Mumbai Monsoons - Day 1 - Update

A little more than 200 mm of rains and here goes the official count (Excerpts from another blogger who really loves his city)

Western Railways – 19 trains cancelled. Trains are running between 5 to 35 minutes late. The WR PRO says “The problem was in the Goregaon-Malad stretch”.

Central Railways – Trains were running 40 minutes late after being stalled between 6.40PM and 7.30 PM as lightening struck an overhead equipment wire between Ghatkopar and Kurla.

Roads – Water-logging at let's see - Grant Road, Goregaon, Bhandup, Vidyavihar, Ulhasnagar, Thane, Ghatkopar, Andheri, S. V. Road at Khar and Santacruz, LBS Marg, Kurla, Hindmata Dadar, Subways at Malad and Santacruz. And of course, flooding in Goregaon, Jogeshwari and Kandivali. I guess that is a lot of Mumbai for one day.

Mohan Kadam (Chief Engineer, Roads) says “If we get a dry spell, we will open all these stretches to traffic within a day or two”. Within a day or two? I guess he meant within an hour or two - Either that or I assume he has gone bonkers.

BMC Commissioner Johnny Joseph says this was more or less expected from the first flush of the monsoon. "Once we clear this up, the drains will work smoothly.” He also mentioned in passing that "the city’s drainage system was equipped only for rainfall of one inch per hour". Whom is he kidding? What are we supposed to do once rain goes beyond that level? Boating? Rafting? Ne more ideas? I am sure Parate would have a great time.

But all said and done, at least Mumbai has more than its fair share of movie theatres, bars, eating joints, hotels (and not just restaurants, mind you) and the likes. In that sense, at least, it is no Rajkot. You might want to check out http://pushkarsblog.blogspot.com for further details.

Mumbai Monsoons - Day 1 - Life goes on

Just for a change, this post is not about any magazine article but about my experience with the Mumbai rains. Not too different from the rains in other cities I have been in: roads are waterlogged, public transport is overcrowded and life is thrown out of gear. The city's common people face the brunt of nature. Almost everyone is affected in some manner or the other - some keep cribbing about it either in private or in the press, a few valiant ones grin and bear it - but life goes on.

Not too different, did I say? Except of course, the fact that I walked all the way from Lower Parel to Gandhi Market in Sion. A little bit like Raj Kapoor - trousers folded till just above the knee - haath mein joote - and alternatively mumbling and humming tunes from some old Hindi movies. It took me about 90 minutes - between 8:30 PM and 10 PM - to wade through the goddamn roads and get back home. Not bad - 90 minutes - give and take a few minutes here and there. The shoes and my trousers have taken a real beating - but life goes on.

Chances are I will get better at this, though - there are still at least two months of this season to go, you see. There would be enough practice every day, I am told. Much like how India is preparing for the 2007 World Cup, I must say. Slow and steady progress every day - today I shall try to walk with my shoes on. Let me see how that works out. There will be a few hiccups along the way, lots of sneezes as well - but what the heck. On the other hand, do I really have a choice? Hey, life goes on.

On a more serious note, I have no idea about the problems experienced by folks who generally travel on the local trains. I believe that trains have been delayed or even outright cancelled due to the rains. But life goes on.

PS: Forgot to add that I called up home (at Hyderabad) to inform them about my whereabouts and guess what - they asked me to buy an umbrella - now that the monsoon is here. At that moment, of course, I could only say "Okay". But now, I am left wondering how I would manage to carry the umbrella under my arms as well as let me see - one bag, a pair of shoes (in case I am not wearing them) - u get the drift? Life goes on.

SEZ: Zone of Contention

Just to take the SEZ issue forward, there have been lots of news in the recent past about how many companies have jumped onto the SEZ bandwagon. And simultaneously, there have been calls from a wide range of sources to take a relook at the SEZ Act.

Now, the zone of contention between the Ministry of Finance and the Commerce Ministry are basically these issues: 1. Land size 2. Existing units allowed to relocate to SEZ with "old" plant & machinery 3. Basic scope of activities permitted under the SEZs

The Revenue Department of the Finance Ministry has raised these concerns with the Ministry of Commerce. Another issue seems to be the process of approving applicaitons for SEZs, which has been proceeding at a fairly break-neck speed. Something to be really suspicious about, if we are familiar with the functioning of normal government approvals. For more details on the technical nuances in this Act, you might want to check out http://sezindia.nic.in, a fairly informative site. The site is not too user-friendly though and seems to be quite dated. So, good luck with the mining.

Now, for the statistics. At last count, 15 SEZs are up and running right now. These include 8 old export processing zones. If one were to ignore them, then 7 new SEZs have become operational. 110 new SEZs have been approved.

28 multi-product SEZs, 86 sector-specific SEZs and 3 Free Trade warehousing zones have been approved thus far. Some of the biggest names in India Inc have jumped on to this bandwagon. Of course, the likes of Mahindra & Mahindra, the Tatas, Reliance (as mentioned in an earlier post on this blog), Wipro and Nokia have been marching in with hype, hope and fervour. Some of those that not many might have heard of but have been quietly creeping in, though, include the following:

1. An SEZ exclusively for animation and gaming
2. A very ambitious "Disneyworld, Hollywood and Las Vegas rolled into one" mega-entertainment SEZ proposed by Essel World, owned by Subhash Chandra (from the stables of Zee)
3. Chandra-owned Unitech Limited, which built the South City in Gurgaon (on a totally different note, though, just check out the valuations for this company [BSE: 507878; NSE: UNITECH]

Given the operational and fiscal advantages that companies would enjoy in the SEZ, I would not be one bit surprised if more and more heavyweights venture in as well.

LATEST UPDATE: An empowered group of ministers will soon be taking a decision on the minimum / maximum land size for Special Economic Zones for infotech, biotech, Gems & Jewellery and non-conventional energy sectors. The group includes some of our Union ministers Pranab Mukherjee, Kamal Nath, P Chidambaram, Dayanidhi Maran and Kapil Sibal and the Deputy Chairman of the Planning Commission, Mr. Montek Singh Ahluwalia.

Will keep you posted on the latest on this front.

The SEZ Saga

What is this with India's leading conglomerates and the creation of Special Economic Zones? A week back, it was the Mukesh Ambani group-backed Mumbai Integrated SEZ that laid out its ambitious blueprint to build four cities, each of them spanning a third of Mumbai's size. And now, it is the Tata Group's THDC that has announced its foray under the Special Economic Zones umbrella.

Like every other thing that the Dhirubhai Ambani founded company has done in the past, Mukesh Ambani is betting big this time too. The initial investment outlay stands at Rs 25000 crores (in debt as well as equity), planned over a decade in Navi Mumbai and Maha Mumbai alone. The sheer magnitude of this investment betrays the seriousness and commitment behind Mukesh Ambani's ambitious plans.

The blueprint means four new mini-cities or large satellite townships with world-class infrastructure, built close to airports and national highways. Getting the buy-in from sponsors is relatively easier: the project is likely to witness potential investment of less than half the real estate costs of central business districts and upscale residential areas of other Indian metros. However, issues regarding land acquisition and infrastructure remain. The Reliance group has not yet managed to acquire the 25,000-acre land banks in the South or in the East.

The Reliance group has huge plans for the Navi and Maha Mumbai zones. It has already initiated talks for urban development planning and research with the Jurong Group of Singapore. The horizontal development — site development, common facilities and connectivity — will be conducted by the group's special purpose vehicles, while utilities like power, telecom, gas and water supply will be provided by group affiliates. The vertical development or built-up premises for offices and homes as well as social infrastructure will be either co-developed with third parties or completely handed over to outsiders. Targeted users will include manufacturing industries as well as services like warehousing, BPO and biotechnology.

It really surprises me as to how the Reliance group emerged with such a detailed plan in the design stage itself. Contrast this with the approach of one of the other large conglomerates. The Tata Group is looking to create several ‘mini Jamshedpurs’ across the country. However, the group does not seem to have identified any locations for these proposed townships. The overall idea, though, will be to maximise tax benefits available throughout these zones. So far, the group has received approval for a 3,500 acre SEZ in Gopalpur (Orissa), where Tata Steel had initially proposed to set up a 10-million-tonne steel plant, a proposal that was subsequently scrapped. Seems like opportunism?

Just a cursory glance at this does not reveal much but I have a feeling that this also betrays a fundamental difference between the two groups. The Mukesh Ambani-backed Reliance group is relying on FEW (4 proposed hubs) gigantic projects whereas the Tata Group, on the other hand, seems to be more risk averse, opting for MANY small projects instead. A risky business model pitted against a more diversified risk portfolio.

I am a big fan of the Tata Group personally, especially for the credibility they have built up in all these decades. However, just for the sheer audacity with which the Reliance group has dared to dream big and dream concrete, I am certainly not betting against Mukesh Ambani. Chiru seems to have a winner on hand this time around. :-(

So, has outsourcing moved to China?

The rising salaries of graduate engineers and MBAs might yet prove to be the nemesis for the Indian BPO growth story. You would seem to think so if you were to believe this article from 'The Economist' (Watch Out, India - May 4th 2006 Print Edition). Though in terms of actual numbers, it currently lags way behind India, experts believe that China is catching up and catching up fast. Xian, the capital of China's Shaanxi province, is slowly but steadily evolving into one of China's most modern cities. The birthplace of China's space programme, Xian houses one of China's largest technology parks that is home to more than 7,500 companies supported by about 100 universities, and churns out 120,000 graduates every year. More than half of these are in the computer sciences field alone.

Apparently, this is just the beginning though. The sheer magnitude of this undertaking speaks volumes about China's ambition and commitment to become a global powerhouse in software and services (to go with its pre-eminence in manufacturing). The market for BPO, which encompasses processing bills and credit-card applications to managing entire human-resources operations, should be worth another $24 billion by next year, and is expanding even faster. India has captured the bulk of this work. While China is the world's top location for contracting out manufacturing, it has just $2 billion of the outsourced-services market.

Well, India may have the lead right now but China has the potential as well as the resources to surpass India as the biggest outsourcing destination. Factors that push China into the consideration set include millions of low-cost workers who are well-educated in basic computing and mathematics. But then, from the strategic literature angle, this is not a differentiating factor, is it? Differentiators, though, emerge in the form of more long-term factors such as infrastructure, generous tax laws and a very strong lobby of support from the state.

If these outline the opportunities for corporates to send business over to China, the motive is not too far behind either. Companies want to spread risk away from India; and China offers just the right kind of sops that these multinationals are looking for. The latest companies to discover China are a revelation though (revelation to me at least). TCS, Infosys and Wipro lead a pack of Indian IT companies, the very companies that have been at the forefront of the BPO growth story in India. And if these Indian IT companies sense an opportunity, can their multinational clients be far behind?

What does all this mean for India? Fortunately, India seems to have a bit of time on its hands. China is still about five to ten years away from seriously challenging India for the pole position in the BPO industry. One factor that goes against China is that the Chinese are poor in speaking or writing in English. Language is a huge barrier when it comes to services that demand frequent communication with overseas clients and customers. Another factor is the intellectual property rights (or the lack of it, to be more precise). The perception that sensitive business information faces a security threat is likely to constrain development, at least in the short term.

So, shall we get working on our infrastructure now?