Business, Economy, Government

The Rise of the Digital Factory

CHENNAI: At a time when fears of automation is gripping industries worldwide, three experts from diverse areas – digital, automotive, and petroleum – discussed ‘the rise of digital factory’ at an event here on Thursday.

Automation is disrupting business models. A Canadian company has five engineers monitoring seven data centres located in different parts of the world. Robotic process automation – automating a process to a way a human does it manually – is attacking all enterprises, said S Madhavan, Director, Green Quotient Systems, a company that provides cloud computing and automation framework services.

The fear of a rapid fall in unemployment due to automation has been troubling governments, especially, in developed countries. But, Ford Motor hired nearly a 1000 employees last year which was a 10 per cent increase in its workforce in India, said Michael Brielmaier, Managing Director, Ford Motor Private Limited, India.

Ford’s employees in India, mostly engineers, are performing complex research and development work in laboratories to devise systems that integrate software, Internet-of-Things (IOT), and machines. They are working with global teams for optimal utilisation of what India has to offer, said Brielmaier.

The digital factory that Brielmaier talked about brings together automation and artificial intelligence to drive up manufacturing – where factories will function with less humans and more robots. It will capture the intelligence of products, even after it leaves the factory, sending back information critical for improving standards and quality, said Madhavan.

The intelligence put into products rolling out of factories, in case of cars, can be used for pollution control and reduction of hazards using better instrumentation, according to KRSR Krishna, Vice President (Engg.), Petrofac International Limited, Sharjah, UAE.

Madhavan agreed to this argument and said that cruise automated technology improves fuel efficiency. Nearly 10-12 per cent of a modern car is electronic. The percentage will only go up leading us to the autonomic car, he said.

Krishna referred to the off-shore installations of petroleum companies and recalled oil-rig blasts – Flixborough disaster, Mexico City (1994) incident, and Piper Alpha (1988) fire – and said that automation and artificial intelligence has “induced a degree of freedom from hazards”.

The “fusion powered future” and the disruption caused or to be caused thereafter is nearly $3 trillion to $6 trillion dollars by 2025, said Madhavan.

The speakers were all on the dais for the Madras Institute of Technology Alumni Association’s event organised on Founder’s Day. It was also the Alumni and Institute Day.

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Business, Economy, Government

Empty Roads Ahead: Truckers’ protest begins today

CHENNAI, Mar 30: Truckers all over South India commenced their protest against the hike in third party insurance premium, abnormal toll charges and old-vehicles scrappage policy which has left trucks carrying essential commodities stranded at truck terminals at Madhavaram from 6 a.m. today.

Agricultural produce, poultry, LPG and cotton from Gujarat, Andhra Pradesh and Maharashtra couldn’t enter the city.  Products like match boxes, crackers, copper plates were packed-ready to be sent to different parts of the country.

The increase in insurance premium by 50 per cent for public commercial vehicles with Gross Vehicle Weight of 40 tonnes under a third party insurance provider was approved by the Insurance Regulatory Authority of India in 2016. A third party insurance excludes driver, owner and vehicle from insurance cover and provides it to whom the damage was done by the insurance holder – for instance, in the case of an accidental death or damage caused by the truck, the insured amount would go to the victim.

“IRDA has failed to provide real time data [on the increase in deaths caused by trucks and insured amount demanded] since last four years inspite of repeated assurances in the past,” said the press release by All India Motor Transport Congress (AIMTC).

“We transport essential commodities and hence are against an indefinite strike. But, if it takes one or two months for the demands to be heard and addressed, essential commodities transporters and people will suffer – everybody will face losses,” said M Ponnambalam, Secretary, All India Motor Transport Congress (Tamil Nadu Chapter), Namakkal.

The association has asked for the accidents, claims and compensations data to be sent to the Tariff Advisory Committee (TAC), having representatives from the Ministry of Road transport and highways, Ministry of Finance, and AIMTC, before the hike is implemented.

On the issue of toll, Achutan Nair, Secretary, Chennai Goods Transport Association, said that reducing delays at toll plazas would decrease the idling time of the vehicle thus saving fuel. The frequent and arbitrary levy of toll was also an issue, he added.

Goods transport Associations all across the country have sought the shelving of scrappage policy drafted to phase out heavy vehicles that are more than 15-years-old. They have asked the government to give concession in excise duty to those who are ready to scrap the old vehicle and buy a new one. “It should also let them keep the money received when the old vehicle is sold as scrap. Several people will lose their livelihood if compensations are denied. Creating an awareness in the vehicles owners – about clean technology and environment – is important. If the government is unwilling to take these initiatives, how can livelihoods be saved?” said Ponnambalam.

The truckers have also sought the curbing of corruption on the road through restricted discriminatory powers granted to law enforcement agencies – RTO, Traffic, and Police.

The associations, represented by the AIMTC, have placed before the Union Minister of Road Transport and Highways, Nitin Gadkari, with a caution that an all India strike would be called from April 20 if their demands are not met.

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Business, Covering Deprivation, Economy, Government

Tobacco fields…up in smoke?

Hunsur/H D Kote: Tobacco farmer’s worries have multiplied with licensing issues and fears of a ban coupled with the fall in yield per hectare in Hunsur and HD Kote Taluks of Mysore district.

“Tobacco farming will stop after two years. I will stop growing tobacco and shut my barn,” said Harish Gowda, who is one of the many non-licensee tobacco farmers in the area. He recently changed his crop from tobacco to ginger.

Many non-licensee tobacco farmers have shifted to other commercial crops after the tobacco board refused to grant new licenses.

The Board which was established in 1982 to regulate tobacco cultivation in the country last issued licences in 1990.

“Now, the Tobacco Board doesn’t want to encourage tobacco farming in the area and at the same time, it can’t deprive the licence holders,” said Dr. S Ramakrishnan, Principal Scientist, Central Tobacco Research Institute (CTRI), Hunsur.

“One reason the Indian Government decided against issuing new licences was to discourage tobacco cultivation. It wants to restrict the area under tobacco cultivation,” he added.

India, a signatory to World Health Organisation’s Framework Convention on Tobacco Control (FCTC) charter, must reduce tobacco cultivation to 60 per cent of its current area by 2020.

Scientists at the CTRI explained that tobacco was used as a blanket-term in the document and since there were several kinds of tobacco, the failure to specify the kind raised a confusion.

“The tobacco that they are referring to is not cigarette tobacco, which is grown here. Since this is export oriented, we feel that they might not touch this tobacco. Instead tobacco cultivated in Tamil Nadu and Andhra Pradesh which aren’t export oriented, might get banned. Once all these other kinds of tobacco have been banned, this tobacco might also get banned,” said Dr. M. M. Swamy, Agronomist, CTRI.

There has been a consistent investment in building and maintenance of barns, even by those who didn’t hold licences. Tobacco cultivators in the area claim that loans taken for such purposes can’t be repaid if a ban or reduction is enforced.

“I support regulation. Let the government take over the land and give us a small share. If they ban tobacco, I can’t repay my loan. I can’t get another loan to cultivate a new crop,” said Ibrahim Khan, another non-licensee tobacco farmer.

Dr. Ramakrishnan revealed that CTRI has been mandated to work on finding crops alternative to tobacco in the area.

“It is a contingency measure if at all anything happens to tobacco in terms of banning, and moreover, it is a matter of government policy, they can simply ban it in one stroke,” he said.

Earlier, a total of 1 lakh hectares of tobacco cultivation in the area yielded 100 million kg. Over the last five years, a drop in the total production has led to the tobacco crop area being taken over by other commercial crops – mostly ginger, according to scientists at CTRI.

“If farmers feel ginger is profitable, they will grow ginger. What is needed for ginger cultivation? Irrigation. They dig bore wells to fulfil the need. Nearly 15,000 hectares of land have been newly converted to ginger cultivation,” said Dr. M. M. Swamy.

Several farmers over the decade had leased their farm land to ginger cultivators from Kerala. A lease agreement for two to three years was signed and the cultivator would then dig a bore well and hire workers at his own expense. By the time the crop was raised and collected, the lease would expire, and the cultivator would move in search of a fresher, richer land to sow more ginger.

Although the farmers would receive a princely sum as lease, the cultivators would leave the land depleted of its strength by using chemical fertilizers in excessive quantities. Authorities also found that the ground water table had further sunk to lower levels.

The government has now issued an order annulling all such agreements after this year.

“I can sow ginger only after two to four years once the present yield has been harvested. Earlier, I would plant tobacco and rotate it with ginger. I don’t have that option now,” said Harish Gowda.

 

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Business, Economy, Government

Dying scrap markets ask for industrial area tag

While the formal automobile sector debates the scrapping policy, India’s large informal automobile spare parts and scrap market is dying away.

Old vehicle scrapping policy was a thrust that the automobile industry expected in this year’s budget on one of the rare occasions when environmental arguments and industry demands voiced the same note.

The policy if implemented would cut harmful emissions, increase sales for automobile manufacturers, improve overall fuel efficiency in the economy, reduce the import of oil, multiply government revenue through taxes levied on purchase of new vehicles, and reduce the dependence on steel imports as the old metal would be melted for recasting.

The resistance to this policy comes from pensioners, medium-income and cash-strapped owners who wish to maintain the vehicle and refuse to replace their old car with a new one by spending saved up cash or by taking a loan. Exchange schemes run by automobile companies and the argument that purchasing a new vehicle would offset the maintenance cost doesn’t beat the significant at-a-time investment the buyer would have to make.

Since the service tax was kept unchanged this year, the after sales service cost will remain the same. However, it would still remain high at company service centres. Earlier, people would go to Pudupet or other auto spares market, which catered to their requirement of a low-cost and low-skill maintenance job, such as fixing a broken tail light. Now, such markets can’t compete with the wide-spread network of dealerships and fast-moving, newly-styled models, according to Chandramouli S, Madras Motor Parts Dealers Association.

Markets like Pudupet gathered the scrapped auto parts and pumped them back into the system by selling them to notified agencies such as the government controlled company for trading in metal scrap, Ministry of Steel Trading Company (MSTC).

“The scrap business is not our business. But, we would direct the scrapped parts lying with us to steel furnace units. When it comes to new parts, nowadays, we procure it from distributors through proper channels, by paying taxes and producing bills. Gone are the days when parts could be stolen or smuggled. We can procure old-design parts in that manner but not for latest design,” said Mohammad Ali Irfan, who runs his father’s auto spares shop in Pudupet.

Irfan, a graduate in English Literature, is preparing for law entrance exams. He believes that the informal spare parts business will shut down in 10 years and with it the scrap business.

Although people still visit the market for an odd spare part, Aarif, Irfan’s brother said that the footfall has nearly halved since the Chennai floods. Engines with choked oil and water couldn’t be sparked to start. Days of resting in water-filled clogged roads led to rusting of inner parts. Now, Irfan and Aarif sell head light, tail light, bumpers, alloy wheels and tyres. The scrap generated with these products – mostly plastic and rubber – get dumped at a nearby dumping site.

“Since we can’t pay high prices and procure latest-design parts, people don’t come to us,” said Irfan. And, the absence of a scrapping policy has led to dumping yards with mountains of discarded parts that pass neither through company service centres nor through informal spare parts markets.

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Business, Economy, Government

Budget: No fuel for Auto Sector

The automobile industry in India was left dispirited by Finance Minister Arun Jaitley’s decision to put brakes on cash dealings above 3 lakhs from April 1.

“The number of people showing income more than Rs. 50 lakh in the entire country is only 1.72 lakh. We can contrast this with the fact that in the last five years, more than 1.25 crore cars have been sold. From all these figures we can conclude that we are largely a tax non-compliant society,” said Jaitley during the budget session.

The move will slow down the luxury car market and indirectly restrict the motor vehicle loan services sector that offered loans not entirely but as a proportion of the vehicle cost.

“Before demonetisation, people paid nearly 60 per cent of the cost by cash and 40 per cent through a bank. Even the automobile financier funds just around 40 per cent of the cost. They hardly give 80 per cent of the vehicle cost as loan,” said Shrinivasan K, secretary, Motor Vehicles and Allied Industries Association, Chennai.

“Jaitley said that 1 crore cars have been sold. Manufacturing has increased. Previously, manufacturers were fewer. Now, there are different models. Second-hand car sales has improved. Now, all the dealers have got a general manager for second-hand vehicles, for exchanging an old car with a new one. Only the difference in amount is paid. These exchange schemes stabilised sales,” he added.

Now, the industry expects a steep climb following dull sales for two quarters, hit by demonetisation, which affected the four-wheeler segment much stronger than the two-wheeler segment. The number of enquiries became fewer and bookings were cancelled.

“Automobile sales will be marginal. Even rural demand will get reduced. Only two wheelers will have a gain. Transportation of goods is required, especially for remote villages. Tractor sales will get affected,” said an office bearer, Chennai Goods Transport Association.

“Although there is demand for commercial vehicles, the new policy, once implemented will affect sales. Mostly, truck drivers do not own trucks. Their owners will continue to run old trucks. The business model is such that restricted cash-transactions will not only affect commercial vehicle sales but hit goods transport as well,” he added.

The budget showed its persistent focus on infrastructure with an outlay of Rs. 3.96 lakh crores. The allocation for rural sector was increased by 24 per cent to Rs. 1.87 lakh crores. The funds for the development of rural roads is set at Rs. 27,000 crores.

“The growth in auto industry would rebound to the pre-demonetization level through revival of the rural market and substantial increase in expenditure on infrastructure, which are two key factors responsible for the recent growth of the industry,” said Vinod K Dasari, President, Society of Indian Automobile Manufacturers (SIAM), in the official press release.

However, the sentiment in the automobile sector suggest that these measures to lay new highways and to provide better last mile connectivity would have been beneficial to the commercial vehicles segment if only the cash-dealing restriction wasn’t introduced.

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Business, Economy, Government

RBI Takes ‘Accommodative Stance’ at the crease; Cuts Rates by 0.25 bps

Borrower’s burden will reduce following RBI’s decision to slash the rate at which it lends to banks from the earlier 6.50 per cent to 6.25 per cent.

The RBI, in a highly anticipated move, in its statement tried to answer the question whether the rate-cut will rekindle the fire in the kilns of Indian businesses and send more materials-carrying trucks to sites where projects were under-construction and choked because of supply-necessities.

The Monetary Policy Committee (MPC) of the RBI, which sat for its first monetary policy statement release on October 06, had the price-rise levels marked at 5 per cent (which it hopes to achieve by Q4, 2016-2017) and, for the medium-term, at 4 per cent allowing for an increase or decrease of 2 percent, before it opened the tap to fill the economy with cash after a strict Inflation-led policy regime of the previous governer, Raghuram Rajan.

The RBI ‘notes that the sharp drop in inflation reflects a downward shift in the momentum of food inflation – which holds the key to future inflation outcomes’.

The retail inflation that had an uptake, driven by food inflation, between April and July, fell sharply in August. Further, moderate levels of fuel prices, and also the prices of those goods and services excluding non-food and non-fuel that hovered around 5 per cent, added to the reasoning that cheered for a rate-cut.

Although, input costs in the manufacturing sector gave an indication of shooting up, ‘the presence of considerable slack has restrained their transmission into corporate pricing power,’ according to the statement.

The Monetary Policy Committee in its outlook on the next steps the economy will take expects the momentum to quicken following a good season of monsoon. Rural and urban spending is anticipated to be the other piston of the forecasted growth. The 7th Pay Commission’s award is said to whirr up urban consumption. The Indian industry’s machines are predicted to whiz ahead with the thrust given by ‘strong public investment in roads, railways and inland waterways, and recent efforts to unclog cash flows in large projects under arbitration.’

According to the Reserve Bank’s inflation expectations survey of households, people see prices rising in the coming months.

Although slowing global growth and investment, increasing financial market risks, brightening domestic agricultural scene, and easing inflation gave the MPC to cut rate, it believes that ‘the accommodative stance of monetary policy and comfortable liquidity conditions should support a revival of credit to the productive sectors.’

The RBI spelt a pre-caution that the cost-push pressures, resulting from the 7th pay commission hand out and the rise in lending and spending will need vigilance to prevent a cost spiral rising up and up. The Committee, through its juggling, hopes to stick to a Consumer Price Index (CPI) inflation trajectory that would land at 5 per cent by March 2017.

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Business, Economy, Government

Will the rate cut wed business expectation and reality?

The RBI Monetary Policy Committee’s (MPC) will be expecting the cut in borrowing rates to spark business sentiment, which was burning at low flame according to the 75th round of the Reserve Bank of India’s Industrial Outlook Survey (IOS) conducted during August-September 2016 period.

Availability of finance from banks and other sources was perceived to have improved along with reduced pessimism in the cost of finance, according to the results of the survey. The RBI in its monetary policy statement said that the new liquidity conditions should blaze a revival of credit to the productive sectors. In this sense, improved credit sources, working and employed resources should reduce pessimism even further.

If at all this rate cut should act as a lighter, then the business sentiments of the Indian manufacturing sector, which took a siesta in the previous quarter, as reported in the Business Expectation Index (BEI), will arise and hope to see a better capacity utilisation and an improvement financial situation.

The industrial sector, that experienced a manufacturing-driven contraction in Q2, and as measured by the index of industrial production (IIP) turned out to be slower than a year ago.

“In August, steel production rose to a 37-month high and cement production maintained momentum – auguring well for construction activity – even though the output of core industries as a whole was weighed down by a decline in the production of coal, crude oil and natural gas and deceleration in refinery products and electricity generation,” the policy statement said.

This is in line with the businesses that fear a pressure from rise in cost of raw materials. Hence, they kept profit margin unchanged, according to the Industrial Outlook Survey. Still, their expectations stayed expansionary for Q3.

RBI said that the strong public investment in roads, railways and inland waterways, the recent efforts to unclog cash flows in large projects under arbitration, and the boost to spending from the 7th Pay Commission’s award, should improve the industrial outlook. But, the pressures, even after the accommodative stance that the MPC professes with its +/-2 per cent inflationary band, will be hard to control if it creeps into the economy. The result, however, could be as expected with no signs of improvement in the global trade, investment and growth.

Several industries will soon take a hit if crude prices, which rose to a recent peak in Q2 of 2016, mostly on supply disruption in various parts of the world, rise again if the OPEC announce cutting back on supply.

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