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New trade winds: Neena Bhandari

© Neena Bhandari, Business Standard, India

From cricket and the Commonwealth, India-Australia bilateral ties have moved to embracing commerce. Recent months have seen Indian companies making huge investments in Australian mines and setting up joint ventures to secure the much needed resources for meeting India’s growing energy needs.

The “U” word, as the issue of uranium sales to India is often referred to in diplomatic circles, made front-page headlines and prime time news, and even dominated talkback radio airwaves. So much so that at the visiting US president and Australian prime minister’s joint press conference, one of the questions asked by an Australian journalist was on uranium exports to India to which President Barack Obama replied, “I will watch with interest what is determined.”

Well, come December and all eyes will be at the annual Australian Labor Party conference in which Prime Minister Julia Gillard will be asking members to overturn the party policy banning uranium exports to non-NPT (nuclear non-proliferation treaty) signatory countries. India, which aims to increase its nuclear power generation by about 10.8 per cent a year through to 2035, currently imports uranium from Canada, Namibia and Kazakhstan.

Australia is the world’s third-largest exporter of uranium, but the largest exporter of coal. Electricity generation in India will jump 5.5-fold from 2008 to 2035, with 73 per cent of India’s power in 2035 coming from coal. It is no surprise that Indian companies have been buying Australian coal assets in a big way.

In March, Lanco Infratech Limited and Griffin Coal in Western Australia signed an A$730-million deal. In August, Gujarat-based Adani Group bought Linc Energy’s Queensland coal tenements worth A$2.72 billion and paid another A$2 billion for the Abbot Point terminal near Bowen. In September, GVK of Hyderabad acquired a 79 per cent stake in Hancock Coal’s thermal coal assets in Queensland’s Galilee Basin worth A$1.26 billion.

India and Australia have signed the Coal Action Plan 2011-14 and set up a joint task force to facilitate investment in coal mining and strengthen cooperation in areas of coal technology reducing emission, rehabilitation of abandoned coal mines and extraction of deep-seated coal resources.

Indian companies will also be watching with interest the introduction of the Minerals Resource Rent Tax (MRRT) and the implications it would have for investments in exploration for minerals, especially iron-ore and coal.

The Australian Bureau of Statistics announced that more than $207 million was spent on coal exploration in the June 2011 quarter alone, well above the $122 million in the December 2010 quarter. It is this mining boom that has kept Australia largely shielded from the financial turmoil facing Europe and the US.

While resources and its related industries will continue to underpin the continent’s economic prosperity, Australia is facing severe shortage of skilled workers. To fill this gap, the country is seeking skilled overseas workers, especially in the mining and technology sectors, and has relaxed the 457 work visa rules.

In May, the two countries launched the Free Trade Agreement negotiations to achieve greater economic cooperation and double bilateral trade to $40 billion within the next five years.

For Australia, there is vast potential for franchises to tap into the booming Indian retail sector. The current Indian franchise market is projected to grow around 30 per cent a year with food, education, retail and service industries among the fastest growing.

Australian companies like Gloria Jeans and Cookie Man are doing well in the Indian retail markets through franchising arrangements. Besides, the iconic vegemite to virgin olive oils, snack foods to gourmet sauces, and wines to fresh juices, quality Australian food and beverages are already vying for space on Indian supermarket shelves.

And though the first Indian mango imports into Australia this year didn’t make it to the market shelves, a new heat treatment as an alternative to fumigation will pave the way for a massive expansion of Australian macadamia exports to India. Currently, 10,000 tonnes of macadamia nuts, which are native to Australia, are exported each year with only 80 tonnes a year going to India. Short-term estimates of the value of the Indian market to Australian producers are up to 300 tonnes or about $3 million each year.

India’s steady rise as a global economic powerhouse is continuing to open up new export and investment opportunities for Australian businesses in a diverse range of sectors including sports. With Gold Coast named the 2018 host for the Commonwealth Games, there is a window of opportunity for Indian firms to contribute their expertise.

It is time India’s flagship carrier, Air India, began direct flights between the two countries. Australia’s flagship carrier, Qantas, which is facing problems of its own, operates a one-stop service to Mumbai via Singapore. Direct flights at competitive prices will further boost trade and commerce.

It was Australia’s second Prime Minister, Alfred Deakin, who was one of the first Australian leaders to recognise the relevance of India and had visited the subcontinent in 1890. In 1893, Deakin wrote two books on India and declared that “Southern Asia” would shape Australian society and the Australian economy. Today, the trade relationship is certainly breaking new ground, literally!

© Copyright Neena Bhandari. All rights reserved. Republication, copying or using information from any www.india-voice.comcontent is expressly prohibited without the permission of the writer and the news agency through which the article is syndicated. 

 
Warming up to Oz: Neena Bhandari

© Neena Bhandari, Business Standard, India

With the “uranium irritant” out of the way, the year ends on a promising note for Australia-India bilateral relationship, setting the momentum for deeper strategic, defence and economic ties.

Once the Julia Gillard Cabinet formally approves uranium sales early next year, negotiations will begin on a bilateral nuclear safeguards treaty. Analysts say it will help fast-track the free trade agreement negotiations between the two countries and also encourage Indian companies to invest in Australian uranium mines.

Australia’s Defence Minister Stephen Smith said the uranium export decision reflected India’s global standing and predicted that it would become “one of the world’s three great powers”, along with the US and China. But the decision to revoke the long-standing Australian Labor Party policy banning uranium exports to India has revealed deep dissensions among ministers in the Gillard government and energised the nuclear power debate in both countries.

Opponents of nuclear energy argue that it will fuel a nuclear arms race in the sub-continent and undermine multilateral agreements on nuclear proliferation. New analysis by a Washington-based independent research organisation, Worldwatch Institute, indicates that countries are turning to other energy sources as a result of high costs of nuclear electricity production, low demand, lower natural gas prices and concerns about health and safety.

Australia could expect to sell around 2,500 tonnes of uranium a year to India by 2030, which on current values would generate around A$300 million in export sales. However, sales of this value were not guaranteed.

In recent years, many Indian mining and IT companies have been investing in Australia in a big way. A decade ago, when Pankaj Oswal set out to build one of the largest liquid ammonia plants in the resource-rich state of Western Australia, his stellar rise attracted admiration and envy. In December 2010, his Burrup Fertilisers Pty Ltd (BFPL), a subsidiary of Burrup Holdings Limited, went into receivership. This month, receivers for the Australia and New Zealand (ANZ) Bank put up Oswal’s 30 per cent stake and his wife Radhika’s 35 per cent shares in Burrup Holdings Limited for sale. The sale process is expected to be completed by February next year. Their spectacular fall, involving a quagmire of legal proceedings, may make some investors uneasy.

Housing has been another sector attracting Indian investment. Punjab-born Nirmal Singh Bhangoo, one of India’s largest land owners and founder of the Pearls Global Group, is becoming an important player in the Australian property and development sector. Pearls Australasia, his Australian property arm, entered the Australian market in 2009 with the purchase and ongoing A$20-million refurbishment of the Sheraton Mirage Resort on the Gold Coast. It has invested heavily in a joint venture with Queensland’s Metro Property Development to build over 1,000 apartments in inner Brisbane and 1,000 land lots on the northern outskirts of Melbourne. It has also announced an A$75-million plan to construct 144 waterfront residences and apartments on the Gold Coast. The company is expanding its patented MiiHome building system to meet local and international demand for affordable, remote area housing, and workers accommodation requirements arising from the mining boom.

India and Australia bilateral trade was worth A$ 12.5 billion in 2010-11. India exported goods worth A$ 1.7 billion and imported goods worth A$ 10.8 billion from Australia. India imports coal, gold, copper ores and concentrates, and petroleum from Australia and exports pearls, gems, other jewellery, rotating electric plants and pharmaceutical products.

Recently, Adelaide-based The Jewellery Group (TJG) Pty Ltd that operates the Zamel’s and Mazzucchelli’s retail jewellery brands has formed a strategic partnership with a leading manufacturer of cut and polished diamonds — Mumbai-based M Suresh Group DMCC.

And as Christmas festivities kick in, many in India will be raising a toast with an Australian red or white wine. Australia exported A$3.5 million worth of wine to India in the 12 months to January 2011. But in a submission to the Department of Foreign Affairs and Trade, Wine Australia has raised concerns about the standard import duty of 150 per cent and a number of state-level taxes on wine exports to India.

Opportunities abound and it is for both countries to embrace them. The Northern Territory and Victorian governments are planning trade missions to India to encourage trade and investment and the Australian government will present the biggest ever cultural festival in India from October 2012 to January 2013.

About 100,000 Australian visas were issued to Indian business personnel in 2010-11 and people of Indian origin are fast moving towards two per cent of Australia’s nearly 23 million population. As people-to-people links grow, adding cheer this holiday season is the alliance between Singapore Airlines and Virgin Australia, which includes new international and domestic routes, including connections to India. By mid-2012, Singapore Airlines’ long-haul budget airline, Scoot, will begin daily flights between Sydney and Singapore, adding 400 airline seats a day and providing cheap fares for destinations in Asia, including India.

More flights at competitive prices will enhance trade and tourism. Tourism Australia and Destination New South Wales have teamed up with one of India’s popular TV shows, Bade Achhe Lagte Hain, to lure Indian visitors, who spent A$ 899 million in the year to June. The serial features, among others, the iconic Bondi beach, Sydney Opera House, Sydney Harbour Bridge and the Sydney Cricket Ground.

Cricket, indeed, has been an enduring symbol of this bilateral relationship. As Australia hosts India in the traditional Boxing Day first Test match at the Melbourne Cricket Ground, acclaimed cricket columnist and commentator Peter Roebuck will be much missed.

© Copyright Neena Bhandari. All rights reserved. Republication, copying or using information from any www.india-voice.comcontent is expressly prohibited without the permission of the writer and the news agency through which the article is syndicated.

 

 
Oswals crash land on alleged fraud in Oz

© Neena Bhandari, Business Standard, India

When industrialist Pankaj Oswal set out to build one of the largest fertiliser plants in the resource rich state of Western Australia, his stellar rise attracted admiration and envy, but today he stands accused of one of biggest corporate frauds in Australia after his Burrup Fertilisers Pty Ltd, a subsidiary of Burrup Holdings, went into receivership last December.

The ANZ Bank, which is trying to recover A$900m in loans, appointed PPB Advisory as the Receivers following ongoing court disputes between Pankaj, who was Burrup's chairman and managing director, and Norway's Yara International, a 35 per cent shareholder and customer of the ammonia plant; default events related to debt facilities which were established between 2002 and 2007; and evidence of financial irregularities.

Born with a silver spoon in his mouth, the grandson of one of the great Ludhiana textile magnates and son of Abhey Oswal, he established Burrup Fertilisers Pty Ltd in 2006. The young chemical engineer didn’t take the money from his father, but borrowed from “rich friends” and took loan from banks when he set out in 2000 to set up plant on the rock-strewn Burrup Peninsula in Western Australia.

Burrup Fertilisers Pty Ltd (BFPL) is a private company, formed in Australia in 2000 and backed by the Oswal Group in India. Yara International ASA owns 35 percent of Burrup and is the exclusive marketer of ammonia from the plant. Construction of the company's AUD 700 million liquid ammonia plant on the Burrup Peninsula, near Karratha in western Australia, began in 2003. Production started in April 2006, and BFPL's first export shipment was made from the Port of Dampier in June 2006.

Documents filed in the Federal Court in Perth by receivers PPB Advisory in October 2011 allege the former directors transferred more than double the amount of money previously estimated i.e. A$ 210 million from their 65 per cent-owned Burrup Fertilisers to their privately owned overseas companies.

In the first Court documents filed in March 2011, PPB Advisory claimed that the Oswals were required to re-pay A$95 million. They allege Mr Oswal siphoned money out of the company to pay for the couple’s extravagant lifestyle, including luxury cars, a Fairline cabin cruiser, a Gulfstream jet, credit card debts and construction of a home in Western Australia's Peppermint Grove.

The new statement of claim filed in early October this year repeats earlier allegations that Mr Oswal made payments with company funds toward construction of the family's $70m mansion in Perth's, luxury cars, a boat and a corporate jet. But now, PPB alleges that Mr Oswal transferred $51.7m of Burrup Fertilisers funds to a number of Singapore shelf companies "for no consideration and/or benefit". The amended statement of claim filed by PPB also alleges that a number of other companies issued "inflated invoices" for goods or services that were to be provided to Burrup Fertilisers. The alleged overpayments totalled $61m.

The Federal Court documents list more than 50 transactions made during 2009 and last year. For example, in the case of Oswal Projects, the real value of the work performed was A$462,000, but the actual amount paid was A$7.4m, according to the Federal Court document.

PPB also alleges the Oswals breached their duties under the Corporations Act. Mr Oswal has previously said he was entitled to transfer money to his private companies in exchange for his guaranteeing cost overruns during the construction of the plant. In a statement, he said, ''It is a smokescreen to take the spotlight off PPB's disastrous handling of the gas sales agreement which has destroyed shareholder value and opened up PPB and its lawyers to massive damages claims”.

A report by accounting firm BDO, commissioned by the Oswals law firm, found that PPB Advisory serving as the receiver for Burrup Fertilisers, charged $5.1 million in fees while spending $50,000 on iPads, $51,000 on entertainment at AFL matches and hundreds of thousands spent on travel and accommodation in only five months, according to an article by Andrew Burrell in The Australian.

In September, Radhika lodged a writ in the Victorian Supreme Court against ANZ’s claim that her husband had forged documents used to guarantee A$1.2 billion in funding from ANZ. The Oswals are contesting the right of lender ANZ Bank to appoint receivers to Burrup Fertilisers. The couple lost the appeal to put the bank's court action on hold while it contested the validity of the appointment of PPB Advisory.

The Oswals, Pankaj and his wife Radhika, relocated to Dubai from Perth, which has been their home for the past 10 years, after their 65 per cent shareholding in Burrup Holdings was placed in receivership. The Oswals, who have consistently refuted any wrongdoing, have said they look forward to the sale of Burrup Fertilisers which is still a profitable plant. The $1 billion plant produces 759,000T per year. 

Mr Oswal, who is seeking a Federal Court inquiry into whether the receivers breached their duties by disclosing confidential documents to potential buyers, is convinced that Yara and the ANZ bank are in collusion in an attempt to force him to sell at an unacceptably low price.

Esben Tuman, Vice President Corporate Communications, Yara International ASA, told Business Standard, “We are comfortable with our rights related to our ownership in Burrup Holdings. The legal proceedings related to the remaining 65 per cent share in Burrup Holdings are multiple and complicated, and there is a risk that these will remain unresolved for some time, unless a settlement is reached. The sales process is run by the bank and the receivers. We are awaiting the outcome of the process, and we are interested in buying the stake, given the right valuation”.

Yara International ASA is the number one global supplier of mineral fertilizers and agronomic solutions

The Receivers still expect the sale process to be concluded before the year end. “We have received over 20 expressions of interest and have narrowed it down to a small group of potential buyers,” a spokesperson for PPB Advisory told Business Standard.

Yara has also contested the legality of the Oswals' rejecting the Technical Ammonia Nitrates (TAN) project. Burrup Nitrates’, a joint venture between Burrup Holdings and Yara International, proposed TAN plant adjacent to Burrup’s current facility. "Conduct of this nature would breach the Oswals' duties to act in the best interests of BHL. The Oswals also seem to ignore that BHL has entered into binding commitments with Yara and Yara retains important intellectual property rights needed for the TAN Project," a company statement said.

Technical Ammonia Nitrate is the main raw material in the production of civil explosives and is widely used by the mining industry. The proposed project is ideally located to serve growing demands for TAN in the Pilbara region.

The Oswals have confirmed they would not support the TAN plant, which could impact on the A$20 billion worth of mining developments in the region. Yara International, has pushed for the project because it would own 65 per cent of the related company, Burrup Nitrate.

The Oswals, who refused Business Standard’s interview request, have come under the spotlight not only for their business dealings but also for their lavish cocktail parties and the A$70 million mansion nicknamed `Taj-on- the Swan’ in the swanky Peppermint Grove suburb of Perth.

It appears income linked to the transfer of the stake into Ms Oswal's name resulted in the ATO issuing a $71 million income tax bill for 2007. The debt rose by several million dollars in subsequent years with more than $60 million in penalty fees sending the amount to $186 million by August this year, reports the Australian Financial Review.

Radhika, who owns the fast food vegetarian restaurants, Otarian, In London and New York, had told The Western Australian last year that “I think the fact we are not Australians troubles people. What I really liked about Australia was the fact that it was multicultural when I came here, I'm a bit disappointed”.

A spokesperson for the Australian Securities & Investments Commission, which was alerted to the case eight months ago, told Business Standard, “I can confirm we are currently working with the receiver, PPB, and are in the process of assessing information provided”.

At a time when Indian mining and IT companies are looking at investing in Australia in a big way, the Oswal’s dramatic fall will make some uneasy.

  © Copyright Neena Bhandari. All rights reserved. Republication, copying or using information from any www.india-voice.comcontent is expressly prohibited without the permission of the writer and the news agency through which the article is syndicated.

 

 

 

 

 

 

 

 

 

 

 
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