been leveraging technology and has always believed in offering customer-centric and innova-
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tive solutions. With the launch of FedBook, banking will become handier and add a new dimension to mobile-based solutions”, said Sunny K P, Deputy General Manager, Technology & Operations, at the launch. “This innovative product will provide a fillip to the bank’s existing array of products and services,” he added. “FedBook comes with a host of user-friendly utilities, which include ‘search’ to filter out specific transactions, facility to tag personalized remarks to transactions etc,” said Surendran, GM and Head-Retail & International Business. Transaction details can be viewed even when there is no internet connection. The length of the period of transactions that FedBook can carry can be customized. Currently savings bank accounts, current accounts, term deposits and overdrafts are added to it. Federal Bank received the best IT Team Award for small banks of the Institute for Development and Research in Banking Technology (IDRBT), established by the Reserve Bank of India, in 2003. It has also received the Best Mobile Banking App Award among small banks twice
25
RISK COVER
Insurance is for security; not investment W
hy do we need insurance in life? Is it not unwanted drain on our family budget? Such lingering doubts persist in the minds of the Viswanathan Odatt common people in India. The increasing number of insurance companies coming up in the private sector aggravates this doubt about ‘exploitation’ by the insurance companies. In this context it is necessary that we clarify the vital role of insurance in our life – be it life insurance or general insurance like motor vehicle insurance or fire insurance. The purpose of insurance is to provide security to our assets and belongings and take care of our health and life safely guarding from any untoward happenings. Therefore there cannot be any doubt that we certainly need insurance cover not only to self and family but all our belongings and assets. Unfortunately, in the recent past there has been a lot of mis-selling in the insurance field, which has created apprehensions and doubts in the minds of people about the efficacy and effectiveness of insuring our assets or life. Insurance needs to be sold customized to meet the needs of the individual, taking into account his paying capacity and needs for insurance. Insurance policies should not be taken as an investment venture and should be based on the need for safety and protection in life. This can be illustrated by the actual experience of a person who had taken a life insurance policy for Rs 50,000 to be paid up in 25 years. He had actually paid by way of premium Rs 68, 000 within the specified period of 25 years and got only Rs 1,00,100 on maturity. If this person had paid the same premium amount for a
recurring deposit to a bank he would have certainly got much more than Rs 1, 00,100. The fact that insurance is absolutely inevitable to guard us from untoward incidents in life will be evident from the real-life situation given here. Manoj, a native of Kunnamkulam, got a good placement abroad. Like all Malayalees, he constructed a very good house spending all his earnings and taking a housing loan from a commercial bank. Many friends advised him to take a term insurance plan for his life to cover the liabilities of house construction.
bank. In insurance there are several policies to safeguard us against any contingencies in life. These policies can be customized to each person’s income and needs. A level cover policy and a loan protection policy are some of them. There are also policies which will increase the sum assured according to the inflation without increas-
ing the premium. Insurance coverage should be for security and safety, security for self and family and safety for loved ones. Never for Investment. (The writer is Director, AIMS Insurance Broaking Pvt Limited. Phone: 9895768333, E-mail: odatt@aimsinsurance.in)
In fact an Insurance adviser from a leading insurance company also approached him telling him to take policies to cover his loan liability. Manoj was reluctant and said that he had no time to take a policy and would consider it after a few days. He returned to his job and as bad luck would have it, he met with an accident while going to his office and died. Now his depressed hapless parents are struggling to settle the debt incurred by their son for constructing the house. A little vision and diligence by Manoj would have saved his parents’ agony and misery. There are many such incidents to site. Another pathetic story is that of Anitha, an MBBS student in the second semester in a private college in Tamil Nadu. Her father was an NRI and had got her admitted paying substantial amount as capitation fee. He had taken an educational loan from a nationalized bank. Unfortunately he died of a massive heart attack. He had not taken any insurance coverage for his life. After his death, Anitha could not continue her studies because of defaults in payment of fees. Anitha approached financial advisers and insurance consultants asking them whether she could get any financial assistance for continuing her education and also clearing the financial liability from the Sept 15 - Oct 15, 2013
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Policy premiums should not exceed 30% of one’s income
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eople b u y life insurance policies and keep paying the premiums. As long as they Sanjeev Kumar are able to pay the premiums or they do not have to look at policies to get some money to meet certain requirements they will not have any worry about their policies. But there are some things which could create trouble for them in the future if they have not structured their life insurance portfolio optimally. Take the case of Joy Joseph. He was finding it difficult to meet his income and expenses. His problem was that his total premium payments constituted a big portion of his total payments. While working out his financial plan, it was found that he needed to save additionally for meeting his goals but he was in fact having shortage of funds month after month. The returns
that could be expected from the life insurance policies were also low. I suggested to him that he surrender a few policies. The suggestion was aimed at helping him to generate a monthly surplus so that he could save the required amount towards his goals. How will you know if your premium payments have exceeded desirable levels? The answer is that while reviewing the policies you should check if your total life insurance premium payments exceed 50% of your savings requirements or 15% of your income. If it so happens, you should consider reducing your exposure to investments through life insurance. You may ask what is particular about these percentages. The answer is that it is something one learns through experience over a period of time. Anilkumar, an NRI, had 30 policies which included policies from Indian and international insurance companies. As
most of his savings went into life insurance policies his overall returns were very low. His investments did not seem to earn reasonable returns to meet his goals. He could not afford to save additionally in other investment products. He later surrendered a few policies and bought a residential plot in his home town. Everybody knows that returns from real estate are much higher than those from insurance investments. He allocated the property to his retirement goal. When he returns he can sell it and use the proceeds to generate regular retirement income. Traditional life insurance policies have low risk but returns are also low. Traditional life insurance policies on average gives about 6% per annum returns and for money back policies the returns could be even less than 4%. In the case of ULIP policies the yield after adjusting for various costs on average could be about 10% only. So it is important that you should check your overall investment returns considering investments through life insurance, mutual funds, fixed deposits, stocks, bonds etc. If the returns are lower than what you can expect from your risk tolerance level, you should restructure your investments. As long as your investments in life insurance are less than 30% of your total investments, you need not worry about your policies. In the above case his life insurance requirement was calculated and for the shortage of cover he bought a term life insurance policy. Thanigai Moni, a businessman in rural Tamil Nadu, had
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about 100 ULIPs and 34 traditional policies over a period of time. When business was doing well he subscribed to whatever the policy agents were suggesting thinking that they were like fixed deposits. The agents made him think like that. They told him that he had to pay premiums for three years and after that he could get back the money with high returns. His annual premium payment requirement was more than Rs 1 crore. A few years later when his business went down, he was in need of money. He realized that he was in a trap. He found that the fund value of the ULIPs was less than the premiums paid and the traditional policies if surrendered would fetch him a very low amount. If you put a majority of your savings in life insurance policies, you can end up in liquidity issues. Life insurance promotes thrift savings or forced savings. The benefits will be very low if stopped in between. So you are forced to save till end. If you are not forced to save you will stop the savings after some time, take off the money and spend it. But the flip side is that if you save more in life insurance policies, you could end up in a situation where you will not have money to meet shortto medium-term needs. Aanakku odikkan thadiyundu, kaduku pothiyan elayilla! Life insurance is meant to protect the family from financial losses arising out of the untimely demise of the breadwinner. The death of the incomeearner could derail life’s goals, could
27 push the family into the debt trap and bring down the standard of living. Hari is earning a salary of Rs 30,000 per month. He saves Rs 9,000 towards his goals and pays about Rs 10,000 towards living expenses. He has a home loan of Rs 10 lakh outstanding for which the EMI is about Rs 11,000. His wife is not working. He has 2 two children. If he meets with an untimely death, how will his wife be able to make all these payments? She has to surrender the house to the bank as she will not be able to repay the EMIs. She will not be able to save for the goals like children’s education or even live in the same way they were living. If Hari has the required life insurance cover he could avoid such a bad situation. There is an easy method to get approximate life insurance requirement. He should calculate how much is
When you deal with an agent or a broker make sure that he has a process to assess your life insurance requirement and suggests a suitable policy. You should double-check and make sure that you can expect the returns as suggested by the agent or broker. required to put as a bank fixed deposit so that a portion will grow enough to meet life’s goals, and the other portion will pay monthly interest good enough to meet living expenses of the family. Add to that his current liabilities. From that deduct the current insurance cover and value of assets. The resultant figure is the total additional life insurance requirement. While reviewing life insurance it is essential to find out the life insurance cover actually required and structures the life insurance portfolio accordingly. We can see many people buying life insurance policies as means to save their money. They often do not think about the purpose for which they are buying. For example, when a children’s education policy is bought, the buyer should check the maturity payment dates. If the maturity payment dates do not match the college years then the policy will not serve the purpose for which it is taken. Most often in India most of the amount is required at the time of college entry. But most insurance policies pay a majority of the maturity benefits in the last year of college. This will also not help to pay the goal cost at the time of requirement. Narayanan’s daughter was 10 years old when he bought a marriage
endowment/education annuity plan from LIC to save towards his daughter’s marriage. The policy was good in terms of the return and cover it provided. Its term was 20 years. Narayanan was ignorant of the importance of the term to select. The agent told him about the high bonus and also that if a minimum of three premiums were paid he would get benefits. Narayanan religiously paid premiums every year till his daughter reached 24 years of age. Her marriage was fixed. When he went to withdraw the investment he was told that it would mature after six years only and if he surrendered it then, he would get him very poor benefits. It was a shock to him. So while you review your insurance policies you should check if there is a mismatch between the goal dates and policy maturity payment dates. If the policy matures before the goal date, you can manage it without many problems. You just need to reinvest the maturity benefits according to the time horizon available till the goal. If the goal is to occur after three years from the policy maturity date, you can invest the maturity proceeds in a balanced mutual fund or if the time horizon available is less than three years, you can keep it as a bank fixed deposit. But if the goal is before the maturity date then you will have big trouble waiting for you.
Pradip Unni on advisory council for World Brand Congress
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radip Unni, Principal Brand and Marketing Strategist with Evoke Ideation, a Kochi-based branding and marketing consultancy, has been selected to the International Advisory Council for the World Brand Congress 2013 to be held in Mumbai in October. The World Brand Congress is the single largest event that brings together branding and marketing experts from around the world. These include the brains behind some of the world’s most successful and sought-after brands. The congress is a meeting place for leaders from every sector and continent with over 500 of the world’s branding and marketing elite under one roof. Pradip Unni is a branding and marketing professional with over 20 years of experience in the field having worked extensively in India and abroad. Currently based in Kochi, where he consults for companies from diverse industries. Reacting to the news of his selection, Unni said, “It is an honour to be selected to the International Advisory Council of a prestigious event such as the World Brand Congress. The conference is an opportunity to meet fellow professionals in branding and marketing and share ideas with them.” “The theme for this year’s meet is Sustainable Brands and I hope to be able to share the success sustainable branding has brought to Kerala as a tourism destination”, he added. Details of the World Brand Congress are available on www.worldbrandcongress.com. Pradip Unni can be contacted at +91 8606290790 on pradip.unni@gmail.com
Life insurance policies help to protect the family from financial losses due to untimely death as well as help to save towards life’s goals. But every policy has a purpose. So you need to select the right policy for your need. You should also be aware of your total life insurance cover requirement. Certain agents tend to give wrong information about the returns the policy holders can get. They often tell them that the premium has to be paid for three or five years only. What they mention is the minimum number of annual premiums to be paid to be eligible for surrender value or to keep the policy in force. In reality they are also ignorant about the returns that can be expected from a policy and also the harm in mentioning the minimum premium payment period. When you deal with an agent or a broker make sure that he has a process to assess your life insurance requirement and suggests a suitable policy. You should double-check and make sure that you can expect the returns as suggested by the agent or broker. (The writer is Managing Director and Principal Financial Planner, Progno Financial Planning Systems (P) Ltd) Sept 15 - Oct 15, 2013
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LENDING
Home loans
Precautions should be taken W
e have a lot of financial institutions offering loans for constructing houses/flats and for renovating or expanding existing ones. Vijayan Menon Some of them also offer loans for outright purchases of houses/flats. But as the facilities offered by these institutions are varied in nature with the promise of additional benefits in future, we need to evaluate and compare the offers of these institutions threadbare before finally accepting an offer. The main factors to be carefully evaluated for comparison are the initial interest rate, loan processing charges, the time taken for sanctioning the loan, the possibility of increase in interest rate and the added liability on repayment. The areas that need critical review for comparison of the loan offers are: transparency and simplicity of the agreement for the loan; simplified procedures and formalities for getting the loan; competitiveness of the interest rates; penal rate of interest that may be levied for any default in repayment of loans and possibility of premature closing of the loan without any penal rate of interest. All these factors are very important and significant because these may favourably or adversely affect our overall liability for repayment. Since the loan agreement is for a long period we must
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evaluate the possible additional liabilities on account of the above factors. For example, some of the financial institutions initially offer a lower rate of
the time taken for sanctioning the loan, the possibility of increase in interest rate and the added liability on repayment.
ect, age, qualifications, number of dependants, stability and continuity of income, etc. The loan period ranges from 5 to 20 years, with relaxation of age on a case-to-case basis. Rebate under Section 80C of the IT Act 1961 for interest payment on housing loans up to Rs 1,00,000 in a financial year towards principal repayment and deduction under Section 24(b) of the IT Act for interest payment of housing loans up to Rs 1,50,000 in a financial year (subject to fulfilment of conditions laid down by the IT Act).
interest for attracting customers but increase the rate of interest subsequently. Some others charge an additional rate of interest for a fixed period for premature closing of the agreement. All these will certainly affect our repayment liability. Another important factor is the time taken to process the loan and the simplicity in the procedures of getting it sanctioned. We must know that the estimated loan amount and the documents we submit for proof of income, viz the salary certificate, bank statements, pan card, details of income tax return filed etc, are interrelated. For instance, an individual who wants a loan of Rs 10,00,000 for 10 years must be able, by producing supporting documents as shown above, to prove that he has a sustainable regular income to repay the loan liability in the specified timeframe. In short, sanctioning of loan depends on income and age of the applicant, the estimated loan amount and the regular sustainable income of the applicant supported by documentary evidence. The main factors to be carefully evaluated for comparison are the initial interest rate, loan processing charges,
Sept 15 - Oct 15, 2013 Sept 15 - Oct 15, 2013
GIC Housing Finance Ltd (GICHF), promoted by the five leading Central public-sector insurance companies - General Insurance Corporation of India, The New India Assurance Company Ltd, United India Insurance Company Ltd, The Oriental Insurance Company Ltd and the National Insurance Company Ltd - provides housing loans to resident Indians and NRIs at a very competitive rate. It also renders GICHF extends ‘doorstep service’ to customers, calling on them as and when they need personal help to process their loan request. The processing charge irrespective of the loan amount is Rs 2,809. Administration charge depends on the schemes. unmatchable service terms. Its interest rate starts with 10.25% fixed for five years, and after that the rate is linked to the company’s basic lending rate. GICHF’s products are: loans for resident Indians/NRIs – house/flat construction/purchase; loans for repairs and renovation of existing house/flat; mortgage loans against house property and housing loans for corporate builders. Loan eligibility is based on repayment capacity of individuals - salary income/ business/professional income back-up with proper proof; for NRIs considering salary income only. Loan eligibility is based on consideration of other parameters like cost of proj-
GICHF extends ‘doorstep service’ to customers, calling on them as and when they need personal help to process their loan request. The processing charge irrespective of the loan amount is Rs 2,809. Administration charge depends on the schemes. The added benefits/advantages of using housing loans from GICHF are: 1. It offers free insurance cover to the borrowers against accident death; free property insurance cover; it also offers home guard loan - personal life insurance coverage against single-time premium – very competent to the market; Hassle-free loan process - technical and legal inspections will be conducted without any hassle to customers, whereas some institutions are forcing their clients to run from pillar to post for reports. Going by any standard, this is the right time for an investment in house because it is the only industry where there has been continuous appreciation in asset value. That is why we see a boom in construction activities. Evaluating the present economic scenario in India, the continuous erosion in the intrinsic value of the rupee, the upward spiralling cost of the necessities of life, the galloping trend of inflation and artificially articulated increase in fuel prices, the only venture offer assured appreciation for our investment is the building industry. Investment in this sector has been continuously appreciating and will continue to do so at least for one or two decades to come. In Kerala GICHF has offices in Kochi and Thiruvananthapuram, apart from its authorized direct selling agents. ( The writer is CEO, Bima Bazar Ph.: 9447753560)
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STOCK MARKET
I
BRICS decision to set $100b pool may revamp the market
t seems the dull note on stock market is almost over before the end of the second term of this financial year. There are a number of reasons that brought cheers to the market. The appointment of Raghuram Rajan’s assumption of office of RBI Governor rejuvenated the market to some extent and the investors become confident and come back to the market. Evolving a diplomatic solution for the Syrian crisis has also made a positive impact on Indian bourses.
RBI’s active support against falling rupee value helps to regain it to some extent and Rajan has announced quite a few steps on his first day in office aiming to bring back the economy on rail. The consensus reached among BRICS (Brazil, Russia,India, China and South Africa) countries, to set a $100 billion foreign currency reserve pool to counter the impact of a pullout by foreign investors in their respective markets made Indian investors optimistic about the market. However, stock market experts expect the market will continue to remain under pressure in the month of September, but not to the extent of August. The anointment of Narendra Modi as BJP’s Prime Minister candidate may apply as a favorable factor as stock market is concerned. But the possibility of Modi is still skeptic even in BJP circles. The investors should be vigilant in this tricky situation. The substantial market decline in the recent past may lead to some bounce back, but the expectation of US quantitative easing withdrawal in mid of September will keep the market under pressure.
prevailing now, it will not fully stem the nervousness in markets but it can at least stop it from causing damage sentiments that are hurt by issues beyond its control. Central government and Finance Ministry are also trying to bring back economy growth by passing pending bills in Parliament, approving various projects. Impending elections in Cen-
tral and few state assemblies will create more pressure on central government to take more active steps to ensure employment, reduce inflation for getting support from public and foreign investors. Presently, exporters are permitted to re-book cancelled forward exchange contracts to the extent of 25 per cent of the value of cancelled contracts and importers are not allowed to do so. RBI should enhance the limit available to exporters to 50 per cent and allow a similar facility to importers to the extent
of 25 per cent.
Shares like Reliance, Tata Steel, Tata Motors, TCS, Federal Bank etc good for short term investment. There are certain favorable indicators from the sectors like Auto, IT, Steel, Pharma, Telecom, FMCG sectors also. Moreover, the second quarter result of the companies is to be out after this month. This is unlikely to give a better hope for the market as the performance of the companies may not be a morale booster after a long lull in the economy. Because the result of the companies depend on the inflation valuation. Political uncertainty still lingers as India is on the verge of parliamentary election and an early election could not be ruled out. By October second week the trend of the market may almost be clear. Like any other Asian market in India also the FIIs play a pivotal role . But, one can not expect a sustainable presence of FIIs in any market, if the rupee depreciates or any sort of uncertainties are prevailing on the market
they will opt for another place where they can survive. Even if the market is bearish the investors may recoup by means of futures and put options by which they can hedge the shares and sell when the market would be buoyant. The IIP data, the inflation data and the Federal Reserve review are the indicators of the market trend. But it will not spell big impact on the stock index. The RBI mid-quarter review of monetary policy on 20th instant and mid quarter results of companies will be the factors that determine the market sentiment. There is possibility of the Nifty to rally between 6,000 and 6,100 level. The outcome of the election is not predictable. An early election impulses are on the card. The BJP is the only party that projected its candidate for the prime ministership. The other major coalitions like the UPA and proposed third front have still not disclosed their game plan. It is not quite sure whether Manmohan Singh will get the third chance to be in the prime minister’s mantle or the young blood Rahul Gandhi will jump on to the throne. So, the months ahead are eventful times. There are a lot of scope for speculations in political circles and in the equity market as well. (Inputs from Raghavan of Nirmal Bang Securities; Ignatius Kulirani of Karvy Stock Broking and JeromeJoseph of Vertex Securities)
The RBI has no reason to ease its tight liquidity policy that it introduced on July 15, 2013, though the rupee reversed its trend recently, none is saying the currency has stabilized. Same as in the case of inflation. Though it has come down, still it is hovering above nine percent. However, the market is expecting certain favorable signals from the apex bank. The reduction of marginal standing facility (MSF) rate, which was raised by 200 basis points to 10.25 per cent to be reversed at 100 basis, is one of the major expectation in the market circle. This will nullify the panic situation as regards the liquidity crunch in the market. The MSF was raised in tandem with capping of the liquidity adjustment facility to make the rupee’s carrying cost dearer. Even if RBI opts for reversal of its tight liquidity stance Sept 15 - Oct 15, 2013 Sept 15 - Oct 15, 2013
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CONSUMERS
The brief, tragic reign of consumerism and the birth of a happy alternative millennia.
By Richard Heinberg
Y
ou and I consume; we are consumers. The global economy is set up to enable us to do what we innately want to do — buy, use, discard and buy some more. If we do our job well, the economy thrives; if for some reason we fail at our task, the economy falters. The model of economic existence just described is reinforced in the business pages of every newspaper, and in the daily reportage of nearly every broadcast and web-based financial news service, and it has a familiar name consumerism. Consumerism also has a history, but not a long one. True, humans — like all other animals — are consumers in the most basic sense, in that we must eat to live. Further, we have been making weapons, ornaments, clothing, utensils, toys and musical instruments for thousands of years, and commerce has likewise been with us for untold
What’s new is the project of organizing an entire society around the necessity for ever-increasing rates of personal consumption.
This is how it happened Consumerism arose from a unique historic milieu. In the early 20th century, a temporary abundance of cheap, concentrated, storable, and portable energy in the form of fossil fuels enabled a dramatic increase in the rate and scope of resource extraction (via powered mining equipment, chain saws, tractors, powered fishing boats and more). Coupled with powered assembly lines and the use of petrochemicals, cheap fossil energy also permitted the vastly expanded manufacture of a widening array of commercial products. This resulted in a serious economic problem known as overproduction (too many goods chasing too
few buyers), which would eventually contribute to the Great Depression. Industrialists found a solution. How they did so is detailed in a book that deserves renewed attention, “Captains of Consciousness” by social historian Stuart Ewen (1976). Ewen argued that “Consumerism, the mass participation in the values of the mass industrial market….emerged in the 1920s not as a smooth progression from earlier and less ‘developed’ patterns of consumption, but rather as an aggressive device of corporate survival”. What could possibly go wrong? Meanwhile critics had identified a couple of serious problems with consumerism. First problem: Consumerism, according to the critics, warps human values. Social critics of consumerism like Duane Elgin, Juliet Schor and Vicki Robin have argued that relationships with a product or brand name are dysfunctional substitutes for healthy human relationships and that consumer choice is a soporific stand-in for genuine democracy.
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A second and more crucial problem with consumerism, say the critics, has to do with resource limits. Environmental scientists assert that, regardless of whether consumerism is socially desirable, in the long run it is physically impossible to maintain. The math is simple: even at a fraction of one percent per year growth in consumption, all of Earth’s resources would eventually be used up. The consumer economy also produces an unending variety of wasters, of which water, air and soil can absorb only so much before planetary life-support systems begin unraveling. Advocates of ecological economics have pointed out that the consumer economy treats Earth’s irreplaceable capital; (natural resources) as if it were income…an obvious theoretical error with potentially catastrophic real-world results. Often this critiques have led to a simple personal prescription: If buying ever more stuff is bad for the environment and turns us into vapid mall drones, then it’s up to each of us to rein in our consumptive habits. Buy nothing! Reuse! Recycle! Share! Yet treating consumerism as though it were merely
31 an individual proclivity rather than a complex, interdependent system with financial and governmental as well as commercial components is both wrong and mostly ineffectual. Consider this simple thought experiment: What would happen if everyone were to sud-
dismantle consumerism or replace it with something better, it would have done so by now. Crisis time Still consumerism as a system cannot continue indefinitely; it contains the seeds of its own demise. And the natural constraints to consumerism — fossil fuel limits, environmental sink limits (leading to climate change, ocean acidification and other pollution dilemmas), and debt limits _ appear to be well within sight. While there may be shortterm ways of pushing back against these limits (unconventional oil and gas, geoengineering, and quantitative easing), there is no way around them. Consumerism is doomed. The happy alternative
denly embrace a Gandhian ethic of voluntary simplicity? Commerce would contract; jobs would vanish; pension funds would lose value; tax revenues would shrivel; and so would government services. Absent sweeping structural changes to government and the economy, the result would be a deep, long-lasting economic depression. This is not to say that personal efforts toward voluntary simplicity have no benefit… They do, for the individual and her circle of associates; however, the system of consumerism can only be altered or replaced through systemic action. Yet systemic action is hampered by the fact that consumption has become self-reinforcing. Those with significant roles in the system who try to rein it in get whacked, while those who help it expand get stroked. Nearly everybody wants an economy with more jobs and higher returns on investments. So for a majority the incentive to shut up and get with the programme is overwhelming. Arguments against consumerism may be rationally irrefutable, but few people stop to think about them. If mere persuasion could
It is not too soon to wonder what comes after consumerism. If we have some idea of the circumstances that are likely to emerge in the decades ahead, we may get some clue as to what those alternative arrangements might look like. As we’ve already seen, the consumerist economy of the 20th century was driven by cheap energy and overproduction.
The point of GNH and HPI is to count economic success more by how people feel about their lives and circumstances and less by measuring consumption (which is what GDP does, in effect). Happiness metrics are kryptonite to consumerism, which has been shown time and again to make people less satisfied with the circumstances of their lives. A wholesale official adoption of GNH or HPI by the world’s nations would ultimately lead to a profound shuffling of priorities. Governments would have to promote policies that lead to more sharing, more equity, more transparency, and more citizen participation in governance, since it is these sorts of things that tend to push happiness scores higher. The guardians of the consumer economy are not stupid. They will not permit the wholesale introduction of happiness metrics absent necessity. But, as we’ve seen, necessity is coming. As the current consumer economy frays and sputters, policy makers will need increasingly to find ways to pacify the multitudes and give them some sense of direction. Beyond a certain
point, promises of a return to the days of carefree shopping will ring hollow. Moreover, upon first consideration, happiness indices appear relatively innocuous: they merely propose an alternative to GDP, which many economists acknowledge is deeply flawed anyway. The happiness movement cannot solve all our problems. By itself, it can do little directly to address climate change, water scarcity, overpopulation, or a dozen other converging crises — though it could overturn an economic paradigm that tends to exacerbate all of them. Happiness indices may constitute adaptation that could ease the transition from one economic mode to the next, reducing the trauma that will likely accompany the demise of consumerism. GNI or HPI may be effective packages in which to “sell” sufficiency to policy makers and citizens; they may also be pathways to a genuinely superior mode of human existence. (Third World Network Features.)
All signs suggest the new century will be shaped by energy limits, environmental sink limits and debt limits — and therefore by declining production per capita. Under these circumstances, policy makers will surely strive to provide a sufficiency economy. But how do we get from a consumerist economy to a sufficiency economy? Perhaps the most promising clue comes from the emerging happiness movement. Since the 1970s, the tiny Himalayan kingdom of Bhutan has experimented with Gross National Happiness (GNH) as a measure of economic success, and recently convened a meeting at the United Nations to advocate widespread international adoption of GNH. Concurrently, the New Economics Foundation of Britain has begun publishing an annually updated Happy Planet Index (HPI), which ranks nations by the self-reported levels of happiness of citizens and by the size of countries’ ecological footprints. Sept 15 - Oct 15, 2013 Sept 15 - Oct 15, 2013
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GROWTH COMPANIES-VIII
The fastest-growing tyre company
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pollo Tyres Ltd, with its corporate headquarters in Gurgaon, has been in the business of manufacture and sale of tyres since its inception in 1972. Over the years, the company has grown much, establishing its footprint across the globe. It has manufacturing presence in Asia, Europe and Africa, with nine modern tyre facilities and exports to 118 countries. Powered by its key brands — Apollo, Dunlop (brand rights for 32 African countries) and Vredestein
Rs 79 (investment received back by around two times as dividend). In other words, an investment of Rs 4,000 has appreciated to Rs 65,000. Though headquartered in Gurgaon, the company had its beginnings and registered office in Kerala. The idea of the company’s formation occurred to two Keralites, Mathew Marattukulam, Managing Director of the erstwhile Ruby Rubber Works Ltd, Changanassery, and Abraham Tharakan Thekkanattu parayil, Marketing Manager of the company. The plan to start an automobile tyre factory in Kerala came to Abraham’s mind during the visit of the General Manager of a Hungarian rubber factory to Ruby Rubber Works in 1969. Abraham mentioned it to Mathew Marattukulam who offered all support. Abraham was then made the General Manager of Ruby’s tyre project.
Abraham Tharakan Parayil
- the company offers a comprehensive product portfolio spread across passenger car, light truck, truck-bus, offhighway and bicycle tyres, retreading materials and retreaded tyres. At the
“The estimated project cost
had escalated considerably with the oil crisis in the early 1970s and the original promoters found it difficult to raise the funds. That was when Raunaq Singh stepped in and took over Apollo Tyres
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end of its financial year on March 31, 2012, Apollo had clocked a turnover of $2.5 billion, backed by a global workforce of approximately 16,000. Apollo Tyres is traded in India on the Bombay, National stock exchanges, with 53.06% of shares held by the public, Government entities, banks and financial institutions as on June 30, 2012. In this issue PASSLINE portrays how Apollo Tyres has helped those who invested Rs 40 in 1991 to make
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Getting the licence from the Union Government or entering into a technical collaboration with a foreign company was not easy in those days. Abraham met Dr Rama Varma, the then Chairman of Kerala State Industrial Development Corporation (KSIDC). Varma approached then Chief Minister Achutha Menon, who wrote a personal letter to Indira Gandhi, the then Prime Minister. Ruby got the licence. K T Chandy, a great visionary and one of the architects of industrial Kerala, who succeeded Varma as KSIDC Chairman, took keen interest in the project. In fact he was the one who suggested the name Apollo Tyres. The promoters were tied up with General Tires, one of the major tyre companies in the US at that time, for technical collaboration. T V Thomas, the then State Industries Minister, laid the foundation stone for the project at Perambra in Thrissur district. The estimated project cost had escalated considerably with the oil crisis in the early 1970s and the original promoters found it difficult to raise the funds. That was when Raunaq Singh stepped in and took over Apollo Tyres. Apollo Tyres Ltd (ATL) was incorporated on September 28, 1972, and it obtained the certificate of commencement of business on October 24, 1972. The company was promoted by Bharat Steel Tubes Ltd, Raunaq International
Sept 15 - Oct 15, 2013
Pvt Ltd, Raunaq & Co Pvt Ltd, Raunaq Singh, Mathew T Marattukalam and Jacob Thomas.
The company manufactures automobile tyres and tubes, camelback/ retreading materials and rubber conveyor belts. In 1981 after the expiry of the original agreement the company negotiated with General Tire International Co, US, for the renewal of the technical collaboration for a further five years. In 1987, the company acquired interest in Gujarat Tyres Ltd for implementing an industrial licence to manufacture automobile tyres and tubes in Gujarat. It finalized a proposal for promoting a company in joint participation for carrying on business in pipelaying, drilling, coating contracts and other engineering, designing, consultancy and management services. A total of 6,52,000 equity shares were allotted at par to financial institutions in conversion of loans for raising the capital.
the-art R & D centre. A number of hightechnology radial products were developed and introduced. A network of more than 2,500 dealers in the country was created during 1991-94.
T V Thomas, the then State Industries Minister, at the foundation stone-laying ceremony of Apollo Tyres.
A new plant for manufacturing In 1988 the company set up a plant tubes and flaps at Ranjangaon near with a capacity of 6.75 lakh tyres per Pune was commissioned in 1995. annum at Limda, Baroda, Gujarat, at The company entered into an agreean estimated cost of Rs 168.96 crore ment with Continental AG, Germany, and promoted a new company, Rau- for setting up a passenger car radial naq Aker Drilling Ltd, in technical col- tyre factory with an initial production laboration with Aker capacity of 4.7 million Drilling A/s, Norway. such tyres per annum, The company was to with a capital outlay of undertake multifarious Rs 400 crore, at Pune. onshore and offshore This was a 50:50 joint drilling services/reventure between Apollated activities in India lo and Continental. and also entered into an agreement with In the same year Persterp AB, Sweden, BIFR approved the for promotion of a joint rehabilitation scheme venture company in for revival of Premier the name of Gujarat Tyres Ltd (PTL) envisPerstorp Elektronics aging its takeover. PTL Raunaq Singh Ltd. It undertook manbecame a subsidiary of ufacture of electronicthe company later and grade copper-clad laminates. Radial Apollo emerged as the largest exporttyres for Maruti Suzuki cars and pre- er of tyres registering a phenomenal mium tyres for trucks were launched 102% increase in exports. during 1989. In 1997, Apollo set up shop in all The company proposed exports of the major cities in India as Apollo light commercial vehicles (LCVs) and Tyre World (ATW) through Vora Tyres, farm tyres in addition to truck tyres, equipped with state-of-the-art testing and undertook modernization, upgra- equipment and facilities for tyres. It dation of technology, installation of line signed a letter of intent with the global balancing equipment and a state-of- major Continental AG for a 50:50 joint
33 venture for setting up a Rs 4.7 million passenger car radial facility. ATL has many firsts to its credit. The first Indian company to have an ISO 9001 accreditation for the entire product range is one among them. It has emerged as the fastest-growing tyre company in In-
ever to continue to be a Director and Non-Executive Chairman of the Board of Directors, liable to retire by rotation. The Board of Directors also appointed Onkar S Kanwar as the Chairman, D Sengupta, former Chairman of GIC as an Additional Director and Raaja R S Kanwar as Director. In 2003, it entered into a technical and financial collaboration with the Michelin Group and in 2004, Compagnie Financiere Michelin, Switzerland, acquired 57,12,500 shares amounting to 14.90% of the total paid-up capital of Apollo. Michelin Apollo Tyres Pvt Ltd (MATL), a 51:49 joint venture between the Michelin Group and ATL announced the launch of a range of truck and bus radials for the Indian market.
In August 2004, ATL announced the opening of Apollo Pragati Kendras, exclusive outlets for selling the entire range of its farm tyres to the agricultural dia (turnover up six-fold in the last five years) and the community and later introduced a new range of tubeseventh fastest in the world. The company proposes less car radials. On April 17, 2005, the Perambra unit to step up its radial capacity at the Vadodara plant celebrated its 30 years of successful operations. It also entered into a distribution tie-up with Triveni Khushali Bazaar, specialized farm goods suMar 13(12) Mar 12(12) Mar 11(12) permarkets promoted by Sales 12,794.63 12,153.29 8,867.98 Triveni Engineering and Industries Ltd, for retailing Other Income 94.45 43.40 26.03 its farm tyres. Total Expenses 10,684.06 10,340.35 7,889.73 Perambra unit of the company
Annual results
Operating Profit Interest Gross Profit Provisions Made Depreciation Taxation Net Profit / Loss
0.00 312.77 0.00 0.00 396.56 244.84 613.80
0.00 287.29 0.00 0.00 325.60 144.35 412.12
0.00 185.21 0.00 0.00 271.94 106.33 440.80
Equity Capital
50.41
50.41
50.41
to 57,000 tyres a month, in addition to the current output of 8,500 radials at Kochi. Apollo Tyres has desubsidized two wholly owned companies - Apollo Finance and Apollo International - by diluting its holding in both to below 51%.
In 2006, the company rolled out DuraTreads and executed an MOU with the Tamil Nadu Government for setting up a tyre manufacturing facility and decided to acquire Dunlop South Africa for Rs 290 crore.
The company split the face value of its share from Rs 10 to Re 1 in 2007 and in 2008 diversified into transport and logistics and established a plant in Hungary. In 2009 it acquired 100% shareholding
Year 2012/03 2011/03 2010/03 2009/03 2008/03 2007/03 2006/03 2005/03 2004/03 2003/03 2002/03 2001/03 2000/03 1999/03 1998/03 1997/03 1996/03
Dividend details Dividend (%) 50 50 75 45 50 45 45 45 45 45 45 40 50 40 40 40 40
control of Vredestein Banden BV, Netherlands, and in 2010 launched Vredestein tyres in India. It also introduced six new products in the European market. Apollo Tyres South Africa (Pty) Ltd (ATSA), a whollyowned-subsidiary of Apollo Tyres Ltd, was formed. In 2011, the Tamil Nadu Government and the company signed an MOU on investment of Rs 2,100 crore as part of Apollo’s greenfield project. Apollo Tyres acquired stake in Cooper Tire & Rubber Company in 2012. A person who invested Rs 40 in 1991 has already received Rs 79 as dividend (investment received back by around two times). If he had invested Rs 4,000, his capital appreciation would have been Rs 65,000. (Information provided by Babu Vettoor. Contact No.: 98 95 35 67 23)
Apollo International meanwhile set up a subsidiary firm, Infonet Worldwide, for providing IT solutions to corporate clients. The company set up a greenfield project at Ropar in Punjab to manufacture 100 tonnes a year of agricultural and off-the-road tyres, ie mainly tyres for tractors and earthmovers. The company has a total installed capacity of 1.5 lakh truck tyres a month. The two plants in Kerala have a capacity of 70,000 tyres a month, the Baroda plant has a installed capacity of 55,000 tyres and the conversion arrangement with TCIL contributes another 25,000 a month. In 1999 Apollo signed an agreement with National Securities Depository Limited (NSDL) for holding and trading of shares in demat form. The Kalamassery unit had won the 26th National Competition for Young Managers for the year 2000 organized by the All India Management Association in New Delhi. The company zeroed in on Tamil Nadu for setting up its Rs 450-crore greenfield truck radial tyre manufacturing plant. It posted a 48.48% decline in net profit at Rs 3.22 crore for the quarter ended September 30, 2001. In 2002, the company appointed Raunaq Singh as Managing Director. He was howSept 15 - Oct 15, 2013
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NEWS
M and B Switchgears Ltd is now Ujaas Energy Ltd
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and B Switchgears Ltd has changed its name from August 19, 2013 into Ujaas Energy Limited “in order to more accurately and categorically define the nature of the company’s business.” ‘Ujaas’ means ‘light at the dawn’.
Net up nearly 2700% Ujaas is progressing rapidly its net profit rising 2672.88% to Rs 16.36 crore for the quarter ended March 2013 from Rs 0.59 crore during the same quarter ending March 2012. Sales rose 913.08% to Rs 178.20 crore in the quarter ended March 2013 (Rs 17.59 crore).
The first to generate and sell solar renewable energy certificate (REC) For the full year, net profit rose 2835.87% to power in the country from its solar Rs 27.01 crore for the year ending March 2013 (Rs power plant of 2 MW commissioned 0.92 crore). Sales rose 614.70% to Rs 242.57 crore as M & B Switchgears, a proprietary as against Rs 33.94 in 2012. concern, the company was started by Shyam Sunder Mundra in 1979. The single window to own a solar power plant, right transformer manufacturing company was converted into a partnership concern in 1995 from selection of land to selection of technolowith Shyam Sunder Mundra and his sons Vika- gy; putting up a solar power plant; getting all the lp Mundra and Anurag Mundra as partners. In permissions; selling power to third-party buyers; 1999, tit became M and B Switchgears Private issuance of REC; trading of REC till the final reLimited and in 2011 a public listed company af- alization reach to the account of the investor. It ter its maiden IPO. Now Ujaas Energy Ltd, it is also undertakes operation and maintenance (O an ISO 9001:2008 and ISO 14001:2004-certi- & M)) responsibility for the next 20 years. fied company. Under its corporate social activities the comUjaas Park is a plug and play model of service in solar projects at an affordable cost. It is a
pany has installed and powered many villages with solar-based street lighting
KFC hands over Rs 16.46 cr as dividend to Govt K
erala Financial Corporation (KFC), the pioneer industrial financing institution of Kerala, the other day handed over a dividend cheque of Rs 16.46 crore to the State Government. Finance Minister K M Mani received the cheque
from KFC Chairman and Managing Director P Joy Oommen. KFC, which had posted the highest-ever profit of Rs 66.83 crore and a growth rate of 46.38% for FY 2012-13 , had declared a dividend of 8% to its
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shareholders.
With improvement in all operational areas, KFC has increased the quality of its assets and reduced its net NPA to 0.36%. It has also registered record growth in critical operational areas like sanction, disbursement, recovery, interest income etc. Its net worth has increased to Rs 383.76 crore with 17.77% growth. The capital adequacy ratio (CAR) is at 24.94%, far above the minimum norm of RBI-prescribed 9%.
KFC had recently come out with innovative schemes to provide financial assistance of up to 90% of the project cost for modernizing manufacturing units at effective interest rates of 11% for the manufacturing sector and 12% for the service sector. It had also mobilized low-cost funds from the market by raising Rs 200 crore
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“M
‘Metro rail, a lever for reinventing Kochi’
etro will change the way the city is being perceived by outsiders and it will prove to be a lever for reinventing the city. This will also lead to the integration of all forms of transportation in the city, which is a basic condition for the project sanction,” said
Elias George, MD, Kochi Metro Rail Corporation, addressing the KMA members. (L-R) Prasad K Panicker, Chairman, Programme Committee, KMA; S Rajmohan Nair, President, KMA; and Jibu Paul, Honorary Secretary, KMA. Elias George, Managing Director, Kochi Metro Rail Limited (KMRL), addressing Kerala Management Association (KMA) members in Kochi the other day on the topic ‘Makeover for Kochi City’. S Rajmohan Nair, KMA President, welcomed the gathering and Prasad K Panicker, Chairman, KMA Programme Committee, introduced the chief guest. Jibu Paul, Honorary Joint Secretary, proposed a vote of thanks
Shreyas opens east-west containerized trade link
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hreyas Shipping & Logistics Limited, Mumbai, has added two new services in coastal shipping, thus becoming the first company to link all key ports of the country for con-
go by sea mode and with the proposed east-west corridor, Shreyas targets to achieve 5% containerized cargo shift to the sea mode”. Singh also says that sea transport has proved to be safer and more efficient worldwide. S Ramakrishnan, CMD, says: “India has decent infrastructure for moving cargo in the north-south corridor. With these services, we have contributed to networking all key ports providing a cleaner, more viable and more efficient alternative to domestic movement of cargo via the searoute.”
tainerized trade. Cargo can now be shipped between any key port within the country. The linking of the ports for domestic movement of cargo will also help Vallarpadam terminal, Mundra etc to be promoted as a transshipment hub. Shreyas now has five vessels focused on providing this nationwide network.
Shreyas is India’s first container feeder owning and operating company and was incorporated in 1988. It came out with an IPO in 1994, and started operations primarily to fill the gap for feedering of containers between Indian ports and international transshipment ports such as Dubai, Jebel Ali and Colombo.
On the impact of a robust east-west corridor, V K Singh, CEO of Shreyas, says, “Efficient transportation infrastructure by sea has tremendous social and economic benefits for the nation. The current north-south corridor handles around 3% containerized car-
During the first quarter of the current financial year, the company’s topline has increased by about 30% to Rs 113.10 crore over the corresponding quarter of the previous year. Profit after tax stands at Rs 2.87 crore
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Young entrepreneurs going places, doing things
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wo fledgling companies that have charted their own paths to success typify the new face of entrepreneurship in Kerala which has undergone a sea change in the past year thanks to a combination of positive governmental action and the sheer energy and inventiveness of youth. Profoundis and The People’s Company are both the brainchildren of young people who have stepped out
of the traditional mould of thinking in Kerala which has tended towards jobseeking and risk-aversion; they have both been the beneficiaries of a new eco-system that favours innovation and enterprise; and their diverse functional areas demonstrate just how dynamic this new entrepreneurial culture is. One month after Startup Village was inaugurated as India’s first telecom technology business incubator in April 2012, four engineering graduates set up their data analytics company, zrofoundis, at the new facility. Fifteen months on, Profoundis has become the first Indian company to be chosen for Blackbox Connect, a unique accelerator programme designed to help non-US startups access the resources of Silicon Valley in the US and scale globally. Profoundis CEO Arjun R Pillai and COO Jofin Joseph will travel to the US in October for a two-week immersion programme consisting of training workshops, seminars, networking opportunities and visits to major IT companies to familiarize themselves with the successful entrepreneurial and work culture of Silicon Valley. Profoundis’ core product is a testimonial management system called iTestify. It designed primarily for e-commerce website and other online selling portals. Still in beta stage, it already has notched up more than 260 signups. Clients for Profoundis’ other web services range from telecom major Vodafone to a Finland-based NGO. Another group of youngsters riding Kerala’s start-up wave are Raqib
Rasheed, Ashik Salim, Syamkrishnan P A, Anto D Akkara, Shehaz V B and Muhammad Junaid, who shunned job offers at multinational companies to take up a project for reviving Kerala’s handloom sector where more than 50,000 traditional weavers are struggling to survive. Even before passing out of the College of Engineering in Thiruvananthapuram last academic year, the group got together to float a start-up venture – The People’s Company– that has now won a contract from the Kerala Government to support the ailing handloom sector as part of the first phase of gradually reviving sick public sector units. Under the two-year contract, effective from July this year, The People’s Company will integrate all weavers’ societies into a single production system and create linkage between newgeneration fashion designers passing out of national institutes, and traditional weavers, with the larger goal of breathing fresh life into the industry. “Towards the end of our course in college, we approached Additional Chief Secretary (Industries and Commerce) V Somasundaran with our blueprint for the revival of sick PSUs. Impressed by our proposal, the Government gave us a two-year contract with the target of helping revitalize the handloom industry, keeping the weaver community as the major beneficiary,” says Raqib.
Abraham George is new President KTM to explore new markets
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The last edition of the prestigious braham George, the new President of the Kerala Travel Mart event held in Kochi in 2012 had at(KTM), has said that KTM 2014 will ex- tracted over 1,160 buyers from around 50 countries besides plore new markets and various states in India. identify more quality Since its inception in buyers from East Asian, 2000, KTM has grown South American and into the largest trade fair European countries. of its kind in the subconAbraham George, who tinent, bringing together was elected President all stakeholders in the at the annual general tourism industry, inmeeting of the orgacluding businesses and nization the other day Abraham George policymakers, on to one said that KTM would try to benefit from the rupee devalua- platform. tion and penetrate the global market to The election of Abraham George, make use of this opportunity. Chairman and Managing Director of Stating that the aim was to re-po- Intersight Group of Companies, as sition KTM to make it more beneficial KTM President for 2013-15 was unanito its members, Abraham George said mous. Office-bearers and members of that the introduction of facilities like the Managing Committee, tasked with organizing the tourist visa on areighth edition rival, now availof the biennial able at Kochi event in 2014, and Thiruvananwere also electthapuram aired. They are are: ports for citizens Vice-President of 11 countries, - Gopalakrishwould strengthnan M R; Secen KTM’s camretary - Anish paign to bring Kumar P K; Joint in more buyers Jose Pradeep Anish Kumar P K Secretary - Roy from overseas. Chacko; TreaKTM would cooperate with the ministries concerned surer – Jose Pradeep; Managing Comto have more countries added to the mittee members - Baby Mathew, Dilip Pottamkulam, Hari Kumar C, Janeesh list. J, Jose Mathew, Mathew C Thom“KTM 2014 will also chalk out novel as, Mathews E V, Ravindran K, Riaz initiatives to showcase Kerala as a ma- Ahmed, Riyaz U C, Ross Masood, Sajor tourist destination, besides offering jeev Kurup V and Scaria Jose. Mathew new and varied products and servic- Philip continues as CEO of KTM es,” he said.
“It is wonderful to see energetic and proactive youngsters like them coming forward to revive the handloom industry, a move which will be of great benefit to marginalized weavers of Kerala. Connecting traditional handloom weavers and young fashion graduates is a great concept. The Government will extend all support for such innovative ventures, “observed Principal Secretary (Industries) Shri P H Kurien. “These youngsters’ choosing a social cause signals a new revolution piloted by our enterprising youths,” says Sanjay Vijayakumar, Chairman of the Startup Village Board of Governors. “Many ventures like Profoundis and The People’s Company are quietly taking shape on school and college campuses in Kerala,” says Sijo Kuruvilla George, CEO of Startup Village Sept 15 - Oct 15, 2013
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New initiatives for student entrepreneurs
Passline News Services
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tartup Village’s milestone achievement of securing 1,000 applications in 15 months took on added shine on Independence Day this year as the State Government announced the rollout of its flagship Student Entrepreneurship Policy to schools in the second phase. Chief Minister Oommen Chandy in his Independence Day speech cited the example of Startup Village, India’s first telecom technology business incubator, as a testament to the success of the policy which was announced by the State Government at the Emerging Kerala Global Connect in September last year and offered a number of incentives for college students wanting to set up business startups. In its second phase, the Student Entrepreneurship Policy, which is designed to encourage innovations by youngsters, will be extended to schoolgoing students. Around 10,000 bright school students from classes VIII to XII will be chosen through an online examination and provided computers and other learning material to improve their technology skills as part of the new project. “Young people are going to provide the strength for Kerala’s forward march, and our duty is to provide them with the opportunities here at home,” the Chief Minister said. “It is very clear that employment and growth opportunities around the world in the next 50 years are going to be based on technology,”
he said. He declared that September 12, the anniversary of the Emerging Kerala meet, would be celebrated in the state as Entrepreneurship Day.
The state government is also launching a new project that offers 100 teams of five college students each a Startup Tool Box, which will have high-
end computers, smartphones and other technology items required to create a startup company. “Startup Village in Kalamassery has got more than 1,000 project proposals with novel ideas and concepts in just 15 months. This and the fact that Kerala today has 125 functional startups show how widely the Government’s policies have been embraced within the student community,” Chandy said. Startup Village’s milestone was reached in exactly 479 days since the
MES-AIMAT comes into being
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he MES Advanced Institute of Management and Technology (MES-AIMAT) has started functioning
at Marampally, Aluva. Inaugurating the institution the other day, Public Works Minister V K Ibraham Kunju said the MES management had set an example by starting a new professional college for self-financing courses like MBA and MCA. “There are ample opportunities
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for bright MBA and MCA holders and the MES establishment should strive for grooming high-profile professionals”, he said and asked the college authorities to develop MES-AIMAT into a centre of excellence. K K Abu Backar, former MES State President, presided over the function. Dr Muhamed Aslam, MES-AIMAT Secretary, described the evolutionary growth of MES. M Ali, MES State Secretary, and Dr A Biju, MES College Principal, offered felicitations. Dr Antony Gregory, MES-AIMAT Director, welcomed the gathering and Dr Abraham Meleth, MBA Department Head, proposed a vote of thanks
Sept 15 - Oct 15, 2013
setting up of the incubator on April 11, 2012, as a public-private partnership between the Department of Science and Technology, Government of India; Technopark, Thiruvananthapuram; and technology firm MobME Wireless. Nearly 80% of the incubating companies there are product startups which
require nurturing and support in the initial stages because it will take them at least three years to mature and demonstrate explosive growth. “Young people in India today have access to education on a par with global standards. This is the resource pool that is going to create knowledge, employment and wealth for society and the nation in the future. We see this raw, creative energy at work in places like Startup Village. A charged, vibrant ecosystem like Startup Village will be a catalyst
for change and it will put Kerala on the global stage,” said Kris Gopalakrishnan, Co-founder and Executive ViceChairman of Infosys and the Chief Mentor of Startup Village. “Few people would doubt that technology is going to be the driver of economic growth in the next 40 years. IT services and products are going to be at the centre of it,” said P H Kurian, Principal Secretary, State Department of Information Technology. “The most important raw material for a knowledge-based economy is human capital and we have plenty of that resource in our educated, skilled and talented young people. Our efforts are now to leverage this strength.” “By extending the Student Entrepreneurship Policy to school level, Kerala will seamlessly have a programme where young minds from 8th standard have the opportunity to explore original thinking and learn computer programming languages in depth which will give them a great foundation to begin a startup from the first year in college and have a successful company by their fourth year in college,” said Sanjay Vijayakumar, Chairman, Board of Governors, Startup Village. Sijo Kuruvilla George, CEO, Startup Village said: “Kerala is fast achieving the critical mass for startups and crossing 1,000 applications has been a tremendous milestone in 479 days. This state is at the cusp of a startup revolution and the excitement among the youth and on college campuses has not been seen in a long time.”
Science coaching classes for high school students T
he Kerala State Council for Science Technology and Environment (KSCSTE) is launching a series of special coaching classes for high school students to help widen their knowledge base and build a scientific temperament among them. The classes will supplement science lessons taught in schools and the scheme is supported by the District Institute of Education &Training (DIET), Thiruvananthapuram, which functions under the Department of Education. The inaugural programme will be a day-long seminar titled ‘Sasthra Sameeksha’ to be conducted on September 28, at Sasthra Bhavan,
Pattom. The classes will be taken by reputed science teachers and will cover topics such as ‘Science in the Class & Home’, ‘Computer as an Educational Tool’ and ‘The World of Science Fiction’. Each school can nominate three to five Class IX students and one science teacher, if they are interested, to take part in the programme. Sixty students will be enrolled in one batch. The schools may send names of the participants to The Principal, DIET, Attingal, Thiruvananthapuram, before September 20. Details can be had at phone No: 9447321100
Manappuram moves to new corporate office
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old loans giant Manappuram Finance Ltd has moved into a new corporate office building at Valapad (Thrissur district). Inaugurating the building the other day, Maharashtra Governor K Sankaranarayanan recalled that while hundreds of banks in the US and Europe had folded up in the wake of the global economic slowdown, none of the banks or even small cooperative banks in India had closed, signalling the strength
V P Nandakumar, Managing Director and Chief Executive Officer, recalled the company’s humble start at Valapad village in1949 by the late V C Padmanabhan, his father. While Manappuram had grown over the years to acquire a nationwide footprint, what had not changed was the company’s commitment to Valapad, Nandakumar said.
Praising Manappuram’s CSR initiatives, the Governor said this was what distinguished the company from others. He suggested that the company should consider diversification into other activities as a measure of prudence.
Tvm Joyalukkas Jewellery celebrates fourth year T
he fourth anniversary celebrations of Joyalukkas Business Group’s Joyalukkas Jewellery’s Thiru-
Ashalatha and Balakrishnan, the popular radio presenters of Hello Joyalukkas, interacted with the customers
vanathapuram showroom were inaugurated by film actor Suresh Gopi the other day. Thiruvananthapuram Mayor Chandrika, Joyalukkas Group Chairman Joy Alukka, Executive Director P P Jose, General Manager-Gold P D Jose and Retail Manager P D Francis attended the function along with many eminent personalities.
present at the showroom. Brand ambassador Suresh Gopi handed over the jewellery to those who bought for Rs 2, 50,000 or above. Exquisite designs of gold, polkky, diamond, precious stones, silver gifts and silver ornaments are displayed at the showroom in connection with the anniversary
B N Raveendra Babu, Executive Director, gave details of the building
Maharashtra Governor K Sankaranarayanan inaugurating the new corporate office of Manappuram Finance Ltd. Company Director V M Manoharan, MD and CEO V P Nandakumar, Chairman Jagdeesh Capoor, Manappuram Healthcare Ltd Director Sumitha Jayasankar and Riti Jewellary MD Sushama Nandakumar are also seen. of the country’s banking system as well as of the economy, though the value of the rupee had gone down recently. He was sure that the rupee would come back strongly.
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which is centrally air-conditioned. It has an area of about 1,00,000 square feet with a seating capacity of 780 employees. It conforms to green standards, with structural glazing, rainwater storage and harvesting. Others who spoke included Geetha Gopi, MLA, Msgr Francis Alapatt, Vicar General, Archdiocese of Thrissur, and Jagdish Capoor, Chairman of Manappuram Finance Ltd. I Unnikrishnan, Executive Director and Dy CEO of the company, proposed a vote of thanks
Finance Minister KM Mani launching entrepreneur week in Technopark, Thiruvananthapuram, Kerala. IT Secretary PH Kurian and KFC MD P Joy Oommen are also seen.
S A S Navaz assumes office of CIAL Air Cargo Complex
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A S Navaz, Deputy Commissioner of Customs, has taken charge of the Air Cargo Complex, Cochin International Airport Ltd (CIAL) from September 1, 2013. He will also hold additional charge of Air Customs (Administration) and Air Intelligence Unit. He replaces Deputy Commissioner C Madhavan and Assistant Commissioner Anil Kumar. With the postings of Navaz, the relationship of all other agencies with Customs is expected to improve and become cordial and friendly again.
Assistant Commissioner in the Service Tax Commissionerate till the end of 2009. He was also appointed the ‘Director of Competition’ for the conduct of Table Tennis during the 35th National Games to be held in Kerala during February 2014. An International Table Tennis Player and presently, Hon Secretary of the Kerala Table Tennis Association and Associate Vice-President of the Table Tennis Federation of India, Navaz is also heading Kerala Olympic Association as its vice-president .
Navaz was the Navaz ‘liaison officer’ deputed From 1998 onfrom the Customs Dewards, Navaz has partment to interact with CIAL twice, from 1995 onwards served Regional Sports Centre, Cotill the airport commenced opera- chin, as Hon Secretary, Vice Presition in 10.6.1999. He is recipient of dent, Executive Committee Member. ‘Commendation Certificate’ from Dr With the concerted efforts of Navaz, Manmohan Singh, the then Finance Regional Sports Centre, Cochin, has Minister of India in 1991 for his ‘drive become a power house sports faagainst smugglers, foreign exchange cilitator in India. The passion of Naracketeers and psychotropic sub- vaz, other than his job, is to develop the infrastructure of Regional Sports stances’. Centre, Cochin, into world-class stanHe was promoted as Assistant dards and to produce international Commissioner in August 2005, post- and Olympic sportspersons from ed to Bangalore where he worked as there Sept 15 - Oct 15, 2013
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PERSONALITY
By Pushpa M
T
he much-sought-after hairstylist and makeup artist Ambika Pillai, with her roots in Kollam and crown in Delhi, has a stylish success story to share with PASSLINE. Clad in black, with that radiant smile on her face, Ambika Pillai is busy styling her customers in her new salon at Vyttila in Kochi. Apart from Kochiites, clients from faraway places such as Thodupuzha and Thiruvananthapuram are there. Students, home-
makers, professionals and celebrities from tinsel town are among them. All of them are freely consulting Ambika, and she in return helps them to realize how fabulous they are. Coming from an affluent family of the cashew industry in Kollam, Ambika never thought of becoming a hairstylist. “Growing up I was never inclined to doing my three sisters’ hairstyles; I was more of a tom boy. I got married and divorced at a very young age. Out of the sheer need to stand on my own foot, rather than take the easy way out by staying under my dad’s protective umbrella, I left home to do my hair and beauty course. It’s only after I started working and my haircut appointments were booked up for months on end that I realized I was quite enjoying the job I was doing,” reminisces Ambika. Her marriage was at the age of 17 and it ended up at 23. She went to Delhi with her two-year-old daughter. She had her training from Shahnaz Husain and Blossom Kochhar. Eventually Ambika became the final word in hairstyles, beauty and make-up. Aiswarya Rai Bachchan, Sushmita Sen, Katrina Kaif, Bipasha Basu, Deepika Padukone… her clientele is astounding. She had held fashion shows in New York, London, Paris, Singapore, Dubai, Mauritius and many other international cities. It was her hands which beautified the granddaughter of Saudi King Fahd on her big day. Ambika has eight salons of her own across the country - seven in Delhi and the eighth, the latest, in Kochi. All salons are unisex. She is planning to start
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three more in Kerala - in Thiruvananthapuram, Kottayam and Kozhikode. “I am a fighter and a hard worker,” says Ambika.“I used to work very long hours. After so many years of nonstop working I have finally reached a stage where I can pick and choose the work I want to do. There are many fashion shows I turn down and many more that I do. On a normal day I work in the salon with appointments only. During the bridal season, I restrict my appointments to not more than 12 brides a day. After decades of working like there was no tomorrow I have finally decided to do it my way.” It might be this spirit and fighting attitude, or her will power or the family background, that moulded the entrepreneur in Ambika. “My whole family is full of very successful businessmen including my father. I would love to believe I am much like him.” She shares a special chord with her daughter too. “Kavitha is the core of my being. Now she is into my business,” says the proud mother. Ambika is very much professional in her entrepreneurship. In all the eight salons there are around 200 staff members. She gives them regular training to her staff, for she wants to assure her clients of her standard and quality, even in her absence. “There is constant training happening at all our salons all the year round to keep hairdressers, makeup artists and skin therapists updated with international trends and techniques.” Interestingly she thinks the biggest challenge in her profession and business is poaching of their skilled staff by other salon owners. She wants to keep the standards in areas such as administration and financial management in her business. She knows the importance of the comprehensive awareness of own business, middle management and team work. “I have to be good at administration and management, though I do admit I am not very good at it. But I have a very competent management head and team that look after that side of my business.” She may not be bothered about the jargon, such as diversification or expansion. But we saw the victorious entrepreneur in her Ambikapillai Sales Pvt Ltd for makeup products which was started in 2008. “We outsource all our products. Right now it’s only available at our salons and online. The plan is to go pan-
India once the whole line of cosmetics comes out. I am open to giving out franchises if I find the right partners.” As she believes in giving back to society, she has been associated with Cankids, a support group for children fighting against cancer. Here, running a beauty parlour is just like self-employment for many ladies. As a successful entrepreneur and makeup artist Ambika advises them: “Training is a must”. To her, the definition of beauty lies in naturalism. “Be comfortable with what you were born with”, she counsels. In Kerala, undoubtedly we can say that Ambia Pillai the hairstylist and the brand ‘ambikapillai’ have taken the industry to the next level. She taught us the difference of makeup and makeover. She pointed out the difference of cutting the hair by a hairstylist and a beautician. She thinks high-end salons and parlours have a bright future here. “I think we have started a trend. People are waiting for a change and I am happy to be part of it.” Yes, Ambika Pillai wanted to stand on her feet, and God blessed her to have wings on her feet.
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