Jain Irrigation Systems Ltd has inked an MoU with the Maharashtra Government for two mega projects. The company will be investing Rs 550 crore in Jalgaon. The investment will cover additional production of micro irrigation equipment, fruit and vegetable processing, tissue culture and other allied agricultural activities.
Showing posts with label Investing. Show all posts
Showing posts with label Investing. Show all posts
Friday, May 16, 2008
Friday, March 28, 2008
Loan Waiver And Agricultural Investment
The Rs 60,000-crore agricultural loan waiver by the Finance Minister has generated widespread debate. The reason goes back to farmers’ debt-related distress and even suicides. If the issue is debt-related distress, one must ask why it is so. There is no guarantee that the farmers will not borrow the ensuing year. More specifically, long-term prospects are sacrificed at the cost of short-term gains.
It is established now that the farmer is generally required to repay his/her debt immediately after the harvest. This means the farmer is trapped in a regressive market mechanism in two ways. First, with no other means of repaying the debt, he/she is forced to sell the produce immediately after the harvest — quite often to the creditor or to his agent — probably at a pre-arranged price or in pre-decided quantities.
Second, the sale of crops immediately after the harvest means that the farmer probably receives less for his/her produce than what he/she could have obtained when the market prices stabilise. As more and more farmer-debtors wish to convert their harvest into cash, crop prices tend to get further depressed.
Act of commerce
While all this is true of farmers, in general, the case of cash-crop farmers deserves special attention. Interestingly, those who go for cash crops such as tobacco, sugarcane or cotton are not typical small farmers. They are the ones with relatively large land holdings and risk appetite, for whom farming is a commercial operation. The anticipated incentives in the output market are the motivating factors for hard work as well as for high input costs. The results are, however, not always as expected.
During harvest time, the supply of crops often overshadows demand and, thus, prices go down. This is due to the pressure created by both formal and informal lenders for loan repayment, post-harvest. As a consequence, average input costs are sometimes higher, or just marginally lower, than the average revenue, leaving little or no cash surplus for loan servicing.
Small farms
It is hard to generalise a small farm as one with not more than two hectares of land across the whole of India. Physical land under assured irrigation is much more productive than the area with no assured irrigation.
Thus, a small farmer with less land but assured irrigation may be financially better off than another farmer with much larger land holding but no assured irrigation.
Take the case of eastern India and some parts of the south. The basic unit for organising production in the rural areas is either the farm or the village, depending on how rural society is structured.
In this region, agriculture is characterised by small farms in alluvial lowlands; too many people on too little land; production largely for subsistence; and a heavy dependence on cereals and other food staples. Farming with simple handheld tools or ploughs pulled by animals is common. Many farmers are owner-tenants and tenants.
Rice, usually grown under wet conditions, is the staple food crop in these regions. Controlled irrigation facilities are poorly developed, yields are often low, and double-cropping (planting and harvesting two crops in one calendar year) is not universally practised. Although high-yield varieties of wet rice have been introduced since the 1960s, this has not increased production as predicted.
In northern India, irrigation schemes have helped stabilise annual yields and increase overall production, but the average rice yield per hectare in the mid-1990s was only about half that of Japan.
Nevertheless, Asian countries produce about 90 per cent of the world’s rice. China and India alone account for nearly 60 per cent of the world total.
Low productivity and water management
The average rice yield is 2.9 tonnes per hectare in India. In comparison, the average rice yield (in tonnes per hectare) is 6.8 in the Republic of Korea; 6.2 in Japan; 6.3 in China; 4.3 in Indonesia; and 3.8 in DPR Korea.
The key issue is: Why has productivity remained so low in India, particularly in the eastern region, despite availability of modern rice technology? Experts argue that the above differences in yield are a result of poor water management. Irrigation, drainage and flood control investments can alter the water regime and, in the process, the plight of millions of small farmers. Together, they constitute the concept of water management. The high magnitude of poverty in this region is partly explained by poor water management.
Admittedly, achieving food security has been the overriding goal of agricultural policy in India. The introduction and rapid spread of high-yielding rice and wheat varieties in the late 1960s and early 1970s resulted in steady output growth for food grains.
Public investment in irrigation and other rural infrastructure and research, together with improved crop production practices, has helped significantly increase food grains production.
Declining investments
However, the benefits of the Green Revolution are waning now. Public investment in agriculture is declining, and the annual increment to gross capital formation is now lower than in the early 1980s.
This trend is the same across all the States, not just the poorer ones. More interestingly, the increasing shares of total public expenditure on agriculture are allocated to input subsidies (on fertilizers, electricity, irrigation, and credit, for example), rather than to productivity-enhancing investments such as research and public investment in irrigation. The share of input subsidies in public expenditure rose from 44 per cent in the early 1980s to 83 per cent by 1990.
Private investment in agriculture has increased modestly in recent years, but is nowhere near enough to fill the gap caused by the decrease in public spending. Unfortunately, the agricultural loan waiver can hardly be used to create these investments.
It is established now that the farmer is generally required to repay his/her debt immediately after the harvest. This means the farmer is trapped in a regressive market mechanism in two ways. First, with no other means of repaying the debt, he/she is forced to sell the produce immediately after the harvest — quite often to the creditor or to his agent — probably at a pre-arranged price or in pre-decided quantities.
Second, the sale of crops immediately after the harvest means that the farmer probably receives less for his/her produce than what he/she could have obtained when the market prices stabilise. As more and more farmer-debtors wish to convert their harvest into cash, crop prices tend to get further depressed.
Act of commerce
While all this is true of farmers, in general, the case of cash-crop farmers deserves special attention. Interestingly, those who go for cash crops such as tobacco, sugarcane or cotton are not typical small farmers. They are the ones with relatively large land holdings and risk appetite, for whom farming is a commercial operation. The anticipated incentives in the output market are the motivating factors for hard work as well as for high input costs. The results are, however, not always as expected.
During harvest time, the supply of crops often overshadows demand and, thus, prices go down. This is due to the pressure created by both formal and informal lenders for loan repayment, post-harvest. As a consequence, average input costs are sometimes higher, or just marginally lower, than the average revenue, leaving little or no cash surplus for loan servicing.
Small farms
It is hard to generalise a small farm as one with not more than two hectares of land across the whole of India. Physical land under assured irrigation is much more productive than the area with no assured irrigation.
Thus, a small farmer with less land but assured irrigation may be financially better off than another farmer with much larger land holding but no assured irrigation.
Take the case of eastern India and some parts of the south. The basic unit for organising production in the rural areas is either the farm or the village, depending on how rural society is structured.
In this region, agriculture is characterised by small farms in alluvial lowlands; too many people on too little land; production largely for subsistence; and a heavy dependence on cereals and other food staples. Farming with simple handheld tools or ploughs pulled by animals is common. Many farmers are owner-tenants and tenants.
Rice, usually grown under wet conditions, is the staple food crop in these regions. Controlled irrigation facilities are poorly developed, yields are often low, and double-cropping (planting and harvesting two crops in one calendar year) is not universally practised. Although high-yield varieties of wet rice have been introduced since the 1960s, this has not increased production as predicted.
In northern India, irrigation schemes have helped stabilise annual yields and increase overall production, but the average rice yield per hectare in the mid-1990s was only about half that of Japan.
Nevertheless, Asian countries produce about 90 per cent of the world’s rice. China and India alone account for nearly 60 per cent of the world total.
Low productivity and water management
The average rice yield is 2.9 tonnes per hectare in India. In comparison, the average rice yield (in tonnes per hectare) is 6.8 in the Republic of Korea; 6.2 in Japan; 6.3 in China; 4.3 in Indonesia; and 3.8 in DPR Korea.
The key issue is: Why has productivity remained so low in India, particularly in the eastern region, despite availability of modern rice technology? Experts argue that the above differences in yield are a result of poor water management. Irrigation, drainage and flood control investments can alter the water regime and, in the process, the plight of millions of small farmers. Together, they constitute the concept of water management. The high magnitude of poverty in this region is partly explained by poor water management.
Admittedly, achieving food security has been the overriding goal of agricultural policy in India. The introduction and rapid spread of high-yielding rice and wheat varieties in the late 1960s and early 1970s resulted in steady output growth for food grains.
Public investment in irrigation and other rural infrastructure and research, together with improved crop production practices, has helped significantly increase food grains production.
Declining investments
However, the benefits of the Green Revolution are waning now. Public investment in agriculture is declining, and the annual increment to gross capital formation is now lower than in the early 1980s.
This trend is the same across all the States, not just the poorer ones. More interestingly, the increasing shares of total public expenditure on agriculture are allocated to input subsidies (on fertilizers, electricity, irrigation, and credit, for example), rather than to productivity-enhancing investments such as research and public investment in irrigation. The share of input subsidies in public expenditure rose from 44 per cent in the early 1980s to 83 per cent by 1990.
Private investment in agriculture has increased modestly in recent years, but is nowhere near enough to fill the gap caused by the decrease in public spending. Unfortunately, the agricultural loan waiver can hardly be used to create these investments.
Tuesday, March 25, 2008
Fiat To Increase Ranjangaon Capacity
Mumbai: Fiat India Automobiles Pvt Ltd, a 50:50 joint venture between Fiat Group of Italy and Tata Motors, has decided to increase its production capacity at its greenfield plant at Ranjangaon near Pune. FIAPL will be infusing an additional Rs 2,341 crore over and above the on-going investment of Rs 1,679 crore. With a total investment of Rs 4,020 crore, the Ranjangaon facility will now manufacture two lakh cars, three lakh engines and three lakh related parts and accessories. FIAPL on March 24 inked a MoU with the Government of Maharashtra to increase the production capacity and for backward integration at its Ranjangaon plant. The joint venture company will be manufacturing cars, engines and transmissions for both the partners.
Thursday, March 13, 2008
Vedanta Group Investing Rs 20,000 Cr In Bengal
Kolkata: The $ 6.5-billion turnover Vedanta Group will set up aluminium manufacturing capacities in Burdwan district of West Bengal at an investment of Rs 20,000 crore. Budget
A `Memorandum of Development’ in this regard was signed here today between the Vedanta Group and the West Bengal Industrial Development Corporation Ltd.
Among those present at the development agreement signing ceremony were the West Bengal Chief Minister, Buddhadeb Bhattacharjee, West Bengal’s Minister of Industries and Commerce, Nirupam Sen, and the Chairman of the Vedanta Group, Anil Agarwal.
As part of its roadmap in this regard, the Vedanta Group has acquired, and will revive, the now-defunct West Bengal Aluminium Corporation that was set up in 1952 with an installed capacity of 30,000 tonnes per annum (tpa).
Along with this, Vedanta will also set up new capacities with a view to taking the total smelter capacity to 6.5 lakh tpa. Additionally, a power plant of 3000 MW capacity would be set up in two phases of 1,500 MW each. The twin projects will require 1,000 acres of land and are scheduled for completion within the next two years.
Speaking on the occasion, Buddhadeb Bhattacharjee, said the State Government has proposed to set up an aluminium park close to the Vedanta project. Investors would be encouraged to set up aluminium downsteam units in the aluminium park.
Bhattacharjee said aluminium was a “green metal” and had the potential to replace wood in various applications. People should be encouraged to use more aluminium, especially in the context of the growing problem of global warming, he said.
Nirupam Sen said work on the project could take off immediately on the 270 acres of land that is already in the possession of Vedanta. The State Government would make available additional land that would be required for setting up the twin projects.
Anil Agarwal said the project would meet the requirements of downstream units in the small and medium sector. He expressed happiness that the project was being set up in West Bengal, which was home to India’s first integrated aluminium manufacturing plant.
A `Memorandum of Development’ in this regard was signed here today between the Vedanta Group and the West Bengal Industrial Development Corporation Ltd.
Among those present at the development agreement signing ceremony were the West Bengal Chief Minister, Buddhadeb Bhattacharjee, West Bengal’s Minister of Industries and Commerce, Nirupam Sen, and the Chairman of the Vedanta Group, Anil Agarwal.
As part of its roadmap in this regard, the Vedanta Group has acquired, and will revive, the now-defunct West Bengal Aluminium Corporation that was set up in 1952 with an installed capacity of 30,000 tonnes per annum (tpa).
Along with this, Vedanta will also set up new capacities with a view to taking the total smelter capacity to 6.5 lakh tpa. Additionally, a power plant of 3000 MW capacity would be set up in two phases of 1,500 MW each. The twin projects will require 1,000 acres of land and are scheduled for completion within the next two years.
Speaking on the occasion, Buddhadeb Bhattacharjee, said the State Government has proposed to set up an aluminium park close to the Vedanta project. Investors would be encouraged to set up aluminium downsteam units in the aluminium park.
Bhattacharjee said aluminium was a “green metal” and had the potential to replace wood in various applications. People should be encouraged to use more aluminium, especially in the context of the growing problem of global warming, he said.
Nirupam Sen said work on the project could take off immediately on the 270 acres of land that is already in the possession of Vedanta. The State Government would make available additional land that would be required for setting up the twin projects.
Anil Agarwal said the project would meet the requirements of downstream units in the small and medium sector. He expressed happiness that the project was being set up in West Bengal, which was home to India’s first integrated aluminium manufacturing plant.
Monday, March 10, 2008
The A To Z Of Investing In Chinese Shares
Part-time world traveller and full-time investor Jim Rogers has been very bullish on China over the last two years. And this optimism clearly comes out in his latest book, A Bull in China - Investing Profitably in the World's Greatest Market.
"I'm such a believer in China's long-term prospects that I brought in a Chinese nanny to rear my daughter, Happy, born in 2003 and already a happy Mandarin speaker. As I've counselled before and will counsel again: get out of the dollar, teach your children Chinese, and buy commodities," he writes.
The question that crops up here is how foreign investors can invest in China to make money out of Rogers' optimism. Unlike other stock markets, China follows a split-share system.
As Rogers points out, "The answer, for the Chinese, is a 'split-share' system that allows Chinese companies to issue different classes of shares to domestic and foreign investors. It's an unwieldy, yet workable compromise that keeps investors coming while making the government's economic watchdogs feel relatively secure."
The split-share system starts with A shares. "On an individual basis, these are available to domestic Chinese investors only. They are denominated in renminbi, not freely convertible to international currencies. Since November 2002, Qualified Foreign Institutional Investors (QFIIs) such as large banks, funds, and securities companies with at least $10 billion in management, have been allowed to buy up to 10 per cent of a company's shares (still held in Chinese currency)," writes Rogers.
Then comes the B shares. As Rogers points out, "This class of shares was first created in the mid-1990s to be sold solely to foreigners using foreign currency. At that time, Chinese companies were attracted to the idea because foreigners eager to invest in China were at first willing to pay more per share than their domestic counterparts. So a bubble developed - but eventually popped, until people were practically giving away B shares… B shares are denominated in Hong Kong dollars on the Shenzen exchange and US dollars on the Shanghai exchange. Generally speaking, due to lower demand, the long-term performance of the B share market has lagged far behind the A share market even when the same company issues A and B shares with identical voting and dividend rights."
H shares are another form of Chinese shares. These are essentially shares of mainland Chinese companies listed on the Hong Kong stock exchange. "Many of China's best A-list companies have previously preferred the prestige and fund-raising potential of listing abroad - and that usually means listing in familiar Hong Kong. Sometimes companies can sell at better prices on foreign exchanges than at home; at other times, companies simply benefit from the exposure," writes Rogers.
The H shares are freely available to all foreigners. Similarly, shares of Chinese companies listed on the Singapore exchange are known as S shares. N shares are shares of Chinese companies listed in either the New York Stock Exchange or the NASDAQ, L shares are shares listed on the London Stock Exchange or the Alternative Investment Market (AIM) board in London and J shares are shares listed on the Tokyo stock exchange.
So, a foreign investor looking to invest in China has a lot of choice.
As Rogers writes, "A foreigner may be prohibited from buying A shares in a company listed in china, but could buy B, H, L, N, J, or S shares in the same company. Interestingly enough, Chinese domestic investors bear the brunt of the risk in China's developing market since they can invest only at home while most foreigners have more choices."
"I'm such a believer in China's long-term prospects that I brought in a Chinese nanny to rear my daughter, Happy, born in 2003 and already a happy Mandarin speaker. As I've counselled before and will counsel again: get out of the dollar, teach your children Chinese, and buy commodities," he writes.
The question that crops up here is how foreign investors can invest in China to make money out of Rogers' optimism. Unlike other stock markets, China follows a split-share system.
As Rogers points out, "The answer, for the Chinese, is a 'split-share' system that allows Chinese companies to issue different classes of shares to domestic and foreign investors. It's an unwieldy, yet workable compromise that keeps investors coming while making the government's economic watchdogs feel relatively secure."
The split-share system starts with A shares. "On an individual basis, these are available to domestic Chinese investors only. They are denominated in renminbi, not freely convertible to international currencies. Since November 2002, Qualified Foreign Institutional Investors (QFIIs) such as large banks, funds, and securities companies with at least $10 billion in management, have been allowed to buy up to 10 per cent of a company's shares (still held in Chinese currency)," writes Rogers.
Then comes the B shares. As Rogers points out, "This class of shares was first created in the mid-1990s to be sold solely to foreigners using foreign currency. At that time, Chinese companies were attracted to the idea because foreigners eager to invest in China were at first willing to pay more per share than their domestic counterparts. So a bubble developed - but eventually popped, until people were practically giving away B shares… B shares are denominated in Hong Kong dollars on the Shenzen exchange and US dollars on the Shanghai exchange. Generally speaking, due to lower demand, the long-term performance of the B share market has lagged far behind the A share market even when the same company issues A and B shares with identical voting and dividend rights."
H shares are another form of Chinese shares. These are essentially shares of mainland Chinese companies listed on the Hong Kong stock exchange. "Many of China's best A-list companies have previously preferred the prestige and fund-raising potential of listing abroad - and that usually means listing in familiar Hong Kong. Sometimes companies can sell at better prices on foreign exchanges than at home; at other times, companies simply benefit from the exposure," writes Rogers.
The H shares are freely available to all foreigners. Similarly, shares of Chinese companies listed on the Singapore exchange are known as S shares. N shares are shares of Chinese companies listed in either the New York Stock Exchange or the NASDAQ, L shares are shares listed on the London Stock Exchange or the Alternative Investment Market (AIM) board in London and J shares are shares listed on the Tokyo stock exchange.
So, a foreign investor looking to invest in China has a lot of choice.
As Rogers writes, "A foreigner may be prohibited from buying A shares in a company listed in china, but could buy B, H, L, N, J, or S shares in the same company. Interestingly enough, Chinese domestic investors bear the brunt of the risk in China's developing market since they can invest only at home while most foreigners have more choices."
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