Business Vs Environment (Protests at Sterlite Tuticorin)

There were protests at Sterlite copper factory in Tuticorin, which took a violent turn and caused few deaths in the past month. State Govt. ordered closure of the factory. It drew my attention and I started looking into the details. Protesters claim health hazards rising in the surrounding communities where the factory operates in. The copper factory blames that on other power plants operating in the town and says its own factory is safe for community.

Most (if not all) mining and ore extraction companies cause environmental damage at varying levels, many a times they are irreversible. Few companies do take ownership and employ sustainable measures to keep the harm to a minimum and they also take initiative to develop the communities living nearby as a token of offsetting the loss caused to them. Keeping that in mind, a copper smelting factory at Tuticorin had zero discharge (no waste bi-products), so factory’s claims of being safe cannot be ignored. But the society’s suffering is real, so instead of targeting only this factory, a wider survey needs to be undertaken and all those causing environmental damage should be made to take necessary corrective actions.

That was one side of the story. Another side, this was one of the India’s biggest copper producing units. With its closure, India must import copper now, so the costs are going up substantially and all the value-chain using copper as input are suffering business losses and many jobs are at a risk. If 2,000 jobs are about to be lost in the copper smelting unit, at least 10x more jobs will disappear in the subsequent chain industries, if the the situation continues.

As a trade-off, I feel both the copper factory and protesters need to take a back-step from their stance and come to terms. Protesters should not only target this company but make all the polluting companies responsible and at the same, the industry needs to adhere to safety norms and spend more than they are doing now on developing the communities living nearby. Govt. need to strike a balance between jobs and the environment, rather than taking a side. That is easier said than done. If the protests were politically motivated targeting only the Sterlite, then it is a sorry state for the environment. Once those political leaders get their pay-off, copper factory will come back to life but the environmental damage caused by other factories will continue to remain an issue and an opportunity to fix it is lost.

Stock Pick (Fundamental): Nava Bharat Ventures

Trade wars will make India stronger

India’s GDP growth is driven by consumption and not by international trade. In fact, India has a trade deficit, it imports more than exports. When there are trade wars, it greatly affects those countries like China, Germany and Japan whose economies are export driven.

For India, if our exports are affected it would affect Pharma and IT but take a close look. Most of pharma exports are low priced generic drug. There are not may places you can make it cheaper than in India. Similarly, IT service exports are driven by the talent availability along with low cost. Again, you can’t easily get those millions of English speaking IT engineers at the cost which India operates anywhere else. Given these competitive advantages, though these two sectors will see a setback they don’t vanish. Other exports such as Textiles, Jewellery, Agri commodities have loyal consumer base for Indian exports. They too will see headwinds but their survival may not be under threat.

When it comes to imports, though oil & gold have the lion share but there are lots of other stuff like industrial equipment, automobile spares, etc. which in the times of trade wars becomes expensive and create a fertile ground to make them in India. That, over a period, will drive investments, creates new jobs and saves import bill. Remember that auto industry was non-existent in the 1950’s in India and now our car makers produce indigenous designs made for Indian consumers. Similarly, our defense spending, which is mostly spent on imports now, can slowly transform into the one which drives domestic industry growth. Since trade wars make imports expensive, it makes commercial sense to produce them out of India, wherever possible.

I hope and wish that India makes use of the opportunities provided by the trade war and come out stronger.

Sugar: The problem of plenty

Excessive sugar in our body affects our health. Excessive sugarcane output is hurting the farmer’s health who are already lean and do not consume much of what they grow. The bumper crop output for second consecutive year in Brazil, the world’s largest sugar producer and India, the second largest sugar producer, took the sugar prices down from Rs 50+ per kg to the levels below Rs. 30 per kg.

Sugar consumption or demand growth is in the range 5-10% year on year. But on the supply side, crop output is cyclical and in the last two seasons crop output is 50% higher than usual. Also, the extraction rates (percentage of sugar out of sugarcane) is also improving. That damaged the sugar prices significantly.

The optimum price level needed is Rs.40 per kg for both farmers and sugar mills to survive. Govt. has announced few relief measures that lets the farmers barely survive but the profitability is out of scope. Since the sugar stocks are already high in warehouses, best way out of this is to export them. There are few takers like China who import sugar in large quantities. There are trade wars and sanctions which may act as a hindrance yet whatever can be moved out needs to be done quickly.

Alternate markets for sugarcane like Ethanol, which is used as a bio-fuel, also molasses making for liquor industry are not encouraging as those markets are limited in size and can’t consume the million tons of additional crop output.

If no effective solution is found soon, farmers are likely to stare at huge losses. They better limit the acreage for this crop in future and move on to other non-cyclical crops. Considering sugar cane is water guzzler crop, it would be good to discourage as that much of water can be used for other productive purposes. Lower prices of sugar are already driving farmers toward discarding it. Had they reduced the acreage after one bumper harvest last year, they would have avoided the mess they got into now. I wish our farmers make more informed decisions.

Science creates history and not vice versa

Lots of feeds on my Facebook on how great ancient India was not only annoys me but makes me worry about the state of our society. Sure, our forefathers achieved lots of great stuff. They could do so because they thought innovative. Had they spent singing how great their ancestors i.e., cave men were, there would not have been any development of a subject like Ayurveda. While numerous of them worked on studying and developing subjects from Astrology to Astronomy, ancient India flourished building upon the expanding knowledge base. They made India great, a sought-after nation by remaining relevant to their times and not getting lost in their past. Their contributions to science created history.

Now many of us spend time praising achievement of ancestors on a smart phone manufactured in Taiwan or China on Facebook application which is developed in the US using the Internet as a medium, the technology of which again is not developed in India. I wonder those spam the Facebook feed, don’t they feel ashamed? What is the use of saying that aircraft technology is many centuries old and it was in use in ancient India? Why and when did it disappear? What point do they want to prove tracing the evidence of Mahabharat? I think what else we are doing apart from it is more important.

Greatness comes from creating new solutions for the current problems. Go and find solutions for new age diseases, that would make India great. Grow the talent who will rule the space technology and challenge Elon Musk. Build finer products than Apple does. Find newer materials for battery technology and free up world’s dependence on oil. Help farmers increase output multiple times using less land and water and make sure no one in the world goes hungry. Things like that will make India great. Contributions to science creates history. Just praising history leaves us where we are and we lose the race to those who live in current times.

We need to be proud of ancestors. But need to remember that they fell victim to invaders because of their own weaknesses. Blaming the foreigners for today’s issues leads us nowhere but building upon the good things done by our forefathers can make India great again.