4 Apr, 2008

India A Lucrative Market For Global Luxury Brands

Imtiaz Muqbil

Mr Kamal Nath, Union Minister of Commerce and Industry told the Mint Hindustan Times Luxury Conference that India today is no longer a mere testing ground for international luxury brands but a lucrative market in its own right.

In this dispatch:

1. INDIA A LUCRATIVE MARKET FOR GLOBAL LUXURY BRANDS

2. DUE DILIGENCE BEGINS FOR NON-METRO AIRPORTS

3. NEW SCHEMES TO HELP TEA, COFFEE AND SPICE FARMERS

4. SIX-DAY CHINESE FILM FESTIVAL HELD

5. MASSIVE BUDGET BOOST FOR RESEARCH AND DEVELOPMENT IN ALTERNATIVE ENERGY

6. MORE ALTERNATIVE FUEL CONTENT FOR TRANSPORTATION SYSTEMS

7. CANAL HELPS NARMADA RIVER WATER REACH DROUGHT-PRONE REGION

8. INSTITUTE OF AYURVEDA AND HOMOEOPATHY SET UP IN SHILLONG

9. INDIA, JAPAN SIGN CURRENCY SWAP AGREEMENT

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[Editor’s Note: In order to prevent any inaccuracy, all numbers in the following are being retained in their original Indian reporting format. One crore is 10,000,000, and one lakh is 100,000. Pls use www.xe.com for conversion]

1. INDIA A LUCRATIVE MARKET FOR GLOBAL LUXURY BRANDS

Friday, March 28, 2008 – Mr Kamal Nath, Union Minister of Commerce and Industry told the Mint Hindustan Times Luxury Conference that India today is no longer a mere testing ground for international luxury brands but a lucrative market in its own right. Quoting from the report of Global Consulting firm A T Kearney, Mr Kamal Nath informed that the report recently placed India at the top of a list of emerging markets for global retailers in its 2007 Global Retail Development Index.

“Many factors have contributed to this growth in demand for luxury goods. High salaries of employees in the corporate sector, emergence of new cities, a growing middle class, increasing number of working women and the rise of a new breed of self-employed entrepreneurs in a whole range of business sectors. Yes, we are proud of our new wealth. But let me also stress that India is a developing country with significant development challenges. The business of luxury cannot exist in a vacuum and must be seen from the overall context of equity and inclusiveness. I think it was Francis Bacon who once remarked: ‘Money is like manure; it’s not worth a thing unless it’s spread around’,” he added.

Explaining the contribution to the luxury industry from an Indian perspective, Mr Kamal Nath said that ‘Dharavi’, which is supposed to be Asia’s largest slum, also doubles up as a giant manufacturing cluster. Over the years, many migrants have moved there and have set up one-room factories, which have become extremely successful businesses. Migrants from Gujarat have established a potters’ colony, and tanners from Tamil Nadu have migrated to Dharavi and set up a flourishing leather tanning industry. Other artisans, like the embroidery workers from Uttar Pradesh, started the ready-made garments trade. The 15,000 odd one-room factories, at Dharavi manufacture products worth nearly 500 million dollars every year, a large proportion of which are exported.

“My simple point of showcasing Dharavi is this: the skills of these artisans, and millions of others living in different pockets all over the country – can, and should be, effectively used by the global luxury players to develop their own low cost manufacturing bases. To be sure, quality could be an issue in the short term. But I am sure with the right environment and training, Indian artisans can work with European companies and develop world-class products for customers all over the world, he added.

As regards FDI in luxury sector, Mr Kamal Nath stated that India is keen to encourage the entry of foreign investment in the luxury sector to offer more choices to the Indian consumer. But the Government of India would like to facilitate this entry, at a pace that does not put local manufacturers and unorganized retailers at a risk.

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2. DUE DILIGENCE BEGINS FOR NON-METRO AIRPORTS

Thursday, March 27, 2008 – The Airports Authority of India (AAI) has began the process of legal due diligence for non-metro airports with the appointment of Legal Advisor. The AAI has appointed M/s. M.V. Kini & Co., Mumbai as Legal Advisor for providing legal advisory services for the city side development of the four non-metro airports – Amritsar, Udaipur, Trichi and Vizag. The Legal Adviser will be advising the AAI on all legal matters associated with the successful conduct of the bidding process and execution of the Concession Agreement with the select bidder.

RAGHU MENON APPOINTED AS CHAIRMAN AND MANAGING DIRECTOR, AIR INDIA

Thursday, March 27, 2008 – The Government has approved the appointment of Mr Raghu Menon as Chairman and Managing Director of the National Aviation Company of India Limited (NACIL), Ministry of Civil Aviation. According to an order dated 26th March, 2008, Mr Raghu Menon will be the CMD of NACIL on the superannuation of the present CMD, Mr V. Thulasidas which was on 31 March, 2008. Mr Menon will continue as CMD till his superannuation from service, or until further orders, whichever is earlier and his appointment would be in the rank and pay of Secretary to the Government of India.

Mr Menon, a Nagaland Cadre IAS officer of 1974 batch is presently Special Secretary and Financial Advisor, Ministry of Civil Aviation. In a separate order the Government has approved the appointment of Mr Vishwapati Trivedi, presently Joint Managing Director, NACIL, Ministry of Civil Aviation, as Additional Secretary and Financial Advisor, Ministry of Home Affairs.

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3. NEW SCHEMES TO HELP TEA, COFFEE AND SPICE FARMERS

Friday, March 28, 2008 – The government has approved the Tea Quality Upgradation and Product Diversification Scheme for implementation by Tea Board during the XI Five Year Plan (2007-11) with an outlay of Rs. 230 crore. The scheme envisages payment of subsidy at 25% of the actual cost of machinery for modernization of the processing factories by replacement of old & worn out machinery and for value addition by way of creating additional infrastructure for cleaning, blending, colour sorting, packaging etc. In the case of machinery for orthodox tea in 100% CTC factories and new factories set up by Self Help Groups the subsidy at 40% would be provided. Besides, subsidy equivalent to 50% of the certification fee would be provided for ISO/HACCP and organic tea certification. The production of orthodox tea will have a subsidy at Rs. 3/kg of annual production of leaf grade and Rs. 2/kg for dust grades and an additional incentive at Rs. 2/kg of the incremental volume over the previous year.

The “Export Development and Promotion of Spices” scheme of has been approved for implementation during XIth plan period by the Spices Board with an outlay of Rs. 192.691 crore. The money will be used for development of infrastructure for adoption of high technology in spice processing, technology and process upgradation, setting up of in-house labs and quality certification/accreditation, as well as for product development, research and trade promotion, infrastructure for common cleaning/grading/packing/storing & processing facilities (spices parks) and setting up of Sterilization Units. The Spices Board will undertake market studies abroad under the scheme.

A third scheme approved is for “Development Support for Coffee” by the Coffee Board with an outlay of Rs. 310 crore. The scheme will help coffee growers to improve farm productivity by way of replanting senile blocks; to support water augmentation, quality improvement of the product to augment growers realizations and pollution abatement; to support coffee development in North East Region and in non-traditional areas. During the XIth plan the total area targeted for replantation is 40,000 hectares and the subsidy will be provided at 25%, 30% and 40% to the coffee growers having holdings of more than 10 hectares, 2-10 hectares and upto 2 hectares respectively. Out of Rs. 310 crore, Rs. 100 crore will be spent for replantation programme.

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4. SIX-DAY CHINESE FILM FESTIVAL HELD

Thursday, March 27, 2008 – In an effort to promote cultural relations, a festival of Chinese Films was held from March 28 to April 2, 2008 in Sirifort Auditorium II, New Delhi. Organised by the Directorate of Film Festivals, Government of India and Film Bureau, China State Administration of Radio, Film and Television, the Festival showcased eight films from China.

The formal inaugural was followed by the screening of film ‘Gun of Mercy’ directed by Xiao Feng. A nine-member Chinese delegation headed by Mr.Tong Gang, Director General, SARFT was in India during the Festival.

Since its very first motion picture, “Conquering the Jun Mountain (Ding Jun Shan)” made in 1905, the Chinese cinema has traveled a century long path of glory. Over the past century, the Chinese cinema has evolved from its very beginning to today’s complete industry engaged in film production, theatrical distribution and exhibition and development of post-theatrical market such as DVD, internet, VOD, cable, merchandizing etc.

China has more than 100 films studios and production companies of different sizes. The year 2007 saw a total production of 402 feature films and a considerable amount of science and educational films, documentary films and animation films, setting up the biggest record in history. By the end of 2007, China had 1,427 well-facilitated theatres in urban areas of the country, operating total of 3,527 screens, among which 493 were set up in 2007 alone. In addition, the CCTV Movie Channel broadcasts 12 features films, both domestic and foreign, on daily basis, covering over 700 million TV viewers across the country.

The Chinese cinema has witnessed increasing enhancement in international arena, particularly after worldwide release of Chinese hits like The Knot, The Assembly And Kekexili, among others, which are well received by the world audience. In 2007, 29 Chinese films received 49 accolades on 19 international occasions.

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5. MASSIVE BUDGET BOOST FOR RESEARCH AND DEVELOPMENT IN ALTERNATIVE ENERGY

March 28, 2008 – Rs. 600 crore has been tentatively allocated for Research, Design and Development in New and Renewable Energy during the 11th Five Year Plan (2007-2011). This is up from only Rs. 72.65 crore spent in the previous five-year plan for the same activities by the Ministry of New & Renewable Energy. The Ministry has financially supported about 600 RD&D Projects particularly in Solar Energy. New schemes include ‘Development of Solar Cities’ and ‘Demonstration Programme on MW size Grid Solar Power Generation’.

A total of 33 grid interactive solar photovoltaic power plants have been installed in the country with government financial support. These plants, with aggregate capacity of 2.12 Megawatt, are estimated to generate about 2.55 million units of electricity a year. In addition, around 14.5 lakh decentralized off-grid solar photovoltaic systems aggregating to about 125 Megawatt capacity have been installed, capable of generating about 150 million units in a year.

Furthermore, a collector area of about 2.15 million sq m has been installed for solar water heating applications. Typically, a solar water heating system with 2 sq m of collector area can generate energy equivalent to up to 1500 units of electricity when the system is used for about 300 days in a year.

The Government has taken several measures to reduce the cost of solar energy systems, such as: (i) research and development to improve their performance and reduce the consumption of materials, (ii) subsidy on selected solar energy systems; (iii) interest subsidy to provide soft loan to users and the manufacturers; (iv) concessional or nil import duty on some of the raw materials, components and products; (v) excise duty exemption; and (vi) 80% accelerated depreciation in the first year etc.

Many incentives have been given to private agencies for research and generation of solar energy. All academic, research institutions and industries, including the private institutions are engaged in research in solar energy. They are eligible to receive grant for undertaking R&D. In addition, expenditure on R&D by the private industries is eligible for deduction from profits under Income Tax Act.

Proposals from any project developer with a maximum aggregate capacity of 5 MW, either through a single project or multiple projects of a minimum capacity of 1 MW each, are being considered under the programme. Preference is given to the projects from the States where the State Electricity Regulatory Commissions (SERCs) have announced or are in the process of announcing tariff for solar power.

For projects approved and commissioned by 31 Dec 2009, the Ministry will provide generation based incentive up to Rs.12 per kWh for solar photovoltaic power and Rs.10 per kWh for solar thermal power after taking in to account the tariff provided by the SERC or the utility.

The Ministry also has announced a demonstration programme to support megawatt size grid interactive solar power generation projects, up to a maximum capacity of 50 MW. Any registered company, as project developer, would be eligible to set up solar power projects on build, own and operate basis. Proposal from each project developer with a maximum aggregate capacity of 5 MW, either through a single project or multiple projects of a minimum capacity of 1 MW each, would be considered.

NINE SOLAR ENERGY PLANTS INSTALLED IN PAST YEAR

Friday, March 28, 2008 – The Ministry of New & Renewable Energy promoted deployment of 9 Solar Energy Plants during 2007-08 in six States. Maharashtra tops the list with three plants, Jammu & Kashmir two plants, Chhattisgarh, Haryana, Orissa and West Bengal each got one power plant. The total capacity sanctioned for these plants is less than 2000 kWp. The capacity under implementation is more than 800 kWp.

All 6 states have received one Solar Photovoltaic Power Plant Project. The state of West Bengal has been sanctioned highest capacity of 945.0 kWp followed by Chhattisgarh with 646.8 kWp. Jammu & Kashmir and Maharashtra, each have been sanctioned Building Integrated Photovoltaic Power Plants (BIPV) with total sanctioned capacity of 18 kWp and one each SPV Power Pack of total sanctioned capacity of 8 kWp.

The Ministry is promoting deployment of solar photovoltaic power packs/plants in different parts of the country under various programmes including remote village electrification programme by providing partial financial support. These projects are implemented through the state implementing agencies in their respective states. The total funds released to the state agencies are to the tune of Rs. 40 crores which includes funds for four ongoing projects also. These projects are likely to be completed during 2008-09.

The projects for installation of solar photovoltaic power packs/plants are considered by the Ministry on the basis of proposals submitted by the States, as per provisions of the scheme, and availability of funds.

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6. MORE ALTERNATIVE FUEL CONTENT FOR TRANSPORTATION SYSTEMS

Friday, March 28, 2008 – Under alternative fuel for transportation systems, 10% Ethanol Blended Petrol (EBP) becomes mandatory from this October. Earlier 5% blending of Ethanol with petrol was made mandatory by the Government since 9th October 2007 in the Country and 10% blending was made optional. During the last three years the Government has taken various steps to develop and promote use of alternative fuels like ethanol, bio-diesel and hydrogen for transport applications.

The Ministry of Petroleum and Natural Gas (MoP&NG) has mandated the use of 5% Ethanol Blended Petrol (EBP), subject to commercial viability in the entire country with effect from 1st November 2006, except in the North-Eastern States, Jammu & Kashmir, Andaman & Nicobar Islands and Lakshdweep. As a result, release of 5% EBP has commenced at all locations in 15 States and 4 Union Territories.

The modalities for implementation are being worked out by the Ministry of Petroleum & Natural Gas in consultation with stakeholders. A broad based programme for research & development, production and utilization of bio-diesel is under implementation by different Ministries.

The Ministry of New and Renewable Energy (MNRE) has also prepared a Draft National Policy on Bio-fuels. Under its ongoing Research, Development and Demonstration Programmes, MNRE has supported field trials of different blends of bio-diesel in diesel cars, use of hydrogen as fuel in motorcycles and three-wheelers and introduction of hydrogen-compressed natural gas (CNG) blends in different vehicles. In addition, support is also being provided for development & promotion of battery operated vehicles.

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7. CANAL HELPS NARMADA RIVER WATER REACH DROUGHT-PRONE REGION

Friday, March 28, 2008 – Prof. Saifuddin Soz, the Union Minister for Water Resources has expressed satisfaction over the flow of Narmada river waters to the drought-prone districts of Barmer and Jalore in Rajasthan through the Narmada Canal project. Prof. Soz has expressed the hope that this will be of immense benefit to the people of the State.

Sardar Sarovar Project envisages construction of 458 km. long main canal in Gujarat to deliver 2500 cusec of water at the Gujarat and Rajasthan border near village Silu, Tehsil Sanchore, District Barmer (Rajasthan). There is a 74 km. main canal in the Jalore and Barmer districts in Rajasthan for utilizing allocated share of 0.5 million acre feet of Narmada water in Rajasthan.

Prof. Soz said, the Union Ministry of Water Resources has provided 90% assistance to the Government of Rajasthan for construction of the project. Similarly, the Government of India has also provided assistance under AIBP to the Government of Gujarat for the construction of main canal in Gujarat. The Central AIBP assistance provided to Gujarat and Rajasthan is Rs. 4887 crore and Rs.625 crore respectively for the Sardar Sarovar Project and the Canal System. Prof. Soz said that this was the highest allocation for any single project.

Prof. Soz said that the Central Government assistance was also being provided to the Government of Rajasthan in project planning and in water management planning like the use of drip and sprinkler irrigation, etc. As a result, the command area of the project has increased from 75,000 hectares to 2.46 lakh hectares to serve 233 villages besides providing drinking water to a population of about 3.7 lakh in 1107 villages and two towns along the irrigation canal.

About the delay caused in the construction of the 4 major structures on the Narmada Main Canal, the Union Minister for Water Resources said that the problem was overcome by construction of a by-pass arrangement for ensuring early delivery of water to Rajasthan. The Sardar Sarovar Project started releasing 50 cusec of water from the main canal as of 5 Feb 2008 and the Narmada water physically reached Rajasthan on 18 March 2008.

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8. INSTITUTE OF AYURVEDA AND HOMOEOPATHY SET UP IN SHILLONG

Thursday, March 27, 2008 – The Union Cabinet today gave its approval for establishment of the North Eastern Institute of Ayurveda and Homoeopathy in Shillong (Meghalaya) at a cost of Rs. 67.51 crore. The decision will facilitate promotion of Ayurveda and Homoeopathy, the expansion of health care, improvement in the doctor-population ratio and R&D on bio-resources in the North East.

There are a total of 225 Ayurveda colleges and 181 Homoeopathy colleges in the country, out of which only one Ayurvedic College in Assam and three Homoeopathy colleges in Assam and Arunachal pradesh are in the North East. There are no teaching institutions in other States of the North East, even though there is considerable demand for Ayurveda and Homoeopathic systems in North Eastern States. Shillong is a central place in the north East where students and patients from the other North Eastern states can avail the facilities of Ayurveda and Homoeopathy in the proposed institute.

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9. INDIA, JAPAN SIGN CURRENCY SWAP AGREEMENT

Thursday, March 27, 2008 – The Union Cabinet approved an authorisation for the Reserve Bank of India to sign the proposed Currency Swap Agreement with the Bank of Japan to exchange an amount of US $ 3 billion against the respective domestic currency for mitigating short term Balance of Payment (BOP) problems. The actual draw down will be effected by RBI when the Government judges that it should be drawn down, after consulting RBI.

The currency swap is an additional arrangement outside IMF to meet short term liquidity in US $ during a Balance of Payment crisis. It is a cost effective tool of achieving the strategic objective of demonstrating regional cooperation.