Tuesday, March 29, 2005

The Simputer making progress

After making it to the field-trials stage (where it still is) with the Indian armed forces as the SATHI (Situational Awareness and Tactical Handheld Information), the Simputer is now making inroads in automobile manufacturing.

When Mahindra & Mahindra recently rolled out their first Euro III variant of Scorpio from its production line, a simputer was used to clear the codes and start the engine for the first time....

Encore Software supplied simputers to M&M to use as a diagnostic tool for its Euro III compliant vehicles.
The device interestingly is aimed at dealers, to enable them to test and monitor engine parameters on the field (not in the workshop), which points to the potential size of the market. The interface (with the Engine Control Unit) software in this case was developed at Mahindra's facility at Nasik.

For the future of the Encore simputer, while the company has approached other automobile players too for similar applications, they are also looking at industries.
Other applications where simputer could be used include micro-banking. The company is working with co-operative banks, ticketing and billing systems, supply chain systems (pilots running currently), data generation and analytical device for ECG units, and diagnostic tools for mining industry.

India's tallest building in the World

One of India's most famous architects, Hafeez Contractor, presented a design concept to the Noida Authority for building what he hopes will be the tallest building in the World. At a proposed 135-storeys it is truly a revolutionary concept for urban planning in India, where the current record is held by the MVRDC World Trade Centre I in Mumbai at a 156m/35 floors, while the Shreepati Arcade is 152.5m/45 floors. The proposed height of the Noida skyscraper is not known, but Hafeez intends it to be bigger than current record holder, the Taipei 101 at 508m, and, the Guardian reports, bigger than even the proposed Burj Dubai tower in Dubai.

The Burj Dubai is being built with only one intention - to be the tallest tower in the world. So while current plans of its exact proposed height when it is ready in 2007 or 2008 are being kept a secret, speculators have claimed anything from 492m to even 900m. Even those claiming the same 160 floors are varied in their estimates from 700 to 800 meters. It is widely believed however that the foundation of the building would be made extra strong to accomodate future floors, to ensure supremacy in the numbers game. (Just a passing thought, but the exterior design does not look conducive for future anhancements of that kind.) With that background, it remains to be seen how exactly Hafeez (who is also building a 120 floor tower block in Dubai) plans to beat the Burj Dubai tower.

Some experts believe that towers of this kind do not take into account ground realities in India, like erratic water and power supply. For a building of this size a single power cut would be disastrous, as the lifts will stop and people will immediately pile up around the entrances, with even stampedes possible. So how does Hafeez intend to tackle these problems?

Firstly I would say Hafeez is optimistic. He thinks that things are moving in the right direction on the infrastructure front, and it is a matter of time before reforms will rectify the water and power problems. After all, the building would take at least 4 years to be ready. If that does not happen, then the backup plan would be to actually invest in ventures to ensure supplies. This could be entering into exclusive deals (with strict penalty clauses) with independent power producers or water management companies, or an entry of building companies into those fields. All in all, I predict exciting times ahead, as the spin-offs are likely to affect a wide range of infrastructure industries.

Update 4/6/7: The Burj Dubai is now slated to hit 1011m, but there might be more aspirants coming up in India: Indian World's Tallest Building Aspirants

Friday, March 25, 2005

India Petroleum Update

Action on the refineries front

Indications that Petroleum Minister Mani Shankar Aiyar's EOU refinery strategy could succeed came when Saudi Aramco (the world's biggest company in terms of oil reserves assets), Kuwait Petroleum Corporation and National Iranian Oil Company expressed interest to set up grassroot refineries in India. HPCL and Essar Oil were mentioned as being in talks as potential joint-venture partners.

This is expected to be a win-win situation for either of the sides: big FDI inflows, increased petroleum exports, and increased supply security for India. For the 3 OPEC members represented by SA, KPC and NIOC, it offers a chance to increase its customer base and hence an increased output quota from OPEC.

ONGC meanwhile is setting up a Rs 4,000 crore refinery to process all that heavy crude Cairn discovered recently. Incidentally India has very little heavy crude refining capability, but now with Venezuelan crude entering India in a big way, that looks likely to change.

Foreign Oil Equity Quest

ONGC Videsh will get a little more sprightly in investing abroad as they will now not need a cabinet approval for investments of up to $75 million, as against $50 million before.

The IOC-OIL consortium signed a contract formally acquiring the Libyan oil field it bagged at a bidding last month.

Domestic exploration

ONGC is finding positive signs of gas in its exploratory efforts in the Sunderbans. They are also running into some trouble with the environment lobby, over concerns over the Ridley turtle population getting adversely affected.


The new entrants into the retail segment in the country are already launching salvos on the pricing front. ONGC launched its auto fuel retailing operations under the OVAL brand name with a rather unique discounting scheme. The first outlet at least had more facilities than the average outlet of the much hyped Reliance.

On its part Reliance is poaching the State Transport Corporations as customers from the PSU giants. A case in point is Tamil Nadu where the decision let to an uproar.

Wednesday, March 23, 2005

India's indigenous aircraft carrier

On April 11th, India's defence minister Pranab Mukherjee will inaugurate contruction work on India's first indigenous aircraft carrier (popularised as the Air Defence Ship in the media). At a displacement of 37,500 tonnes, it will be bigger than carriers any country currently manufactures except the US, the UK and France. Russia built two 40,000 tonne displacement carriers (one of which, the Admiral Gorshkov, it is selling/"gifting" to India and is due to arrive in 2008), stopped building them.

The Air defense Ship is expected to be delivered by the Kochi Shipyard in eary 2012, and would hold Mig-29K fighters and Kamov-31 helicopters.

Friday, March 18, 2005

India Petroleum Update

Most of the action this week was around the proposed Iran-Pak-India gas pipeline.

First Iran refuses to sign the 'supply-or-pay' clause in the gas deal with India. This effectively means Iran refuses responsibility to supply the gas at India's doorstep - and thus the responsibility of reigning in Pak.

Then Condoleezza Rice visits Delhi and does the expected - asks India to keep away from Iran for a while.

The next day, Aiyar gets tough with Iran on the pricing front, even saying they can go to the other customers they harp about. To be fair to Aiyar, he did verbally refuse to bow to any US pressure on the issue. Still, you cant stop the conspiracy theorists right?

On the foreign oil and gas equity front, Reliance Industries bagged exploration rights to one of the largest deep water blocks in Oman. At some 20,000 sq kms it is huge, and has the right structure to possibly hold huge gas reserves.

In an article in the Asia Times, Chietigj Bajpaee explains some of the geopolitical contraints that India faces in its quest for oil energy security. A nice round-up.

N. Mahalaxmi has a nice article on Rediff, pointing out why India Inc is so bullish about the future, despite rising and rising oil prices - gas. A cheaper and cleaner source of fuel, even without any of the new pipelines fructifying, Reliance (from the KG Basin), Petronet LNG, and other companies are scheduled to ensure that supply of gas in the domestic market will go up from 114 mscmpd (Million standard cubic metres per day) in 2004-2005 to 195 mscmpd in 2008-2009. RIL, ONGC, GAIL, Indraprastha Gas and Petronet LNG will be champions of ensuring future gas security in India. I am pleased to note that I am well invested in at least three of them.

Wednesday, March 16, 2005

Towards a handheld future

The Sony Playstation Portable is a superhit - as was the Nintendo DS.

There are four major categories of handheld devices that are a rage these days:
1. Mobile phones
2. Personal Digital Assistants and Digital Diaries
3. MP3 players (from Rio to iPod)
4. Portable Gaming consoles

The interesting thing is that at different levels these have already been integrated. For example, Nokia has mobile phones that can store and play MP3's, act as PDA's and the n-Gage for gaming. They dont have one that can act do all three though. And vice versa for the other devices too.

But convergence resulting in one device that can do all four seems imminent. Mobile phones are already making large inroads into the MP3 player space. This category seems the most vulnerable to death in the shake-out. The survivors will only be niche players, and the market will become small once the average mobile phone can do what they do - which seems just a matter of time.

Actually there is already a device that can do the job of all the four - the PC with proper plug-in accessories and software. So that brings us to another question: if one of the four handhelds rises to being able to perform the role of all four, will it then be able to replace the PC too?

I should think so. Already top-end PDA's are as powerful as top-end PC's of 5 years back. Remember that those PC's can still do anything that 90% of PC users need to do. The Sony Playstation 3 will be powered with a chip that is 10 times as powerful as the most powerful Intel chips. So if the same chip can work on the PS Portable, well that solves the power question. The biggest obstacle however lies elsewhere.

The main difference is in the display. Displays in handhelds are restricted by the size of the human hand - which despite evolution is not growing fast enough. The solution lies in moving away from LCD's and on to projectors. The technology to fit a projector to act as a display on a handheld already exists. It is a matter of time before the ergonomics are worked out and such a device is in the market. That then would be the final frontier for the PC.

Tuesday, March 15, 2005

Scorpio going places

When traditional utility vehicle manufacturer Mahindra and Mahindra launched its Scorpio in the Indian market (back in 2001-2002), it was touted as India Inc's SUV (Sports Utility Vehicle) version of the Indica. Both were the first Made-in-India products of their class of any standing. Also the price-power ratio at which they were offered made them great deals for the Indian consumer. Moreover the Scorpio was developed at a cost of just Rs 1600 crores, whereas internationally a model would be developed at at least three times that.

Though over the years, the Indica-platform of cars has been hogging all the limelight (worthily, because they sell in much more competitive market segments, and at much larger volumes), the Scorpio has been making quiet inroads into overseas markets. Currently being sold in South Africa, Europe, the United Arab Emirates, Qatar, Kuwait and Uruguay, it will now also be available in Oman. The stress on the Middle East market is no coincidence:

"The Middle East SUV market is one of the most dynamic and demanding in the world and we look forward to the challenges it presents," said Alan Durante, executive director and president (automotive sector) of Mahindra and Mahindra.
India Inc now has passenger cars that are just making it onto the menus of international buyers. The next step would be to ensure they are chosen more often. That would need a lot of effort, though one strategy would be to ensure a bigger and wider presence on that menu.

Friday, March 11, 2005

Alternate Energy is happenning in India...

Wind Power
India is emerging as one of the biggest and fastest growing wind energy producers in the world. In 2004 India added 875 MW of generating capacity, which brings it within striking distance of being the third largest wind energy producer in the world (at 3 GW it is just behind Denmark with 3.117 GW). Germany is doubtless the numero uno in the world with a capacity of 16.6 GW. Government policy in Germany firmly shifts the subsidies in favor of renewable energy producers. Spain has emerged the new number two with 8.2 GW installed capacity, and was also the fastest grower of the year 2004.

Meanwhile, despite the inability of the Indian government to kick-off bio-diesel in a big way in the country, European countries are seeing the competitive advantages offered by the country and are rushing in to procure bio-desel from the country. To get an idea of the opportunity, D1 Oils believes that a, "100,000 hectare jatropha farm would yield revenues of $100m per annum", which translates to $1 million per 1000 hectares. India has 175,000,000 hectares of wasteland - which translates to a potential of $175 billion a year (about 33% of our GDP).

Thursday, March 10, 2005

India Petroleum Update

The Russian frontier
Despite all the hoopla about India being made big offers in Russia, is appears that all of these are contingent on one event scheduled for September-October: the passing of the Russian Sub-Soil Mineral Rights law, which gives the Russian government ownership over all natural resources. TOI reports that the Rosneft-Gazprom merger removes the only other big bump in the relationship. India is looking at sourcing about 1 million barrels a day from Russia, over the next 5-7 years, by when that would be 20% of India's requirement. Interestingly a lot of it would be via the oil equity route.

The happenning ONGC!
Meanwhile, ONGC tastes success off the Andhra Coast, in Egypt, in Nigeria and has been offered an oilfield in Venezuela, in what could mark, "India's foray into the Latin American hydrocarbon sector". ONGC plans to process the Venezuelan crude in MRPL, a stake in which was offered to a Venezuelan company in return. To bring home all the oil and gas from its several properties overseas, ONGC is going to buy a very large crude carrier (VLCC) soon. This would be India's sixth VLCC since 2003, when India had none.

Reliance on the prowl too
Reliance Industries was awarded the International Refiner of the year 2004 award by Hart's World Refining magazine. On the exploration side, Reliance does not want to be left far behind ONGC either. They are in talks with countries in West Africa (Nigeria, Chad, Angola, Ghana, Cameroon, Congo and Gabon), in Latin America (Venezuela, Mexico and Brazil) and in the Middle East (Iran, Saudi Arabia and Qatar). They would be helped by the fact that their crack team for the prowls is led by Atul Chandra, who at ONGC Videsh Ltd (OVL) oversaw the Sakhalin and Sudan deals for OVL.

Restructuring options
At recent presentations to the 'synergy for energy' committe, GAIL argued for an, "integrated national gas behemoth", while on a different note IOC argued for three integrated oil and gas companies, led by IOC, BPCL and ONGC, where all three had a presence in upstream, downstream and retail.

NELP-V lures Talisman and Shell
Talisman, the $14 billion Canadian oil giant, which sold ONGC the 25% it now holds in Sudan's Greater Nile Petroleum Operating Company, is planning an India foray. "The company plans to participate in the bidding for oil and gas blocks offered under the fifth round of the New Exploration and Licensing Policy." Shell is coming back too.

Aiyar this week
EOU refineries is the latest salvo being pushed by Aiyar to reduce the forex outflow because of India's dependence on foreign crude. The idea is to set up huge export-oriented refining capacities near ports to eventually make India an net petroleum product exporting country. Demand remains huge in China, Japan and Korea.

Moot Point: Aiyar keeps saying that India has reserves of 225 billion barrels of oil or oil equivalent gas. Assuming that 5 years from now India would need 5 million barrels a day, and assuming that only 25% of the reserves are recoverable, that means we have enough for (225,000 * 0.25) / (5 * 365) = 30 years. This is if we start sourcing our entire requirements from local sources. Even if we import just 50% of our requirements then on (as against the 85% Aiyar predicts), we will still have enough for 60 years. Obviously that is not the case. So what have I got wrong here?

Monday, March 07, 2005

Israel builds "Weapon Next" in robotic warfare

The US is rolling out robotic foot soldiers. Israel is putting robotic eyes in the air.

The systems works like this: Israeli soldiers are assisted by unmanned small planes which have powerful cameras. The images from this camera are beamed into wrist watches that the soldiers wear. So the soldiers have an arial view of the enemy on their wrist, so the enemy positions can be identified in seconds, once the general direction is known.

It is then a matter of time before the land-based warrior robot and the arial eyes are mated into a deadly weapon in urban warfare.

An alternate route to Central Asia

In an earlier post, we saw how Pakistan was playing spoilsport in India's access to Central Asia. Currently, Pak allows transit of goods from Afghanistan to India, but not vice versa. Obviously, since Afghanistan is a landlocked country the bulk of the traffic should flow into Afghanistan, rather than out of it. Secondly, the cost of transport also doubles if only one-sided traffic is allowed. However, there just might be a way out in the future.

The Asian Development Bank, rediff reports, is working on a trans-Asian highway to link Kabul and Central Asia to Bangkok. The exact route is not specified, but the report says it would pass through Central Asia. This means that it would pass through China, and may just not pass through Pakistan at all. It appears that the plan is at a very preliminary stage of exploration, and it would be upto India to take it up with the remaining stakeholders and push hard for it. It would be longer than the route through Pakistan, but strategically at least it would be priceless. Further, the very idea that such a route was being planned could force Pak to grant India direct access - at least that way they have some control, not to forget the lucrative transit fees.

Thursday, March 03, 2005

India Petroleum Update

The oil equity quest

Middle East: ONGC Videsh, with a US partner, edged out a dozen companies to win a contract to explore and develop an offshore oilfield in Qatar. The Najwat Najem oilfield is extimated to hold 300 million barrels of oil reserves.

Meanwhile, Iran has extended an official invitation to Indian companies to "participate in the development" of its giant South Pars natural gas field

Burma: Last month the IOC-OIL combine won India its first overseas block through the competitive bidding route, at a bidding where European giants drew zilch. Now they are taking the bidding to a closer home destination - Myanmar - where they will bid for two oil blocks.

Russia: ONGC meanwhile has signed an MoU with Gazprom that opens the doors for their joint bidding for global energy assets. It was the absence of such a deal that made Indian companies miss out of Putin's famous "Christmas present" to Aiyar - by then it was too late to bid for a prized Yukos asset which went under the hammer.

Rosneft has put a number to the total oil and gas projects it wants ONGC to participate in - 11. This includes all the big tickets that were being touted like Yugansk, Sakhalin-3 and Vankhor. The exact details will be out in a joint statement soon.

Bangladesh: GAIL finally got India into the gas stakes in Bangladesh. Though Bangladesh has huge gas reserves, which were rather recently discovered, and India is a natural and big market, domestic politics does not allow them to sell gas to India. Now GAIL has signed an agreement with Spectra International of Bangladesh to "identify possibilities of joint co-operation in CNG infrastructure development projects and gas retailing in Bangladesh." Could this small step become a giant leap?

Africa: A senior Ministry of External Affairs delegation is heading for oil-rich Angola. The mission is to say, "No hard feelings", after Angola in the recent past gave a pretty lucrative oil contract to China instead of India.

Incidentally, China had then offered a total aid package of $2 billion, as against India's offer for an upfront $20 million. Apparently the powers-to-be in Angola know their math well enough. The Indian oil hunting machine has seen much coming-of-age since then, and maybe better deals will be offered at future biddings.

Update:Chad, Nigeria keen on Indian role in oil sector

Aiyar's Third Front

IOC meanwhile has begun working on the third front in Aiyar's strategy of securing energy security for India (after equity and pipelines), in the form of longer-term contracts. South Korea recently signed a 10-year oil supply contract with Kuwait, while Indian companies still work with annual contracts. Towards this end IOC has prepared a set of suggestions to act a guidelines while negotiating new contracts. These include:
IOC feels new contracts must incorporate provisions like:

• undisrupted supply of contractual volumes even if Opec cuts production

• flexibility to reduce term contract volume by 25% at buyer's option

• exit clause in force-majeure situation

• flexibility on change of grade

Domestic compulsions on strategy

Sunil Jain on Rediff.com talks on how the real challenge for Aiyar lies in domestic pricing. Indian CNG, LPG, kerosene and coal are priced well below international rates. The underpricing on CNG results in an under-recovery of $4-5 billion annually. To maintain this underpricing once the pipelines from Iran and Turkmenistan are working at full capacity, the Govt will have to spend $6 billion annually. For the record, current under-recovery is $1.6 billion on LPG, $3 billlion on kerosene, and $5.5 billion on coal - including CNG that makes it about $15 billion. Is it worth it considering power rates in India are still not among the lowest in the world?

Wednesday, March 02, 2005

ISRO's biggest overseas deal

We dont know where its going, or or what its going to cost, but Antrix has been making news saying that ISRO is finally going to have a purely commercial deal to put a satellite into orbit for a foreign customer.

Well, what we do know is that it is an Italian 350 kg satellite called Agile, to be launched sometime "early next year", and that "they are paying in full". So unlike the previous occasions when tiny foreign satellites would ride with a local main payload, this time the main payload is a customer country's.

Since it is the PSLV in question, it is most likely not going to be the geosynchronous orbit (though there has been talk of readying the PSLV for that too). But the clincher seems the weight - commercial communications satellite rarely weigh less than at least 3 times that, as it is uneconomical otherwise. So it is most likely some sort of remote sensing satellite, which will be launched in either the Low Earth, Polar or Sun Synchronous orbit.

Tuesday, March 01, 2005

Developing new trading avenues

The North-Eastern part of India has long suffered from economic stagnation for a variety of reasons. One of them is the absence of access to a warm water port. The journey to Calcutta is too long and tedious to economically transport perishables or non-perishables. The most obvious solution would be the usage of Bangaldesh's Chittagong port. But Bangladesh is Bangladesh - the scorpion that bites the frog carrying it in the middle of the river. So we move on to the next best option - Burma (or Myanmar)!

In an indication of the rapid strides made by the UPA Govt in cultivating links with the Burmese junta (while support for democratists through George Fernandes remains), that India now has not just a stake in Burma's oil and gas industry, but also is on the verge of getting access to a port. The idea is to link the NH-54 in Mizoram to a the Kadalan river in Burma at Kaletwa. Next the river will be dredged to provide ships access to the Sittwe port, which will also be developed as part of this project. The total duration could be 48 months. While India will finance the bulk of the operations, Burma could waiver transit fees for at least 5 years.

On the Western front, India finds that Afghanistan, and the Central Asian republics beyond present it a huge market. However, the other scorpion lies in between. Currently India exports goods via a ship-road link through an Iranian port, but this route is far more expensive than a direct road link would be. Needless to say, Pakistani support is the key to India cultivating Central Asian markets for itself.