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A Journal of Management Sciences

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VOL.1-NO.3, June 2012ISSN : 2249-1066

Adhyayan

AdhyayanA Journal of Management Sciences

ISSN : 2249-1066Vol.1 No.3, June 2012

EDITORIAL BOARD

Editor-in-ChiefProf. (Dr.) M. MehrotraDirector, SMS Lucknow

ADVISORY BOARD

Dr. Somya SinghAssociate Professor

Dept. of Management StudiesIndian School of Mines, Dhanbad

Adhyayan- A Journal of Management Sciences is half yearly publication of School of Management Sciences, Lucknow, India. The vision of the Journal is to present a pedagogic platform to scholars all over the world to publish their novel, original, empirical and high quality research work. The editorial board would like to publish research papers/articles from scholars pertaining to contemporary developments and practices in all the areas of management and emerging issues in allied areas of management.

No part of any paper/article can be reproduced without the prior permission of the Editor-in-Chief, ADHYAYAN – A Journal of Management Sciences.

Disclaimer: The view and opinions presented in the research papers / articles published in the Journal are solely

Managing Editor:Ms. Suchita Vishwakarma

Lecturer, SMS Lucknow

Consulting Editor:Dr. Alok Kumar

Associate Professor SMS Varanasi

Prof. B. P. Singh Former Professor,

Delhi School of Economics, New Delhi

Prof. Arunabh ChaterjeeProfessor & Ex HOD-Dept. of Commerce

University of Lucknow, Lucknow

Prof. S. K. SinghFaculty of Management Studies

Banaras Hindu UniversityVaranasi

Prof. (Dr.) H. J. GhoshroyDirector & Dean, IMSARMD University, Rohtak

Prof. (Dr.) Rattan SharmaDirector, Bhartiya Vidya Bhavan’s Usha & Laxmi Mittal Institute of ManagementNew Delhi

Mr. A. T. RamanChairman SEAA Trust & Accreditation ConsultantNew Delhi

Member Editorial Team

Mr. Satyajeet AsthanaLecturer SMS Lucknow

Ms. Ratna YadavLecturer SMS Lucknow

Editorial

It is a matter of pride and honour to introduce this second issue of ADHYAYAN - The Journal of Management Sciences, Lucknow. This issue of the Journal incorporates a congregation of various research papers on diverse fields of Management and allied areas.

This issue includes seven quality research papers, one literature review and one book review. The authors are a mix from various well-known institutes and universities of the country. I am sure the journal will serve as a valuable addition to the management literature and will also prove to be a valuable reference material.

I would also like to place on record my sincere thanks to all the members of the editorial advisory board for their unrelenting support to Adhyayan. I also sincerely thanks the appreciable efforts of the members of the editorial team for helping to bring out this issue of the journal.

I am also grateful to reviewers for providing their comments and suggestions. Our sincere appreciation goes to all the authors for their timely contribution and to the readers for their incessant support.

We look forward to your comments on this issue and suggestions on matters concerning the journal.

Prof. (Dr.) M. MehrotraEditor-in-ChiefSchool of Management Sciences, Lucknow

Contents

1.

Dr. Bhargav S. V. Ramachandra & G. Srinivasa

2. Workplace Stress- The Theoretical Study on Reasons and Coping Methods of StressVaibhav Misra & Manish Kumar Srivastava

3. A Comparative Study of Registered & Foreign Venture capital Investment with special reference to BT Sector in India

G Srinivasa & Sir M Visvesvaraya

4. ITC-e chaupal - A Strategic Agribusiness Approach towards Strengthening the Market Reach in Rural India Dr. K.K Agarwal & Preeti Singh

5. Case: The Growth QuestionMoid U. Ahmad

6. Crowd Sourcing –a New Management Mantra

Devi Premnath & Dr. C.Nateson

Growth of Currency Futures in IndiaDr. Avinash Bajpai

Public Private Partnership in Infrastructure - Roads Sector in India Dr. P.K. Sinha & Sanchari Sinha

9. Bridging the Health Inequality and Strengthening Public Health System Through Public Private PartnershipDr. Rajesh Kumar Shastri & Rinki Verma

10. Software Quality Management - An Overview Of CMMI And TPI Quality Assessment ProceduresProf. Karuna Devi Mishra

Venture Capital, A Tool In promoting Entrepreneur ship

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KEY ISSUES IN THE VENTURE CAPITAL INVESTMENT AND FUNDING 1. Venture capital requirements varies between

$50000 and $ 5000002. Venture capital growth varies between 20% to 30%

over a period of time3. It involves high technology investors who take the

risk of investment in the upcoming small and medium enterprises

4. Companies can project high amount of cash flows over a period of time within three to five years

VENTURE CAPITAL INVESTMENT PROCESS

Venture capital investment process is driven by the growth and potentiality of the investor and entrepreneur as well stages include,

1. Fund conception and investment strategy targeting the investment opportunities: This includes the preliminary screening of the investment process. In this step, the investor tries to get into the total fund requirement for an enterprise with the risk involved; on the other hand from the perspective of the entrepreneur, this includes, finding out the best alternative of investment. Exploring the investment opportunities plays a key role in the organizations growth and profitability hence in order to have steady growth the entrepreneur should end up in selecting the best type of investment alternative.

INTRODUCTION Venture capital has already made drastic impact in

the globalized economy by creating high standards of living and steep increase in the GDP in the developed countries like US, UK, Japan etc. The challenges in India seem to be a narrow way wherein the small and medium entrepreneurs go for making a small investment from the financial institutions. Venture capital has a sterilized the economic crises by the way of inducing the foreign investors. Merchant bankers, to go for providing venture capital for the entrepreneurial development with a ease of flow of capital even to the domestic markeat as well.

Venture capital is a high risk investment made by the investee companies in the new business for returns. Venturing as a entrepreneur in this economic crises certainly is a challenge because of the adverse returns of the market earned in the subsequent years. Adding to this venturing as a entrepreneur not only involves business skills, but also selecting the right type of the investment companies at the right time and backing the return on the investment, hence it is a mere fact to know how venture capital normally works, venture capital investment process, risk and return expected by investee company on the investment, Supporting services rendered by venture capitalists, and finally challenges ahead for the venture capitalists and entrepreneurs in the up coming era. This conceptual paper tries to cover all these aspects which are useful for the business and entrepreneurs as well.

Venture Capital, A Tool In promoting Entrepreneur ship

Dr. Bhargav S. V. Ramachandra* & Mr. G. Srinivasa**

ABSTRACT

Venture Capital (VC) is usually defined as an independently managed, dedicated pool of capital that focuses on equity or equity-linked investments in privately held, high growth companies it is one of the important factor which contributes to the growth and potentiality of business as well as for entrepreneurs Entrepreneurs and SME managers face two key choices when financing their ventures: debt or equity. Debt in the form of personal loans (including credit cards) and bank loans, key sources for most nascent ventures, gives efficient incentives for managers to exert effort and allow entrepreneurs to maintain control. The availability and utility of debt vary significantly with economic conditions, which, in turn, will have an impact on the supply and cost of capital. To a lesser extent, entrepreneurs rely on equity financing, in which parties external to a venture obtain partial ownership (and control) in exchange for financial capital, thus diluting managers' incentives to expend effort. Equity financing is particularly important for high-growth ventures, since the amount of debt financing available may not permit sufficiently rapid growth in volatile industries (for example, technology). Objectives and incentives that are well aligned between investor and manager are the most efficient and facilitate additional value for the venture.

The paper tries to bring out the effect and growth of venture capital funding over a period of time with that off traditional funding, Venture capital General Investment criteria decided by the venture capitalists, and finally adding

the conclusion of Role and importance of Venture Capital in the Entrepreneurial Development.

* Dr Bhargav S V Ramachandra, Director, TTL College of Business Management,Mysore

** Mr. G Srinivasa Research Scholar, Bharathiar University Coimbatore,

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7. Informal Investment: Venture capital firms seek relatively high rate of return on the capital employed. As such it is mere a fact that the venture capitalist will definitely perform enough due diligence process before making such investment. From the entrepreneur's perspective selecting the right type of venture capitalists becomes difficult particularly in selecting the informal investors because most of the informal investors will look into the market opportunity, potentiality of the business, cash flow in the subsequent years and return on investment, and making the investment exit.

(Source: Harvard Business School Press, from Venture Capital at the Crossroads by WD Bygrave, J.A Timmons Boston, Harward Business School Publishing Corporation)

CHARACTERISTICS OF VENTURE CAPITAL INVESTMENT

1. Equity investment: Venture capital investment is a type of equity finance that is invested in the new upcoming projects. As it was noted earlier, venture capitalists perform enough due diligence before making such investment which includes review of business plan, meeting the full management team, see any product prototype or design that may exist and so on.

2. Substantial minority/equity stake: Venture capital investor expects the minimum return on the capital employed as such he may acquire substantial minority or stake in the company. This concept holds good in several situations because the venture capitalist not only funds but also provides various non financial support services to the enterprise making the enterprise to achieve the expected growth and profitability.

3. No “Takeover Management Mentality,” but rather has a “Company First Philosophy”: This statement signifies that the venture capitalists work for the enterprises and not for the self. This would rather be put as providing the full assistance to the enterprise acting as unique strength of the venture capitalists which certainly adds value to the enterprise.

4. Board Position – desired but not mandatory (Passive vs. Active Investor): Most of the venture capitalists prefer to exit when the investment is backed up. In certain cases venture capitalists prefer board position, which depends on the type of investor. If it is aggressive and active investor he prefers to have a stake and board position as well but if it is a passive investor he will be interested in providing cash alone and getting return on investment on the cash flow.

2. Raise capital for investment: Raising the capital is one of the important steps in the venture investment process. Venture capital itself is called as risk capital as the investor is risking his investment in the new business hence rising the initial capital for investment may be difficult, however venture firms seek value to the investment and gets the maximum return on the investment.

3. Generate deal flow with New and young companies with high potential: “Most venture capitalists have a short list of first class players and those are the horses you back”, says, Norwest partner Ernie Parizeau. With the above actionable statement, it is very clear that generating the deal flow is not an easy task for the investors; hence most of the venture capitalists try to make their investment in the new and young companies. Though there is high risk of business success as the venture capitalists and so they are called risk capitalists. They ensure that the business meets the growth potential.

4. Screen and evaluate the deals: Evaluating the deals play a significant role in the venture capital investment process. Most of the venture capital commitments happened in India in the year 2000 to 2004 wherein most of new venture capital firms entered Indian market with an aggressive investment which has helped most of the entrepreneurs to start a new business. On the other hand, venture capitalists have started to screen and evaluate the deals on the basis of different types of risk such as market, bailout risk, liquidity risk growth risk etc.,

5. Valuation and negotiation structuring the deals: At last the venture capitalists value their investment and return on hand to hand. Venture capitalists add value to their investment by the way of strategy development, active board membership, attracting outside expertise, providing all non financial support to the firm so as to make the firm to reach at its peak. The non financial support as mentioned above will be delivered on time to the entrepreneur whenever required this support service will definitely benefit the entrepreneur in getting the business success which will also add value to the venture capitalists and make him find and structure his other investment alternatives.

6. Exit mechanism: Once the business develops and makes profit, venture capitalists tries to exit. This can also happen when the required return is achieved because he feels that the business can operate without his support. This can be done by the way of selling off part of their stock or by the way of initial public offer, mergers etc.,

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Exit is very important (within 3 - 5 years): Most of the venture capitalists prefer to exit within 3 to 5 years and turn their investment towards the other new business this also helps the venture capitalists to make the relative investment easy.

ROLE AND IMPORTANCE OF VENTURE CAPITAL IN THE ECONOMY & ENTERPRISES

1. Supporting ideas which have high risk and high reward: This is the major role played by the venture capitalists. Most of the small and medium enterprises today are funded by venture capitalists in US and UK and even a developing country like India which had a series of impact of VC funding particularly from the beginning of 2000 to 2004 and it has also been noted that, even during the collapse of market, venture capital funded enterprises performed very well.

2. Nurturing innovation and creativity: Most of the venture capitalists today are looking for funding in the innovative sectors such as Bio technology, Pharmaceuticals, other than only funding towards the manufacturing and service sectors this has made the economy to be stabilized over a period of time

3. S u s t a i n i n g a c o m p e t i t i v e b u s i n e s s environment: In order to boost the competition among the funding companies it is necessary to upgrade the new technological investments as such venture capitalists played pivotal role in making such things happen. Creating such healthy competitive environment is necessary for the growth of the economy and certainly VC's have contributed best.

4. Supporting the growth of entrepreneurial excellence: Entrepreneurship is the today's talk not only in educational institutions but also a slogan by the government, hence to promote the entrepreneurship the government has taken necessary steps. Venture capitalist supports such growth by providing funding to the new, up coming business enterprises.

5. Providing insights to the evolving business strategy: Venture capitalists not only provide funding to the business enterprises but also provides assistance in evolving a business strategy or core competency which is very much essential for the business for survival and growth.

6. Developing alliances and partnerships: Venture backed firms develops alliances and partnerships with the other large scale enterprises; this is the very important way in which venture capitalists helps the enterprises by the way of minimizing the competitiveness. It also helps the venture capitalists to build their network and to fund

various other projects as well.

7. Providing networking access to vital prospective customers: Customer is the king in the business; as such venture capitalists with their huge network base provide the link to the business enterprises which will help the business enterprises to grow much higher and huge customer base which is strength for any business.

8. Assistance in head hunting for senior positions: This is a very important non financial support provided by the venture capitalists. From the development of business strategy to execution, senior people play a very keen role. As such being the case appointing the right person for the right job is very important in this regard venture capitalists provides easy solutions with their network base

9. Sharing vital and relevant information: As it was said before venture capitalists act as a active investor by the way of sharing vital information which is very much essential for the business enterprises to run and to compete in the today's competitive environment which will help the business enterprises from policy formulation to policy execution.

So, an ideal venture capital investor should have,

ü Knowledge of industry, deal structuring and exits.

ü Industry and VC network.

ü Ability to stay over 2 to 3 rounds.

ü Assis tance wi th business s t ra tegy, recruitment, fund raising, partnering, customer contacts and exits (IPO, M&A).

ü Active board participation.

(Source: Private financing advisory network).

CHOOSING AN IDEAL INVESTMENT PARTNER

This is the most crucial step for the business enterprises as the business is new, the options are few for the investment.

As such selecting the right type of investment partner who provides both financial and non financial support is very important and difficult as well this should include,

1. Industry and “stage of funding” focus: Choosing an ideal investment partner merely depends on the stage of funding i.e. seed capital, start up capital, expansion capital and replacement capital. Investment is also driven by the risk and return of the business hence the investor should also have adequate knowledge about investment funding and round of investment to back in

2. Referrals from investee Co.'s of the VCs: This is

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a very good source of getting the investment. In these steps the entrepreneur does lot of ground work before selecting such investment companies. Referrals from the previous companies saves lot of time for the entrepreneur in performing due diligence and such ground work definitely contributes for the growth of the business as well

3. Professional conduct of the partners and their knowledge of the industry: Knowledge of the partners acts as a platform in performing the due diligence by selecting the right type of investors. This intern has a effect on the goodwill of the business and helps to perform better corporate social responsibility.

4. Cleary defined value additions: Defined values, vision, mission, all these terms add value not only to the business but also to the partners and investee companies as well. This makes the business partner to predict the required investment with in the required time gap and helps such business to achieve anticipated growth

CHALLENGES AHEAD

ü Perceived risk: Though it is risk to invest in new business, it is suggested that, the investee company should perform enough due diligence before making such investment as there is always a perceived risk.

ü Industry and market risk attractiveness of technology: From the entrepreneur's point of view, there is always new technology transfer, competition which is being the case, of business in short run. It has to focus on getting back the return on investment.

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ü Matching the anticipated growth rate: This is another important factor the entrepreneur should focus into, as the business will be in the verge of break even for few years matching anticipated growth rate would always helps the firms to make a brand name within short span of time.

ü Matching the amount of capital required and liquidity: The amount of working capital required should be determined on the day to day basis in order to match the liquidity position of the business

ü Age and Stage development: Entrepreneurs should also have the impact of competition on the business hence the entrepreneur should know the SWOT of the business this ensures the business to make effective stage by stage development and growth over a period of time.

ü Fit with the new stage development: Last but not the least the entrepreneur should also focus into new dimensions in which the business should run and also he should have a vision of diversifying business in the long run

CONCLUSION

Entrepreneurship is certainly a boon for the country like India. This has to be properly rooted through an effective investment, framing the strategies, selecting the right type of Investee Company. For this, one has to understand the various investment techniques available for the entrepreneurs in the incubation process. Hence an attempt is made to bring down some of the important concepts of venture capital and its use for the entrepreneurs.

REFERENCES

Ÿ ICFAI Journal for Applied Finance, ICFAI university Press Vol. 16 2010.

Ÿ New Venture Creation, Entrepreneurship for 21st Century by Jeffry A Timmons, Stephen Spinelli, Tata Mc. Graw Hill Edition.

Ÿ PowerPoint presentation of Venture capital funding by private financing advisory network..

Ÿ How Venture Capital Works, Report by Indian Venture Capital Association, IVCA Report.

Ÿ Sources of Venture Capital by Spencer Stuart NVCA Research Report on Venture Capital.

Ÿ Venture Capital at the Crossroads by W.D Bygrave, J.A Timmons Boston, Harward Business School Publishing Corporation.

Ÿ Launching and Building Entrepreneurial Companies by Harry A Sapienza and Jeffry A Timmons, conference proceedings of Babson Entrepreneurship Research Conference.


Workplace Stress- The Theoretical Study on Reasons and Coping Methods of Stress

Vaibhav Misra* & Manish Kumar Srivastava**

ABSTRACTThe author emphasized on Organizational Stress in this study. The author focused on the reasons that causes stress

and also focused the measures or methods of coping up with the stress. The study is based on theoretical framework; therefore the author studied the literatures related to the topic extensively. The author worked on following objectives:Ÿ To identify the organizational stressorsŸ To identify the reason that causes employee stressŸ To find out the suitable methods to cope up with stress

After finding out the objectives or basis of study the author designed the methodology of working. The author found that the study is based on secondary data, the author collected the secondary data by means of internet, journals and books. The author considered teachers lectures, author's views, employees' and managers' opinion as primary data for the study.

The author identified the causes of employee stress and the methods of coping with the stress in this study.

Keywords- Organizational Stress, Reasons of Stress, Employee Stress, Coping Methods of Stress.

INTRODUCTIONAn organization is a social arrangement for the

controlled performance of collective goals (Buchanan, Huczynski, 2005). The organizations operate through division of labor and allocation of functions, and well defined hierarchy of authority and responsibility. However, each organization is faced with internal and external pressures which may cause psychological stress. Stress, is “an adoptive response, mediated by individual characteristic and psychological processes, that is consequence of any external action, situation or event that places special physical, psychological demands upon a person” (J M Ivancevich and M T Matteson, 1980) which may result into high labor turnover and absenteeism rate, low productivity, reduced performance, ineffectiveness, and inefficiency levels that also affect the psychological, social and physical health of the employees.Operationally defined, stress is the dysfunctional, psycho-physiological response to excessive emotional challenges or inordinate instinctual demands (Juniper, 2003). During stressful conditions the body reacts in special manners to prepare itself for the action that it is threatening us, which influences our performance to different extent. In modern times when our daily life is much more competitive than ever before, stress plays an important role in how successful or unsuccessful we are in our productive work activity, and so the entire organization's performance. Because of the role it plays, imperfect stress management has become a new challenge faced by managers in the enterprises nowadays.

STRESSORS RECOGNITIONRecognizing the stressors is the key to the stress management technique. There are many recognized stressors as well as the ways to categorize them. Donovan and Kleiner (1994) assert that stress can be derived from three sources: physical, mental and situational. Physical stress can be brought on by such things as overwork, lack of rest and a poor diet. Mental stress can be traced to a person's mental state of mind. It involves our hopes, fears and regrets from our day-to-day life. Situational stress is derived from our interaction with the outside world – our roles as husband, father, wife and mother and also our interaction with the trappings of modern life such as cars, computers, etc.

TWO SIDES OF STRESSStress could be beneficial or detrimental. A beneficial stress or so-called Eustress (Rojas and Kleiner, 2000), has the following positive effect:

· Proper stress increases the breathing, level of adrenaline, production of coagulants in the blood, heart rate and consequent blood pressure, in this condition the employee is evoked to cope with the heavy work more efficiently;

· In the appropriate stressful condition the employee's wisdom could be fully exploited and the employee's response could speed up, so that the working efficiency is enhanced. The detrimental stress or so-called Distress (Rojas and Kleiner, P103), has the following

* Vaibhav Misra Research Scholar, Department of Management NIMS University, Jaipur, Rajasthan** Manish Kumar SrivastavaAssistant Professor, Department of Management Shri Ram Swaroop Memorial Group of Professional Colleges Lucknow

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negative effect:

· In over stressful conditions, blood flow is diverted away from extremities such as the hands and the feet, breathing becomes shallow and rapid in an attempt to increase oxygen levels in the body, and blood sugar production which increases and quickens metabolism to release fats and energy into the bloodstream (Donovan and Kleiner, P31). All of these physical reactions threaten the employee's health badly;

· Long-lasting and high-level stress could restrain the employee's brain response and body motivations, so that the working efficiency is reduced.

· The potential cost of stress to organizations, through, for example, high turnover, absenteeism, low morale, and reduced productivity has been noted frequently (McHugh and Brennan, 1993)

Consequently, managers should maintain the stress in a proper extent to maximize the staff's working efficiency.

OBJECTIVES OF THIS STUDY

· The author will work on the following objectives:

· To identify the organizational stressors

· To identify the reason that causes employee stress

· To find out the suitable methods to cope up with stress.

RESEARCH METHODOLOGYAuthors had mainly collected secondary data to

prepare this paper. Authors also add personal thinking, teacher's lecture and local people's thinking about the topic. In this sense, this paper consists of both types of data i.e. primary and secondary.

Primary data is author's opinion, teacher's lecture and employee's and manager's opinion about the topic. Secondary data is the ideas collected from some specialist's articles which were collected from internet.

LITERATURE REVIEWNumerous studies found that job stress influences

the employee's job satisfaction and their overall performance in their work. Because most of the organizations now are more demanding for the better job outcomes. In fact, modern times have been called as the “age of anxiety and stress” (Coleman, 1976). The stress itself will be affected by number of stressors. Nevertheless, Beehr and Newman (1978) had defined

stress as a situation which will force a person to deviate from normal functioning due to the change (i.e. disrupt or enhance) in his/her psychological and/or physiological condition, such that the person is forced to deviate from normal functioning. From the definition that has been identified by researchers, we can conclude that it is truly important for an individual to recognize the stresses that are facing by them in their career. Management role of an organization is one of the aspects that affect work-related stress among workers (Alexandros-Stamatios et. al., 2003).Workers in an organization can face occupational stress through the role stress that the management gave. Role stress means anything about an organizational role that produces adverse consequences for the individual (Kahn and Quinn, 1970). Management will have their own role that stands as their related. Role related are concerned with how individuals perceive the expectations others have of them and includes role ambiguity and role conflict (Alexandros-Stamatios et. al., 2003).

Family and work are inter-related and interdependent to the extent that experiences in one area affect the quality of life in the other (Sarantakos, 1996). Home-work interface can be known as the overlap between work and home; the two way relationship involves the source of stress at work affecting home life and vice versa affects of seafaring on home life, demands from work at home, no support from home, absent of stability in home life. It asks about whether home problems are brought to work and work has a negative impact on home life (Alexandros-Stamatios G.A et al., 2003). For example, it questions whether the workers have to take work home, or inability to forget about work when the individual is at home. Home-work interface is important for the workers to reduce the level of work-related stress. According to Lasky (1995) demands associated with family and finances can be a major source of 'extra-organisational' stress that can complicate, or even precipitate, work-place stress. Russo & Vitaliano (1995) argued that the occurrence of stressors in the workplace either immediately following a period of chronic stress at home, or in conjunction with other major life stressors, is likely to have a marked impact on outcome.

Several studies have highlighted the deleterious consequences of high workloads or work overload. According to Wilkes et al. (1998) work overloads and time constraints were significant contributors to work stress among community nurses. Workload stress can be defined as reluctance to come to work and a feeling of constant pressure (i.e. no effort is enough) accompanied by the general physiological, psychological, and behavioral stress symptoms.Al-Aameri AS. (2003) has mentioned in his studies that one of the six factors of occupational stress is pressure originating from workload. Alexandros-Stamatios

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G.A. et al. (2003) also argued that “factors intrinsic to the job” means explore workload, variety of tasks and rates of pay.

Rapidly changing global scene is increasing the pressure of workforce to perform maximum output and enhance competitiveness. Indeed, to perform better to their job, there is a requirement for workers to perform multiple tasks in the workplace to keep abreast of changing technologies (Cascio, 1995; Quick, 1997). A study in UK indicated that the majority of the workers were unhappy with the current culture where they were required to work extended hours and cope with large workloads while simultaneously meeting production targets and deadlines (Townley, 2000).Role ambiguity is another aspect that affects job stress in the workplace. According to Beehr etal. (1976), Cordes & Dougherty (1993), Cooper (1991), Dyer & Quine (1998) and Ursprung (1986) role ambiguity exists when an individual lacks information about the requirements of his or her role, how those role requirements are to be met, and the evaluative procedures available to ensure that the role is being performed successfully. Jackson & Schuler (1985) and Muchinsky (1997) studies found role ambiguity to lead to such negative outcomes as reduces confidence, a sense of hopelessness, anxiety, and depression.

ENVIRONMENTAL FACTORS CAUSING STRESSenvironmental factors which may cause stress can be categorized into:

Ÿ Individual levelŸ Group levelŸ Organization levelŸ Extra-organizational level

The potential stressors in the individual context are job demand, work over load, role conflict, role ambiguity, work/family conflict (T. A. Judge and J. A. Colquitt, 2004), and fear of losing job. Job loss can turn into a very stressful event causing decreased psychological and physical well being.Interestingly, sleeplessness or insomnia may also cause stress and strain. Various studies indicate that even to eight hours of sleep significantly contributes towards alertness, restoration of energy, performance, creativity and critical thinking. Job pay differentials, inequities, ambiguous procedure, unrealistic job description, too much of centralization, high degree of specialization, line –staff conflict, over crowding, safety hazards, poor communication system, unfair control system, inadequate information, inappropriate system of promotion, posting and transferring of their employees, poor intra-and-interpersonal relation of the employees, lack of coordination and cooperation among the employees, favoritism, nepotism, lack of accountability, absence of justice, authority used for personal benefit, vested interest and violation of merit. In such environments majority of the people become

sycophant, no reward and incentive system for good work and no accountability on corruption and avoidance of work and untrained man power in the offices. Absence of proper arrangement of training of the employees also leads to stress.

If the above cited malevolencies and prejudices are prevalent in the manpower of any organization, surely they will fall prey to tensions, frustrations and pressures, which are the major causes of stress. Common signs of stress include increased heart rate, high blood pressure, muscle tension, mental depression and an inability to concentrate. Typical reactions include social withdrawals, increased use of tobacco, alcohol, or drugs and feelings of helplessness and depression about the situation. The problem of occupational stress has been of great concern to many industrial organizational psychologists because researches indicate that if undue stress is imposed on employees, it will affect the job performance and their psycho-somatic health that is, physical and mental health as well. The industrial/organizational psychologists focused their attention on the causes and effects of stress in the work place for two reasons. First, there is a general awareness that stress-related diseases are wide-spread, and that more people are disabled today as a result of stress than at any other time in history. Secondly, stress on the job is costly and is reflected in a form of lower productivity and poor performance in the organization.

STRESS MANAGEMENT METHODSThen how to control the stress of the employees

under an optimistic extent? A great number of methods can be found in the existed literatures. For instance, Bland (1999) summarized the methods into such types as the pragmatic, spartan, touch-feely and new age. Ivanevich et al. (1990) described three broad categories of stress management intervention. The first type of intervention focuses on the situation and aims to reduce the stressors present.

The second and third categories focus on the employees, and aim either to change the employee's cognitive appraisal of the situation, or to help employees cope more effectively with the consequences of stress by increasing their coping resources. Based on the existed achievements and the author's own experiences, the author suggests the following stress management methods from both the managers' view and the employees' view.

ŸMETHODS FROM THE MANAGERS' VIEW

· To adjust the conception towards stress at workplace

The first task of employees who want to manage the stress better is learning how to adjust their emotion in unchangeable working condition and environment. (Bland, P45). The unnecessary worry about stress may become a new stressor on the contrary.

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However, even in a healthily developing company, every employee would feel stress. What the employees have to do is to keep the stress in a beneficial extent and transform it into driving forces.

· To enhance time managementEmployees that allocate their time in an orderly way can accomplish more tasks and feel less stress than those in a chaotic way, in the same time. Therefore, understanding and applying the principles of time management can help people to cope with the stress at work. The principles of time management are as follows:· Listing up the things to be done in

each day; · Arranging these things in order

according to their importance and emergency;

· Arranging the agenda based on the order;

· Clarifying the regular pattern of your physiology cycle and to implement the most important thing when you are most efficient and clear-headed.

· To try variable techniques to alleviate the

stress

There are many techniques employees would

like to apply to alleviate the stress

physiologically and psychologically. The

physiological techniques include breathing,

meditation, exercising, massaging, etc; and

the psychological techniques include

imagining sitting in a comfortable place,

looking at life differently and learning to relax

and enjoy it, setting appropriate goals for you

and so on.

CONCLUSIONAfter reviewing the literatures on the study the

author concluded that stress is one of the most important factors in increasing or decreasing human capacity of working. The author studied about the various causes such as individual level cause, group level cause, organizational level cause and extra organizational level causes which are responsible for generating the stress. The author also focused on the various measures through which employees can cope up with the stress. These methods of stress coping are divided into two ways- the first one is based on managers' views and the second one is based on employee's view.

The author also discussed about the outcome of stress that is, till what extent the person can be affected from stress. The author suggests manager to consider the reason of stress and also use different methods to cope their subordinates from stress.

8

REFERENCES· Al-Aameri A.S., 2003. “Source of job stress for nurses in public hospitals”, Saudi Medical Journal, 24(11),

pp.1183-1187.· Alexandros-Stamatios G. A., Matilyn J.D., and Cary L.C., 2003. “Occupational Stress, Job satisfaction, and

health state in male and female junior hospital doctors in Greece”, Journal of Managerial Psychology, 18(6), pp. 592-621.

· Beehr, T.A. & Newman, J.E.,1978. “Job Stress, Employee Health and Organizational Effectiveness: A Facet Analysis, Model and Literature Review”, Personnel Psychology, 31, pp.665-669.

· Beehr, T.A., Walsh, J.T., & Taber, T.D. 1976. “Perceived situational moderators of the relationship between subjective role ambiguity and role strain', Journal of Applied Psychology, 61, pp.35-40.

· Bland, M., 1999, “A new approach to management of stress”, Industrial and Commercial Training, Volume 31, Number 2, pp. 44–48

· Cascio, W.F., 1995. “Wither industrial and organizational psychology in a Changing world”? American Psychologist, 50, pp.928-939.

· Coleman J.C. 1976. Abnormal Psychology and Modern Life (Indian reprint), Taraporewalla, Bombay.· Cooper, C.L., 1991. Stress in organizations. In M. Smith (Ed.). Analysing Organisational· Behaviour. London: MacMillan.· Cordes, C.L., and Dougherty, T.W. 1993. “A review and integration of research on job· burnout”, Academy of Management Review, 18, pp.621-656.· Donovan, S. B. and Kleiner, B. H., 1994, “Effective Stress Management”, Managerial Auditing Journal, Vol. 9,

No. 6, 1994, pp. 31-34· Dyer, S., & Quine, L. 1998. “Predictors of job satisfaction and burnout among the direct care staff of a

community learning disability service”, Journal of Applied Research in Intellectual Disabilities, 11 (4), pp.320-332.

· Huczynski B. 2005 Organizational Behavior: An Introductory Text, London: Prentice Hall.


· Ivancevich J. M. and Matteson M. T. 1980. stress and work: A Managerial Perspective (Glenview, IL: Scott,

Foresman,), pp. 8-9.· Ivanevich, J.M., Matteson, M.T., Freedman, S.M. and Philips, J.S., 1990, “Worksite Stress Management

Interventions”, American Psychologist, Vol. 45 No. 2, pp. 252-61· Jackson, S.E., & Schuler, R.S. 1985. “A meta-analysis and conceptual critique of research on role ambiguity

and role conflict in work settings”, Organisational Behavior and Human Decision Processes, 36, pp.16-78.· Judge T. A. and Colquitt J. A. 2004. 'organizational justice and stress: the mediating role of work-family

conflict'. Journal of applied psychology. pp 395-404· Juniper, D., 2003, “Leisure counseling in stress management”, Work Study, Vol. 52, No.1, pp7-12· Kahn, R.L., & Quinn, R.P. 1970. Role stress: A framework for analysis, In A. McLean (Ed.), Occupational

mental health, New York: Wiley.· Lasky, R.G, 1995. Occupational stress: a disability management perspective. In D.E. Shrey & M. Lacerete

(Eds.). Principles and Practices of Disability Management in Industry, pp.370-409.· McHugh, M. and Brennan, S., 1993, “Managing Work Stress: A Key Issue for all Organization Members”,

Employee Counseling Today, Vol. 5 No. 1, pp. 16-21· Muchinsky, P. 1997. Psychology applied to work: An introduction to industrial and organizational psychology

(5th Ed.). Pacific Grove, CA: Brookes/Cole Publishers.· Quick, J.C. 1999. “Occupational health psychology: The convergence of health and clinical psychology with

public health preventive medicine in an organizational context”, Professional Psychology: Research and Practice, 30(2), pp.123-128.

· Rojas, V. M. and Kleiner, B. H., 2000 “The Art and Science of Effective Stress Management”, Management Research News, Volume 23 Number 7/8.

· Russo, J., & Vitaliano, P. 1995. “Life events as correlates of burden in spouse caregivers of persons with Alzheimers disease”, Experimental Ageing Research, 21, pp.273-294.

· Sarantakos, S. 1996. Modern Families, South Yarra: MacMillan Education Australis Pty Ltd.· Sutherland, V. J. and Cooper, C. L., 1997, 1999, Strategic Stress Management, Chinese version, translated by

Xu hai-ou, Economics & Management Press, Li yuan, China People's University Press.· Townley, G. 2000. “Long hours culture causing economy to suffer”, Management Accounting, 78 (6), pp.3-5.· Ursprung, A.W. 1986. “Incidence and correlates of burnout in residential service settings”, Rehabilitation

Counselling Bulletin, 29, pp.225-239.Ÿ Wilkes, L., Beale, B., Hall, e., Rees, E., watts, B., Denne, C. 1998. “Community nurses' descriptions of stress

when caring in the home”, International Journal of Palliative Nursing, 4 (1).

9


INTRODUCTIONVenture capitalists today are focusing on the

emerging sectors which can get the maximum returns with the least cost of capital. As the venture capitalists not only provides the funding but also provides the sectors for the development in lieu of non financial support, this certainly adds value to the investment and makes the business lively . Venture capital today has flows almost to all sectors of the Indian industries as compared to the decade before. The focus of the venture capitalists has taken a different shape by finding out not only the different sectors of investment but also, the investment of portfolio has taken a different shape in the emerging market conditions. The amount of registered venture capitalists has also increased drastically over the last decade period of time adding additional input and sector wise input for the development etc., which in turn has this turn has made impact on the promoters as well. As compared to last decade there is improvement in the promoters contributing for the successful entrepreneurship

The paper titled “An empirical study on the Venture capital investment with special reference to Bio technology industry in India” talks about the emerging trends in the venture capital industry and flow of investment of venture capital in the recent years. The paper also tries to bring out the sectors wise investment made by the venture capitalists from the beginning to the year end and gives the scope for the further investments to be made or possible in the upcoming years. Risk and return of these investments are also shown with a view to give focus on the upcoming emerging sector where investments can be done. The paper also brings various evidences based on which conclusions are drawn. To sum up a comparison is drawn in terms of risk and return of the sector wise venture capital funded enterprises in the recent years and suitable conclusions are drawn from the same.

10

A Comparative Study of Registered & Foreign Venture capital Investment with special reference to BT Sector in India

Mr. G Srinivasa* & Sir M Visvesvaraya**

ABSTRACTInvestment plays a key role in setting up of the business, initial investment has grabbed more concern of

promoters today as there are different funding options for setting up of the business. It is the selection of the type of investment which plays a key role in return and smooths functioning of the business. Promoters reluctance for the new investment has become one of the stumbling block as far as the risky investments are concerned hence, to address this issue ,the government has also taken adequate measures to promote the small and medium enterprises, it is needless to say that there is a gradual improvement in the flow of investment in the above sectors in recent years because of the various factors such as Growth opportunity, Cost of capital, risk and return aspects

OBJECTIVES1. To know the range and amount of

Investment in terms of different sectors 2. To do a comparative study on the flow of

investments in terms of each sector 3. To analyze Risk and return of both venture

capital investment and Foreign venture capital flow in terms of cumulative investment

4. To suggest and project the best sector which attracts the above investments in the nearby future

METHODOLOGY(1) Ho: - The Range of investment is more in

Bio technology as far as the other sectors are concerned

H1:- The Range of investment is cumulatively less in Bio Tech as far as the other sectors is concerned

(2) Ho:- Risk and return of the Foreign venture capital investors are more in terms of Cumulative investment as far as the BT sector is concerned H1:- Risk and return of the foreign venture capital investors are relatively less in terms of Cumulative investment as far as the BT sector is concerned

SOURCES AND TOOLS USED FOR DATA COLLECTION

1) As the Study is based on the Technical Analysis Previous data relating to flow of cumulative investment in terms of both venture capital investment and foreign venture capital investment is taken together from the compiled report of SEBI (submitted by both registered venture capital funds and foreign venture capital investors).

*Mr. G Srinivasa, Faculty, Department of Management Studies

**Sir M Visvesvaraya, Institute of Technology, Bangalore & Research Scholar, Bharathiar University, Coimbatore


2) The information so taken is compiled through tabulation. Percentage analysis is used to determine the flow of investment in terms of each sectors there by Risk and return is also calculated by using the statistical tools such as Standard Deviation and Variance analysis

3) Conclusion is drawn on the basis of range of risk and return obtained by using the above mentioned statistical tools and projected flow of investment and sector is identified accordingly.

REVIEW OF LITERATURE

The Risk associated with the Venture investment is clearly quoted in the article “Venture Investing worth the Effort? A Study of Keiretsu Forum” where the authors has examined the returns with the Venture capital investing and study analyzed about the dynamics of angel investment groups. The author here has focused on the angel investing in Silicon Valley and the returns from the investments made by a group, Keiretsu Forum, and the processes used by the group to obtain those returns. The researchers also feels that Understanding the risks, returns, and dynamics of Venture investment should encourage greater participation in the early stage investment ecosystem and foster economic growth (Morrisette, 2011).

The information related to different options available for the entrepreneur has been clearly bought in the article “Corporate Venture Capital: Seeking Innovation and Strategic Growth” by Dheeraj Pandey and Thillai Rajan A (2011) The article tries to bring out the effect of venture capital fund on the dot com and authors has also made a point of comparison between equity fund and venture capital fund in the Indian context. The data analyzed also shows the attractiveness as well as immatureness of Indian VC industry in compare and contrast with US VC industry (sector wise). The article emphasizes on the relative valuation of venture capitalists and the other options such as equity fund etc.

Shepherd (2008) “Researchers of Venture Capitalists' Decision Making, Beware!” working paper, 1-8. States that Most of the venture capitalists do invest on the projects based only on the profitability and they lack introspection into the policies. The findings show that venture capitalists lack introspection into their profitability assessments. However, the findings also demonstrate some introspective ability into probability of survival assessments and most of the research is not based on the value judgment in terms of potential biases and errors associated with self reported da.

ANALYSIS

Cumulative Investments

As on March 31, 2011 (Rs. in Crore)

SL NO Sectors wise economy VCF FVCI Total % on total

1 Information Technology 563 2787 3103 18.14

2 Telecommunications

777

6199

6532

11.89

3

Pharmaceuticals

568

1089

1442

39.38

4

Biotech

228

188

329

69.3

5

Media

584

763

883

66.13

6

Services Sector

902

2157

2327

38.76

7

Industrial projects

875

1451

1672

52.33

8

Real estate

5584

3397

7473

74.7

9 Others 8192 10863 15288 53.58

Total

18273

28894

39051

11


The above tabulated information depicts the total percentage flow of investment in each sector for the month of March 2011. Out of the total cumulative investment made registered venture capitalists hold maximum percentage with (69.3) in terms of Bio technology sector. This is the next best sector compared to Media with (66.13)

12

Cumulative Investments As on June 2011 (Rs. in Crore)


1 Information Technology 538 3367 3362 16

2 Telecommunications 858 6321 6612 12.97

3 Pharmaceuticals 507 1085 1395 36.34

4 Biotech 212 198 323 65.6

5 Media 817 788 1114 73.33

6 Services Sector 1100 1964 2380 46.2

7 Industrial projects 1071 1504 1924 55.66

8 Real estate 7943 3152 9590 82.82

9 Others 8454 12341 16686 50.66

Total 21500 30722 43686


The above tabulated information depicts the total percentage flow of investment in each sector for the month of June 2011. From the analysis it is been observed that registered venture capital firms are performing well in Media (i.e. to next to real estate) as compared to Foreign investment, through there is more flow of cumulative investment in real estate. Comparatively media has overtaken the biotech in terms of total percentage .This signifies that media has also attracted a combined leverage which has made both registered venture capitalists and foreign venture capitalists to invest.

The above tabulated information depicts the total percentage flow of investment in each sector for the month of Sept 2011. From the analysis it is been observed that registered venture capital firms are performing well in Media (i.e. to next to real estate) as compared to Foreign investment, through there is more flow of cumulative investment in real estate. Comparatively media has overtaken the biotech in terms of total percentage this signifies that media has still retained combined leverage which has made both registered venture capitalists and foreign venture capitalists to invest. There is more flow of investment in Bio tech as compared to previous month.

13

Cumulative investments as on September 2011 ( Rs in Crores)

SL NO

Sectors wise economy

VCF

FVCI

Total

% on total

1

IT

529

3026

3324

16

2

Telecommunications

856

7466

7789

10.9

3

pharmaceuticals

538

1050

1411

38.12

4

Biotech

212

146

313

67.7

5

Media

847

801

1166

72.64

6

services sector

1222

1911

2606

46.89

7

industrial projects

1155

1428

1951

59.2

8

Real estate

8180

3151

9828

83.23

9

others

9438

14123

19455

48.5

Total 22977 33102 47843


14

The above tabulated information depicts the total percentage flow of investment in each sector for the month of

December 2011. From the analysis it is been observed that registered venture capital firms are performing well in Media

(i.e. to next to real estate) as compared to Foreign investment, through there is more flow of cumulative investment in

real estate .Comparatively media has overtaken the biotech in terms of total percentage this signifies that media has still

retained combined leverage which has made both registered venture capitalists and foreign venture capitalists to invest.

There is more flow of investment in Bio tech as compared to previous month.

Cumulative Inv estments as on December 2011 (Rs in Crores)


1 IT 533 3016 3319 16.05

2

Telecommunications 858

7145

7469 11.48

3

Pharmaceuticals

460

985

1325

34.71

4

Biotech

187

140

289

64.7

5

Media

802

701

100 6

79.72

6

Services sector

1215

2039

2677

45.38

7

Industrial projects

783

886

1355

57.78

8 Real estate 8155 3107 9783 83.35

9

Others

10029

15223

20637

48.59

Total

23023

33241

47859


The above tabulated information depicts the total percentage flow of investment in each sector for the month of March 2012. From the analysis it is been observed that the growth trend in terms of registered venture capital firms related to Media continues (i.e. to next to real estate) as compared to Foreign investment, through there is more flow of cumulative investment in real estate. Comparatively media has overtaken the biotech in terms of total percentage. This signifies that media has still retained combined leverage which has made both registered venture capitalists and foreign venture capitalists to invest, Perhaps the bio tech is remained as a third best in terms of flow of investment.

15

Cumulative Investments as on March 2012( Rs in Crores)


1 IT 564 3436 3878 14.54

2 Tel ecommunications 1092 7221 7865 13.88

3 Pharmaceuticals 457 976 1313 34.8

4 Biotech 186 139 288 64.58

5 Media 903 705 1101 82.01

6

Services sector

1168

1903

2493

46.85

7

Industrial projects

947

1102

1735

54.58

8

Real estate

8700

2987

10379

83.82

9

Others

11559

17124

23636

48.9

Total

25576

35593

52688

Cumulative Investments as on June 2012( Rs in crores)

SL NO

Sectors wise economy

VCF

FVCI

Total

% on total

1

IT

554

3475 3961

13.98

2

Telecommunications

1092

7234 7878

13.86

3

Pharmaceuticals

464

971 1316

35.25

4

Biotech

167

141 272

61.39

5

Media

924

718 1119

82.57

6

Services sector

1334

2191 2837

47.02

7

Industrial projects

1030

1202 1919

53.67

8

Real estate

9131

2962 10784

84.67

9

Others

11526

18204 24759

46.55

Total

26222

37098 54844


The above tabulated information depicts the total percentage flow of investment in each sector for the month of June 2012. From the analysis it is been observed that the growth trend in terms of registered venture capital firms related to Media continues (i.e. to next to real estate) as compared to Foreign investment, through there is more flow of cumulative investment in real estate. Comparatively media has overtaken the biotech in terms of total percentage this signifies that media has still retained combined leverage which has made both registered venture capitalists and foreign venture capitalists to invest. Perhaps the bio tech is remained as a third best in terms of flow of investment

16

Comparative Risk and return of the Venture capital investments in Total Cumulative Investment

SL NO

Sectors Wise Economy Mar-11 Jun-11

Sep-11

Dec-11

Mar-12

Jun-12

Grand Total SD Variance

1 IT 563 538 529 533 564 554 3281 15.458547 238.96667

2 Telecom 777 858 856 858 1092 1092 5533 135.18346 18274.567

3 Pharma 568 507 538 460 457 464 2994 46.596137 2171.2

4 Biotech 228 212 212 187 186 167 1192 44.858295 503.06667

5 Media 584 817 847 802 903 924 4827 243.56491 14830.967

6 Service sector 902 1100 1222 1215 1168 1334 6941 146.50108 42925.133

7 Industrial projects 875 1071 1155 783 947 1030 5861 271.68928 18453.767


The above table shows the Risk and volatility of each sector, through there is more flow of registered venture capital investment in Services sector (i.e. Next best to “real estate which is not considered because of the Constant growth potential and returns) followed by Industrial projects, Telecommunications and Media.

The above table projects the flow of investment risk and volatility in terms of Foreign Venture. Capitalists are concerned that the table gives a different picture with more amount of risk related to telecommunications looking into the growth potential of the business. The range of risk is also more in terms of IT and Industrial projects; because of the high volatility of market recurring investment flow of foreign investment is also more.

17

Comparative Risk and return of the Foreign venture capital investments in Total Cumulative Investment

SL NO

Sectors Wise Economy

Mar-11

Jun-11

Sep-11

Dec-11

Mar-12

Jun-12

Grand Total SD Variance

1 IT 2787 3367 3026 3016 3436 3475 19107 280.167628 78493.9

2 Telecom 6199 6321 7466 7145 7221 7234 41586 532.137952 283170.8

3 Pharma 1089 1085 1050 985 976 971 6156 55.1942026 3046.4

4 Biotech 188 198 146 140 139 141 952 26.889899 723.066667

5 Media 763 788 801 701 705 718 4476 43.744714 1913.6

6 Service sector 2157 1964 1911 2039 1903 2191 12165 123.886642 15347.9

7 Industrial projects 1451 1504 1428 886 1102 1202 7573 241.833345 58483.3667

CONCLUSION

1. The study concludes that the flow of registered venture capital investment is more in Services sector(6941) with a risk of (146.50). The risk in terms of industrial projects are more (271.68) with less volatility(18453)as compared to services sector(42925).

2. The risk in terms of Media is also M o r e ( 2 4 3 . 5 6 ) w i t h t h e v o l a t i l i t y being(14830) this can attract further investment in future because most of the Venture capitalists prefer to invest in risky projects

3. From the above analysis it is also pointed out that Range of investment of registered venture capitalists in Bio tech is relatively more than

the foreign venture capital investment 4. Looking into the risk and return of the

Registered venture capitalists, risk seems to be comparatively less as far as the BT is concerned i.e. (44.85) as compared to other sectors.

5. As far as the Foreign Venture capital investment is concerned it is been observed t h a t R i s k i s m o r e i n Te r m s o f Telecommunications(532.13)followed by IT(280.16) & Industrial Projects (241.83) BT has emerged as a Least Risk Sector with (26.889) and so called less volatile sector with variance being(723.079)

6. The positive trend of flow of investment in terms of Telecommunications(41586) likely to continue in near future also with the risk of (532.13) volatility of returns being(283170)


18

7. The flow of Investment as far as the Industrial projects are concerned is relatively less as compared to other sectors (7573) with a risk of (241.83) and volat i l i ty of re turns being(58483) this shows that there is more scope for investment in the near future

8. From the study it is been observed that services sector is booming with more flow of investment, less risk and less volatility of returns hence as far as the first objective is concerned Null Hypothesis is Rejected

9. The Overall Risk and return of the Foreign

Venture capital investment is Relatively high in Telecommunications(532.13)followed by IT(280.16) & Industrial Projects (241.83) hence Alternate Hypothesis i.e. (H1) is Accepted

10. To sum up Services sector can attract more amount of Investment and can become one of the Emerging investment sector as far as the Registered Venture capitalists are concerned, subsequently as far as foreign venture capital investment is concerned there may be a turn of investment towards Industrial projects.

Ÿ REFERENCES Ÿ “Venture Investing worth the Effort? A Study of Keiretsu Forum” (Morrisette, 2011).Ÿ “Corporate Venture Capital: Seeking Innovation and Strategic Growth” by Dheeraj Pandey and Thillai Rajan A

(2011).Ÿ Shepherd (2008) “Researchers of Venture Capitalists' Decision Making, Beware!” working paper, 1-8.Ÿ Compiled report of SEBI (submitted by both registered venture capital funds and foreign venture capital

investors).Ÿ Report on trends and investments RBI Bulletin


ITC-e chaupal”- A Strategic Agribusiness Approach towards Strengthening the Market Reach in Rural India

Dr. K.K Agarwal* & Preeti Singh**

ABSTRACT

The direct contribution of the agriculture sector to national economy is reflected by its share in total GDP, its foreign exchange earnings, and its role in supplying savings and labor to other sectors. However the contribution has been decline in the last two decades. The traditional market structure of the agriculture leads to exploitation of the poor and illiterate farmers by the intermediaries. The ITC E-chaupal supply chain model is a strategic agribusiness approach to free this vulnerable section from the clutches of the intermediaries by making them aware about the market and other such information necessary for better farming. The success of E-choupal has signaled a new era in the Indian agro-sector and is a win-win partnership between the farmers and the organization.

INTRODUCTION

In the early 19th century, agriculture was a self-contained industry which meant a farm family producing its own food, fuel, shelter, draft animals, and performing nearly all operations related to the production, processing, storage and distribution of farm commodities. However agriculture evolved from self-sufficiency to symbiotic relationship with other segments of the economy specifically allied to manufacturing of production supplies and the processing and distribution of food and fiber products. The traditional role of agricultural sector as the engine of growth of the economy was overtaken by the manufacturing, industrial and services sector. Some of the reasons for decline of the agricultural sector were the unfavorable process of the agricultural commodities, increased prices of the farm inputs, shortage of agricultural labor (due to migration to industrial jobs; increased competition for land use; and the more favorable policies accorded to the industrial sector that could have made investment in agriculture a less attractive alternative.) The traditional market structure of farming consisted of local, govt mandated market place called mandi where these farmers having small landholdings sold their crops to local traders who in turn sold it to other buyers. Agriculture being one of the strongest sectors of the Indian economy, accounts for 14.6 per cent of the country's gross domestic product (GDP) in 2009-10, and 10.23 per cent (provisional) of the total exports. Furthermore, the sector provided employment to 55 per cent of the work force

The evolution from agriculture to agribusiness has brought numerous benefits. These include drudgery for laborers, the release of workers for non-agricultural endeavors, a better quality of food and fibers; a greater variety of products; improved nutrition; and increased

19

mobility of people. The mantra for sustainable growth of the Indian agrarian economy is the constant integration of skillful and innovative techniques into the entire food production system translating into commercial profits for all stakeholders of the Indian agri system. The e-Choupal model has been specifically designed to meet the challenges posed by the distinct features of Indian agriculture, characterized by fragmented farms, weak infrastructure and the involvement of numerous intermediaries, who restrict critical market information from reaching to the farmers and ultimately using it for their own benefits.

STRATEGIC ORIENTATION OF AGRIBUSINESS

Dunne (1999) identifies three basic forces that drive change in the agri-business sector

1. The globalization of market2. The rapid advances in technology 3. The greater involvement of people in what

and how to produce.

Figure 1: The Forces of Change

*Dr. K.K Agarwal Professor Faculty of Commerce and Management, MGKVP Varanasi

**Preeti Singh Research Scholar Dept of Commerce, MGKVP Varanasi


income for farmers in relation to the other Indians.

Table 1: Consumption of Diet Diversified across consumer groups

Chart 1: Farmer Base

Source: Gulati (IFPRI) using data from Agricultural Census Division, India

ITC-E CHAUPALE-choupal is an ITC's strategic initiative which has

outreached more than 1 million farmers in nearly 11,000 villages within five years of its implementation and still expanding rapidly. Now it has been penetrated over million farmers with a growing a range of crops; soybean, coffee, wheat, rice, pulses, shrimp in over 40,000 villages through nearly 6200 kiosks across ten states, apart from it ITC provides many secondary services like:

1. Weather forecasting2. Soil testing services 3. Educating farmers on ways to improve crop

quality, scientific farm practices & risk management

4. Engaging banks to offer farmers access to credit, insurance, and other services

5. Services related to micro-credit, health and education

20

Source: Dunne and Colins 2001Globalization has been substantially successful in

liberalizing trade in manufacturing goods; progress in the agribusiness sector has been limited because of the importance of food and fiber industries to the social fabric and national security of individual countries. Very fast development in the fields of biotechnology and communication, have revolutionized the way food and fiber products are produced, processed, distributed and consumed. People have strong influence in the agribusiness sector as they have dual roles of consumers and guardians. Changes in the demographics, incomes and social awareness of people have also influenced how these products will be produced and made available to the public. This awareness has made an impact on the agribusiness sector through increased regulation of how food and fiber products are produced

Boehlje et.al (1995) claim that these changes have a dramatic impact on the management of an agribusiness firm because they effect the competitive environment of the firm and influence the way in which the management of the firm will reorganize its internal resources to meet these challenges.

THE STATE OF INDIAN FARMERSThe picture of the Indian farmers is not at all

beautiful. They have small landholdings, weak infrastructure (physical and social), low literacy and low income and high dependence on nature and intermediaries which leads to Low productivity – Low risk taking ability – Low share of consumer spending and ultimately they are trapped in the vicious cycle of poverty and underdevelopment.

Figure 2: Predicament of Indian Farmers

Source: Yogi Deveshwar 2004

TRENDS IN AGRIBUSINESS

The composition of diets has diversified across consumer groups which are induced by sustained economic growth and rising per capita incomes, urbanization and globalization (Table 1). The production system has responded well with an increase in supply of the various products despite a predominantly small farmer base (Chart 1). The base has continuously showed expansion, but the growth of Agriculture GDP is slower in comparison of aggregate GDP which has resulted significantly lower per capita


STRATEGIC BREAKTHROUGH INITIATIVEThe e-choupal infrastructure consist of

1. Sanchalak's undergo training at the nearest ITC plant. They receive education on basic computer usage, the functions of the e-choupal website basic business skills, as well as quality inspection of crops. For the sale of products through e-choupal, the sanchalaks receives product training, directly from the manufacture and facilitator. Their role is very important as it requires considerable entrepreneurial initiative which enables the agricultural community access ready information (in their local language) on the weather & market prices, disseminate knowledge on scientific farm practices & risk management, facilitate the sale of farm inputs (now with embedded knowledge) and purchase farm produce from the farmers' doorsteps (decision making is now information-based).

2. Samyojaks or cooperating commission agents. They earn income from ITC by providing logistical services that compensate the laggings of rural infrastructure and are located in the reach of target farmer. The samyojaks play an especially important role in the initial stages of setting up the e-choupal because they know farmers very well like what kind of families they have, what are their financial situations and who is seen as an acceptable and respectable in the villages' and has been suitable for sanchalak. They have opportunities for revenue through providing services such as management of cash, bagging and labor in remote ITC procurement hubs and handling of the paperwork for ITC procurement. They also serve as licensed principals for the retail transactions of the e-choupal.

21

E-

choupal Now By the year

2012

States

Covered

9

15

Villages

Covered

40,000

1,00,000

No. of e chaupals

6,500

20,000

Farmers empowered

4 million 10 mllion

Table 2: E-Choupal at a GlanceSUPPLY CHAIN MODEL OF E-CHAUPAL

E-chaupal is implemented on the model of a self-sustaining business. Farmers may order seed, fertilizers, and other products such as consumers goods form ITC or its partners, at process lower than those available from village traders. To save on logistics/ transportation cost, sanchalak normally forwards these orders collectively to the nearest ITC processing center or representative.

Figure 3: The Value Chain-Farm to Factory Gate

The project e-Choupal is ITC's unique click & mortar initiative e-Choupal is an Information communication technology platform for carrying out trade at a number of locations. In this, ITC sets up a back-up physical service support at the village level, called Choupal, through Sanchalak: a lead farmer, who acts as the interface between computer and the farmer. ITC accumulates information regarding weather, modern farming practices, and market prices from sources like Meteorological Department, Agri-universities, mandis (regional market) etc., and upload all information on to e-Choupal web site. All information is customized according to local farmer's requirements and provided into the local language through computer set up by ITC in Sanchalak's house. Sanchalak access this information and facilitates its dissemination to farmers. Information regarding weather and scientific farming helps farmers to select the right crop and improve the productivity of their farms. Availability of market information helps farmers to become market oriented. They know what price ITC is quoting and the price prevalent in the local market, thereby helping better price realization for farmers. If farmer decides to sell to ITC, Sanchalak works as the aggregator of small farmers produce to sell them to ITC. Sanchalak also aggregates farmers input purchase orders for various items like seeds, pesticides and places them directly with the suppliers through internet and facilitate supply of high quality farm inputs as well as purchase of farm produce at farmer's doorstep with the help of intermediaries.


22

E choupal also unshackles the potential of Indian farmers who has been trapped in a vicious cycle [Fig (2)] and such a market-led business model can enhance competitiveness of Indian agriculture and trigger a vicious cycle of higher productivity, higher incomes, enlarged capacity and higher quality and productivity. Further a growth in rural incomes will also unleash the latent demand for industrial goods so necessary for the continued growth of Indian economy. This will create another virtuous cycle propelling the economy into a higher growth trajectory.

INNOVATIVENESS OF ITC-E CHOUPALIt is largest initiative among all Internet-based

interventions in rural India.Through the e-choupal initiative, ITC aims to

confer the power of expert knowledge on even the smallest individual farmer. Thus has enhanced its competitiveness in the global market. ITC has been able to create collaboration to provide quality information and extension services to build capacity to manage and create competition – both supply side and demand side. It has also been able to make available reliable and cost effective inputs to connect with markets – national & international. This has helped in the elimination of wasteful and parasitic intermediation and thus got successful to capture larger share of growing consumer spend for the farmer

CONCLUSIONThe success of e-Choupal has given new lessons to the

corporates in the India and abroad. E-Choupal has been most successful initiative to wire rural India and to involve the farmers in learning. It has reduced the cost of procurement and the cost of transit and the material handling cost. Procurement transaction costs are reduced from the industry standard of 8% (farmer incurs 3% and the processor incurs 5%) to2% (with farmer saving all his 3%, and the processor – ITC – saving 3%). ITC has envisaged on various plans to replicate the success achieved to other states and expand the services offered to other commodities like spices. ITC has also identified e-Choupal as an important driver for exports, which are targeted at $ 400 million by 2005. E-Choupal has also attracted attention from the renowned academicians, since e-Choupal has managed to innovate the supply-chain. And the model applied by ITC has enough potential to be replicated in the under-developed and developing countries. ITC has been successful in making the farmer feel the sense of ownership and enthuse him to generate additional revenue by eliminating middleman. The gains from the novel initiative are manifold to ITC, the farmers and other companies. E-Choupal has helped the farmers to improve their productivity and get better prices, whereas ITC has benefited by better sourcing of raw materials and building a backbone to market the end products which is vital for the FMCG companies like ITC. At last, the most powerful aspect about this model is that it has created a win-win partnership between ITC and the rural farmers some of whom will depend on the organization for their livelihood, and builds a self-sustaining cycle of growth and development for all

REFERENCESŸ Aarti Shetty & BV Mahalaxmi, dated 8/4/2002 'Corporates Enter to Cash in on the AgriPotential' The Financial

Express.Ÿ Anthony J Dunne supply chain management: Fad, Panacea or opportunityŸ Ashish Chandra, Adesh Chandra Bhatele e –choupal a structured retail chain of rural India.Ÿ B. Bowonder, Vinay Gupta and Amit Singh.(2005)," Developing a Rural Market e-hub The case study of e-

Choupal experience of ITC" Rural Market e choupal" Dt. 2005Ÿ Boehlje M. 1996, Industrialization of Agriculture: What are the implications? Choices, First Quarter, pp.30-33.Ÿ Boehlje M. 1999, Structural Changes in Agricultural Industries: How do we measure analyze and understand

them? American Journal of Agricultural Economics, Vol. 81, No. 5, pp.1028-1041.Ÿ Elfena E Glinskaya, Ending poverty in South Asia: Idea that worksŸ Kumar Deepak(2005), "Private Sector Participation in Indian Agriculture” Effective Executive, The, ICFAI

University Press, July 2005Ÿ Mahfoor Haji Harron, Mad Nasir Shamsudin and Ismail Abd. Latif challenges for Agribusiness: A Case for

Malaysia.Ÿ Rahul Goswami, Ekta Juneja, Swati Sharma, Agribusiness sector in Rural India and increasing opportunities of

E-Commerce.Ÿ S. Sivakumar, CEO of ITC-IBD, dated 8/4/2002, 'Collaboration Works' Business world.Ÿ S i v a k u m a r , C E O o f I T C - I B D , / ( 2 0 0 2 ) , ' C o l l a b o r a t i o n W o r k s '

Businessworld.http://library.thinkquest.org/11372/data/rd.htm?tqskip1=1&tqtime=0625.Dated 5/3/2002 "no stops for ITC" ITC news.

Ÿ Surjeet Das Gupta, dated 5/3/2002, 'The choupal as a meta market' Business standard, Strategist


Table 4: EBIT for Theta Techno

Table 5: Balance Sheet as on March 31, 2008 of Theta Techno (Rs. Crore)

To find out the correct acquisition value of Theta Techno was a tedious task. Mehra was of the opinion that a sales multiple of 10 would give an idea about the acquisition value. He was also reminded of a thumb rule where one should pay six times of the EBIT of Target Company while purchasing a company and eight times of EBIT while selling a company. The same question was troubling Zarra, the CEO of Theta techno. Zarra has another option of taking a Venture Capitalist funding and grow. Average growth rate for the IT sector is 11% pa and the BPO sector is 15%. Zarra and Khan, both, were contemplating on the minimum and maximum of Table A and B. Both Zarra and Khan were of the same opinion that apart from financial issues, the non-financial issues are also critical for any successful deal.

Table A: Range of Valuations of Eta Technologies

INTRODUCTION: The given case is a hypothetical demonstration of valuation of a business using simple techniques. It can also be used to discuss entrepreneurship issues such as Business Modelling, sale of business and different aspects of financing for new ventures. It was a hot summer day in May 2008, Mr. Mehra; the CEO of Eta Technologies was sitting in his corner room and contemplating. He was wondering on the quick growth of his company. Somebody knocked at his cabin. It was Khan, Vice President-Strategy of Eta. Mehra had called Khan to discuss future strategy for the company. They were discussing about taking over the Theta Techno, and for this Khan had prepared a synergy statement justifying the acquisition along with the financial statements for both the companies.

Table 1: EBIT forecast for the combined business of Eta and Theta

Table 2: EBIT for Eta Technologies

EBIT: Earning before Investment and TaxTable 3: Balance sheet as on March 31, 2008 of Eta Technologies(Rs. Crore)

23

Case: The Growth Question

Moid U. Ahmad*

*Moid U. Ahmad Assistant Professor, Jaipuria Institute of Management, A-32A, Sector 62, Noida, Indiaz

2009 2010 2011 2012 EBIT(Rs. Crore) 50 51 52 54

2005 2006 2007 2008 EBIT(Rs. Crore) 16 20 22 25

Current Assets 13

Fixed Assets 189

Total Assets

202

Current Liabilities

17

Capital

162

Reserve and Surplus

23

Total Liabilities

202

2005 2006 2007 2008 EBIT(Rs. Crore) 8 4 5.2 3

Current Assets 11

Fixed Assets 15

Total Assets 26 Current Liabilities 6 Capital 18 Reserve and Surplus

2

Total Liabilities

26

Minimum Maximum EBIT Net Assets Price/Earnings


Table B: Range of Valuations of Theta Techno

ABOUT THE COMPANIES Eta Technologies has been operating in the business of software development for last 10 years. It has been promoted by a large Parma group and its USP is quality service at an economical price. It primarily developed and implemented 'BANKCOM', software for the Banking Industry. Their major clients were based in United States and United Kingdom. Eta is a bulk recruiter of engineers and MBAs from premier institutes and is growing fast in size. It has tied up with 'Humano', an HR recruiting firm for the same. The company was also looking forward to diversify into the Business Process Outsourcing (BPO) sector. Theta Techno was a small sized company into the BPO business which was not doing so well in recent past but was lead by an ambitious and dynamic lady, Zarra, who had the vision to propel her company amongst the top companies within five years down the line. As the company grew there were many bids for taking over from the rival companies.Khan collected the following data for Indian market for the year 2008.

1. The corporate tax rate is 40%.2. NSE Nifty Price/Earnings ratio is 13.

3. NSE IT Index Price/Earnings ratio is 17.4. Infosys Technologies Price/Earnings ratio is

21.5. Discounting rates for unlisted private

companies is 25%.6. The Internal Rate of Return expected from

either acquisition is 19%.

CASE QUESTIONS

1. What complications can be faced by a new

venture when it enters the growth phase?

Answer in not more than 300 words.

2. If you are a Venture Capitalist, will you invest

in Theta. Also explain the stages of Financing

as they occur during an Entrepreneurial

journey.

3. With reference to the Osterwalder's canvas for

business models, draw the canvas and fill it up

for the business model of Eta Technologies

and Theta Techno.

4. Please complete Table A, Table B on the basis

of facts given in the case, and also suggest

,should Eta acquire Theta?

5. Please complete Table A, Table B on the basis

of facts given in the case, and suggest should

Theta go for acquisition of a larger and

establish company Eta?

6. Relate Eta and Theta with various stages of

Venture Life Cycle (VLC).

24

Minimum Maximum EBIT Net Assets Price/Earnings


25

CROWD SOURCING –A NEW MANAGEMENT MANTRA

Devi Premnath* & Dr. C.Nateson**

ABSTRACT“Crowd sourcing” is a brand new concept which has started to make wave in the field of management'. It refers to the process of outsourcing of activities to an online community or crowd in the form of an open call. Any member of the crowd can complete the assignment and can be paid for the efforts. This phenomenon is increasingly noticed in the field of advertising where the companies have started generating ideas and strategies of advertisement from the crowd, for a better realistic approach. The process is speedy and it is less expensive in terms of time and money. This paper is an attempt to put light on the various nuances of “crowd sourcing”, the methodologies involved and its impact regions related this competitive segment of business. The success mantra in crowd sourcing is the power of the crowd that drives the future of management.

Keywords: Crowd sourcing, Crowd funding, open call

INTRODUCTIONModern marketing has become very competitive

.The monopolistic nature of the markets has created a rush among the companies to establish them in competing position. The concept of crowd sourcing is the brain child of Jeff Howe and Mark Robinson. Here the help from the public is sought for t he promotion of a particular brand or product. The power and strength of the public is utilized to the best possible extend. Word of mouth is an important tool in the hands of the public which when properly utilized with fool proof strategies will work wonders. The most interesting thing about crowd sourcing is that we have been using these strategies from long ago, but we were unaware of the concept.

HOW DOES CROWD SOURCING WORKS?This is a million dollar question. First if a company

does a work in-house and if this work requires a lot of labor and expense, then the work will be given to the public by an “open call”. The open call can be given through internet or through newspaper .The assignment is then given to the “Crowd'. The time for the completion of the project will be specified and at the same time they will be payed after the completion of the work. It is not easy to get the crowd through an open call , often motivational strategies have to be employed to attract the crowd, like fame , money etc…..It can also be seen that the assignment given should be simple and lucid ,else the crowd will not turn up for extremely complicated ones. To play safe it is better to have a legal footing on the contract that is going to take place.

CROWD SOURCING AND MANAGEMENT Management is universal and it extends its

horizons in different functional areas like human resource management, marketing management, financial management, operations management,

systems .It is interesting to note that management is functional in all the realms through crowd sourcing. Powers of crowd sourcing has in fact made management a field of study which has become so reputed and acceptable now a day. Through this article we will delve into the role of crowd sourcing into the management functionalities.

HUMAN RESOURCES MANAGEMENT Recruitment and selection

Human resource management basically revolves around the concept of selecting the right person for the right job. In modern days crowd sourcing is used to recruit the right men in many companies. The assignment is given to the public who latter recommend the eligible candidates to the companies. This creates value to the company by providing human labor from virtual pool or cloud there by making this process really cost effective. It is the best method for talent acquisition and talent management.

Pooling Human resourcesDemocracy is for the people, by people and of the

people. The very democracy stands tall on the principles of crowd voting. It is the mandate of the crowd that is personified in the form of a representative government. The people vote for their rights there by indirectly giving power to few who run the show. Had there been no crowd sourcing the very concept of democracy would not have existed.Anna hazare had made waves with the Jan lokpal bill. The entire public opinion was sources and the crowd wisdom was channelized. Here the strategy of crowd creation was done to show the strength of unification for a common cause. Crowd sourcing is also used by the web portal like yahoo answers were the questions are asked and anybody having knowledge or wisdom can

*Devi Premnath Asst prof (S.G) Sree Narayanaguru Institute of Management Studies**Dr. C.Nateson Professor Jansons School of business


26

give an answer. There are certain news sites also which works on this concept. Marketing

Right from branding to advertising crowd sourcing has a major role to play. Yes, crowd sourcing is a concept which is quite actively operating around us in different forms. Especially in a country like India we can learn and understand this new concept through examples .One perplexing fact is that in every sphere of life we can see crowd sourcing workingModern Advertising

Today the T.V channels are flooded with reality shows and reality shows have a perfect interaction with the public through SMS. The crowd actively participates through SMS giving business to the network providers and it works as good promotion strategy for the sponsoring companies and therefore the T.V programs will benefit through increased viewership. Asking the public to vote and giving them attractive prizes or chance s to participate is the motivational strategy that they use.

Maggi Noodles gives an open call to people asking them to send letters stating the first experience of eating Maggi Noodles. The company also asks the public to guess the taste of the new brand that they have recently launched. The company creates a sense of belonging among the public by printing their faces on the noodle wrapper or package. This crowd sourcing strategy has clicked and we can see other brands also imitating the sameProduct development

The firms use crowd sourcing to get input and advice on their product development efforts. Some companies ask the public to design the product according to their likes. The age old practice of collecting feedback from the customers and implementing the suggestions is a kind of crowd sourcing practice. The wings that can be seen in all the modern sanitary napkins are a crowd sourced suggestion which has been implemented by the product developers.Branding

Some companies crowd source their logos and brand name... Contest are created by the companies , they invite the crowd to compete in contest and crowd will have to design a logo or suggest a brand name , the best brand name or the logo will be selected and person who wins will be rewarded. People enjoy doing this. It is advantageous also as these crowd sourced brand names and logos stay fresh in the minds of the people. The popularity increases there by the sales.

CROWD SOURCING – BOON TO WEB BASED BUSINESS

Today face book, orkut, YouTube are some portals that are very successful. It is the number of clicks or hits or the membership that matters. The crowd sourcing is “the “mantra for the success of these social networking channels.

Crowd FundingCrowd funding enables an entrepreneur to obtain the funding they need to startup a project through a pre-sales strategy or simply connecting with people who wish to suppor t the pro jec t f inancia l ly.This money is a gift, not a loan, and not considered taxable income. It is not considered as an investment nor do you have to take on financial partners. For a little time and creative talent, crowd funding is available to anyone who wishes to attempt it.

For example:-

Microfinancing

This is a process through which low income individuals can get loans for which they may not ordinarily be qualified or when they do not have access to financial services.

A classic example is the self help groups which have mushroomed as result of government initiatives. These SHG's will take up mini projects and the profits are shared by the members of the group. The general public or multinational company's pools in the cash, the individual responsible for the project receives the money as a loan which they must repay. The loan payment goes back into an accountPublic offers

A very old practice followed by the companies is calling on the public to buy the shares of their company. By this act the public automatically becomes the owner of the company through the purchase of the shares.

This is a classic crowd sourcing practice that we hardly noticed.

PRODUCTION MANAGEMENTTechnology outsourcing

Some companies crowd source the technology of production so that it helps in least cost of production. Crowd sourcing is also done for the raw material procurement.

CORPORATE SOCIAL RESPONSIBILITYCharity & Fund Pooling

Funding good causes are again a crowd sourcing or crowd funding strategies. An open call to people to help others or to uproot an evil in the society is a usual scene in the modern scenario. The programs like

Amateur artists and designers raise funding for specific projects from multiple donations. Filmmakers and reporters pitch the public on their favorite story ideas and then deliver report on them using multiple donations. Though this will not save the newspaper industry still we can find that it is an interesting attempt to get the public to pay for quality investigative reporting, which struggling newspapers find difficult to pay.

Musical Bands fund the recording of their albums from multiple individual investors who then share in any profits down the road. Users pay a monthly fee and Contenture-member sites share in the revenue when users visit their sites.


27

PROBLEMS WITH CROWD SOURCING· Nothing is perfect, so is crowd sourcing.

When the problem is quite diffused and ambiguous then crowd sourcing is not a good option to go with. In such situations crowd sourcing will create more confusions and take away the focus from the real problem.

· It is not possible when the problem is of secretive nature then crowd sourcing is not a good option.

· When we need dedicated contributors or resources it is better to rely on experts or in house faculty rather than crowd sourcing.

· Social networking is a boon but sometimes it turns into a bane when the privacy is affected. It also leads to antisocial activities which later require legal intervention.

CONCLUSION Across many industries crowd sourcing will be a growing tool as apart of various outsourcing strategies. Organizations will mobilize the passionate special interest groups not only to carry message but also to lead the activities on their behalf. From political canvassing to software development, people from journalism to environmental activism see huge growth in crowd sourcing models provoked and led, in large part, by digital social media strategies.

REFERENCESŸ Jeff Howe (June 2006). "The Rise of Crowd sourcing". Wired.

http://www.wired.com/wired/archive/14.06/crowds.html. Retrieved 2007-03-17Ÿ Daren C. Brabham. (2009). "Crowd sourcing the Public Participation Process for Planning Projects", Planning

Theory, 8(3), pp. 242-262Ÿ Crowd sourcing: consumers as creators, by Paul Boutin, Business Week, July 13, 2006.


Growth of Currency Futures in India

Dr. Avinash Bajpai*

ABSTRACT Inception of currency futures in India, from August 2008, has given a new depth to Indian financial system. The

diversified instruments of investment, borrowing and hedging, that suit the need of financial players are the strength of ideal financial infrastructure. Currency futures are advantageous over OTC market. It provides reduced currency exposure to international traders, international investors and arbitragers. Initially, only USD was allowed to deal in Indian currency futures market but later RBI announced three more currencies GBP, JPY and EUR that are providing vulnerability to this market. Recently RBI has announced currency options in USD-INR segment that will enhance the strength and efficiency of the derivative market. Players are shifting towards this market, as total trade of $ 3.4 b has taken place in the year 2008 and till Dec. 2009 it reached to $ 84 bn. as compared to the OTC market. Intermediation of clearing houses and mark-to-market method reduce default risk and provides greater liquidity in one hand and on other hand, this feature will be helpful to attract foreign capital investment in India.

The paper focuses on relevance of currency futures market and its comparative growth potential with OTC market in India. Research is based upon secondary data. Information is collected from the websites of NSE, MCX, RBI, SEBI, DGCX, CME, CBOT and other prominent currency exchanges, articles on financial derivatives, financial literature and reference books. By application of relevant statistical techniques conclusion is obtained. In the conclusion, the necessity of currency options other than USD is observed and the importance of Renminibi /Yuan is felt in currency future segment.

Key Words: Currency Futures, Forex Risk Hedging, Growth of Currency Derivatives in India

INTRODUCTION The infrastructure is the foremost need for the development. India, being a developing country, is on the path of development. Rapid changes are taking place in different walks of life. As tremendous infrastructural support base has been prepared to assist energy sector, communication sector, transport mechanism and export sector, the Indian financial markets have also marked their place with comprehensive new market instruments. The commendation of derivative markets in India in June 2000, given new heights to the Indian stock market. Started first with Index future contracts, followed by Index Options in June 2001, Options in individual stock in July 2001, futures in single stock derivative in November 2000 and starting currency futures in the year 2008. Now, along with the currency futures with USD, GBP, JPY and EUR, the spread contracts are also available for trading. As through circular no.005 Currency Derivative segment NSE announced spread trading. “For each of the new pair EUR-INR, GBP-INR, JPY –INR six spread combinations constituted from the first four expiry contracts shall be available for trading. On expiry of near month contract, the 3 spread combinations constituted of each expiry, automatically matures and hence, 3 new spread combinations shall be made available so that at any point of time, there shall

1be 6 spread combinations available for trading.” That is all outcomes of the reform programs that have been started since 1994.

LITERATURE REVIEW The currency futures are the significant tools to

hedge the forex exposure. A number of studies have taken place with the respect of growth of Indian financial infrastructure and commodity market. John M. Sequeria in his paper Time Series Analysis of settlement prices for individual currency futures in Singapore, has shown the volatility of settlement prices in the future contracts and suggested a model to calculate the rate of return of the currency and based on that future settlement price could be obtained. Narendra L. Ahuja, in his study Commodity derivatives Market in India: Development, Regulation and Future Prospects has focused on the relevance of derivatives trading and advocated such trading in India in variety of products. The strength of Indian securities market is characterized by nationwide access through electronic based system. The total quantum of trade is growing with the participation of both the domestic investors and FII investors, although FII investment is not allowed so far, in respect of currency futures. The turn over of NSE derivatives increased from Rs.23, 654 million (US $ 3,207 million) in 2000-01 to Rs. 130,904, 779 million (US $ 3,275,076 million) in 2007-08. Not only in India, have the similar growth trends but similar trends have been seen in foreign derivative markets in the last years. The table below gives the glimpse of growth of global derivative markets.

*Dr. Avinash Bajpai Assistant Professor Institute of Management Sciences University of Lucknow

28


The data in above table cover the activity recorded in the global over-the-counter (OTC) and exchange-traded derivatives markets. The data on exchange-traded derivatives are obtained from market sources, while those on OTC derivatives are based on the reporting to the BIS by central banks in major financial centers that in turn collect the information on a consolidated basis from reporting dealers

2headquartered in their respective countries . Among all the derivatives the currency derivatives secured higher growth rate. The currency future in India started from Aug. 2008. An excessive fluctuation in the exchange rate was one of the major consequences of increased foreign exchange transactions. High volatility in the exchange rate created detrimental effects on the exporters, efficient price discovery and sustainability of current account balance. No doubt, the market participants as well as the policy makers were seriously concerned with tackling these issues.

In order to facilitate the market participants in managing the exchange rate volatility, RBI (Reserve Bank of India) set up a joint working committee to explore the feasibilities of introducing currency futures. Joint working committee of RBI and SEBI (Securities and Exchange Board of India) finalized the guidelines for exchange-traded currency futures in April 2008. Based on the guidelines, RBI framed the directives on currency futures trading on recognized stock exchanges and new exchanges and published it through a circular RBI/2008-2009/122 dated 6th

3August 2008 . Currency Futures trading in NSE commenced on August 29, 2008. Initially USD was only allowed with

the special contract size of $1000. At the starting month of trade the total number of contract traded at NSE 1,258,099 of value of Rs. 5,763cr. This figure grown to Rs. 2, 47, 505 cr. in the month of March 2010. On the very first day of operations a total number of 65,798 contracts valued at Rs.291 crore were traded on the Exchange. Since then trading activity in this

29

Table 1 (Source: Statistical Annex, BIS quarterly Review, March 2010 pg. no. A10)

Global OTC Derivatives Market, end -June 2009 (In billions of US $)

Total

With Reporting

Dealers

With Other

Financial

Institutions

With Non -

Financial

Customers

All Contracts

21,825

7,067

13,215

1,543

Foreign Exchange Contracts

2,081

703

942

437

USD

1,650

609

743

299

Euro

917

266

421

230

Japanese Yen

336

35

136

6 5

Pound Sterling

416

132

179

105

Other

843

284

405

175

segment has been witnessing a rapid growth. The total traded volume from August 2008 till March 2009 was Rs.162, 272 crore (US $ 31,849 million). Total number of contracts traded during the August 2008 to March 2009 was 32, 672, 7684. The business growth of Currency Futures Segment from 2008 to 2011is shown in the graph-

Figure- Yearly Contracts Traded

(Source: NSE report on currency data segment) In the year 2008, 32, 672, 768 contracts were traded while in the year 2009-10 the contract traded stood at 378,606, 983. The figure grown in a massive way in the year 2010-11 and came to 749,602,075.


The above mentioned figure shows the monthly turnover of currency futures contract traded on monthly basis. From the year 2009-10, starting with growth, secured continuous growth till June -2010, after that trading trembled down. From February 2011 the currency futures trading were again in a growth swing.

Top 5 Currency Futures contracts according to number of contracts 2008-09 to 2010-11

Table 2 (Source: NSE report on currency data segment)Future currency market is regulated by RBI & SEBI both. Future contract are allowed in specified exchanges

NSE & MCX. A specified amount of GBP, USD, EUR and JPY (GBP 1000, USD 1000, EUR 1000 and JPY 100,000) can be purchased or sold at prevailing rates. The clearing agency NSCL takes the contra position for each contract and assures execution of the contract, hence providing guarantee against the default risk. Mark-to-Market method is adopted to ensure smooth execution of the contracts. Though, Contract can be purchased or sold preceding two working days of the last day of the month but the maximum maturity is allowed for twelve months. The final settlement will take place by the RBI reference rate of RBI at maturity.

30

Figure-2 Monthly Contracts Traded

(Source: NSE report on currency data segment)

S.No Derivative

Fut. Currency

Symbol Maturity Total Traded

Quantity Total Traded

Value

Total traded value (%)to currency

Futures Total Value 1 FUTCUR USDINR 28-Jun-10 72,336,036 337,765.48 9.79 2 FUTCUR USDINR 27-May-10 72,252,976 328,323.13 9.52 3 FUTCUR USDINR 27-Oct-10 70,196,230 313,957.45 9.10 4 FUTCUR USDINR 28-Apr-10 63,797,022 284,050.82 8.23 5 FUTCUR USDINR 29-Mar-11 60,838,476 275,204.06 7.98

Figure 3: EUR Future Settlement Prices Figure 4: GBP Future Settlement Prices


Figure 4: GBP Future Settlement Prices

Figure 5: USD Future Settlement Prices

Figure 6: JPY Future Settlement PricesThe growth of derivative market is due to

fluctuating forex rates. “A key difference between investing in domestic and foreign assets is that the latter exposes the investor to a currency risk. Over the years, most investors have not been careful in characterizing this risk to returns from un-hedged portfolios. One simplistic view was to measure the return in domestic currency terms and compare it with returns in local

currency terms and characterize the difference as the currency effect. The reasoning was that if the exchange rate remains constant from the time of purchase of the foreign asset to its sale, then the currency risk has had zero impact. On the other hand, if domestic currency has weekend (strengthened) against the foreign

6currency, the exposure would result in gain (loss).” The rapid changing forex rates pose transaction exposures to the traders. Future currency contracts are one of the measures to tackle such exposures. So, hedgers, arbitrageurs and speculators participate in the market. Though the OTC market , money market hedge techniques are there to hedge the risk but this market is having added advantage over other techniques as here the clearing agency takes 100% position against default of other party, no such arrangement are there in OTC market (forward market). Though maintenance of margin requirement may be a cumbersome job for few traders, but it ensures certainty of cash flows from the date of contract traded.

CONCLUSIONSAs the tremendous growth has been seen in small

span of time and because it's a strong aid to international business, this market is likely to develop in the coming time. As it is clear by the above tables recent maturity contracts are more traded in exchange. The inception of currency options in USD-INR will provide the vulnerability to the market. Similarly, currency options in other currency segments like GBP-INR, JPY-INR and EUR-INR should also be open to the traders. Not only the INR based contracts but also other contracts having underlying like USD, EUR, and Renminibi should be included in the product basket of the market.As the China is now the biggest trading partner of India, so the future and option contracts as underlying currency Chinese Yuan/Renminibi, will give advantageous hedging benefit to exporters and MNCs. The FII investors should also be allowed in the market to strengthen the market.

31

RBI Ref. Rate (JPYINR)

47

48

49

50

51

52

53

2/9/

2010

2/16

/201

0

2/23

/201

0

3/2/

2010

3/9/

2010

3/16

/201

0

3/23

/201

0

RBI Ref. Rate(JPYINR)

REFERENCESŸ Ahuja Narendra L., Commodity Derivatives Market in India: Development, Regulation and Future Prospects,

International Research Journal of Finance & Economic, Issue 2 (2006.)Ÿ BIS Quarterly Review, March-2010, Statistical Annex, BIS International Financial statistics summary table

stPg.No.A10.Circular No. 005, Currency Derivative Segment, National Stock Exchange dated 1 Feb 2010. Ÿ Currency Futures GuideŸ SEBI – Comments (6)Ÿ John M. Sequeria, Time Series Analysis of settlement of prices for individual currency futures in Singapore.Ÿ National Stock Exchange, Derivative segment, Derivative Trading Summary pg.no.162.Ÿ Publications, Reports and data from National Stock ExchangeŸ Report of the RBI-SEBI standing Technical Committee on Exchange Traded currency futures-2008.Ÿ Sharma Somnath, An Empirical Research on relationship between currency futures and exchange rate

volatility in India, RBI working paper siries-1/2011. Ÿ Using Currency Futures to Hedge Currency Risk by Sayee srinivasan & Steven Youngren, Chicago Mercantile

Exchange Inc.Ÿ Verma Jaynath R., IIM Ahmadabad, Indian Money Market: Market Structure, Covered Parity and Term

Structure.


Public Private Partnership in Infrastructure - Roads Sector in India

Dr. P.K. Sinha * & Ms. Sanchari Sinha **

ABSTRACTPublic Private Partnership (PPP) has emerged as key instrumentalities for involving the private sector in the

provision of infrastructure and other public services. There is room for debate as to whether private sector involvement necessarily implies private finance. The term PPP could cover situations where private investment is brought in to improve the efficiency of public expenditure and private finance. PPP are not vehicles for privatizing public services since the Government retains full political accountability for the services. They simply are a means by which the Government can use what the private sector offers to improve its own performance. It is done by establishing its own arrangements often through legally binding contracts that will bring benefit to both sectors. The private sector needs to earn a return on its ability to invest and perform. The Government should therefore look very carefully at PPPs, because if economic advancement can be made via infrastructure improvements, it may meet any increased cost of involving the private sector. This article brings about an overview of the PPP terminology in infrastructure with emphasis on the roads sector. It highlights on the need, concept, use, framework, sectoral overview of the roads sector, major risks faced, overview of the PPP process & its phases and India's experiment with the road sector PPPs.

INTRODUCTION· PPP refers to private business investment

where 2 parties comprising the Government as well as a private sector undertaking form a partnership. The deficit can be overcome by ensuring much more private capital investment. Expert guidance is the only way out for enabling efficiency through subsequent cost reduction.

· Promotion of PPP is therefore necessary as it is the most preferred mode. Despite its benefits, there are some constraints which are outlined below:

o In the present financial scenario sufficient instruments as well as ability to undertake long term equity cannot be provided by the market. Also financial liability required by infrastructure projects would not be sufficed. Most sectors face a lot of hindrance in enabling a regulatory framework as well as a consolidated policy.

o Lack of ability of private sectors to fit into the risk of investing in diversified projects also needs to be overcome. Modernization of new airports, transmission systems and building power generating plants are some of the avenues which require skilled manpower.

o Ability of public institutions to manage the PPP process should also

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b e s u b d u e d . M a x i m i z i n g stakeholders return need to be managed due to involvement of long term deals including life cycle of asset infrastructure.

o Lack of credibility of bankable infrastructure projects used for financing the private sector should also be overcome. Inconsistency is still visible in the limitations of PPP pro jec ts , desp i te cont inued initiatives by State and Central ministries.

o Inadequate support to enable greater acceptance of PPPs by the stakeholders forms another source of constraint.

· Several initiatives have thus been undertaken by the Government of India to enable a greater PPP framework in order to eradicate the above mentioned constraints. o Various foreign as well as private

investments are encouraged by waving off charges.

o Framing of standardized contractual documents have been devised for laying down terminologies related to risks, liabilities and performance standards.

o Approval schemes for PPPs in the Central sector have been streamlined through Public Private Partnership Appraisal Committee or PPPAC.

*Dr. P.K. Sinha Director of a Management Institute at Pune. **Ms. Sanchari Sinha Research Associate in an International Consulting firm Pune.


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· PPPs can only be mainstreamed by continuous response to varying goals of people and the economy in general. The boundary domains of PPPs should be increased in order to prosper the infrastructure development of India.

NEED FOR PPP IN INFRASTRUCTURE · According to estimates by the Government,

an estimated 50% of the population (about 700 Million people) will be living in cities by 2025. This means that the Government and other stakeholders face the daunting task of providing world class infrastructure facilities, connectivity, utilities and access to basic/ civic amenities for all to improve their quality of life.

· Factors like lack of skilled manpower, project management expertise, time and financial resources act as major constraints before the Government to execute projects on their own in areas like national highways, power, transport, airports and seaports. It therefore presents a huge opportunity for the private sec tor, bu i lders and NGOs (non-governmental organizations) to jointly execute infrastructure development projects on a war-footing through the PPP model.

· India needs a developed infrastructure which can only be met through PPP as the investment requirement is huge and the Government alone cannot raise this amount.

· The most visible indicators of overstretched infrastructure are India's congested highways, airports and ports. According to estimates by the Planning Commission, infrastructure development would need a huge investment of about USD 320 Billion during the XI Plan period (2007-2012). Further, to achieve the growth targets of the XI Plan, the country would have to develop 40,000 km of highways by 2012, increase traffic handling capacity at ports from 737 million tonnes to 1,500 million tonnes, maintain growth momentum in freight and passenger traffic at 8-9% annually and enhance power generation capacity by 60,000 MW.

· To promote PPPs in infrastructure, the Central Government launched a Viability Gap Funding (VGF) scheme in 2007, while setting up a Public Private Partnership Appraisal Committee and India Infrastructure Finance Company Ltd. Against this backdrop, there is a need for States to adopt the PPP model in view of the enormous investment needs.

· It is therefore imperative that avenues for

increasing investment in infrastructure through a mix of public investment, PPPs and through exclusive private investments wherever feasible be explored.

· Apart from freeing Government resources for greater investments in other sectors, PPPs would usher in private sector expertise along with efficiencies in operation and maintenance, thus leading to better quality of public services.

PPP CONCEPT IN INFRASTRUCTURE · Physical infrastructure such as roads, water &

sanitation networks and transportation systems involve large investments that can put a strain on the public expenditure. This strain is especially great for countries such as India, whose economy is undergoing rapid development and urbanization and has a great need for expanded infrastructure.

· PPPs are increasingly being used by governments and public sector authorities throughout the world as a way of increasing access to infrastructure services for their economies at a reduced cost.

· Characteristics of PPPo Private sector is responsible for

carrying out or operating the project and takes on a substantial portion of the associated project risks.

o During the operational life of the project the public sector's role is to monitor the performance of the private partner and enforce contract terms.

o Private sector's costs may be recovered in whole or in part from charges related to the use of services provided by the project and may be recovered through payments from the public sector.

o Public sector payments are based on performance standards set out in the contract.

· PPP brings the public and private sectors together as partners in a contractual agreement, for a pre-defined period (e.g. 30 years) matched to the life of infrastructure assets used to provide services. The private partners (investors, contractors and operators) provide specified infrastructure services and in return the public sector either pays for those services or grants the private partner the right to generate revenue from the project. For e.g. the private partner may be allowed to charge user fees or receive revenue from other aspects of the project.


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· The best PPPs will have public and private partners working together to build and sustain a long term relationship that is of benefit to all.

· Advantages of PPP which provide strong reasons in favour of using PPPs in India and elsewhere: o Access to private sector finance. o Efficiency advantages from using

private sector skills and transferring risk to the private sector.

o Potentially increased transparency. o Enlargement of focus from only

creating an asset to delivery of a service, including maintenance of infrastructure asset during its operating lifetime. This broadened focus creates incentives to reduce the full life cycle costs (i.e. construction costs and operating costs).

· Complexities in PPPs: o Complex procurement process with

associated high transaction costs- PPP project must be clearly specified

including risk allocation and clear statement of service output requirements. The long-term nature of PPP contracts requires greater consideration and specification of contingencies in advance.

o Contract uncertainties - PPPs often cover a long term period

of service provision (e.g. 15-30 years, or life of the asset). Any agreement covering such a long period into the future is naturally subject to uncertainty.

- If the requirements of the public sponsor or the conditions facing the private sector change during the lifetime of the PPP the contract may need to be modified to reflect the changes. This can entail large costs to the public sector and the benefit of competitive tendering to determine these costs is usually unavailable.

- This issue can be mitigated by selecting relatively stable projects as PPPs and by specifying in the original contract terms how future contract variations will be handled and priced.

o Enforcement and monitoring - The success of PPP from public

perspective once it enters the construction and operation phase

will depend on the ability of the sponsor to monitor performance against standards and to enforce the terms of contract.

o Difficultly in demonstrating value for money in advance - A project ideally should be procured

as a PPP on the basis of a clear demonstration that it provides value for money (VFM) compared with pub l i c sec to r p rocurement . However, i t i s d i ff icul t to demonstrate VFM in advance due to uncertainties in predicting what will happen over the life of the project and due to lack of information about comparable previous projects.

- The standard for VFM is however d i ffe ren t in India to more economically developed countries such as Australia or the UK. In those countries there is a much smaller funding need. In India, many projects procured in the public sector, experience time and cost overruns, and hence it is likely that well-managed private procurements will deliver savings. Furthermore, the funding gap is far greater than the Public Sponsor can meet by itself. In this case, it may sometimes not be a question of public vs. private procurement, but rather the choice between private procurement or none at all. If this is the case then the focus should be on making a careful assessment of alternative project options to be sure that the projects that are selected are the best ones economically and financially.

· The above mentioned complexities can be minimized under certain circumstances and through careful management of the PPP design by the Sponsoring Authority. This requires public sector capacity (experience and expertise) to manage the PPP process.

WHEN SHOULD PPP BE USED IN INFRASTRUCTURE

· The following important conditions should be checked early for every infrastructure project. This will improve the quality and likely success of projects entering the PPP development pipeline. o Public sector environment is suited

to supporting PPPs. o Project is suitable to being carried

out as PPP.


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o Potential barriers to successful project implementation have been identified and can be overcome.

· Given that these conditions are satisfied, the project must be commercially viable for the private sector and offer value for money (VFM) for the public sector.

· If the conditions outlined above are not met it may be better to carry out the project through the traditional public sector route (which may be through direct budgetary funding or the use of dedicated taxes or borrowing). In this case private sector involvement might be introduced in management or operations, but primary responsibility for financing and control of the project would remain with the appropriate public sector authority.

FRAMEWORK FOR PPPS IN INDIA · The Constitution of India divides the

responsibility of legislation between the National Parliament and State legislature bodies. The Seventh Schedule of the Constitution of India contains a Union, State and Concurrent List. The Indian Parliament is competent to make laws on matters enumerated in the Union List. State Legislatures are competent to make laws on matters enumerated in the State List. While both the Union and the States have power to legislate on matters enumerated in the Concurrent List, only Parliament has power to make laws on matters not included in any list.

· The key areas that have been included in the Union List are ports, airports, railways, national highways, inland water transport, telecommunications, oilfields and mineral resources.

· The key areas that have been included in the State List are police services, prisons and corrective facilities, regulation of local governments, public health and sanitation, state highways, city roads, water supply and irrigation.

· There are sectoral legislations at the national level in certain areas covered in the Union List, such as the in the sectors of airports, national highways, major ports, power and cable TV. These legislations provide legal framework for infrastructure projects including private participation in key infrastructure sectors.

· In addition to these sectoral legislations, at the central level, the legal framework consists of a set of administrative controls, programmes and policies.

· At the State level, some key states of India like Gujarat, Punjab, Karnataka, and Andhra Pradesh have developed legal framework for private participation in infrastructure, specifically in areas in the jurisdiction of the State legislature and the State government. As each State has the right to promulgate legislations in the areas covered in the State List, the situation in each State is different in the context of infrastructure development.

SECTORAL OVERVIEW – ROADS SECTOR · The roads sector has witnessed considerable

activity over the past 10 years. Various initiatives such as the National Highway Development Programme (NHDP), the Central Road Fund Act 2000, the Pradhan Mantri Gram Sadak Yojana (PMGSY) and the Control of Highways Act 2002 have been launched in this period.

· Certain policy measures have generated private sector interest in the roads sectors: o 100% FDI under the automatic route

is permitted for all road development projects.

o NHAI/ GoI can provide a capital grant of up to 40% to enhance the viability of a project.

o NHAI is permitted to participate with up to 30% of the equity component in BOT projects.

o NHAI bonds exempt from capital gains tax.

o Customs duty exemption on import of equipment.

o Higher concession period up to 30 years.

o Under Section 80 IA, investors are offered a 100% rebate on income tax for 10 consecutive years, out of the first 20 years of a project.

· National Highways Authority of India (NHAI) is the apex Government body for implementing the National Highway Development Programme (NHDP). Private sector participation is typically through construction contracts and Build-Operate-Transfer (BOT) contracts. BOT contracts permit tolling on those stretches of the NHDP by the private operator or may also be based on the lowest annuity payment from the Government. NHAI awards all contracts, whether for construction or BOT, through competitive bidding.

MAJOR RISKS IN ROADS SECTOR PPPS · In the roads sector not all projects will have


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the same set of risks and the risks that are common will vary in importance from one project to another. However, it is possible to identify a set of risks that generally apply to projects in the sector.

o Revenue/ Market risk- Traffic & traffic growth risk

Traffic projections difficult due to: a) Alternate toll free roadsb) Traffic leakage c) Growth rates linked to macro

economic factorsd) Notification banning specified

traffic difficult to implement by Local authority / government authorities

o Willingness to pay risk - Toll free roads matter of right- User willing to pay only for tangible benefits - No proper evaluation of 'Value of time'o Credit worthiness of concession

provider - Relevant for annuity/ grant based

concession o Construction risks- Design risk, the risk of design being

deficient- Quality of construction- Price variation due to price

fluctuation in factors such as labour, cement, steel, etc.

- Time overruns: delays due to land acquisition/ delay in approvals.

- Cost overruns: Brought about by price fluctuation, time delivery, etc

o O&M risk- Higher costs- Decline in the quality of service/ non

availability of service- Safety of userso Financing risk- Commercial banks willing to finance

infrastructure projects face maturity mismatches as they have a shorter time preference owing to liability profiles, take out financing structure by FIs are to be encouraged.

- The concept of subordinate debt/ mezzanine finance, a third tier in a company's capital structure (thus combining the financial characteristics of debt instruments with those of equity) has to be introduced to the advantage of equity providers, senior lenders and subordinate debt providers.

- The securitization and reconstruction of

financial assets and enforcement of security interest ordnance 2002 provides an efficient and practical means by which to turn an idle asset into a revenue generating entity, as well as address the concerns of the lenders of the project if the financing is in foreign currency.

- Foreign exchange rate fluctuation.o Force majeure risk- Non political FM events – acts of God, local

strike- Indirect political FM events - War, agitation- Political FM events – change in law,

expropriationo Termination risk- There is a need for specifying the manner of

terminating the contracts in the event of unsatisfactory performance by either of the parties.

- Private contractor entitled to termination with compensation.

- Concern about the financial ability of the local authority / concessionaire to meet its contractual obligations in the event of early termination.

OVERVIEW OF PPP PROCESS IN THE ROADS SECTOR · The PPP process is categorized into four phases:

o Phase 1: Project identification and need analysisPotential PPP projects are identified on the basis of an analysis of the need for infrastructure services and the options for meeting the service are considered in terms of need for and type of assets.

o Phase 2: PPP decision, project appraisal and

clearancePotential PPPs are evaluated for their suitability for development as PPPs. Those that are considered suitable are studied in detail and an application is made for in-principle clearance to continue to procurement.

o Phase 3: Final approval and procurement The procurement process begins, application is made for final approval, negotiations take place with the preferred bidder and the project is taken to technical and financial closer.

o Phase 4: Implementation and monitoring The project proceeds through its construction (when part of the project) and operation phases. The public partner monitors the PPP over the life of the contract.


PPP PROCESS IN THE ROADS SECTOR

Source: Public Private Partnerships in India, Ministry of Finance, Government of India

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PHASE 2 OF ROAD PPP PROCESS · The first step in Phase 2 is to make sure there is

a plan put in place by the public sector to manage the PPP development process. Detailed project analysis then takes place in the full feasibility study.

· Phase 2 is the start of the PPP development pipeline. The 'pipeline' is made up of individual projects that have successfully passed the Phase 1 PPP suitability checks and been given internal clearance to proceed for development as a PPP. These projects have been specifically chosen for development as PPPs.

· Plans for PPP project management should be reviewed at the start and if necessary expanded to the Project Team.

· The heart of Phase 2 is a full feasibility study. Preparation for procurement process also begins in this Phase including selection of the best procurement method and first drafts of the bidding documents.

· The final step in Phase 2 is an application for In-principle Clearance by the Appraisal / Clearance Authority.

· Projects that are granted In-principle Clearance can move to the Procurement phase of the PPP development pipeline in Phase 3.

· After receiving final approval the contracts can be signed and Phase 4 - the contract management and monitoring phase can then begin which continues throughout the life of the PPP.

· It is important to remember that projects in the PPP pipeline are being developed as PPPs. This does not mean that they have final approval to become PPPs – this does not happen until all the analysis, preparation and approvals are complete at the end of Phase 3.

· Responsibility for Phase 2 will be with the Sponsoring Authority (e.g. ministry(s) (Central-level projects), sponsoring department(s), or statutory or public sector corporate entity, as appropriate to the case). Support to the project development might be provided by dedicated PPP agencies, such as a PPP Cell or Project Development Agency.

· Phase 2 involves the following analytical and procedural steps for an individual project:o Planning and preparing for PPP

project management. o Carrying out a detailed feasibility

study including PPP due diligence of the project.

o Deciding on the best-suited procurement method for the project.

o Preparing first drafts of the key project documents.

o Carrying out Readiness Check 2 to check that the project is ready to proceed to the clearance stage.

o Applying for In-principle Clearance from the appropriate Appraisal / Clearance Authority. If In-principle Clearance is granted then the project is able to proceed to PPP procurement.


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PHASE 3 OF ROAD PPP PROCESS · Phase 3 involves the following specific

activities:o Preparing for procurement

Key preparation activities include: a) Forming a team to lead the

procurement and evaluation process.b) Reviewing project information and

making any necessary updates. c) Appointing an independent monitor

to ensure quality and process oversight.

o Market sounding – preparing and issuing an Expression of Interest (EOI)

o Qualifying - Issuing Request for Qualification (RFQ) and short-listing bidders Preparing final drafts of key project documents

o The third Readiness Check.

· Indicative timeline for procurement activities o There is a natural sequence of events

in the procurement process. However, each procurement will be slightly different and the actual timing may differ from one project to the next. The time required will be affected by the complexity of the project and the level of previous experience with similar procurements.

o Some activities can happen together at the same time (in parallel). For e.g. In cases where an EOI is issued, preparation of the RFQ can take place while the EOI is being evaluated. Likewise, preparation of the RFP can take place while approvals are being awaited (but the RFP should not be issued until the approval has been received). Preparation of final drafts of bid documents can be underway from the start of the procurement.

o Naturally, the overall process will be shorter if an EOI is not required. For e.g. an EOI may not be required if the Sponsor already knows how many and which firms are likely to be potential bidders.

FINAL STAGE: PHASE 4 OF ROAD PPP PROCESS

· Once the procurement is complete the PPP is ready to move onto implementation and monitoring. This is Phase 4 of the PPP process, which continues for the rest of the life of the PPP.


· In Phase 4 the Sponsor has an important ongoing role of monitoring the contract performance. This is to ensure the private partner lives up to its end of the bargain.

· The goal of Phase 4 is to ensure the PPP project is implemented and carried out according to the terms of the Concession Agreement. Phase 4 continues until the end of the PPP's life.

· Phase 4 begins once the project reaches technical closure with the signing of the Concession Agreement.

· The life of the PPP during Phase 4 involves:o Implementation and operation of the

project by the concessionaire. o Performance monitoring and

contract enforcement by the sponsor.· When the contract is signed the sponsor goes

from preparing the PPP to managing its implementation and ongoing operation according to the terms set out in the Concession Agreement. The Sponsor remains engaged with the PPP in this new role until the end of the contract's life.

· Contract management and monitoring is an especially important part of a PPP. The effective and efficient implementation of the PPP requires a significant level of proactive management with clear terms between the public sector sponsor and the private operator (the concessionaire).

· The responsibilities and obligations for contract management will be specified in advance in the Concession Agreement. This means the foundations for contract management and monitoring are laid earlier in the PPP process, in particular in Phase 2 and Phase 3 when the key documents are drafted and finalized.

· Responsibility for Phase 4 will typically be with a Contract Management Team within the Sponsor. Specific arrangements and processes are needed to carry out contract management and monitoring. Ideally, these institutional set-ups should also be in place before the PPP contract begins. This is more likely to be so where there is an existing PPP programme, since different PPPs can be managed using the same arrangements.

· The timeline of the Phase 4 process is split into two parts: o Before the start of the PPP's

contractual life: This partly overlaps two of the other Phases. “Preparation for contract management”, should take place during Phases 2 and 3 when the Concession Agreement is developed and

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finalized. Institutional set-up should also be done before major contract management activities start.

o During the PPP's life: “Contract management during the contractual life of the PPP”, follows the natural stages in the PPP's life, from the preparations in the pre-operative stage, through construction, operation and on to contract closure. In addition, there are other activities that may become necessary during the life of the PPP but which cannot be scheduled in advance. These include the possibility of contract amendments and dispute resolution.

INDIA'S EXPERIMENT WITH ROAD SECTOR PPPS

· India's experiment with PPP in the road sector mostly involves annuities. It was initiated by the Prime Minister's Task Force, which felt that this would offer significant advantages over the conventional approach and the National Highways Authority of India (NHAI) was advised to develop a pilot project on that basis.

· The National Highways Act 1956 (NH Act) and the National Highways Authority of India Act, 1988 (NHAI Act) together constitute the legal framework for the development, maintenance and management of National Highways in India. According to the terms of NH Act all National Highways vest in the Union of India and it is the responsibility of the Central Government to develop and maintain in proper repair all national highways.

· By virtue of Section 11 of the NHAI Act, the Central Government is competent to vest in or entrust to NHAI any National Highway or stretch thereof for development, maintenance and management and by virtue of Section 16 of the NHAI Act, it is the statutory function of NHAI to develop, maintain and manage the National Highways vested on it and in order to discharge its function, engage or entrust any of its functions to any person on such terms and conditions as may be prescribed.

· Features of the Annuity Contracto Private party to provide road services in

accordance with a defined set of requirements during the concession period which is usually around 17.5 years including 2.5 years of construction.

o NHAI is required to pay the private party fixed semi-annual payments called annuity starting on a date 6 months after

c o m p l e t i o n a n d a c c e p t a n c e o f construction (thus providing effective checks on any time over run).

o There is a provision for proportionate reduction in annuity payment due to any delay.The annuity is fixed on the basis of the bid submitted by the private party to NHAI and the concession is usually awarded to the lowest bidder unless it is certified as unreasonably low by the consultants who vet the bids. In biding the private party is expected to take into account any future variable that is likely to increase the cost of delivering the road service.

o The project although structured on annuity basis, NHAI would have the right to levy toll or grant tolling rights on the stretch of the road forming part of the project to third parties. The same would however be independent of the concession. The layout of the toll plaza would have modern features matching with international practices.

o The concessionaire shall need to provide various facilities for the users of the toll highway and for its efficient operation such as truck parking facilities, bus bays, highway communication system, traffic control and incident management, rest areas, other features (safety measures by way of crash barriers, pedestrian crossings, highway lighting, other traffic user facilities, etc).

o Environment clearance, if any, required for the project would be processed by NHAI. NHAI would also be responsible for rehabilitation/ resettlement and payment of compensation, if any, in respect of acquired land as per applicable guideline.

o The responsibility for design and construction of the project facility in accordance with the specification and standard prescribed would be that of the concessionaire. NHAI would also provide design & drawings for the project, which could be adapted by the concessionaire.

o The concession agreement would set out the O&M requirement and standards.

o An independent engineer would be appointed to monitor the project during the concession period.

o The concessionaire would be required to achieve financial closure within a specified period from signing the concession agreement.


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o The concessionaire would maintain a minimum aggregate equity stake in the project equivalent to 51% till the expiry of 3 years for the commercial operation DATE (COD) and 26% for balance period of the concession.

o The project facility would be transferred to NHAI at zero cost upon expiry of the concession period.

o The contract is liable to be terminated under two circumstances (i) The occurrence of a force majeure

event (ii) Default by either of the parties

o Termination payments are specified for each event depending on whether it is during the construction period or during the operation period.

o Force majeure events are divided into political, non-political and other events.

o The risk of NHAI / Government (including future Governments) is taken care of under the political force majeure clause. In such an eventuality the Government pays the termination payments which include an interest of 3-5% over the lending rate of State Bank of India. The private party loses the equity contribution in the project in case the project suffers during the operation period due to an event of default attributable to the private party and gets no payment in case of event of default during the

construction period. Correspondingly, the private party will be paid discounted value of future net cash flows in case of an event of default attributable to NHAI.

o Dispute resolution is carried out in two stages – an expert panel to resolve issues and in the event of their failure submission of the dispute to arbitration under the Arbitration and Conciliation Act, 1996.

CONCLUSION

1. The article highlights on the PPP concept with respect to the roads sector in India.

2. Advantages of using PPP in the roads sector have made project implementation easy and rapid. Cost of land has been reduced, public consent has been ensured which has reduced opposition while implementation. Private sector expertise at various stages has made project implementation efficient.

3. Public Private Partnership in infrastructure i.e. road projects facilitates access to private investment, innovative finance and specialized expertise. The public sector can use this effectively to develop city infrastructure as well as to augment their scarce resources. Professional approach to planning and implementation is crucial for such infrastructure projects. Increased role of private investment in infrastructure will in turn govern India's GDP growth of 9-10% which will significantly change the living conditions in India.

REFERENCES · Department of Economic Affairs, PPP Cell. · Panel of Transaction Advisers for PPP projects: A guide for use of the Panel, Department of Economic Affairs,

Ministry of Finance, Government of India, 2007. · PPP is the key to development of urban infrastructure, Project Monitor, Pankaj Vohra, July 20, 2010. · Public Private Participation in Roads and Highways, FOCUS, The International Journal of Management

Digest, Bangalore Dr. P.K. Sinha, Pages 55 to 65, Oct 2005.


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Bridging the Health Inequality and Strengthening Public Health System Through Public Private Partnership

Dr. Rajesh Kumar Shastri* & Rinki Verma**

ABSTRACTth India stands at 67 rank amongst around 133 developing countries with regard to the number of doctors, while it stands

that 75 rank with respect to number of nurses. The government owned health facilities accounts for only 20% in comparision to 80% of private sector of total healthcare spending in India. Over 72.2% of Indian population lives in rural areas under poor and unsatisfactory environmental conditions, with high levels of susceptibility to diseases and ill health. A significant proportion of poor in India are destitute due to paying incapacity to the services of private hospitals characterized by highly qualified doctors and costly equipments, whereas public hospitals are noticeable by insufficient number of facilities, lack of personnel, medicines along with long queues which further highlights economical imbalance problems of Indian people to thrash about the health related problems. As per the NFHS 2 data, only 43% the urban poor children are fully immunized by completion of one year of age. The percentage of severely underweight children among the urban poor is 23.0 which is twice the urban average (11.6%) and five times (4.5%) that of urban high income group. The vast majority of the country suffers from a poor standard of healthcare infrastructure which has not kept up with the growing economy. The only hope for the improvement in condition of the health care system of developing countries can be the mixture of public –private through Public Private Partnership. This paper aims to examine the current status of health infrastructure in developing countries like India and challenges are lying before Government in developing health care system, identifying critical gap and requirements in Health services besides the comparison with other developing economies. It also seeks to examine the socio-economic environment in developing country's attractiveness towards private sector participation in health care development and review of potential benefits and risk involved to ensure success and sustainability of Public Private Partnership.

Key Words: Public-Private-Partnership, urban and rural poor, rural health infrastructure, healthcare, India

INTRODUCTION

India is far behind from the developed countries and developing countries in providing the health care services. Even financial disparities among the citizens of India bring more complexity in availing the health care services due to vast differences in earning capabilities of Indian people. India is the second most populous country after China in the world. At present, India accounts for only 2.4% of world's land area, supports as much as about 17% of the world's population. The standards of living and sanitary parameters are very unsatisfactory in India which is making India more susceptible towards the diseased people especially for rural and urban poor living in vulnerable condition. Poor health infrastructure and earning incapacities of poor people are making condition out of control. India is the country of vast diversity between cultural differences, language while also having differences between earning capacity. All these reasons, united with sultry climate, make India a breeding ground for unhealthy and contaminated diseases. Due to financial imbalances amongst the people of India it's not only the deprived people who suffer, the wealthy suffer too. The difference is that the rich have money to avail the costly private services and expensive medical treatments. The poor people have no other option to go but to survive with improper and

inadequate facilities of public health care system. The rich lose their money after getting treatment from a costly private hospital. Compounding the problem it has been surveyed that India has 1/3rd of world's poor and these poor people are living below poverty line. According to the new evaluation technique called the Multi-dimensional Poverty Index (MPI) acute poverty prevails in eight Indian states which includes Bihar, Uttar Pradesh and West Bengal also. They were reported for more poor people than in the 26 poorest African nations combined. The new measure called the Multidimensional Poverty Index was developed and applied by the Oxford Poverty and Human Development Initiative with UNDP support. The measure reveals the nature and extent of poverty at different levels: from household up to regional, national and international level. An analysis by its creators reveal that there are more than MPI poor people in 8 Indian states (421 million in Bihar, Chhattisgarh, Jharkhand, MP, Orissa, Rajasthan, UP and West Bengal) than in the 26 poorest African countries combined (410 million).The MPI assesses a range of factors at the household level in availing services of education to health outcomes. It has higher percentage of people residing in India and 828 million people or 75.6% of the population living their life on less than $2 per day which is far below then even sub-

*Dr. Rajesh Kumar Shastri, Assistant Professor Department of Humanities and Social Sciences, Motilal Nehru National Institute of Technology Allahabad **Rinki Verma, Research Fellow Department of Humanities and Social Sciences, Motilal Nehru National Institute of Technology Allahabad


Saharan Africa countries. 33% of the world's poor are Indians. Sub- Saharan Africa is measured as the world's poorest region which is at better stake than India. Delhi and J& K have the smallest number of poor. 41.8% of the rural population stay alive with monthly per capita consumption expenditure of Rs 447 spending only Rs 447 on vital requirements like food, fuel, light and clothing. These economic conditions are making matters worse. The sky high prices of various medical tests (ranging from the basic X-rays, blood tests, to various other complicated tests) and the ever increasing prices of drugs are not in the reach of many people of India. As with inadequate facilities public health care system can not only fulfill the demand of the needy Indians. A common Indian cannot afford such expensive tests and medicines. The condition of people are worse with the operational costs, other expenses and are therefore left with no other alternative but to go to untrained and unqualified local practitioners, who sometimes perform as life takers rather than givers. Availing the services of private hospitals, many of them lose all their savings on treating themselves or their family members/relatives. However, the rich can look forward as the private health care system is opening up and it will translate into more options for them. But it will be cost effective or not is still a question. With these economic constraints, problems are among the urban and rural people. For rural people there are schemes related to health like National rural health mission and the three tier system of public health care while for poor in urban areas who are fighting with their irregular employment and inflation in household commodities which are comparatively costly than their rural counterparts. They also lack health care services, either service is not affordable or having a long waiting line and sometimes requires jack to hospitalize their family members which makes condition of urban poor more vulnerable. For illustration, Under than Five Mortality Rates (U5MR) among the urban poor (112.2) are nearly three times higher than the rates for the urban high income groups (39.4). As per the NFHS 2 data, only 43% the urban poor children are fully immunized by completion of one year of age. The percentage of severely underweight children among the urban poor is 23.0 which is twice the urban average (11.6%) and five times (4.5%) that of urban high income group. The vast majority of the country suffers from a poor standard of healthcare infrastructure which has not kept up with the growing economy. Despite having centers of excellence in healthcare delivery, these facilities are limited and are inadequate in meeting the current healthcare demands. Many Indians die every year due to inadequate healthcare facilities and majority of people have no access to specialist care. Due to variation in economic conditions private hospitals are not approachable to the poor people and in public hospitals resources are in negative proportion to the

demands placed. The only hope for the improvement in condition of the health care system of developing countries can be the mixture of public –private through Public Private Partnership.

This paper aims to examine the current status of health infrastructure in developing countries like India and challenges lying before Government in developing health care system. It also identifies the critical gap and requirements in health care services besides the comparison with other developing economies. It also seeks to examine the socio-economic environment in developing country's attractiveness towards private sector participation in health care development and review of potential benefits and risk involved to ensure success and sustainability of Public Private Partnership.

Public and Private Healthcare Expenditure in India. About 75% of health infrastructure, medical man power and other health resources are concentrated in urban areas where only 27% of the population of India lives. In contrast to that maximum population of 72.2% of India residing in rural areas has only 25% of available health infrastructure. In India, private household's contribution to health care is 75%. Most of these expenses are out-of-pocket costs. State government contributes 15.2, the central government 5.2 and third party insurance and employers put in 3.3 percent of the total. Local government and foreign donors contribute 1.3 percent (World Bank, 1995). Out of this amount, 58.7 percent is spent on primary health care (curative, preventive and promotive); 38.8 percent on secondary and tertiary impatient care and rest on non-service costs. In terms of GDP, India is spending only 2% of its GDP on health in contrast; France spends 10.4% and Japan 8%. In India, public expenditure contributes significantly small percentage in healthcare expenditure. The comparison of health expenditure with some Asian countries suggests that, India's public health expenditure is only 17.9 percent of the total.

Table 2: Public Expenditure on Health as Percentage of Total Expenditure, 2001

42

Country

Percentage

Bhutan 90.6

Maldives

83.5

Thailand

57.1

Sri Lanka

48.9

Bangladesh

44.2

Nepal

29.7

Indonesia 25.1

India 17.9


Private Expenditure on Health (PHE) as a percent of per capita

income has doubled since 1961. The PHE as percent of per capita income has increased from 2.71 during 1961-70 to 5.53 during 2001-03. This implies that PHE has grown at a much higher rate than the per capita income over years.

Table 3: Private Health Expenditure as Percent of Per Capita Income in Different Periods

Source: www.nationmaster.com (15 Sep'2010)

Table 4: Health Expenditure (total % of GDP) in India

HEALTH INFRASTRUCTURE IN INDIABy 2030, India is expected to exceed China as the

world's most populous nation. Another aspect lashing the growth of India's healthcare sector is increase in infectious and chronic diseases. Communicable diseases sometimes ago thought to be under control such as dengue fever, viral hepatitis, tuberculosis; malaria, typhoid and pneumonia have returned in vigor and moreover have developed an inflexible resistance to drugs also. India's healthcare infrastructure is not keeping pace with the developing problems and economy's growth. The physical infrastructure is mournfully insufficient to congregate today's healthcare demands and not as much of tomorrow's problems. While India has several centers of superiority in healthcare delivery but are not delivering adequate and standard facilities because of the poor condition of the infrastructure and mismanagement in majority of the country. Of the 15,393 hospitals in India in 2002, two-thirds were public. Years of corruption and under-funding, most public health facilities are supplying only basic care. Many public hospitals are having inefficient facility, inadequately managed staffed, and have poorly maintained medical equipment. The numbers of public health facilities are

also inadequate. For instance, India needs 74,150z community health centers per million populations but have less than half that number. With these problems other problems like 11 Indian states do not have appropriate laboratories for trying drugs and more than half of existing laboratories are not suitably equipped or staffed. To cope up with challenges lying in health care delivery system, the need is to get a sound infrastructure and making sure that it has been implemented to faultlessness. Increasing infrastructure is regarded as a crucial source of health care prosperity. One can easily differentiate the infrastructure used at urban level and rural level. Fig (1) gives a detailed view of health care infrastructure in India.

Fig.1. The Health System Infrastructure in IndiaHowever, the total healthcare financing by the

public sector is much less than private sector spending. In 2003, fee-charging private companies contributed for 82% of India's $30.5 billion expenditure on healthcare. Private firms are deliberating about 60% of all outpatient care in India and as much as 40% of all in-patient care. It is estimated that nearly 70% of all hospitals and 40% of hospital beds in the country are in the private sector. The private hospitals have plenty of life saving equipment that goes idle due to paying incapacities of many Indian individuals. Many patients die from lack of equipment facilities in public sector while machines go unused in many of five star and three star private hospitals with very little or no access for poor persons. The government health centers in India are undermanned. 53% of pediatric positions are not filled. Government doctors earn less than private doctors and private practitioners and luring recruiting techniques by private hospitals agree them to entice physicians who have worked and trained abroad. Ironically, the luxurious private hospitals in India are mostly used by Americans and foreigners who are looking to save about 70-90% money in health care expenses as it is very costly other than India.

Source: World Health Organization Report 2008(6 Oct '2010)

Table 5: Health Profile of India 2008

43

P eri od Average (in percent)

1961 - 70 2.71

1971 - 1980 3.27

1981 - 1990 3.72

1991 - 2000 3.26

2001 - 2003 5.53

Health expenditure on public sector (% of GDP)

0.87%

Health e (% of GDP)

xpenditure on private sector

4.14%

Total expenditure on health (% of GDP)

5%

External resources for health as % of total expenditure on health

1%

Indicators Fact

Total population 1.5 billion

Population living in urban areas (%) 29% Gross national income per capita 2.930 Physician per 10,000 population 5.8 Nurse and midwives per 10,000 population 12.7 Birth attended by skilled health professional(%) rural

37

Birth attended by skilled health professional(%) urban

73

Life expectancy at birth (years) Male

63

Life expectancy at birth (years) Female

66


There is a continuous decreasing trend in Infant Mortality Rate (per 1000 live births) from 80 in year 1991 to 53 in 2008, Crude Death Rate from 12.5 in year 1981 to 7.4 in year 2008, Maternal Mortality Ratio (per 100,000 live births) from 398 in (1997-98) to 254 in (2004-06) but due to increasing trend in growing population these data will only look pleasing to the eyes but the real situation of health structure in India is very bleak. This is one driving force in growing private healthcare services due to India's booming population, currently 1.5 billion and increasing at a 2% annual rate. Issues in Public Health Care Delivery Mechanism:

Due to inadequate facilities of public health care system Indian middle class and poor class are not getting proper services or many of them are under debt-trap till they are alive. The main problems associated to health sector in India are mobilization of physical infrastructure; access, answerability and clearness. Other issues are of health service provider's motivation and gender concerns. Access to healthcare is slowed down not only by geographic, social and cost barriers, but also by innate systemic and structural weaknesses of the public health care system. Some of the issues related to public health care delivery system are improper health structures and insufficient definition of roles at all levels of care; inefficient supply, use and management of personnel so that people have to compete with lack of key personnel, unenthusiastic staff, absence of staff, long waiting period, problematic clinic hours/outreach, service times. Issues like poor planning and management and monitoring of services/facilities; displaying inattentiveness to local/community needs; ineffective referral systems, resulting in under-utilization of PHCs and over-utilization of CHCs, hospital services are pertinent in the Indian system. Inadequate awareness programs for health education and public disclosure are making system lame. According to NFHS report of UP, 2005 it is depicted that due to lack of confidence on public service, people are turning towards private sector. Under these circumstances, our search is for a model that makes for a just health care system as an ideal for rural India and poor people who cannot afford the high cost services. The main criteria for this could be a system with adequate facilities, proper management and of lower cost. It can be only possible if blend of the free services and specialist care are delivered to the Indian people. This can be done through the public private mix which is often called as PPP or public-private partnership.

44

Source Urban Rural

Public Medical Sector 16.2 15

Govt./Municipal Hospital 10.6 2

Govt. Dispensary 0.3 0.2

CHC/Rural Hospital/PHC 4.7

12.2

Sub Center

0

0.2

Anganwa di

0

0

UHC/UHP/UFWC

0.5

0.2

Other Public Medical Sector

0.1

0.1

NGO/Trust Hospital or Clinic

0.4

0.1

Private Medical Sector

83.2

84.6

Private Hospital

5

2.2

Private Doctor/ Clinic

74.9

63.9

Private Paramedic

0.1

0.3

Vaidya/Hakim/Homeopath

0.7

0.2

Traditional Healer

0

0.4

Pharmacy/Drugstore

0.9

0.6

Other Private Medical Sector

1.5

16.9

Other Source

0.2

0.2

Shop

0.1

0.1

Home Treatment

0.1

0.1

Table 6: Source of Healthcare, Household Members Generally Use When they Get sick UP, 2005-2006 (Source: NFHS-3, Uttar Pradesh (2005-

06), Table 67.)

PUBLIC-PRIVATE PARTNERSHIP: A PARADIGM SHIFT

Although inequitable, expensive the private sector is easily accessible, better managed and monitored is more efficient than its public counter parts. It is assumed that collaboration with the private sector in form of public private partnership will improve the health care condition in form of impartiality and good organization, responsibility excellence and ease of access of the entire health system. Public private partnership can prove to be an effective mode of implementing government programmes and schemes throughout the country in all the sectors of the economy. There are various areas, where we can consider PPP. Health services are our biggest priority. In public private partnership providers may include individual physicians, diagnostic centers, ambulance operators, blood banks, commercial contractors, polyclinics, nursing homes and hospitals of various capacities. They may also include group of people, service extension of industrial establishments, co-


45

operative societies and qualified professional associations. In order to implement the method of Public Private Partnership, the execution should entail some of the prerequisites to avoid any flaw in the process of public private collaboration which will eradicate the health problems of India. A clear accepting and understanding of pros and cons between the partners about shared benefits will help it to make it flawless. Detailed description of the responsibilities, accountability and obligations between the partners is necessary. Strong community support from society can win the hearts of many people. There is a need for some alluring scheme to initiate the process of partnership. A proper framework of the political (government) and legal laws can be maintained. Any regulatory monitoring framework can be implemented and followed which can be enforced by both partners. Suitable managerial systems can be made for partnership to avoid any discrepancy. Strong management information system of patient, benefit provided by private partners and payment or subsidies provided by government to check authenticity of partnership. A clear communication about incentives plans and penalties to avoid future problem is vital. Government officers should be given charge to check the corruption, availability of medicines and tests for poor if any fault comes in notice, corrective actions should be taken immediately. Suggestion and complaints of public should be taken in account. It is very important to have a proper implication of program to execute the collaboration for a long way success of PPP. This will involve many sequential steps to execute properly.

A. Need assessment and Situation Analysis in Problem Areas: An elaborate study should be taken out in the city to recognize the existing situation of health problems and evaluate the needs of the population. This is an important step in collaborative process to make foundation strong. This process will help to assess poor and inadequate health facilities to encourage partnership and will also be helpful to know about the type of partnership to eradicate the problem.

B. Consultations from Public and Private to Determine capacity and willingness for partnership: Meetings and workshops to be held with the key private practitioners, NGOs and Institutional establishments etc. to make out their present strengths and weaknesses and the benefits of partnership with any of the partners.. This will execute the program to plot the required skills which possibly will be c o o r d i n a t e d d u r i n g t h e p r o g r a m implementation process.

C. Involving Government Officials in Process of Partnership: Public sector should motivate those officials who have clear understanding of the subject. These officers should be given charge of some partnership plans to execute the program and to have a check on faults. Their support should be encouraged from the beginning and great and special opinions from the public sector personnel can be encouraged and may even be included in the program progress process. This will give them a greater ownership of the program and thereby greater support from the government.

D. Strategies to Incorporate Public Private Partnership into Planning and Open Feedback System: Strategies to fulfill needs of poor people and giving proper cure from disease is an important part of successful partnership program. All the techniques and strategies should be made from open ideas of public and other stakeholders so that new ideas can occur during the implementation of the program. Feedback from the society and community should be encouraged for overa l l development of the program of Public Private Partnership. A strong information system should be developed to communicate the problems and feedback of the people which can be at once translated into appropriate responses by the implementing agencies.

E. Creating Management Information System within government system for supporting the process: This is step in the whole program which will have all the records of patients and availed services from collaborating partners. Type of subsidy, payment or advantages provided by the government in form of tax relaxation and other benefits to the private partners. This will save a lot of time and will establish a connection with every newly appointed government officer and private partners. All important meetings can be documented and their minutes duly signed and kept for record for further monitoring.

F. Collaboration with private partners and implementation of the program: A selection committee comprising government officials and other ministry of health representatives can be appointed to evaluate the capacities of potential partners. An agreement involving government and private partners can be developed to make it a formal document. Timely evaluation and monitoring should be done by government authorities to avoid any future contingencies.


CONCLUSIONFrom the above discussion it is clear that, PPP can prove to be an important strategy in promoting better health outcome for the population at large and especially for the poor. The need for such partnerships is a need of the hour. Being a provider with suggestive measures government can build up the changes. For any program it is important to have a hold on both partners. For this formal documentation within the system by way of meetings, signed terms and conditions are very necessary. It is necessary to make certain that partnership decisions and policy remain untouched by corruption and mediators involved in the process. It is very important to initiate efforts early for

This sequential process of developing Public- Private Partnership (PPP) will eradicate many problems related to healthcare. In Fig.2. One model has been developed to have a view on approach of Public-Private Partnership.

Fig.2: Model of Public- Private Partnership

46

Sick India

Evaluation and Monitoring

Implementation of Partnership

Formulation

of the Program

Government Information

System

*Policy Implication

*Creation Of Database

*Assistance Provided for

Implementing PPP Program

Patient information system

*

Personal Data

*Medical History

*Details of Treatment

*Prescription up to Date

*Advice on Treating High Risk

Healthy India

PPP Model

*Need Assessment

*Consultation

*Advisory Board

Recommendations

*Alluring Schemes

for Partners

*

Appointing Govt.

*Formal

Documentation

*Legal

Laws *Strategies to

*Feedback from Patient

*Incentives and Penalties

*Measuring Health

accompaniment of Government in sustaining health improvements. It is important to build and integrate the public and private physical infrastructure with the association of matching strengths and expertise of private collaboration. However, for these changes reform and acceptability is crucial. Along with analysis of benefits and losses, inputs and productive outputs measurement is vital to bring any change in form of any public private partnership which should occur to be beneficial for all the community and individuals. The most important thought is that it is the poor people who would benefit from the transformation that would effect in overall enhancement in the health indicators of the country.


47

REFERENCES

Chaudhury N., J. Hammer, M Knemer, K. Muralidharan, and F.H.Rogers (2006). 'Missing in Action: Teacher and Health Worker Absence in Developng Countries', Volume 20, November 1,Journal of Economic Perspectives, Pittsburg.

·

·

·

·

·

·

·

·

·

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Bhandari Laveesh, Dutta Siddhartha(2007)'Health Infrastructure in Rural India'

www.iitk.ac.in/3inetwork/html/reports/IIR2007/11-Health.pdf (6 Sep, 2010)

http://www.expresshealthcaremgmt.com/200601/focus01.shtml

(retrieved on 22 Oct '2010)

http://aimdda.wordpress.com/2010/03/26/over-1cr-health-smart-cards-issued-to-po/

http://www.who.int/whosis/whostat/2010/en/index.html

World Health Statics Report,2010

Lokhandwala Yash(2000) ' Decline in Public Health Infrastructure in India' Jul-Sep;8(3), Indian Journal Of

Medical Ethics (2000) India http://www.iitk.ac.in/3inetwork/html/reports/IIR2007/0-Prelims.pdf

Economic Survey 2007-08

Family Welfare Statistics in India '2009, Ministry Of Health, Govt. Of India Report'2009

Jahan Bibi Ishrat 'Public Private Partnership in Uttar Pradesh Health Care Delivery System- UPHSDP as an

Initiative' www.esocialsciences.com/data/.../Document17122009240.1164057.pdf

Himanshu ' Poverty and Inequality: All India and States,1983-2005' Vol XLII No 6 Economic and Political

weekly Feb10-16, 2007

Bhat Ramesh ,Jain Nishant 'Analysis of Public and Private HealthCare Expenditures' Vol XLI No1, Economic

And Political Weekly, Jan 7-13,2006, India.Health Seeking Behavior In Rural Uttar Pradesh: Implication For HIV Prevention, Care And Treatment , August 2009 www.healthpolicyinitiative.com/.../961_1_UP_Health_Seeking_Behavior_ and_HIV_Brief_FINAL_8_31_09_acc.pdf


SOFTWARE QUALITY MANAGEMENT - AN OVERVIEW OF CMMI AND TPI QUALITY ASSESSMENT

PROCEDURESProf. Karuna Devi Mishra*

ABSTRACT

The objective is to bring out the various aspects of CMMI and TMMI standards in software testing . It also aims to bring out a new frame work which will cover all aspects into one standard implementation rather than carrying out various tests and still feeling something is left out.

CMMI (Capability Maturity Model Integration) is a process improvement approach that provides organizations with the essential elements of effective processes, which will improve their performance. CMMI-based process improvement includes identifying your organization's process strengths and weaknesses and making process changes to turn weaknesses into strengths.

CMMI applies to teams, work groups, projects, divisions, and entire organizations. Find out has been adopted by so many organizations worldwide.

why CMMI

INTRODUCTION:

CMMI (Capability Maturity Model Integration) is a process improvement approach that provides organizations with the essential elements of effective processes, which will improve their performance. CMMI-based process improvement includes identifying your organization's process strengths and

C

ess improvement goals and priorities, provide guidance for quality processes, and provide a point of reference for appraising current processes

weaknesses and making process changes to turn weaknesses into strengths.CMMI applies to teams, work groups, projects,

divisions, and entire organizations. Find out why CMMI has been adopted by so many organizations worldwide.

apability Maturity Model Integration (CMMI) is

a process improvement approach whose goal is to help organizations improve their performance. CMMI can be used to guide process improvement across a project, a division, or an entire organization. Currently

supported is CMMI Version 1.3.

C M M I i n sof tware eng ineer ing a n d

organizational development is a process

improvement approach that provides organizations with the essential elements for effective process improvement. CMMI is registered in the U.S. Patent

and Trademark Office by Carnegie Mellon University.

According to the Software Engineering Institute (SEI, 2008), CMMI helps "integrate traditionally separate organizational functions, set proc

CMMI originated in software engineering but has been highly generalised over the years to embrace other areas of interest, such as the development of hardware products, the delivery of all kinds of services, and the acquisition of products and services. The word "software" does not appear in definitions of CMMI. This generalization of improvement concepts makes CMMI extremely abstract. It is not as specific to software engineering as its predecessor, the Software CMM.

There are five maturity levels. However, maturity level ratings are awarded for levels 2 through 5.

An organization cannot be certified in CMMI; instead, an organization is appraised. Depending on the type of appraisal, the organization can be awarded a maturity level rating (1-5) or a capability level achievement profile.

Many organizations find value in measuring their progress by conducting an appraisal. Appraisals are typically conducted for one or more of the following reasons:

1. To determine how well the organization's processes compare to CMMI best practices, and to identify areas where improvement can be made.

2. To inform external customers and suppliers of how well the organization's processes compare to CMMI best practices .

3.To meet the contractual requirements of one or more customers

Appraisals of organizations using a CMMI model must conform to the requirements defined in the Appraisal Requirements for CMMI (ARC) document. There are three classes of appraisals, A, B and C, which focus on

*By Prof. Karuna Devi Mishra Research Scholar , Vellore Institute of Technology, VIT Business School ,Chennai Campus , Chennai


48

identifying improvement opportunities and comparing the organization's processes to CMMI best practices. Of these, class A appraisal is the most formal and is the only one that can result in a level rating. Appraisal teams use a CMMI model and ARC-conformant appraisal method to guide their evaluation of the organization and their reporting of conclusions. The appraisal results can then be used (e.g., by a process group) to plan improvements for the organization.

CMMI can be appraised using two different approaches: staged and continuous. The staged approach yields appraisal results as one of five maturity levels. The continuous approach yields one of six capability levels. The differences in these approaches are felt only in the appraisal; the best practices are equivalent and result in equivalent process improvement results.

TMMI (TEST MATURITY MODEL)

The Test Maturity Model Integration (“TMMi”) is a guideline and reference framework for test process improvement.

Such a framework is often called a “model”, that is a generalized description of how an activity, in this case testing, should be done. TMMi can be used to complement Capability Maturity Model Integration (“CMMI”), the Carnegie Mellon Software Engineering Institute's wider process improvement approach, or independently. Applying TMMi to evaluate and improve an organization's test process should increase test productivity and therefore product quality. In achieving this it benefits testers by promoting education, sufficient resourcing and tight integration of testing with development.

Like CMMI, TMMi defines maturity levels, process areas, improvement goals and practices.An organization that has not implemented TMMi is assumed to be at maturity level 1. Being at level 2, called “Managed”, requires the practices most testers would consider basic and essential to any test project: decision on approach, production of plans and application of techniques. I call it “the project-oriented level”.

The goals and practices required by level 3, “Defined”, invoke a test organization, professional testers (that is people whose main role is testing and who are trained to perform it) earlier and more strategic test. TMMi level 4: Measured This is the level where testing becomes self-aware. The Test Measurement process area requires that the technical, managerial and operational resources achieved to reach level 3 are used to put in place an organization-wide programme capable of measuring the effectiveness and productivity of testing to assess productivity and monitor improvement. Analysis of the measurements taken is used to support (i) taking of decisions based on

fact and (ii) prediction of future test performance and cost. Rather than being simply necessary to detect defects, testing at this level is evaluation: everything that is done to check the quality of all work products, throughout the software lifecycle.

ADVANTAGES OF TMMITMMi is aligned with international testing standards such as IEEE and the syllabi and terminology of the International Software Testing Qualifications Board (ISTQB). The TMMi Foundation has consciously not introduced new or their own terminology, but re-uses the ISTQB terminology. This is an advantage for all those test professionals who are ISTQB certified (approximately 170.000 world-wide at the time of this publishing). TMMi also differs from other test improvement models by being business-driven.

IMPROVEMENT USING TMMI CYCLE TIMEŸ Decrease time-to-market to deliver product

innovations faster than competitorsProductivity

Ÿ Accomplish more with less (judicious automation)

Ÿ Improve effectiveness of multi-site delivery or testing Predictability

Ÿ Improve accuracy of cost and time estimates for testing phases

Ÿ Identify input constraints early and consistently

Ÿ Improve ability to meet delivery commitments consistently and reliably Quality

Ÿ Reduce cost of poor qualityŸ Improve alignment of IT solutions to the needs

of the business Testing portfolio managementŸ Ensure investments target the right prioritiesŸ Optimize use of testing resources across

priorities Continuous improvementŸ Establish environment for continuous

i m p r o v e m e n t t h r o u g h a p p r o p r i a t e measurement

COMPLIANCE/CERTIFICATIONTMMi® Framework helps in the following areas :

· Standardize process

· model and assessment

· methods

· Training courses for

· appraisers

· Model including Specific

· Practices and Goals, Subpractices, examples

· TAMAR

· Maturity profiles per

· industry

· Benchmarks


49

· ROI expectationsA full TMMi assessment structure needs to cover all levels, domains and practice areas :

· Methodology

· Environment & Tools

· Organization &

· Communication

· Approach & Planning

· Design & Preparation

· Execution & Reporting

· Performance Testing

· Estimation

· Test Metrics

· Project Management

· Defect Management &

· Prevention

· Test Automation

CONCLUSION Software Quality management is as challenging as

Software development a total quality solution should be developed in order to deliver a quality software . Many standards do exist but when then the confusion what to choose and how to choose.


50

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Published by:

Adhyayan: A Journal of Management Sciences is half yearly publication of School of

Management Sciences, Lucknow, India. The vision of the Journal is to present a

pedagogic platform to scholars all over the world to publish their novel, original,

empirical and high quality research work. The editorial board would like to publish

research papers/articles from scholars pertaining to contemporary developments and

practices in all the areas of management and emerging issues in allied areas of

management.

Documents

Adhyayan new