At the high-level meeting held at Moneylife Foundation’s office on Wednesday to discuss the Passport mess in Pune, TCS officials showed hesitancy in making the document public. Indeed, an earlier CIC decision ordering TCS to make it public has been defied
During the Wednesday high-level meeting of the Pune Passport Grievance Forum (PPGF) conveners with top officials of Tata Consultancy Services (TCS) at the Moneylife Foundation office in Mumbai, one of the points raised was making the Master Service Agreement (MSA) between TCS and the ministry of external affairs (MEA) public. This would make responsibilities and roles of both the entities transparent.
Shailesh Gandhi, former Central Information Commissioner and RTI activist, who was also present at the meeting, informed that in one of the hearings in 2012, while he was CIC, it was TCS which had shown unwillingness to make the document public. He said, that “we need to know who is objecting to making it public, MEA or TCS? In my experience during a hearing, it was TCS that was unwilling.” Tanmoy Chakrabarty, vice-president and head for government-industry solutions unit at TCS put the onus on the MEA for making it public, when this query was asked by Mr Gandhi at the meeting, but then went on the defensive stating that, “We will have to ask our legal cell.”
Vijay Kumbhar, one of the conveners of the PPGF has already filed a CIC complaint against TCS for not putting up the MSA in the public domain. He is waiting for the date of hearing. At the meeting, he brought it to the notice of the TCS officials, being in a public private partnership (PPP) venture with the government body, wherein the MEA has outsourced the above work and has given authorization as well as permission to TCS for the same and as the MEA provides funds for the above and mode of funding is Build, Operate, Transfer (BOT), TCS is public authority.
Mr Gandhi, the then CIC, had in a hearing pertaining to TCS on the issue of a Passport Seva Kendra having been built on an allegedly illegal property in Ghaziabad had ordered that the Master Service Agreement should be made public, barring the portion.
The TCS representative had brought the copy of the order at the time of hearing. Mr Gandhi in his order had stated that, “The Commission has looked at the agreement and the contentions of the respondent (TCS person). The Commission agrees that the rate mentioned in the contract if disclosed could harm the competitive position of the service provider. In view of this the Commission directs that the rates mentioned in the Agreement can be severed as per the provisions of Section 10 of the RTI Act. The Commission asked the respondent to specifically point out the information in the contract which could be said to be held in a fiduciary capacity. The respondent (TCS) states that he needs to get instructions from the ministry on the matter of disclosure of the Master Service Agreement as part of its Section 4(1) (b) obligations. The Commission therefore adjourns the matter to 1 May 2012 at 05.00pm.”
On 1 May 2012, the TCS representative remained absent and asked for more time to consider whether the Agreement should be made public. Mr Gandhi, in his order stated: “Respondent: Absent; The Commission has been informed that the third party Tata Consultancy Services (TCS) has asked for time to voice its objections to disclosure of information. In view of this the Commission adjourns the hearing to 27th June 2012 at 4.00pm. All parties may send their written submissions, if they wish, before 30 May 2012 and copies of such submissions would be sent to opposite parties. Any rejoinders will be sent by the third party M/s TCS, MEA and the appellant to each other and to the Commission before 15 June 2012.”
The Commission directed TCS as well as the PIO (MEA) and the appellant to appear before the Commission on 27 June 2012 at 4.00pm to give their arguments.
On 27th June, again the TCS representative remained absent at the hearing. However, Tarunima Vijra and Dushyant Manocha, advocates for TCS were present. They asked for adjournment and a fresh date as their senior official VP Singh was travelling. Mr Gandhi denied another date stating that, “The Commission is conscious of the fact that its time is paid by the poorest man in India and it therefore does not have the luxury of giving another adjournment.” Mr Manocha also argued that the information is exempt under Section 8 (1) (d) & (e) as the information is “commercially competitive and disclosing would harm competitive interest of the TCS.”
Shailesh Gandhi, ordered the PIO of MEA to disclose information.
His decision on 4 July 2012 read as follows:
“The Commission had given adequate opportunity of hearing to the third party M/s Tata Consultancy Services (TCS) to explain its objections and put forth its arguments before the Commission to establish that the information sought by the appellant was covered by the exemptions of Section 8(1)(d) &(e) of the RTI Act.
“The third party TCS has claimed exemption under Section 8(1) (d) & (e) of the RTI Act but has given no explanation as to how the information sought by the appellant is exempt. The third party TCS has undertaken a commercial transaction with the ministry and has been given the authority to run the Passport Seva Kendra on behalf of the government. The government has effectively sub-contracted its function through a contractor.
“Since the third party TCS has not given any arguments to support its claim for exemption under Section 8(1) (d) & (e) of the RTI Act the Commission does not have any basis for accepting whether the said claim is justified. Since no justification had been provided for the claim of exemptions the Commission cannot see any justification for denial of information to the appellant.
“This is information that can certainly be obtained by the ministry from TCS if it is not available and would squarely fall in the definition of information as defined under Section 2(f) of the RTI Act which states, ‘information’ means ‘any material in any form, including records, documents, memos, e-mails, opinions, advices, press releases, circulars, orders, logbooks, contracts, reports, papers, samples, models, data material held in any electronic form and information relating to any private body which can be accessed by a public authority under any other law for the time being in force’. When the government asks a private party to conduct any functions which it has been conducting earlier in the nature of providing vital services to the citizens such as providing a passport, it certainly has to be able to access all information regarding the activity from the private body to which it has given the contract.
“The Appeal is allowed.
“The PIO is directed to provide the information to the appellant before 25 July 2012.” -Shailesh Gandhi, Information Commissioner 04 July 2012.
Tanmoy Chakrabarty has promised the PPGF to seek advice from TCS’s legal cell and revert at the earliest.
Credit Suisse expects the supply glut pressure to ease up, with north India benefitting the most from the accretive price increase in cement. However risks like paying the penalty of $1.2 billion levied by CCI and government support remains
When the infrastructure boom was happening between 2000 and 2009, cement companies, in anticipation of huge demand started ramping up their capacities. However, this proved to be a costly mistake and they paid the price for it, when infrastructure development slowed down considerably (thanks to the policy paralysis of the government coupled with corruption and global slowdown). This left the cement industry with a supply glut as well as drastic price reductions and wafer-thin margins (and in some cases even outright losses) and poor performance, especially over past few years.
However, according to Credit Suisse, the cement industry is expected to pick up steam in the next two years with supply pressure easing and improved demand. “We expect the cement upcycle to continue at least for the next two years with accretive price increases leading to margin expansion. Capacity additions should peak out in FY14 and production discipline should imply a recovering FY14 and a stronger FY15,” it said in a research report.
Government support crucial
Credit Suisse feels one of the key drivers for the expected outperformance of these cement companies is the higher outlay announced in the recent Union Budget for rural infrastructure development vis-a-vis Prime Minister’s Rural Roads Programme (PMGSY) and rural housing (Indira Awas Yojna) as well as a pick up in general demand. Credit Suisse expects ACC and Grasim to outperform in the next 12 months while it is neutral on UltraTech Cement and Ambuja Cement. None of the south-based cement companies were covered though.
However, Credit Suisse said, one of the key risks to the recovery is the implementation of the Competition Commission of India’s (CCI) order against cartelisation that could see an outflow of as much as $1.2 billion, which will severely impact future capacity expansions.
Capacities added in FY10 still not breaking even
In fact, according to Credit Suisse, some small- and mid-cap companies are not even breaking even on RoIC (or return on invested capital). Not only is cement capital intensive, it is also extremely competitive which tips the scales in favour of large-cap cement companies. It is quite possible that consolidation could happen; or there is even the possibility of small-cap cement companies winding up since the economics are stacked against them.
Even among large-cap cement players, production has slowed down, thanks to the rapid capacity expansion that happened between 2005 and 2010. According to Credit Suisse, “Greenfield capacities commissioned in FY10-12 are still not breaking even on cost of capital as these capacities are operating at ~70%-75% utilisation. 60% of new capacities commissioning during FY13-15 are greenfield capacities with higher break-even utilisation.” In other words, new plants take longer time to break even as opposed to brownfield plants (or simply boosting existing capacities. But supply pressure is expected to cool off, leading to inventory take off and higher sales, as well as meet 65% of the demand, according to the report.
Production discipline holds the key
Credit Suisse says its views on cement upcycle assume production discipline to continue where volume growth of existing players is expected below industry average to accommodate new capacities. The economic rationale for the production discipline is higher sensitivity of profits to prices (5% profit change for 1% change in prices) versus volumes (2%). "We expect production discipline to be sustained, as the pace of new capacity additions has slowed, which reduces supply pressure, majority of capacity addition in last four years was with mid-caps and small-caps where overall RoIC is still below cost of capital due to low utilisation and profitability and 60% of new capacities commissioning during FY13-15 are greenfield capacities with higher break-even utilisation," it said.
North to have the maximum accretive price increases
Credit Suisse said it expect overall accretive price to increase but regional performances could come out as different. It said, “We expect maximum accretive price increase in the northern region over next two years followed by eastern and southern regions. We expect no accretive price increases for western and central India, given the higher supply pressure. However, if ABG’s or Reliance’s commissioning is delayed in FY14, supply pressure could be lower in western and central regions. Of the two regions, central is likely to face the maximum supply pressure where Madhya Pradesh and Uttar Pradesh caters to 15% of India’s cement demand.”
Cost to go up over next two years
According to Credit Suisse’s analysis over past two decades, cement price increase have not exceeded inflation unless cost increases were more than inflation and cement companies have been able to pass on increases in cost unless demand growth was weak as was the case in FY11 when the demand in southern India turned negative.
However, Credit Suisse expects cost to increase by about 8% over the next two years against inflation of 7-8%. “As per the feedback from the industry there are two factors leading to cost increase. One increase in cost of linkage coal as Coal India starts importing coal and implement pooling process to average coal costs. We expect cost of linkage coal to increase at a 10% CAGR over the next two years; and diesel price deregulation for bulk purchasers such as Railways and periodical increase in diesel price which impacts road freight,” it said.
“The extent of accretive price increases depends on whether the demand is strong (if south recovers) or moderate (low accretive price increase). We build in higher increase in EBITDA/t in FY15 only as we expect southern India demand to recover by FY15 and supply pressure to moderates in FY15,” it added.
The high-level meeting of Pune Passport Grievance Forum with senior-most officials of Tata Consultancy Services organised by Moneylife Foundation at its Mumbai office has raised some hopes for the generally harassed passport applicant