[Assam] NE joins low cost airline by year-end

Tue Jul 25 10:37:08 EDT 2006

      NE joins low cost airline by year-end         DH News Service Guwahati: 
  With the boom in the aviation sector, the landlocked North-East — which has had to cope with a geographical bottleneck to transportation and, for various reasons, a sense of alienation from the rest of the country — now appears ready to join the big party in the sky. 

While SpiceJet is the latest carrier to link Guwahati with New Delhi and IndiGo is set to follow suit on August 4, the region is also likely to have a dedicated low-cost airline by the end of the year. 

Kerala-based Universal Empire Group (UEG) is launching Surya Airlines exclusively to link northeastern cities. The new carrier will have a fleet of small 19-seater aircrafts only. 

  “We will take off either in November or December with five Raytheon Beechcraft 1900Ds. We will add three more aircraft to our fleet later,” Prashant Nair, the UEG’s vice-president (marketing), told Deccan Herald. The UEG is likely to get the planes on lease purchase from Raytheon Aircrafts, a subsidiary of the famous military contractor of the USA, Raytheon Company. Each aircraft costs around $5 million. 

Surya Airlines will connect Guwahati — the gateway to the North-East — with almost all the major cities in the region, except Itanagar and Gangtok, the capitals of Arunachal Pradesh and Sikkim, where there are no airports at present. However, the airline will link Guwahati with Bagdogra and Lilabari, which are the nearest airports to Gangtok and Itanagar respectively. 

To small towns 

“There are several unused airports in small towns across North-East. We have plans to fly to those places too,” Mr Nair said. 

Surya Airlines has a technical collaboration deal with Nepal’s Buddha Air, which too has a fleet of four Beechcraft 1900Ds. 

Suntech Corp, an investment company based in Singapore, has picked up a 49 per cent stake in Surya Airlines. The total investment in the new carrier will be Rs 350 crore. 

“We see good opportunity for aviation in the North-East, because even though the region has a great tourism potential, connectivity is still very poor. Besides, with the Union Government pursuing the “Look East” policy, the North-East is likely to emerge as a gateway to South-East Asia in near future,” said Mr Nair, adding that the Surya Airlines would offer fares as good as other low-cost airlines. 

SpiceJet has just launched a thrice-a-week service to Guwahati from New Delhi. The starting fare offered by the low-cost carrier is Rs 2,499, excluding taxes. It is likely to start Guwahati-Kolkata service by next October. 

Another low-cost start-up IndiGo will launch its Delhi-Guwahati and Guwahati-Imphal service on August 4 and Guwahati-Kolkata service on August 20 next, with minimum fares for the three sectors as low as Rs 2,549, Rs 1,029 and Rs 1,399 respectively. Apart from the full-service carriers like Jet Airways, Air Sahara and Indian, low-cost carriers Air Deccan and Kingfisher already fly to several destinations in the North-East. http://www.deccanherald.com/deccanherald/jul232006/update1414412006723.asp

          The knowledge economies and Indian Northeast                  Sunday, 23 July 2006       By Partha Gogoi
Background information: In Dec 2003 Business Week magazine came up with a report by Forrester Research that 3.3 million jobs will be moved out of the United States to countries like India, China and others – by 2015. This was a very startling fact at that point of time for many Americans. There was also a prediction that to achieve this kind of exponential growth, Bangalore, Hyderabad, Delhi and Mumbai will not have the necessary infrastructure to accommodate such growth. In this regard, I wrote about the emerging opportunities for India. This is a series of articles - which will examine in detail - the India's positioning in the knowledge economies and how the Eastern States specifically the North East can leverage some of its advantages. In Bangalore, which is way too crowded from the days when I visited in 1995, it is important to note the Infosys CEO Nandan Nilekani's comments on the current imbroglio - 'We will go where there is least resistance'. This comment came in
 a report in the Telegraph 'Infosys to grow outside home' 12th Jan 2006. 

  Part I  A paradigm shift:

  Year 1995: In Bangalore, a group of Indian software programmers are huddled together cranking out code by the hour. Instructions are pretty simple – follow instructions given by the client. Don’t ask any other questions. Meet the deadline.

Year 2003: Engineers at the General Electric R&D center in Bangalore are holding rights to patents on innovative design work for GE’s 13 US divisions. Scores of patents have been filed so far.

This represents the new face of India in the US economy - bold, confident and technologically competent in the new 'knowledge economy'. A paradigm shift! India is all poised to be the United States' economic partner. The brain drain of Indian engineers in the 80s and 90s led to a one-way traffic – with import of human capital into the US. Now, with slowdown of the global economy in general and the US specifically, corporations in the US are looking for higher productivity gains with focus on innovation. It is not just the low cost of labor in Indian companies – focus on “quality” and “effective” project management has propelled the Indian workforce onto the next level of the economic value chain. India Inc. has made a deep impact on Software, IT consulting, Chip design and Call centers. It is a two-way traffic now.

Potential growth areas: The US IT services industry is worth (conservative estimates) $240 billion (2003) – India’s current share, despite such an economic boom in Bangalore and Hyderabad, is a less than measly 3%. This is just IT services. The next growth areas are in Financial Sector (analysis for Wall Street firms, Investment Banks, accounting etc), Industrial Engineering (R&D work on big Engineering firms) and Analytics (mathematical models for risk analysis, consumer behavior and business processes). Forrester Research, Inc., an independent technology research company, projects that at least 3.3 million jobs are moving out of the US to India and other nations by 2015.

What does this mean for India? Given India’s direct leap from agricultural to services sector, it is too late to compete with China, the manufacturing powerhouse. Interesting statistics. Only 14% of the US economy (around $10 trillion GDP) is in Manufacturing, more than 60% is in the services sector. This is where 'collaboration' is key to India’s growth and ultimately 'dominance' in the services sector. For US based companies, outsourcing to India means – triggering off 'innovation', 'job creation' and 'productivity', which in turn is passed on to the consumer. Despite the unrest in the US over jobs moving offshore, this is an irreversible process. This is not to suggest that India does not build its own manufacturing units.

There are scores of success stories. For example, the need for overnight analysis reports in Wall Street has prompted companies in India or Philippines to take advantage of this opportunity provided by time difference. Or an insurance claims processing, which needs to be handled and prepared before the next working day. The cost of drugs research in the US is becoming prohibitive; as a result, the health sector in the US has spiraling costs. Corporations are looking at possible ways of increasing more returns for the dollar. The search has led to countries like India. India Inc. should gear its human resources to take advantage of these opportunities.

Equitable growth has not happened in India. If a concerted effort is to be made and increase India’s stake in the American service sector (not just IT), lets say to 5% ($300 billion), Bangalore, Mumbai, Delhi and Hyderabad alone would not be able to gear up to meet the demands. It is time to build more growth centers around the country. These cities are getting crowded and cramped.  The need of the hour is for building newer export zones and educating the massive human resources of the country. A favorable climate consisting of human capital, good management, venture capitalists etc. can spur growth in the economy. A good case in point is Bangalore - the IISc (providing the higher level energy like R&D and innovation), the IIMB (providing good managers) partnering with the other Technical Institutes (providing the second layer of energy) of the region and its Private Engg. Colleges (providing the lower energy – 200 odd numbers) have led to "critical mass" – the rest is
 history. Kudos to efforts by our South Indian brothers.

What it means to the Eastern Zone

  This model of growth needs to be replicated elsewhere in the country. The Northern part of India (Delhi and above) is perceived to be a nuclear flashpoint. Perception is a big thing for foreign executives. In the South, multinationals are hiring in hundreds. Perhaps, it makes sense to apply a similar initiative in Eastern India – Assam and the North Eastern states, West Bengal, Jharkhand and Bihar. Policy makers in this entire zone (barring Kolkatta metro which is attracting some action) missed the Information Technology bus – if this new set of 'opportunities' are missed, it will rob the region of a chance to emerge out of its economic quagmire and make advances in the knowledge economy. As a first step, perhaps, the creation of a coordinated committee of chief economic advisors of all these states to come together and formulate a common, broad based, mutually benefiting approach – prime objective being – to build human capital so that they position themselves to take
 advantage of this 'knowledge economy' wave. The key, again, is not just a focus on IT but on all the emerging fields. Central to this is education and training to develop workers with the kind of nimble minds and adaptable skills required in this “opportunity” wave. One cannot wait for aberrations like insurgencies to end for starting the work. 

  Part II  

  Expansion of growth centers and opportunities for the North East states- review in 2005 

  Looking back at 2003, most of the predictions made by experts are coming true. We find instances when leading cities like Bangalore are 'incapacitated' to accommodate all the growth potential. It handles 32% of India's annual revenues from overseas outsourcing. A search on traffic jams in Bangalore reveal that their traffic jams are legendary now - discussed in pubs, paanwallah joints and even in Parliament. The most recent spat between Narayana Murthy (Infosys Chairman) and former Prime Minister, Mr Deve Gowda, is 'symptomatic' of how crowded and messy the place has become. This reflects a growing disillusionment with 'centralization' and the concept of 'mega cities'. Which brings up several pertinent points - Why not develop lesser crowded cities? Why not have more planned second tier cities which carry advantages of cheaper costs and more space? In this regard, here is an opportunity for governments in the North Eastern states to wake up and start making a case out of
 their own potential. Technology has no boundaries. As long as the basic infrastructure is there, work can operate from a house on a mountain top or near an isolated lake. It is said that "cities are the engines of growth". In this case, even a small city with an International airport, railway and basic office space in the form of technology parks and export processing zones.

Government initiative: Every government should have a Technology minister and a department to support his/her activities and initiatives. What can the government do? Over the past decade, professionals from the North East have permeated all companies across India and abroad. These professionals have tremendous goodwill for their place of origin and want to do something positive - however, they have not been able to connect with the government functionaries. A combined force of expatriates and government initiatives can unleash a 'ripple effect' in the investment scenario. Take for instance, the Guwahati city - it is relatively smaller, has an international airport, 6-8 flights between the metro cities daily and 4-5 trains daily heading westward towards Delhi, Mumbai, Kolkata and Bangalore, plenty of land available for technology parks in North Guwahati. It has an IIT, four engineering colleges in its vicinity and a fast growing Assam Institute of Management to provide the
 human capital and necessary support. The new IIM is going to be only 2 hrs away in Shillong.

What needs to be done: As a first step, perhaps, the ideas have to be sold to the key players in the region - at the political, at the economic, at the administrative as well as at the academic levels. The idea has to be looked at in a different light - instead of greeting it with 'indifference' and 'cynicism'. It is natural for any new idea to be treated this way - however, this has the potential to bring about "must needed" technology investments into the region. This group has to champion the cause and make a case with the Assam Government to get a deal in place with companies like Infosys.

Let the government form a technology task force - comprising people from the different areas. Expatriates can help in different forms - ideas, guidance and action. No deal is made without going through the process of 'negotiations'. In a situation where companies are looking out for 'infrastructural solutions', it is highly recommended that the government provide the following incentives

  a. Land and Office space

  b. Guaranteed supply of power

  c. Tax Breaks from the State Govt

  d. Maintain a flexible set of IT policies - changing with the times.

The direct benefits of sealing a deal: Job creation for highly skilled people, a change in perception about the city and the region, which in turn, is a great selling point for the Govt for subsequent proposals to woo potential companies. This will also enable a lot of expatriates who are serving in different cities to come back. This is akin to the "brain drain" of Indian talent in the 80s and early 90s towards the west and how it was reversed. Today, NRIs are heading back to their cities to head company operations. There is a dynamic happening with a constant exchange of brains between India and the West. A similar dynamic can be introduced by this kind of initiatives in the North East.

   Part III  Competition and challenges: The road ahead 

  Every one wants to have a pie of the US economy. The competition is cut-throat. In recent times, other countries are gearing up to challenge India’s dominance in the IT and IT enabled sector. Taking advantage of the 'same' time zone factor, countries in South America are wooing US business. They are offering similar cost benefits although they do not have the critical mass that India has. Countries in East Europe are utilizing the excellent university systems to come up with graduates and human resources necessary to attract investments. Philippines is using its old ties with the US to corner business.

India Inc has a definite cost advantage – apart from the top quality it has been able to deliver. However, other countries are learning fast and playing the same game. Let us take the example of a company like Infosys in Bangalore. The cost of living is extremely high – which means that the employee has to be compensated proportionately. Add to that the cost of maintaining office spaces in an expensive city. Land availability is a big constraint too. The advantage of cost benefits is clearly being eroded. Does this sound like an opportunity? Or should this go to a country in East Europe?

West Bengal, despite being a communist state, has laid out the 'red carpet' for any form of technology investments – the success is phenomenal. Every major IT company has opened up shop around Kolkata. There is an active team from the government led by the IT minister Mr Manabendra Mukherjee – with active support from the Chief Minister of West Bengal and its expatriates. Anil Ambani recently announced the setting up of an IT School. All this goes to show the power of effective lobbying and marketing. We must do the same!

  Postscript
  Sources

  www.businessweek.com

  http://news.bbc.co.uk/1/hi/business/3693846.stm 

  http://infochangeindia.org/urban_india_11.jsp 

  How Bavaria is wooing investment in Bangalore

  http://www.bayern.de/English/Political_Life/Bavarian_Action_Programme/Bangalore.html 

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