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Case Study Published: UK Website; Ref.207-054-1/2007

JAWAHARLAL NEHRU PORT TRUST - JNPT

- A CASE STUDY ON JNPT PUBLIC PRIVATE PARTNERSHIP ENHACEMENT

By: Dr. Phopale, A. R.

Abstract:

India has almost 5,560 km of natural peninsular coastline strategically located on the crucial East-West trade route, which links Europe and the Far East. 12 major ports and about 180 minor and intermediate ports service the coastline. The early birds, old ports, may not get all those worms like JNPT, second youngest port commissioned in 1989. Jawaharlal Nehru Port Trust (JNPT), Navi Mumbai is the terminal that set the ball rolling in the country in terms of Public-Private-Partnership (PPP) that is public and private sector partnership in overseas logistics. A decade ago, JNPT attracted all mainline vessels from the congested Bombay Port Trust (known as BPT). It has owned and operated by the GOI’s Indian Ports Act, 1908 and the Major Port Trust Act 1963 and the amendment of 1997 as regards merger of Dock Labour Boards (DLBs) and 1994 & 1996 Private Sector Participation (PSP),the Ministry of Surface Transport (MoST). In 2001 again, India’s first corporate portwas set up at Ennore near Chennai under Major Port Trust Act Amendment Bill, 2001. JNPT’s financial performance was quite impressive, especially with respect to other major Indian ports (except Kolkata-Haldia, India), improving from a net operating surplus of Rs. 7.09 crore in 1990-91 to Rs. 228.13 crore in 2002-03.

There are three container terminals; JNPCT, Nhava-Shewa International Container Terminals – NSICT (1999) a private run, and Gateway Terminal India Ltd.-GTIL a joint venture. While equipment augmentation with private participation improved port

Performance somewhat, complete private operation of a terminal, with a view to promoting port efficiency and profitability, was also being contemplated at the same time. This is in line with India’s new economic policy, enunciated in the early 1990s, which envisaged a more prominent role for the private sector in the provision of infrastructure services. In this context, MoST, World Bank (1995) and the Rakesh Mohan Committee (1996) played an important role by drawing attention to the various inefficiencies prevailing in India’s port sector and emphasizing upon the nature of reforms required in various areas for turning around the sector. Chennai port PPP experiment is also a success. There is a wide scope for another port in the same neighboring area of JNPT. There is a global tender for building a new two-berth container terminal of 600-meter quay length on Build Operate & Transfer (BOT) basis for thirty years. There are eight parts in the case study, starting from PPP in JNPT.

JNPT PORT, Navi Mumbai, Maharashtra State, India

Article Published: UK Website; Ref.208-015-1/2007

INDIAN CROSS-BORDER BUSINESS TAKEOVER By: Dr. Phopale, A. 1. Introduction

India began globalising largely since 1991. Some Indians left howled that this would mean the wholesale takeover of Indian companies by foreign Multi-National Companies (MNCs). When liberalizers suggested that globalization would equally mean the takeover of foreign companies by Indian multinationals through Outbound Foreign Direct Investment (OFDI), they were viewed with amusement as some sort of creatures from outer space. So entrenched was the notion of Indian inferiority and foreign superiority that the very thought of Indian companies taking over global ones was regarded as science fiction. Most of the sick units taken over from 2000 to 2006, by Indian company’s cross-border have become efficient. One must give credit to the New Economic Policy (NEP) reform process that began in the 1990s and the catalytic role it has played in India's globalization drive in terms of Merger & Acquisition (M&A) cross-border named as Indian Cross-border Business Takeover (ICBT). The Indian merger control rules in the Companies Act 1956 and the Securities & Exchange Board of India (under Substantial Acquisition of Shares and Takeovers) Regulations 1997 are widely changed further, on 29 August 2007. The Act was amended by the introduction of the Competition Amendment Bill 2007 to regulate transactions of assets or turnover notification within 30 days made mandatory. Since then, Indian superiority in running business abroad, keeping Indian skilled employment / population ratio higher during 2000-05 is not a dream.

2. Background

Today, Indian superiority in running business has become a reality. The trend began haltingly a few years ago. Sterlite, the successful bidder for the privatization of Bharat Aluminum and Hindustan Zinc, has become a true multinational by acquiring copper mines in Australia in 1998. It has also been short-listed as the preferred bidder for buying a 51 per cent stake in Konkola Copper Mines, the biggest government-owned mine in Zambia. Secondly, the Khorakiwalas had already made a minor foreign acquisition, of Wallis Laboratories, in 1998. Wockhardt owned by the Khorakiwalas, acquired CP Pharmaceuticals of UK. Thirdly, in 2000 Tata Tea took over a global company twice its size, Tetley Tea, the second biggest tea company in the world for USD677 million. Fourthly, Essel Packaging, owned by Subhash Chandra, took over Propack of Switzerland to form Essel Propack for USD30 million. The merger created Essel Propack the biggest producer in the world of laminated tubes, and an Indian MNC became global number one. The company reported a net profit of Rs.80 crore for the year-end 2004, on consolidated global revenue of Rs.669 crore on having 26 % of US market share. Essel Propack would invest USD25 million in its unit to expand capacity of laminated tubes used in toothpaste and cosmetics. There were leveraged buyout in terms of share of investment from Indian corporate, foreign financiers, and intermediaries helping Indian MNCs in the takeover bid. Therefore, this article is a beginning to find continuity in ICBT.

The article narrates the increase in prime Indian Cross-border Business Takeover (ICBT), mainly in predominant manufacturing sectors abroad over the period 2000 to 2006, and path similarity towards American fortune 500 by Indian MNCs like Tata, Birla and so on to come up.

Secondary data surprised, where in found cumulative 510 ICBT, with more than USD5 million, over the period, mainly in overseas manufacturing buyouts. OFDI have increased almost double than FDI in India during 2006-07 as per RBI data. The data is collected from websites named domain-b.com, Price Waterhouse Cooper, Federation of Indian Chambers of Commerce & Industry (FICCI) and Reserve Bank of India (RBI). Quantitative analyses to find relationship between number of ICBT and their deal value, in the regression forms of linear and exponential / time trend graphs are tried with the help of Statistical Package for Social Science (SPSS). Ordinary Least Square Coefficient of

Determination (R²) is 0.9157 of Y-deal value on X-number of ICBT is also found out for its significance. Forecast is calculated for ICBT deal value over period 2000-06. OFDI from 170 ICBT was USD 25.6 billion in alone 2006 (see Table 2 below). Where as expected 200 ICBT in manufacturing sector would appreciate OFDI to USD 32.19 billion.

There are 10 parts, in this article, viz. mega and middle Indian global takeover, quantitative analyses of increasing trend in ICBT over the period of 2000 to 2006, similarity between two big players Tatas & Birlas’s global takeover, special features of ICBT, and areas of risk aversion as well as management of future ICBT prospects and way ahead towards global ranking.

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Article being published

US OIL CONTANGO

&

WORLD TRADE CYCLE (2008)

By: Dr. Phopale A.

1. Introduction

A Crude oil and its products are necessary energies to every economic progress. Small change in its price affect growth rate of economy. During 2008 recession, by way of Exchange Traded Fund (ETF), the popular shares - United States Oil (USO) over 34 millions per day – were purchased and sold in future trade contracts on oil. Such very speculative activity by stakeholders to Buy-and-Hold during expected high future price than current price called “Contango” happened during this World Trade Cycle (WTC) of 2008. The spreads of contnagos multiplied and accelerated give rise to market apprehensions in terms of financial risk. The wide spread gap in cost of oil and its price generate contango. Cost of production of crude oil per barrel in major oil fields is US$10. The processing, storage and transport add to the price of oil together to the extent maximum US$20 per barrel and not more. As per The Wall Street Journal, March 31, 2008_1/ crude oil spot price was US$ 101.59 per barrel. The oil baron companies like Teekay (NYSE: TK), Frontline (NYSE: FRO), Valero (NYSE: VLO), Marathon Oil (NYSE: MRO); banks, financial institutions and speculators continued betting on oil and USO prices with the help of nonprime – low or undocumented or fraud - mortgage loan. Mortgage Back Securities (MBS) based on Adjustable Rate Mortgage (ARM) have created illegal loans in large magnitude by banks and financial institutions hoarded oil and USO, which increased the oil spot prices further to US$ 145.28 on Thursday, July 3, 2008. Hoarding physically, the scarce oil in tanks, vessels is seen prima-facie, but hoarding USO shares and their spread with mortgage loan supporting oil price speculation is like huge iceberg beneath water. This hoarding of oil and USO lead to “Oil Price Bubble” and result was hyperinflation in oil market during first half of 2008 H1. This is named here as “US Oil Contango” which busted due to panic when USO share prices started dwindling down. Then, there started unexpected sale of USO shares in fear of further financial risk and recession due to mortgage frauds. Highest price US$ 94.26 on June 18, 2008 of USO reduced to US$ 33.82 on March 19, 2009 (data given by – Media Container Format - MCF Insider Trading, Contango Oil & Gas Trading Co. page 1);_2/ mainly busted the articulated Oil Price Bubble.

Largely, such unproductive Contango speculations and their unexpected spreads on commodity and stock markets in reality, dotcom, Oil, Gold, Arms & Ammunition, FII, FDI, Sovereign Funds, Participatory Notes mixed with smuggling, gambling, hoarding and so on result in present WTC are the anomalies which must be regulated for over all industrial progress. In past such reality and dotcom bubbles were equally responsible for collapse of economies and sufferings of people of the universe. Government policy to cut interest rate and bail out key financial institutions, assuming significant additional financial commitments to productive, and employment generating industry is partly helpful in creating confidence in economy. Speculation is not a crime, if you play with own money. It is a fraud when other’s money and nonprime security - mortgage loan investments put to high financial risk. It is not only moral but also financial responsibility of every Central Bank to control unproductive allocation of resources, if work contrary to smooth economic and social goals, which are anti-national. This time oil bubble is still more dangerous and repetition could be disastrous. Therefore, Contango anywhere found that need to be curbed by government regulators. Such contangos generating speculative and hoarding trends are mainly the causes of economic instabilities, which resulted in present 2008 WTC. Let us establish quantitative support for the USO contango leading to 2008 recession. Those 34 million speculators in USA almost decide USO prices and hence crude oil prices. All world consumers are forced to accept the unexpected changes in oil price. Since the demand of oil is inelastic, we deteriorate in purchasing power during high oil contango. This article is devoted to the sufferers of 2008 recession. In this article, we deal in with only USO Contango largely responsible for the recession of 2008 and hence GDP growth rate crisis. Our statement problem is whether there is quantitative short run relationship in USO share price and Crude oil price responsible for changes in GDP growth rate during 2007-09Q1 in USA and India. There are nine Parts excluding bibliography in this article. They are Introduction, Background, Causes of Oil Price Bubble Burst, Oil Contango Speculation, Financial Asset Hoarding in 2008, US Oil Contango and WTC, USO Ups & Downs and other Parameters (Data), Methodology and lastly Testing of Hypothesis. Methodology Part is sub-divided into three Techniques: to prove direct relation between USO, Oil Price, as well as Oil Price & US/India growth rates by Technique 1 – Correlation, Technique 2 – Time Series Plot and Technique 3 – Analyses of Quadratic trend. In addition, there are 2 Tables, 10 Graphs with seven sources under Bibliography in this article of 19 pages.

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