security label

Jan. 16, 2012—On Sunday, Jan. 15, I attended a meeting of the Voluntary Interindustry Commerce Solutions Association’s VICS Item Level RFID Initiative (VILRI), in New York City, which was held in conjunction with the National Retail Federation’s Big Show 2012 conference. VILRI is a group of end users, solutions providers and academics working to create standard ways of using radio frequency identification based on Electronic Product Code (EPC) standards within the retail apparel value chain. Nearly 100 people attended the meeting.

Cynthia DiPietrantonio, Jones Apparel’s chief operations officer, described the progress made in the working groups as “astonishing.” I participated in the outreach and communications group, tasked with educating retailers and suppliers about both VILRI’s work and the value of employing radio frequency identification to track items from the time they are manufactured until the point of sale.

During the meeting, David Cromhout and Justin Patten, from the University of Arkansas’ RFID Research Center, updated members regarding the results of VILRI-sponsored research into the business case for apparel suppliers, which RFID Journal covered last month (see RFID Study Quantifies ROI for Apparel Suppliers). Representatives from Accenture updated the group about a survey of retailers and suppliers, conducted at VILRI’s behest, that suggests most are ready to adopt RFID. VILRI has also succeeded in getting speakers on the agenda of a wide variety of events held by relevant organizations, including NRF and the Retail Industry Leaders Association (RILA).

After the meeting, Joe Andraski, VICS’ CEO, hosted a dinner for CIOs at a number of retail chains, mostly focused on apparel. I’m unable to reveal who attended or what they said, as this was a private, off-the-record gathering, but I can say that most attendees were from companies that have not publicly announced RFID initiatives—though many indicated that they had launched pilots, or even small rollouts.

Manvendra Singh watched Royal Dutch Shell pack up and leave India. A decade ago, the Indian MP was told by an executive of the oil company, as he closed up his trailer near the arid city of Jaisalmer, that the quality of the oil beneath the Rajasthani desert was good, but there was not enough of it.

So the Anglo-Dutch oil group, after drilling four exploration wells, was going home. It could not have been more wrong. Today Rajasthan is on its way to becoming a mini-Texas, supplying the world’s fastest growing economy after China. Its 125,000 barrels a day of oil represents almost 20 per cent of domestically generated oil supplies to a country home to nearly a fifth of humanity.

Rajasthan’s transformation into an oil economy is part of a bigger struggle for India to secure its energy security. Energy weakness is a key vulnerability for the emerging power as it still imports more than 70 per cent of its oil. Its dependence has been highlighted in recent months by the threat of international sanctions against Iran, one of its main suppliers, and a weak local currency.

Supplying India’s power stations with coal and gas and securing oil supplies to refineries is causing increasing concern and will be the subject of a high-level meeting between the country’s industrialists and Manmohan Singh, the prime minister, in New Delhi on Wednesday. Mr Singh is likely to face a barrage of complaints about environmental restrictions on coal and slow approvals of power projects.

However, he can take heart from a reawakening domestic oil and gas sector. Ignored by the world’s big energy companies for most of India’s post-independence history, this sector is showing new life, with energy investments representing the lion’s share of India’s $19.43bn in foreign direct investment in 2011.

Two stand out: one by BP, the British oil major; the other by Vedanta Resources, the UK-listed resources company. India was traditionally sidestepped by the global energy giants. Exploration to the east held better prospects in countries such as Thailand, Indonesia and Malaysia, while smaller countries, such as Nepal and Sri Lanka, were left to the smaller explorers.

India, distrustful of western participation, turned to the Russians to help its state oil companies such as the Oil and Natural Gas Corporation, the developer of the Bombay High field, and the Indian Oil Corporation. Liberalisation in the early 1990s, under Manmohan Singh, the then finance minister, invited the private sector to develop what were considered small fields and catalysed a local industry, led by Reliance Industries in gas production and refining capacity.

But disputes and the threat of value destruction chased away others, such as Enron, and the wider US oil industry. Now the landscape is rapidly changing and Indian energy assets hold renewed international appeal. The shift started with Vedanta, headed by Anil Agarwal, walking into an Edinburgh office and launching a dazzling bid for Cairn India, the company developing the Rajasthan fields. The $6.5bn that Vedanta paid Cairn Energy for its controlling stake is the first step in a broader Vedanta strategy to marry an oil business with metals assets and turn itself into a group to rival BHP Billiton.

While Vedanta battled for approvals, Bob Dudley, BP’s chief executive, swept in to buy a 30 per cent stake worth $7.2bn in deepwater offshore gas production off India’s east coast with Reliance Industries, controlled by Mukesh Ambani. More has since come into play. BG, the oil and gas producer, has put up for sale its 62 per cent stake in Gujarat Gas, worth an estimated $600m, as it turns its attention more squarely to Brazil. A local and international bidding contest is now under way.

Simultaneously, Indian companies are trailing their Chinese counterparts in a search beyond home shores. Gail, the state-owned Indian gas company, and the overseas arm of ONGC are potential buyers of Cove Energy’s 10 per cent share in the Rovuma gas fields off Mozambique. The deal could be worth $1.2bn.

Mr Singh has to harness this dynamism quickly to strengthen his country’s energy profile and has already made significant moves to de-politicise and professionalise the petroleum ministry. However, challenges remain.

First, he must streamline the investment process to minimise interference by a lumbering bureaucracy to make it easier for transactions to take place. It took 18 months for Vedanta to buy Cairn Energy’s stake in its subsidiary, while BP mulled its India investment for three years.

Second, he needs to reinvigorate India’s New Exploration Licensing Policy, which rather than inviting foreign participation to find energy reserves, in recent rounds has acted as a powerful disincentive.

Finally, New Delhi needs to globalise its state-owned oil companies to capture foreign energy assets. The overseas arm of ONGC, seemingly unlucky in developing an international portfolio, would do well to partner a big global energy company.

India turned one unpromising desert into a productive resource. It needs to repeat the miracle to boost its local production from 650,000 barrels of local production a day to more than 1m to take it to higher rates of growth.

Businesses in and around Tokyo will pay up to 18 per cent more for their electricity beginning in April as a result of the Fukushima Daiichi nuclear disaster, which has saddled the Japanese capital’s main power provider with sharply higher costs.

The rate increase, announced on Tuesday by Tokyo Electric Power (Tepco), owner of the crippled Fukushima plant, represents a significant new cost for companies in an already tough economy. It will add Y50m a year to the utility bills of some large factories, office buildings and department stores, according to a Tepco simulation.

The increase could, however, give a boost to independent power companies, who have struggled to break into Japan’s theoretically deregulated electricity sector. Some 96 per cent of large-scale commercial users buy their power from Tepco, even though they have been free for several years to sign contracts with other regional utilities or start-up providers.

Tepco had said last month it was planning to raise prices to cover the higher cost of thermal and other conventional electricity production. Atomic plants are expensive to build but relatively cheap to operate, and the utility’s annual fuel bills have jumped by an estimated Y830bn as it has been forced to buy more natural gas and coal to make up for its decreased nuclear capacity.

Japan’s March tsunami destroyed or knocked offline six reactors at the Fukushima Daiichi plant and forced others to shut down for safety reviews. Only two of the 17 reactors at Tepco’s three nuclear facilities are currently in operation.

Some business leaders have grumbled about higher electricity costs at a time when a historically strong yen is already eroding Japan’s industrial competitiveness. “A rate hike will definitely drive more companies abroad,” Shigeo Oyagi, chief executive of Teijin, a chemical and textiles manufacturer, said after Tepco’s warning in December.

Price increases are generally seen to be inevitable after the disaster, however, with Hiromasa Yonekura, chairman of the influential Keidanren business lobby, calling them “unavoidable”.

In addition to higher fuel costs, Tepco faces billions of dollars in damage claims from Fukushima residents and billions more in clean-up and decommissioning bills. The government has extended emergency funds to keep it operating and may ultimately take it over.

Tepco is widely expected to apply for regulatory permission to increase rates for residential users later this year. Such permission is not required for the larger commercial users – those with contracts for 50 kilowatts of power or more – that buy roughly 60 per cent of Tepco’s power.

Under Tepco’s new price scheme, the 18 per cent increase would apply to a customer contracting for 4,000kW and using an average of 1.6m kilowatt hours a month. A customer with a smaller 150kW contract and average consumption of 33,000 kWh a month faces a 13 per cent rise, Tepco said.