Long-term vision

Kumar Mangalam Birla, the corporate mogul known as much for his unassuming demeanor as his long-term vision...

Kumar Mangalam Birla, the corporate mogul known as much for his unassuming demeanor as his long-term vision, is about to sign a path-breaking 30-year coal carriage contract with the Indian Railways. Under the deal, Railways will be transporting about 2.7 million tones of coal every year from the North Karanpura mines to his 567 MW power plant at Rosa, Shajahanpur in Uttar Pradesh. In fact the tycoon has been negotiating the deal with the Railways since 2001. In fact the deal could have been concluded awhile back had it not been for the delays faced by the power project in the absence of some clearances from the state government.

Interestingly, people in the know maintain that Kumarmangalam promises to pay 5% premium on normal freight charges for coal and an additional bonus if the loading goes above a 95% mark. What makes this long-term deal all the more pragmatic is that Laloo’s men too will be accepting punitive charges for poor service. Under the punitive charge clause, Railways would be compensating Birla to the extent of 5% of the freight rates if it fails to transport 85%-95% of the promised quantity. The tycoon’s first-of-its-kind deal with the Railways, many believe, could motivate many more Independent Power Producers (IPP) and State Electricity Boards to get into similar transport contracts in future.

Running on sugar

Mukesh Ambani is about to make a foray into sweeter pastures. The tycoon is currently planning to open three sugar factories in Maharashtra in the near future. He has already indicated the possible sites where these factories could be set up but in a move that will significantly change the profile of sugar production in the state, Ambani revealed plans to set up multi-feed distilleries working with molasses and secondary juice as feed. Reliance’s Kurkumbh plant at Pune will be ready to start production of sugar after the current year’s crushing season. The tycoon’s foray into an apparently unrelated category of course has taken some market watchers by surprise.

But on closer analysis the tycoon’s

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sugary foray does not appear entirely devoid of reason. He has an ambitious ‘ethanol plan’ neatly flowing from his sweet dreams especially with the ethanol level in petrol likely to increase from 5% to 10%. The clean, environment-friendly fuel will be a key element in Mukesh’s

petroleum dreams as the Central

Government is planning to make 5% blending of ethanol into petrol mandatory from October. In such a situation,

Reliance will surely enjoy substantial cost advantage over competitors when its ethanol capacity peaks. Producing ethanol in the sugar plants and blending it with petrol at his petrol pumps does of course make sense. Mukesh is clearly aiming to dovetail his sugary ambitions into his mega petro venture.

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