The long-delayed clearance for the country’s biggest foreign direct investment project will give a boost to other infrastructure projects
Posco, the world's third largest steelmaker, was today given a conditional clearance by the environment ministry for a greenfield plant in Orissa that has been delayed due to criticism that it would disrupt the livelihood of thousands of local people. This project is expected to change the steel business in the country in the near term.
The South Korean steel maker proposes to invest Rs52,000 crore for a plant with 12 million tonnes per annum capacity, in Orissa's Jagatsinghpur district. This makes it the largest foreign investment in the country so far. The entire project requires about 1,621 hectares of land, of which about 1,253 hectares is forest land.
This decision by the Ministry of Environment will raise hopes of some other steel makers who have also been eager to tap the growing Indian market. Like billionaire LN Mittal who tied up with his old friend Rajinder Miglani, chairman of Uttam Galva, to enter the Indian market. Japanese steel companies JFE and Nippon Steel also prefer alliances with Indian steel companies.
Lobbying by other ministers may be one of the major reasons that forced the environment ministry to clear the project. Several projects, particularly mines and steel plants, have been under the scanner of the environment ministry, with the minister Jairam Ramesh echoing ecological concerns and protests by local people. The ministry has banned mining at hundreds of coal blocks, and much foreign direct investment has also been delayed due to opposition to these projects.
But Mr Ramesh has had to face criticism from his colleagues. Coal minister Sriprakash Jaiswal, who was promoted to the cabinet this month, commerce and industry minister Anand Sharma and agriculture minister Sharad Pawar, who was keen on the Lavasa project that has also been delayed, have openly opposed the decisions by the ministry. Prime minister Dr Manmohan Singh too has been concerned that these delays could be a setback for foreign investments. The decision on Posco was supposed to be an indicator of the country's position on the approach to foreign participation in the country's infrastructure growth.
It is also said that the government's ambitious plans to ramp up the country's steel production to 120 million tonnes per annum (mtpa) by 2012 pushed the environment ministry to clear the project. As of now, the country's steel production is at around 60 mtpa and is expected to go up to 120mtpa within the next couple of years. Existing brownfield expansion programmes by steel companies are not enough to achieve the target.
According to the World Steel Association, the current production of the country is around 67mtpa, just 6.4% growth over 2009, while China has increased its production by 9.3% to 627 mtpa. Therefore, more such greenfield projects will be required. India is currently the 5th largest steel producer.
Posco's foray into India will stiffen the competition, as its proposed capacity is much higher than that of most Indian steelmakers, barring SAIL. The company has planned a 12mtpa in three phases.
With global experience and advanced technologies at its command, Posco will set up its plant at a quicker pace. This will put pressure on smaller players and force some of them to consolidate with its bigger peers.
Although Posco has received the environmental clearance, there will be other hurdles in its path like acquiring mines, rehabilitation of locals, allocation of raw material linkages. Posco has said on its website that the government of Orissa has assured a mining lease for 600 million tonnes reserves, which would be adequate for the 12mtpa plant in Paradip for about 30 years. But Posco will be conscious now that there is a lot of difference between signing the papers for such projects and their execution.
Policy makers, concerned about the impact of mobile phone radiation on the human systems, complications in reproductive health and behaviour problems in children, want operators to take effective steps to curb harmful effects
A report submitted last week by the inter-ministerial group to the Department of Telecommunications has recommended that the radiation level per cell tower should be less than 1-watt per sq metre-reducing it to 1/10th the current permissible norm. This was stated by Ram Kumar, former advisor (operations/technology) with the Department of Telecommunications (DoT), at a consumer awareness programme on "Radiation Health Hazards from Cell Towers: Myth or Reality".
The programme was organised by the Bombay Telephone Users' Association (BTUA), on the completion of 25 years of working in the interest of telecom consumers. The programme had a panel of experts from the fields of medical research, physicists, bio-technology and consumer activists.
Mr Kumar told Moneylife, "We have forwarded the recommendations, which would be implemented very soon. Overall, there has been a positive response from DoT on the suggestions."
Rakesh Gujral, joint advisor with the Telecom Regulatory Authority of India (TRAI), said that TRAI had recently issued a consultation paper on infrastructure for the telecom sector which has a section on radiation norms. Asked about the possible implementation of the changes suggested in consultation paper, Mr Gujral told Moneylife, "We have given a particular date for all stakeholders, including the operators to respond. Once they give their views, the process of discussion will begin."
Dr RS Sharma, deputy director-general, Indian Council of Medical Research, who also addressed the consumer seminar, said, "The International Commission on Non-Ionizing Radiation Protection (ICNIRP) guidelines are not suitable for India. It should be reviewed in the Indian context considering factors like body mass index, nutritional intake, population density, etc."
Dr Sharma is engaged in an all-India study on the health hazards from mobile phones. In his presentation, Dr Sharma discussed the findings of international research which points out medical complications arising from sustained use of mobile phones and exposure to radiation form cell towers. All research points out to the impact on the human immune and nervous systems, complications in reproductive health as well as behavioural problems in children. He emphasised that all epidemiological studies point out to adverse impact of mobile radio especially on children, pregnant women and on male fertility.
One of the panel members, Professor Girish Kumar, of IIT Bombay, who has been researching the effects of electro-magnetic radiation (EMR) explained that the microwave radiation has two effects-thermal and non-thermal. The present safety norms are based on thermal effects, ignoring non-thermal effects which are three to four times more dangerous. Non-thermal radiation exposure is associated with affecting cell membrane permeability.
Other members of the panel, which included doctors from the radio-oncology department of Hinduja Hospital, also pointed out that they observed a much higher incidence of inner-ear myeloma and deafness in early adulthood and this was clearly indicative of the impact of long exposure to mobile phones. The panel members strongly expressed that the present radiation norms adopted by India as per ICNIRP guidelines are outdated, not suitable and should be reviewed in the Indian context.
According to current norms, the area within a six-metre radius of your tower is defined as dangerous, despite which many buildings have these towers and many more buildings are not very far from these towers either.
Some of the victims who developed cancer because of the exposure to radiation emitted from the mobile phone towers, also attended the programme and narrated their distressing experiences. One of the participants suggested that since the hazardous effects on children and the young were so clearly proven, it should form a part of the textbooks for the seventh and eighth standards.
Though a representative from TRAI was present for the programme, the overall response from the government was disappointing. Apart from a retired DoT official, there was no representative from the government-central or state, perhaps indicative of the apathy to the woes and concerns of citizens.
The Crisil study suggests that larger SMEs are more sensitive to interest rates, with many of them having borrowed aggressively to finance capacity expansion programmes
Crisil today released the findings of a study on the financial performance of over 3,000 rated small and medium enterprises (SMEs). The report indicates that a 1% increase in interest rates would lead to a decline of 14%, on average, in the SMEs' profits.
One-fifth of the enterprises evaluated could face erosion of 25% or more in their pre-tax profit levels. The study covers 3,234 SMEs, with sales turnover ranging from Rs1 crore to Rs500 crore. It includes manufacturing, trading, and service companies in 30 industries across 20 states.
The study draws heavily on Crisil's deep understanding of the sector, and the insights gained while assessing the credit risk profiles of over 17,500 SMEs. According to Ms Roopa Kudva, MD and CEO, Crisil, "This is the first time that deep analytical insights on small companies are being made available in India; Crisil's effort will promote a better understanding of the SME sector."
In the study sample, 2,200 companies were very small with sales of less than Rs20 crore. Over half of these small companies had low levels of debt (debt-equity ratio below 1), making them less vulnerable to interest rate hikes than their more leveraged peers.
Similarly SMEs that are more capital-efficient, as measured by Return on Capital Employed (RoCE), are less vulnerable to an interest rate hike. 52% of the companies in the sample have a high RoCE (exceeding 15%), and the impact of interest rate increases on these companies will be minimal.
Commenting on the impact of interest rates on SMEs' profits, Mr Ramraj Pai, director, SME Ratings, Crisil, says: "Crisil's study reveals that enterprises using capital efficiently, and deploying debt sparingly, would be the least affected".
The study brings out four other unique insights.
First, enterprises in the service space are relatively insulated from the effect of interest rates, compared with SMEs in the manufacturing and trading sectors.
Second, industries like chemicals, metals, and engineering, are better placed while food processing, textiles, paper, and agriculture-related industries are more susceptible to interest rates.
Third, the financial performance of SMEs based in Maharashtra, Karnataka, and Madhya Pradesh is less influenced by interest rates than that of SMEs based in Haryana, Punjab, Andhra Pradesh, and Himachal Pradesh.
Finally, the study suggests that larger SMEs are more sensitive to interest rates, with many of them having borrowed aggressively to finance capacity expansion programmes.