Midgets unite for the marathon
Plan to tap hydel power in Arunachal gathers pace
Subsidy sop for better price
Bengal hastens power reforms
Drug firms offer discounts to
Tata Cellular goes long distance

 
 
MIDGETS UNITE FOR THE MARATHON 
 
 
BY NITHYA SUBRAMANIANITHYA
 
Calcutta July 30: 
The doughty Davids in advertising are uniting against the glowering Goliaths. Driven to the wall by large firms, the smaller ad agencies are working on the contours of an association they say will help them stand up to the might of the biggies in business.

They are typically the companies which are struggling to stay afloat, even though these are the best of times for the industry: growth rates have been spectacular, between 30 and 40 per cent, in a boom fuelled as much by recovery-inspired companies as by the new-generation dotcoms selling the delights of cyberspace.

The initiative to galvanise small firms into an association has come largely from companies in the north, which include Ushak Kal and Crayons. “This is the first step towards taking on the big agencies. We decided on this recently and are now finalising the charter,” said Raj Hiremath of Ushak Kal.

The association, though restricted to the northern region in its initial years, will fan out later, and could attain a national character in a few years. “This is just an experiment, and we will see how things play out,” Hiremath added. Admen liken the plight of the smaller agencies to that of small-scale units, many of which are teetering on the brink of closure.

One of the key issues the guild is expected to take up is media buying. It intends to set up a combined media buying outfit for all member agencies so that they can get better rates.

“Bulk buying helps big agencies to buy media at cheaper rates, something that works to the disadvantage of several small agencies,” said Rajul Kulshreshta, head of media, at McCann-Erickson. Not surprisingly then, the most lucrative and big-budget accounts are handled by the bigger agencies.

Smaller agencies, generally, have two main problems: they are either losing accounts or facing payment problems. For example, FS Advertising recently lost Digjam, one its big accounts, while iB&W lost the Videocon account. “Besides, many small firms do not receive payments on time. Larger agencies handle default cases better,” another ad professional said.

Losing business is not the only trouble. Small firms fear they will be swallowed by global giants hungry for acquisitions. Recently, Zen Communications was bought out by French ad major Publicis. Another agency, Maadhyam, is also on its shopping list, and a deal is expected any time now.

“Most of the medium and small agencies have been bought out. Those who do not figure in the Top 20 are being severely hit,” Mudra vice-president Samit Sinha said. According to him, the industry follows the 80:20 ratio in awarding accounts. “About 80 per cent of the advertising business is handled by 20 per cent of the agencies,” he added. This has meant that only agencies which have a national presence, and billings of at least Rs 50-60 crore, would be able to survive by offering the full range of services.

That’s not all. The uncertainty over the dotcom business has not helped the smaller agencies, which get a slice of the adspends by online firms, but have to lose the plum accounts to the big names. For example, BPLnet is being is with SSC&B Lintas, MySap.com is being handled by O&M and Lowe has bagged Lintas Microland’s netbrahma.com. Only the local dotcom businesses go to the smaller agencies.

Agencies said say they do not face the much-anticipated payment problems with dotcoms. While some ask for advance payments, others are not insisting on it. “The internet boom has ensured that most small agencies have a dotcom account. But, with a shakeout imminent in the business next year, one will have to see what impact it has on the them,” said Anita Nayyar, media director, at Trikaya Grey.

Admen say only two types of small agencies will survive in the long term: the ones that are run by professionals and offer specialised services, or the others which catering to local business requirements. Others are likely to wither away.

It is the Darwinian prospect that has prompted the recent wave of global mergers and acquisitions.

“Big agencies are trying to get bigger while the smaller ones which remain in business are more like creative hot shops or specialised media buying outfits,” said a senior ad executive.    


 
 
PLAN TO TAP HYDEL POWER IN ARUNACHAL GATHERS PACE 
 
 
BY PALLAB BHATTACHARYA
 
Calcutta, July 30: 
The central government is going ahead with its plan to set up a 5000 MW hydel power generation unit at Arunachal Pradesh at an investment of Rs 30,000 crore. Sources said the project would be part of the government’s plan to tap the vast hydel power potential of the region.

“The area has a potential of generating around 60,000 MW through hydel units. We have plans to tap at least 21,000 MW by the end of 2012. The entire plan would be completed in four phases,” the source said.

“We have already carried out feasibility study for the project, which will be completed in three years time,” they added. Sources further pointed out that the detailed project report would be finalised by the end of the current fiscal.

The project will be set up in the tributaries of Brahmaputra river- Suhansiri and Dahen and implemented by the National Hydel Power Corporation. The cost of power to be generated has been estimated at Rs six crore. The financing model, however, is yet to be worked out.

A senior official, at the union power ministry, said the government’s focus was more on hydel power which is not only environment friendly but also has a much less input cost compared with thermal power.

“Currently, hydro electricity constitutes 26 per cent of the overall power generation which stands at 97,000 MW. Our aim is to raise the proportion to at least 40 per cent by the end of the 11th Five Year Plan,” the official said.

The deficit of power is estimated at 6.2 per cent. “Our plan is to bring down the deficit to zero level by the end of 2012, for which we need to generate one lakh MW of additional power,” he said.    


 
 
SUBSIDY SOP FOR BETTER PRICE 
 
 
BY A STAFF REPORTER
 
Calcutta, July 30: 
The Tea Board of India has launched a scheme to resolve the problem of low price realisation at the auctions. The scheme is, however, restricted to small growers. It provides for subsidy to the small growers (holding tea area up to 10.12 hectare only) for an amount equivalent to the shortfall between the auction price and a benchmark price of Rs 55 per kg.

The extent of price subsidy by Tea Board would be limited to a maximum of Rs 5 per kg of made tea (Rs 1.25 per kg green leaf) or to the extent it is less than Rs 55 per kg at the auction, whichever is less. An amount of Rs 10 crore has been earmarked for this scheme. It will remain open for a period of six months.

However, Tea Board will review the auction prices on a weekly basis and would suspend the scheme before six months if the auction prices are found to be going steady over Rs 55 per kg during five consecutive auctions.

Tea Board has also introduced an optional scheme towards quality assurance of tea from India. Intending domestic exporters and foreign importers of tea may avail the benefits of the scheme on quality assurance.

According to the scheme, intending importers shall request the Indian exporters to forward at least three sets of trade samples, representative of the proposed consignments to be exported. On receipt of the samples, the importers will forward one set to any one of the approved Indian agencies for testing. Another set of sample will be returned to the exporters indicating the acceptance by the importer. The remaining one will be retained by them for future use.

On receiving the forwarded set, the Indian agency shall obtain fresh samples from the consignment proposed to be exported. After testing them, the agency will issue a certificate indicating the conformity of the sample to the importer’s requirements, the chemical parameters for tea (as laid down under the PFA Act) and other details of the consignment.    


 
 
BENGAL HASTENS POWER REFORMS 
 
 
BY SUTANUKA GHOSAL
 
Calcutta, July 30: 
he West Bengal State Electricity Board (WBSEB) has formed a task force which will study ways in which its distribution division can be carved up into six profit centres as part of a larger initiative to revamp the state’s power sector by cracking the three most intractable problems: unpaid bills, power thefts and meter tampering.

“The distribution zones of the WBSEB will be restructured into cost centres. Each one would be an autonomous economic unit responsible for its own performance and for achieving standards in system management and customer service,” board sources said.

While Dipak De, additional chief engineer, will head the task force on profit centres, Kedar Mukherjee, superintending engineer (CP&ED), will study the possibilities of drawing up a power system master plan.

“In tune with the state government’s policy of reorganising the power sector, the board wants to push through a strategy which will address the problems peculiar to distribution. The Asian Development Bank and Power Finance Corporation (PFC) have been commissioned to study the formation of profit centres in distribution,” sources said.

ADB, in turn, has appointed the US-based Hagler Bailley Services and Electrowatt Engineering of Switzerland to conduct studies on the formation of profit centres and the power system master plan.

The board has also constituted four groups which will discuss with the PFC-ADB team a range of issues such as human resources, asset identification, segregation of urban and rural feeders and the earmarking of operational areas for West Bengal Rural Energy Development Corporation. In addition, board officials will hold talks on ways to improve metering, billing, collection, electricity accounting and reducing system losses.

At present, WBSEB’s transmission and distribution losses are pegged are more than 40 per cent due to meter tampering by high-end consumers, usually in connivance with the linesman, under-billing by Panchayat contractors and small farmers.

The bulk of the thefts are carried out by the 1.2 lakh consumers who get power at highly subsidised rates. They bring water from rivers or deep tube wells for irrigation. For this, consumers are billed at specific slab rates (for instance there is a rate for using 3-5 horse power pumps for 4 hours). Small farmers have stopped using the low hp pumps and have shifted to the high-power 7.5 to 10 HP variety. The higher electricity consumption, along with meter tampering, keeps billing low and board suffers from major revenue losses.

What has made matters worse is that even industrial consumers are stealing power, sources said. According to an internal board survey conducted by its distribution division, the industry uses its power connection only for an average for 15-30 minutes per day for at least 20 days in a month.    


 
 
DRUG FIRMS OFFER DISCOUNTS TO 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, July 30 
Fierce competition from branded and unbranded generic drugs has forced several pharmaceutical companies to extend volume-linked discounts to their stockists under a scheme known in the industry as trade offers.

The offers, extended largely with the purpose of de-stocking unsold products and clear the pile-up in inventories, has become popular even with the giants like Glaxo India. “The market has become very competitive and highly discount oriented. There has been significant increase in trade offers. While our company refrained from such offers earlier, we now do it in the case of a few products,” Glaxo India managing director Homi Khusrokhan told The Telegraph.

According to an ORG data which tracks sales for the first five months of the current calendar year, Cipla, Ranbaxy and the Ahmedabad-based Cadila group lead the pack of companies which have used trade offers to boost their sales. Most companies offer their stockists a certain quantity free, depending on the volumes that will be purchased.

Cipla had around 40 products on offer in January, but the figure fell to 28 in May; Ranbaxy had around 15 products at the beginning of this year, which rose to 22 in May; Cadila has, for the larger part of the year till now, put around 30 products on its trade-offer list. Glaxo started with four products on offer in January but increased it to 10 in May.

“This indicates that Cipla, Ranbaxy and Cadila have been the most belligerent as far as de-stocking is concerned. One of the ways adopted by them to boost their towline is to offer discounts to stockists,” said C Srihari, a pharmaceutical analyst with the city-based Khandwala Securities.

In the case of Glaxo, a section of the analysts is of the opinion that its strong topline growth rate has been helped by trade offers. This, they said, is evident from the sudden spurt in the products that were put on offer in May.    


 
 
TATA CELLULAR GOES LONG DISTANCE 
 
 
FROM G S RADHAKRISHNA
 
Hyderabad, July 30 
Tata Cellular has launched a scheme to localise long-distance telephony in Andhra Pradesh, less than a month before private companies are allowed to enter STD services.

The company, which holds the licence to provide mobile services in the state, says it intends to start with 10 towns in its network. These include Hyderabad, Vijaywada, Rajmundry, Guntur, Vishakapatnam, Eluru, Kakinada, Nellore, Bhimavaram and Tirupati.

“We will bring another 38 towns in a phased manner on our long-distance map. Tata Cellular’s STD calls will be as cheap as Rs 1.20 for every three minutes,” company chief operating officer (COO) Prabhat Pani said. An incoming call, he said, costs the company only 0.50 paise under almost-free incoming call (AFIC), its new scheme which has a monthly post-paid structure of Rs 1,000.

The one which localises the long-distance is called ‘AP on Local’. It enables anybody using a land-line phone in Andhra to make a call to a Tata Cellular mobile number at local call rates. As an alternative, the company’s mobile subscribers can call any fixed telephone in the state, also at local call rates. The ‘AP on Local’ system is based on links between a Tata Cellular switch and a DoT node. “We are working on the links and will soon establish it to the satisfaction of our customers,” Tata Cellular marketing manager Manzoor Ameen said.    

 

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