We will strive to accomplish our target under ‘India Business Strategy 2015’: Hitachi India MD

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Hitachi India Pvt Ltd Managing Director Ichiro Lino is eyeing bigger business opportunities in this country. The company has announced its plan for the Indian market, namely, “India Business Strategy 2015”. In an interaction with Bureaucracy Today, the MD chalks out his company’s plans to further develop social infrastructure systems, information and telecommunication systems, high functional materials, and logistics in India.

The history of Japan’s Hitachi Group in India began in 1933 with the export of its fans for household in this country. Hitachi India Pvt Ltd Managing Director Ichiro Lino says, “We expanded our business in a wide range of sector in the last decade in India. Hitachi Construction Machinery Co Ltd acquired the capital of Telco Construction Equipment in the year 2000 following which Hitachi Home & Life Solutions (India) Ltd was set up in 2003. We also established an R&D Centre in Bangalore in 2011.”
 
He further says, “We demonstrated our commitment in December 2012 by holding a Board meeting in India for the first time outside Japan. After that historic Board meeting, the Hitachi announced its ‘India Business Strategy 2015’ aiming at a consolidated revenue of Rs 200 billion in the fiscal year 2015, approximately three times that in fiscal 2011. And the Hitachi will invest Rs 47 billion to promote various measures to achieve this target. We will stand by India and together fuel a big change of building a sustainable society.”
 
FINANCIAL HIGHLIGHTS 
The Hitachi Group is active in many sectors in India, including those of construction machinery and air- conditioning systems, social infrastructure systems, information and telecommunication systems, high functional materials, and logistics. “We are expanding our business under our policy to contribute to long-term development of Indian society. This is through our social innovation business. India is an important region in our global strategy. we are, therefore, stepping up development of the social innovation business in India. It is an important step which will eventually help us achieve the target of tripling our overall India revenue from $1 billion in FY 2011-12 to $3 billion by FY 2015-16,” says the MD.
 
How was the year 2013-14 for your company? Could you please also brief Bureaucracy Today about your financials? The MD replies, “We cannot disclose the revenue in the fiscal year 2013-14 at the moment but for your reference, I can say that our consolidated revenue in India in fiscal 2012 was about Rs 67 billion (approximately 100 billion yen).  Our financials for the third quarter ending December 2013  (the operating income of the company) were $ 1,162 million while our earnings before interest and taxes were $ 1,617 million. The net income of the company was $ 1,198 million.” 
 
MERGERS AND ACQUISiTIONs 
In 2012-13 the Hitachi Group expanded its business in India by entering into the Chemical and Allied friction segments. The company has also set up new automotive powder metallurgy and friction materials plants in Neemrana (Rajasthan) and automotive components plants in Chennai. “In terms of mergers and acquisitions in the Information & Telecommunication Systems we have acquired a 100 per cent equity stake of Prizm Payment Service for about Rs 1,540 crore. In February 2014 Hitachi Systems Ltd. acquired a 76% stake in an IT firm, Micro Clinic India Pvt Ltd, in order to expand its IT service business in India. Post-acquisition, the Micro Clinic will be renamed as Hitachi Systems Micro Clinic Pvt Ltd,” discloses Lino.
 
EXPANSION PLANS
The MD says, “Under our Social Innovation Business policy we provide solutions and social infrastructure systems that combine products, services and highly sophisticated IT. Our strategy is set along with this two-fold policy.”
 
He further says, “First, we will accelerate the expansion of businesses to support infrastructure in India by (1) Bolstering production for consumption in India through increased  localization, namely, made in India and made for India; (2) Cementing partnership with Indian companies and expanding the business base strongly connected to Indian market and (3) Further expanding our business in Africa and the Middle East by employing India as a base. Secondly, we will enhance our corporate functions of the Hitachi Group in India in terms of (1) Expanding the R&D Centre in Bangalore; (2) Strengthening the human resource management system; (3) Also strengthening our finance arrangement functions;  (4) Accelerating Hitachi brand activities and  (5) Expanding shared services.”
 
Ichiro Lino opines, “we will strive to accomplish our business target as outlined in our India Business Strategy 2015 by the concerted efforts of the business unit and corporate functions in the way I explained.”
 
The Hitachi recently introduced Social Innovation Initiatives through effective use of IT in Healthcare, Agriculture, Banking, Energy, Business Management and Manufacturing. Could you please throw light on it? The MD replies , “In Healthcare, we implement the Proof of Concept project with NHS GM (National Health Service England Great Manchester. (improve disease-prevention services), while we cooperated with Mitsui & Co Ltd in precision agriculture. This trial was conducted in Brazil by using the satellite image analysis to ascertain the growing status. In Banking the company has shipped over 1,000 ATMs (Automatic Teller Machines) in India.  In Energy we provide energy saving as a service in North America. This service enables customers to reduce their total energy cost. The Hitachi provides one-stop service consulting and system integration, operation and maintenance. The company’s business approach changed recently from cost reduction to the creation of a new value.” 
 
Shalini Singh, Bureaucracy Today
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Suhaib Ilyasi: The curious case of missing file ID No. 87360 at Indian Gas major, GAIL

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In most of the big PSU corruption cases inquiries are instituted for the sake of formality. Small-time officials are made sacrificial goats whereas the big fishes are allowed to slip and go scot-free. Similarly it is alleged to have happened in the country’s gas major, GAIL India Ltd. The crucial file No. 87360 which has decisive and essential evidence of alleged connivance of top management officers in the crime is missing. The CBI in its preliminary enquiry report conveniently ignores the role of the senior management of the company and instead small officials and private companies have been made accused in the corruption case.

Bureaucracy Today known for the unbiased and fearless brand of journalism brings to its readers an in-depth and shocking report of alleged corruption in the Government-owned Gas Authority of India Ltd (GAIL)

The missing file

A File ID No. 87360 that was supposed to contain all the crucial information and evidence of involvement of Board-level GAIL officials in the alleged Rs 246.16 crore scam has gone missing from Gail office records. The GAIL in its RTI reply to Bureaucracy Today, dated November 26, 2013 acknowledged; “It is hereby submitted that the file containing desired inputs (having file ID as 87360) was not closed in the Pricing Department, hence it is not available. The same is also evident from the file Movement System report enclosed with the letter.”

A source on condition of anonymity informs Bureaucracy Today that “the file had gone missing from the database of the GAIL. The file was last tracked on July 25, 2006 when it was sent by EVS Rao, then (GM Pricing), to then Chairman and Managing Director UD Choubey at 12.18 pm. Later on November 1, 2006, as per record, the file is said to have been closed by Choubey”.

“Why are you so interested about the file movement? It’s our internal matter. Who gave you the information about this file?,” reacted SB Mitra, GM (Law), GAIL India, when the Bureaucracy Today reporter visited the GAIL headquarters in New Delhi to inquire about file No. 87360 which is related to pricing and the alleged favouring of six private parties by the GAIL.

Alleged corruption and its background

The case of alleged corruption pertains to extending an undue benefit of Rs 246 crore to six private power producers by supplying them cheap gas by GAIL India. The private players subsequently sold electricity at commercial rates against the Oil Ministry’s instructions.

Shockingly the top management of the GAIL in 2010 further entered into fresh agreements with the same companies without resolving the pending pricing issue, despite the crucial ongoing controversy of pricing since 2006. Astonishingly the CBI’s investigations and its Preliminary Enquiry (PE) are dead silent on this critical matter.

In the year 2000, six private companies, namely M/s MMS Steel, Saheli Export, Kaveri Gas, Coromandal Electric, Arkay Energy and OPG Energy entered into separate agreements with the GAIL. The public sector undertaking agreed to supply to the above mentioned private companies a fixed quantity of gas, as allotted by the Government of India. The period of validity of the agreements was fixed as December 31, 2010, though in individual cases, there were some variations.

The agreements provided for the extension of the period of contract. Insofar as the price of gas was concerned, Article 10 of the agreements stipulated that up to March 31, 2000, the price as fixed by the Government of India under a Pricing Order dated 18.9.1997 would be adopted. And after 31.3.2000, the GAIL reserved the right to fix the price as per the directives, instructions or orders of the Government of India. It was also stated in the agreement that the price was likely to be market related in accordance with the current policy of liberalization of the Government.

In other words, the quantity of gas to be supplied to each of the applicants was determined by the Government of India, by individual letters of allotment; and the price payable by the applicants was to be in accordance with the pricing orders issued by the Government from time to time. From the time the six private parties entered into gas supply contracts with the GAIl, till the year 2005, there were no issues. But, on June 20, 2005, the Government issued a Pricing Order bearing No.L-12015/5/-4-GP, revising the pricing methodology that was in force from September 18, 1997.

The decisions communicated by the Pricing Order dated 20.6.2005, which are pertinent for this Bureaucracy Today investigative report, are as follows: “Power and fertilizer sectors are critical to the economic development of the country and the output price of these sectors is either controlled or regulated by the Central and State Governments, who have to bear subsidy to a large extent for any increase in the output price. The specific end users committed under Court Orders/small scale consumers having allocations up to 0.05 MMSCMD also deserve priority in gas supply. Accordingly, it has been decided in the public interest that all available APM gas would be supplied to only the power and fertilizer sector consumers against their existing allocations along with the specific end users committed under Court orders/small scale consumers having allocations up to 0.05 MMSCMD at the revised price of Rs.3200/MSCM. This price would be linked to a calorific value of Rs.10,000 K.cal/cubic metre. Consumers other than fertiliser, power and specific end users committed under Court Orders/small scale consumers having allocations up to 0.05 MMSCMD and getting existing gas supplies through GAIL network, would be supplied natural gas at market related price depending on the producer price being paid to joint venture and private operators at landfall point, subject to a ceiling of ex-Dahaj RLNG (regassified LNG) price of US$3.86/MMBTU for the current year i.e. 2005-06”.

Two Pricing Mechanisms

It may be noted from the relevant portion of the Pricing Order dated 20.6.2005 extracted above, that two different pricing mechanisms were adopted. One was termed APM meaning ‘Administered Price Mechanism’.

The second was market-related price, which depended upon the producer price being paid to joint venture and private operators at landfall point. By virtue of Clause 10 of the gas supply contracts that the parties had entered into, it is obvious that the Pricing Order dated 20.6.2005 was to come into effect. By a letter dated 5.6.2006, the Government of India also sent a communication to the private parties indicating that as per the Pricing Order dated 20.6.2005, a revision of APM gas prices was to be carried out for all consumers, other than those in the power and fertiliser sectors, in a phased manner over the next three-five years. Accordingly, the Government increased the price of APM gas supplied to City Gas Distribution Projects and small consumers having an allocation of up to 0.05 MMSCMD, by 20% over the current APM price of Rs.3,200/MSCM for general consumers and Rs.1,920/MSCM for North-East consumers. The revised prices for other consumers were also indicated in the said letter. Thereafter, the GAIL sought a clarification from the Director in the Ministry of Petroleum and Natural Gas, by letters dated 5.6.2006 and 12.6.2006.

By Shalini Singh, New Delhi

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Suhaib Ilyasi : People’s power A sweeping change ahead?

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The stunning win of the AAP in Delhi Assembly elections is the victory of common people’s belief that there is hope against darkness. The party’s victory has put the common man back to the centre-stage of politics from the margins to which he had been relegated. As Arvind Kejriwal began his new journey into politics from the same Ramlila Grounds where his NGO, India Against Corruption, had declared war against the corrupt, Bureaucracy Today tracked the historic moment and paused to feel the pulse of the aam aadmi, who after being fed up with a string of scams and the ever escalating cost of the humble onion — a staple in every household– went for the broom.

In a shocking revelation, our Cover Story brings to Bureaucracy Today readers the explosive report of how the CBI, which is probing the irregularities committed by GAIL officials by allegedly favouring six private companies and causing a Rs 246.16 crore loss to the exchequer, in its preliminary enquiry report conveniently ignores the role of senior management of the company and small officials and private companies are made accused in the corruption case. During the CBI investigation, it came to light that the crucial file no. 87360 which has decisive and essential evidences of the alleged connivance of the top management officials in the crime is missing.  However, a tip-off by an anonymous GAIL official to BT indicates that the file is not missing but lying with the company officials. It seems that more skeletons will tumble out from the country’s leading natural gas major’s closet following this BT investigative report. Bureaucracy Today is keeping a close watch on the developments and will update its readers about them in detail in its forthcoming editions.

Also in this issue we have an investigative report on how government subsidised foodgrains meant for the downtrodden are being siphoned off by greedy hands along the way in Bihar’s Bhojpur district. A Bihar-based freelance investigative journalist, who did a sting operation of the scam, trusted Bureaucracy Today and contacted us for a platform to break the multi-crore scam.

BT Special Report focuses on the new DoPT rules which made it mandatory for State Civil Services officers to face a UPSC test and an interview for promotion to the IAS. The All India Federation of State Civil/Administrative Service Associations has protested the proposed move, saying it is against public interest and will take away the legitimate right of the most experienced and seasoned SCS officers to get promotion to the IAS after serving the State sincerely and diligently for years together. The IAS lobby is silent on the issue though.
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Why is Kingfisher Airlines facing bad times?

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Bureaucracy Today was the first publication to report the spiraling ATF overdues by Kingfisher Airlines to be paid to various public sector oil companies like the BPCL, IOC and HPCL. While the BPCL and the IOC have recovered most of their dues, the HPCL is still struggling hard to get its money back. Much of the credit for the exposé goes to whistleblower and former HPCL Chief Operations Manager Ravi Shrivastava who also happens to be on the BT cover of this month. This man blew the lid off from the fact that how PSUs were running the airlines all by themselves without any dues being paid.

Even when KFA owner Vijay Mallya claims that the turbulence being faced by Kingfisher Airlines would soon be over, and it may be as well for the time being, and the airline will start flying high again, the question is for how long? The fact that Kingfisher’s flawed business model has created most of its problems in current times is resonated by civil aviation industry experts. Several of them agree that the flamboyance for which Mallya aspired with his airline division was too high on his ambitions. His formula of low load factors with low fares and being high on flamboyance proved all wrong as the KFA balance sheet went nose-diving leading to a state of chaos and uncertainty.

What does the Government have to learn from all this? One really wonders why the Government had to be so benevolent to a private airline when the national carrier, Air India, which is looming under abysmal losses, has also lost the confidence of its employees, stakeholders and industry peers. The awkward situation poses a big question mark on the Government’s aviation policy to attract 49 per cent foreign direct investment. The Government would also need to look at losses to the Indian oil companies if jet fuel is allowed to be imported! It is time the Government thought of reviving the civil aviation industry’s lost sheen and pride by bringing Air India back on track. It must now retrospect on its policy for this industry at large.

UP Elections: Expect the unexpected

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Ring in the old, ring in the new… It is a pacy beginning to 2012 with five states–Punjab, Manipur, Goa, Uttarakhand and Uttar Pradesh–going to the polls in the first quarter. It has been interesting to watch political alignments and shifts and methods of wooing voters, especially in the most populous state, Uttar Pradesh.  Keeping with the times, politicians have started using the social media to give their message to the voters. Facebook and Twitter are flooded with messages. As always there have been lavish promises of job quotas, loan waivers and development to entice the elector.

Also interesting has been a change in the political scenario in UP. Like a lot of corporate and royal families, politics has become an heirloom, passed from generation to generation.  In this changing landscape, we saw the Yadav scion, Akhilesh, pushing his Samajwadi Party workers to defeat the Dalit queen, Mayawati. The Gandhi brother-sister duo, Rahul and Priyanka, once again came together to strengthen the Congress base in the State. And a storm blew up in the BJP when Pankaj, son of senior BJP leader and former Chief Minister of UP Rajnath Singh, was promoted as the seventh general secretary of the UP unit of the party. Amongst the major party leaders, only Chief Minister Mayawati has not added an heir to this political whirlwind. Her party has probably not sensed the public mood and shown a young face or used the social media extensively to attract the voter.

Traditionally the road to Delhi has been through UP and the 2012 Assembly poll in the State is not going to be any different. Observers say a lot is being prepared for Lok Sabha elections 2014. If the Congress manages to get a stronger vote bank, it may help establish the credentials of the suave Gandhi and make him a stronger prime ministerial candidate and head of the party. Early UP elections may increase the chance for the Congress adding to its tally in the Rajya Sabha and the BSP remaining status quo or even getting less. If the SP gains political power, the Yadavs will once again establish their reign in UP. Rajnath Singh is back in the ring with his offer of socio-economic progress to all, irrespective of their caste, creed and colour.

Like Bihar, the results of battleground UP may be decided by the minorities, especially the crucial Muslim voter. As the Congress and smaller outfits like the Peace Party gain ground, alliances could be in the offing. But there might be a surprise from the sidelined BJP. This surprise factor came out in a poll conducted on this magazine’s website www.bureaucracytoday.com. The poll was to know how the participants were responding to a mood for change in government. The choice was between the BSP, SP, Congress and BJP. At the beginning of January, the visitors preferred the current BSP regime. As the month progressed, the SP went to the number one position and the BJP was edging closer to the Congress. By month-end, the BJP came to the third position and was close on the heels of the BSP, leaving the Congress at the bottom. The gap between the BJP and the BSP became narrower, with the former getting 22.99 per cent response and the latter 26.44 per cent.

So who will be the next CM of UP? Expect the unexpected as the gates to the UP arena open this February.

By Suhaib Ilyasi

Bureaucracy Today

Running with the hare & hunting with the hounds

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In times of global economic distress when the Indian Government ought to deal with a heavy hand with defaulters and swindlers among profit-driven private players in the oil and natural gas sector, it is strangely caught supping with the devil. Instead of getting its act together in the Krishana-Godavari oil exploration deal with the country’s economic major Reliance, the Government is faced with sort of sanctions by the former as it is seen running with the hare and hunting with the hounds. The developed economies of the West, including the US and Europe, have been suffering an unmitigated crisis due to lack of government control over the capitalist system. India may have managed to come out unscathed by the global recession, but the endemic corruption in dealings both in the Government-managed and private sectors reflects poorly on the nation’s economic health. The government’s role – both in its UPA 1 and UPA 2 avatar – reveals more than it conceals the formal internalization of corruption in the system. The 2G spectrum allocation and CWG scams and the gigantic KG-D6 row have left the ruling coalition with the egg on its face. 

As oil prices around the world may further soar in 2012, it is imperative for the Union Government to check corrupt practices in all fields of economic activity, especially in exploration and exploitation of scarce natural resources, including oil and natural gas. Moreover, with Assembly elections in five States in the offing and the rising prices of petroleum products and other essential commodities for which the common man has to bear the brunt the Government at the Centre must pull up its socks if it has to avoid biting the dust at the hustings.
Year 2012 rings in with the alarm bells set for 2014.

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Why not Independent Directors in time?

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India is today proud to have many public sector companies that have high quality managements and can give any private companies in the same industry segment a run for their money. The NTPC, BHEL, ONGC, IOC, BPCL and GAIL are some such examples, having excelled in their businesses despite being hamstrung by government interference and influence in their decision making. The Central Government’s apathy and casual approach towards these companies are once again visible, this time on the critical issue of composition of the board of directors which presides over the efficient management and future of any company.

The role of Independent Directors on the board of a public sector undertaking (PSU) assumes even greater significance in view of the Government’s interference in the functioning of these companies. Independent Directors can act as a counter influence and balancing factor in the interest of the company. But it is an irony that the role of the Search Committee which recommends the names of Independent Directors for public sector companies itself is under a cloud. The recent appointment of some Independent Directors with questionable credentials has raised a big question mark on the process of selection by the Search Committee. At the same time, major PSUs waiting to launch their IPOs and FPOs are waiting for appointment of Independent Directors. The role of the Department of Public Enterprises is also

debatable. PSUs urgently need fresh capital to face increasing competition, a tough business environment and a tight liquidity scenario. Disinvestment is one way which not only ensures an inflow of capital but also brings in more efficiency and transparency. But PSUs like the BHEL, ONGC and RINL are unable to raise capital through IPOs/FPOs because they are short of Independent Directors and are thus not eligible to tap the capital market under the guidelines mandated by market regulator SEBI. It is indeed intriguing that the Government fails to appoint Independent Directors in time even when they are appointed for a fixed tenure and thus the Government knows well in advance when a particular Director will retire.

The Government needs to pull up its socks. Independent Directors should not only be appointed as soon as a vacancy is created but those who make the cut should be of impeccable credibility and track record. With this issue, Bureaucracy Today is introducing a new column for the aspiring bureaucrats. Senior bureaucrats will share their experiences, explain how they cleared the UPSC exams and will give insights into how the candidates who have cleared the mains should handle the interview. We hope aspiring bureaucrats will get invaluable guidance through this column.

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