India, Japan target $25-bn trade by '14

India and Japan have set a target of achieving $25 billion worth of bilateral trade by 2014 from the present $10.3
billion even as both countries have signed the much-awaited Comprehensive Economic Partnership Agreement
(Cepa) that will see about 94 per cent tariff reduction in goods ranging from cars to shrimps and easier movement of
nurses and chefs.

The deal was signed between Commerce and Industry Minister Anand Sharma and Japanese Foreign Minister Seiji
Maehara in Tokyo. It was formally agreed upon by Prime Minister Manmohan Singh and his Japanese counterpart
Naoto Kan last year in October.

“India stands to gain significantly through this agreement and 90 per cent of tariff lines are covered while Japan has
covered 5 per cent more lines than India. The agreement has ensured that the sensitive sectors for India are fully
protected. These include agriculture, fruits, spices, wheat, basmati rice, edible oils, wines and spirits and also certain
categories of industrial products such as auto and auto parts,” said an official statement by the ministry of commerce
and industry.

On a trade value basis, while Japan has agreed to 97 per cent tariff reduction in trade in goods, India has consented
for 90 per cent duty abolition, according to the Embassy of Japan’s communiqué. The number of Japanese firms in
India has doubled in last three years taking the total investments from Japan to India to more than 800 billion Yen,
according to Japanese official data.(Click for table)

However, as a result of this deal companies from both countries such as Mitsubishi Religare Enterprises Ltd, Heavy
Industries, Toshiba, Dai-Ichi, JSW, Hitachi, L&T, NTPC, Panasonic, Sony and Marubeni India Pvt would stand to
gain.

Besides getting a liberal access to Japan’s $5 trillion economy, India would also now be able to access the Japanese
pharmaceutical sector while imports of petrochemicals, chemicals, textile, readymade garments, cement and
jewellery would be cheaper.

Japan has also agreed to give same treatment to the Indian generics in line with its domestic pharmaceutical
industry.

On several farm products, forest items and marine products such as lumbers, shrimps and prawns, durian and
asparagus, there would 3-6 per cent tariff reduction immediately after the agreement comes into force by April 1.

In other agriculture and marine commodities such as black tea, frozen octopus, capsicum, curry and sweet corn,
Chinese yam, peach and strawberries, tariffs would be gradually reduced in the next 7-10 years.

In industrial goods, elimination of duties in auto parts such as diesel engines and gear boxes would be done over a
period of 10 years. Similarly, duties would be reduced by about 94 per cent in DVD players, video cameras and steel
sheets, plates and alloys within the next 5-10 years.

“As the majority of Japan’s non-agricultural tariff lines will see immediate duty elimination for exports from India, with
a strategic approach, India can significantly improve its share in Japan’s total imports from the existing low level of
0.7 per cent. India also stands to benefit in services,” highlighted Secretary General, Federation of Indian Chambers
of Commerce and Industry (FICCI), Amit Mitra. As part of the trade in services, both countries would soon be
establishing a social-security agreement, specifically for Indian qualified nurses and Japanese certified care-workers.
This agreement is expected to be signed by 2014, the consultations for which have already begun this year in
January.

Under Cepa, Japan has also agreed to provide liberalised access for Indian professionals and service providers such
as chefs, nurses, English language teachers, accountants, advertisers and tourist guides.

“The trade relationship between our two countries has been far below its true potential. We are certain that Cepa will
lead to a quantum increase in bilateral trade and investment flows, by relaxing barriers to trade in goods, services
and movement of natural persons, besides enhanced cooperation on protection of intellectual property,” said
President, Confederation of Indian Industry (CII), Hari S Bhartia from Tokyo.

Both countries would be creating a sub-committee that would explore the feasibility of a Mutual Recognition
Arrangement (MRAs) for certain specific sectors such as electrical products, telecommunications and radio
equipment among others. The sub-committee would be meeting within three months from the implementation of
Cepa.

India and Japan have also agreed to the creation of a joint revolving fund of $9 billion for kick-starting the ambitious
1483-km-long Delhi-Mumbai Industrial Corridor Project running through six states of Delhi, Uttar Pradesh, Haryana,
Rajasthan, Gujarat and Maharashtra.

The India-Japan global partnership summit would also take place in Tokyo from September 5-7 to promote
collaboration and increase investments between both the countries.

Bureaucracy getting output tracking system

Santosh Tiwari / New Delhi February 17, 2011, 0:35 IST
CabSec works on performance-related incentives, on monitoring, evaluating targets for all personnel.

In a major administrative reform exercise, the Cabinet Secretariat is working on implementation of a performance-
linked incentive scheme for officials. With this, it is also in the process of reforming the performance appraisal
report (PAR) system.

The measures are being seen as key next steps in the implementation of a new Performance Monitoring and
Evaluation System (PMES) for ministries and departments.

A senior government official told Business Standard the proposed performance-linked incentive scheme was
intended to be budget-neutral. He moted the recommendations of the 6th Pay Commission on levels and
structures of benefits had been implemented but the linked ones to introduce performance-related incentives
weren’t. The Cabinet Secretariat was working towards this goal.

The current PAR system was not seen to be playing any role in development or training of officers, he said, adding
that urgent reform was required.(Click for table)

An outline of the new PMES was approved by the Prime Minister on September 11, 2009. Since then, work had
been on at various levels, resulting in implementation in two phases to 62 departments and ministries out of a total
of 84. The whole process is expected to be implemented in full swing from this year.

Under the new PMES, at the beginning of each financial year, with the approval of the minister concerned, each
department has to prepare a result-framework document (RFD). This is to consist of the priorities set out by the
ministries concerned and agenda as spelt out, if any, as in the President’s Address and announcements by the
government from time to time.

After six months, the achievement of each ministry/department will be reviewed by a committee on performance
and the goals reset, taking account of priorities at that point. At the end of a year, all ministries and departments
are to review and prepare a report listing their achievements against the agreed results in the prescribed format.
This report will be expected to be finalised by May 1 each year.

How will the PMES work?

The result-framework document (RFD) of a ministry/department (see chart) would list key objectives (most
important and relevant ones) for the year in the first column. Objectives in the RFD would be ranked in descending
order of priority according to the degree of significance. Specific weights would be attached to these objectives in
the second column, decided by the minister in-charge. In column three of the RFD, the department would specify
the required policies, programmes, schemes and projects for each objective. Further, column four would specify
one or more ‘success indicators’ (key performance indicators) for each action mentioned in column three. Column
five is meant for providing relative weights to the success indicators. Finally, column six in the RFD allows the
department to choose a target for each success indicator.
 With this, the RFD would also provide actual values for the past two years and also projected values for two years
in the future. At the end of the year, the government will look at the achievements of each department, compare
these with the targets, and determine the composite score.

The RFD for 2010-2011 have been finalised by the departments and been approved by the High Powered
Committee on Government Performance. The whole exercise is going to make the functioning of the government
completely transparent, with accountabilities fixed at every level, said the official.

Jet seeks nod for direct flight to US

Mihir Mishra / New Delhi February 17, 2011, 0:08 IST

After connecting destinations in Europe, West Asia and Southeast Asia, Jet Airways has sought permission to fly
directly to the United States from next winter. The winter schedule starts in October.

“Jet has asked permission to fly to New York, directly. The flights could be either from Delhi or Mumbai and the airline
wants to fly on all seven days a week,” said a senior civil aviation ministry official seeking anonymity.

As of now, the airline owned by Naresh Goyal, flies to New York with a stopover at Brussels. Air India, American
Airlines and United Airlines operate direct flights between India and the US.

The US and India have open skies policy, which means any number of airlines and flights can connect any
destination in the country. With a fleet of 97 aircraft, Jet Airways serves 47 domestic destinations and 24 international
destinations, and is the country’s largest carrier in terms of passengers carried. With a strong domestic network, the
airline is increasing its presence in the international arena and now has 100, of its 400 flights, operating to
international destinations. The aviation ministry has also given permission to operate daily direct flights to
Amsterdam.

“We have allowed Jet to fly to Amsterdam and they can now go ahead and get into a code share
with the airline of that country,” said the official.

Jet recently got permission to fly to Milan and they have a code share with Alitalia, which could be
in a slight trouble. “Jets code share with Alitalia will need some change in bilateral agreement
signed between India and Italy. We are going to do this soon,” said the official.

Recovering from recession, Jet is expected to end the current financial year with profit as it has
made one in the first three quarters of the current financial year. It ended last year with a loss of
Rs 420 crore and the 2009 financial year with a loss of over Rs 950 crore.

In the third quarter of this year, Jet has posted a 11 per cent growth in profit after tax of Rs 118 core for the third
quarter against Rs 105 crore for the same period last year.

The airline also witnessed 15 per cent more passengers in the quarter

9 foreign airlines cleared of cartelisation charge

Joe C Mathew / New Delhi February 17, 2011, 0:07 IST

The investigation wing of the Competition Commission of India (CCI) has cleared nine foreign airlines of cartelisation
and abuse of dominant position charges, pressed by the Travel Agents Association of India (TAAI).

The report of the Director General (Investigations) was given to CCI on January 27, and this will form the basis of
further hearings of the fair trade watchdog. The next hearing of CCI is on March 3.
TAAI had approached CCI in December 2009 after the airlines — Lufthansa German Airlines, Continental Airlines,
KLM Royal Dutch Airlines, Swiss International Airlines, Singapore Airlines, Air Canada, Air France and North West
Airlines — announced their decision to end the practice of giving commissions to travel agents for ticketing services.

In its petition to CCI, the association alleged the decision to reduce the “Standard Agency Commission” from five per
cent to zero from November 1, 2009 was an anti-competitive move. It also said the airlines were part of two
international networks, Star Alliance Network and Sky Team Alliance, thereby pointing towards a potential
cartelization that led to the joint decision.

After investigating the matter for over a year, CCI’s investigation wing concluded that with a 17 to 20 per cent
combined market share, these airlines cannot be said to be dominant players in the international flying market from/to
India. “The respondent airlines also do not enjoy any commercial advantage over their competitors, neither their
consumers are dependent on them, nor they have acquired any monopoly. Therefore, the airline companies cannot
be termed as dominant enterprises in the relevant market,” the report said.

The counsel for TAAI said the “commission is a legitimate right of a travel agent” and the Aircraft Act, 1934 defines
“tariff” as any fare, rate or charge collected by airlines, which include commission payable to agents. He said TAAI
had appealed to CCI to make the civil aviation ministry and the Director General of Civil Aviation parties to the case.

CCI had rejected at least two cases involving travel agents and airline companies at the primary stage itself. They
have appealed against these orders in the Competition Appellate Tribunal

Sebi looks at cash settlement in IRF

Ashish Rukhaiyar / Mumbai February 18, 2011, 0:26 IST
Sebi-RBI committee looking at ways to boost dwindling volume.

As part of efforts to boost volumes in exchange-traded interest rate futures (IRF), the Securities and Exchange
Board of India (Sebi) is evaluating the option of introducing cash settlement in the segment. If approved, it could
come as a shot in the arm for the niche market that has been witnessing almost nil volumes for months.

IRF is an exchange-traded derivatives product for hedging interest rate risks. Only the National Stock Exchange
(NSE) offers IRFs, which were launched for the first time in 2003.

According to people familiar with the development, the joint technical committee reviewing the guidelines and
contract specifications for IRFs is looking at cash settlement as one of the ways to attract more market participants.
The committee comprises representatives of Sebi and the Reserve Bank of India (RBI).

“It is believed that the uncertainty over liquidity of the underlying bond is acting as the biggest deterrent for the
growth of the IRF market,” said a person privy to the developments. “If cash settlement is allowed, concerns
related to dumping of illiquid bonds can be addressed,” he added.

He, however, clarified that nothing had been finalised yet and the technical committee could look at tweaking other
features of the segment without switching to cash settlement.

At present, participants can settle contracts with delivery of government (GoI) securities with a tenor between nine
and 12 years. The tenor of deliverable grade securities has been fixed between 7.5 years and 15 years.

IRFs are based on a notional 10-year GoI bond, bearing a notional seven per cent interest rate, payable half-
yearly. They were launched for the second time in September 2009. But volumes are still negligible. On most days
in the recent past, only a single token trade has been executed on NSE.

Incidentally, the regulator has been trying hard to make the IRF segment more market friendly. Another idea that is
being discussed is the concept of banks performing the role of market makers to enhance liquidity. Banks are the
biggest players in the IRF market and any initiative taken by them is expected to lead to an exponential rise in
volumes. Globally, IRF is a huge market with volumes running into trillions of dollars.
 With U K Sinha, the new chairman of Sebi assuming office from Friday (February 18), it is expected that the
revised guidelines for IRFs will be unveiled soon.

Infosys to redraft strategy, structure

Shivani Shinde / Mumbai February 16, 2011, 0:52 IST

India’s second largest information technology services company, Infosys, will enter the next financial year (2011-
2012) with a renewed strategy and a new company structure.

The aim is to help the company address the changing global business environment and customer needs.

“We are seriously looking at a strategy shift. We are also thinking if this strategy change also requires a structural
change. The new year is upon us and it will be a good time for us to start the new year with a new approach. We are
definitely looking at a very important change that will address our go-to-market strategy,” said Subhash Dhar,
executive council member and senior vice president and head of communications, media and marketing.

He said the change was a reflection of new global realities like downturn, emerging economies, use and acceptance
of technology by average user and increasing adoption of mobiles, that in turn has impacted client priorities.

Earlier this month, market research firm CLSA gave a report that Infosys might need another restructuring of its
business verticals and focus, not only to better address the customers but also take on competition from peers like
Tata Consultancy Services and Cognizant. Industry officials had confirmed the company was looking at a three-part
organisation to address issues such as large outsourcing deals, consulting & intellectual property, and innovation.

Shifts & scale

Other than changing market conditions Dhar said the need to review strategy also arose from the fact that this time
the change was much larger. “It is not that customers were not talking about these trends. But now it is about
delivery. Once you start talking about delivery, you need to re-organise yourself. From Infosys’ perspective, I need a
group that can handle transformation work or a group that can improve their operations or handle innovation in
process,” said Dhar.

The shift in customer demand is evident in the increased uptake that Infosys has seen in its ‘new engagement
models’. Though this was launched two years before as an answer to the global meltdown, Dhar says this approach
is getting good traction. “From 4.5-5 per cent revenue share two years back, this has now touched 11 per cent. In the
last 12 months, we have seen acceptance of our model even in cases of large deals.”

There are two parts to the new engagement model proposed by Infosys. The first focuses on outcome-based pricing
such as transactions, devices or trouble tickets that the company resolves. The second is pay-as-you-go and focuses
on creating platforms using intellectual property. “There is an overall acceptance of the mode. In the past 12 months,
we have signed five-six large deals contracted upwards of $40- 50 million under our outcome-based model. A couple
of these are also in the $100-million range. The good news is that 50 per cent of our large deal pipeline have some
component of our non-linear model,” said Dhar.

He said Infosys had been restructuring regularly. “Once in every three to four years, you need to relook at what the
clients are talking about. And, see if only a strategy change is enough or a new structure is required to support that
strategy. You also have to remember that we are a client-driven industry and any change in their strategy will make
us also relook,” he added.

When asked if S D Shibulal, the current Chief Operating Officer, would take over as the next Chief Executiv e Officer,
Dhar said: “Infosys has been transparent about management changes. As of now, the company is evaluating the
Chairman’s position, for which we already have a committee. Murthy (Narayana-Murthy, founder-head) retires in
August. As for the CEO’s post, I cannot comment. The current CEO will have to step down for any other person to
take over.”
'Google to become more personalised in future'
Surajeet Das Gupta / Barcelona February 17, 2011, 0:26 IST

Google CEO Eric Schmidt has said that in the future, the search engine will increasingly become a more personalised
tool. Google will also use artificial intelligence to provide customers with more solutions. The company has also
identified telemetry as another key area of growth and plans to develop basic medical diagnostics to help check one’s
blood pressure on smartphones or other devices.

Delivering his keynote address at the GSMA summit in Barcelona, he said, “Google search will become more and
more personalised, but that will also depend on the amount of information the customer is ready to share about
himself.” As an example, Schmidt said when one asks what the weather would be, the answer doesn’t lie only in the
temperature of the city. Google can provide answers to whether one would require one’s raincoat or would it be
necessary to water one’s flower pots, provided it has information about the person.

Another coming change he mentioned was that individuals would not, for instance, have to search for historical
places on Google while traveling. This data would be available automatically as he moved around, provided Google
knew historical places were the area of interest.

Schdmit said with the help of artificial intelligence software, Google would also help decisions — and this could hold
immense scope in the future. The interest in this area stems from the fact that about four per cent of all search
queries are related to health, thus making telemetry the next big thing.

He also outlined a few key developments such as Google Instant, which can answer search queries three to five
seconds faster. It would also be possible to not only find the direction between two places, but to talk to friends who
have used the same routes, and find the shortest or cheapest to travel, all through the search engine.

Schmidt added that in the area of financial services, the NEC SIM card chip, with 18 digits, is a secured ID, and
various nations are contemplating using it for financial transactions. Google could provide those who want to make a
transaction with alternative offers from stores close to one’s location. “When you get into the store, they are already
ready to make the transaction. What we offer is alternative offer prices for a product around the locality from where
you want to buy,” he said.

Talking about the challenges faced by Android from the new tie-up between Microsoft and Nokia, through which
Microsoft operating systems will be used on Nokia phones, Schmidt said, “We also tried, but Nokia chose our
competitors. We hope that some day they will choose Android.”

Schmidt said new applications are possible because high-speed broadband wireless is now a reality, thanks to 3G
and now, LTE 4G networks. With speeds of 12-14 Mbps already possible, this offers new applications beyond one’s
imagination. These will be ushered in through mobile devices, whose numbers are already exploding. “A year ago, I
had predicted that smartphone sales will overtake PC sales in two years, but this has already happened in the last
quarter, and PCs are not growing,” Schmidt said. Speeds of telecom networks have gone up by 60 per cent since
2009.

Talking about Facebook, Schmidt acknowledged the social networking site, together with Twitter, played a great role
in the revolution in Egypt. He, however, said, “Facebook is additive for Google, and Microsoft, which has a good
advertising model, remains our main competitor. We have not seen any shift in our advertising due to Facebook