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1 April 2016 Editorial



Tata to Corus

When Tata Steel paid out a hefty $13.1 billion to acquire Corus in 2007, Chairman Ratan Tata described it as a defining moment for the company. It is not hard to see why he thought this may be so. It made Tata Steel’s capacity grow three times, put the company on the global map, and spread the risks of the business of making steel. The investment was made in a climate when there was a tremendous buzz about outward foreign direct investment (FDI), a time when a clutch of Indian industrialists were persuaded to see value in making foreign investments at extremely heady prices, which were sought to be justified on the basis of over-optimistic profit projections and growth forecasts for the world economy. In hindsight, it is apparent that the acquisition was a bad strategic decision, but it would have been difficult, if not well nigh impossible, to predict such things as the Eurozone’s slide into recession and the abrupt and unexpected slowdown in China. The damage was compounded by cheap Chinese steel flooding western markets.

The move by Ratan Tata’s successor Cyrus Mistry to explore a sale of Tata Steel’s U.K. steelmaking business is not going to change the fortunes of the company in a hurry. It remains to be seen whether buyers can be found and if so what prices they are willing to fork out for plants operating in an industry that seems set for a protracted and severe winter. But given the circumstances, in which the Indian company’s profitability is eroded by its operations in Europe, the decision to bolster a still-lucrative core by paring the company’s debt from the Corus acquisition is probably the best course of action. It remains to be seen how the U.K. government will react to this decision. There could be an attempt to nudge the company into accepting a restructuring proposal. But given that the company’s European operations have lost almost $5 billion since 2010 and the net debt surpassed the cost of the Corus acquisition by the end of last December, it may take a lot of doing to get the company to change its mind. While the decision to divest itself of the U.K. business is a bold one, it could be said that the company took a tad longer than it should have in arriving at that decision. Arguably, foreign investments made by some Indian companies during the extended period of the commodity boom were influenced too much by the ambition or desire to scale up for the sake of doing so. For instance, the billions of dollars invested by some of the country’s industrialists in sectors such as coal at the peak of the commodity supercycle have come to no good. But it may be worth pointing out that some of the acquisitions have indeed paid off. When Ratan Tata acquired Jaguar Land Rover, there were those who wondered about the wisdom of the purchase. Still the gamble has worked, and the losses notched up at the domestic businesses of Tata Motors have been more than offset by the profits earned by one of Britain’s most iconic carmakers.

Rare frogs and the circle of life

The new insights on the life stages of a species of dancing frog in the Western Ghats reported in the journal PLoS One serve as a reminder, if any were needed, that key features of the rainforests are vital to the survival of less-known species. As a biodiversity-rich mountainous realm of plants and animals, many of which are endemic to the region, the Western Ghats are an acknowledged hotspot. What the research on the tadpoles of the dancing frog Micrixalus herrei reveals is that such animals can complete their life cycle only if critical features of the natural landscape are preserved, and human pressure on habitats is consciously reduced. Specifically in the case of the Indian dancing frog, the availability of shallow streams with sandy depressions enables the laying of eggs and development of tadpoles, that then spend some time under the sand. Such invisible phases of the life cycle of species are often not widely known or discussed, and therefore may not find a place in rapid environment impact assessments when a project is proposed. In fact, the range of such frogs revealed by newer methods such as DNA bar coding has not been sufficiently documented, as scientists from the University of Delhi, the University of Peradeniya and the Gettysburg College in the United States who studied the dancing frog point out. It is therefore vital that the habitat of amphibians in the Western Ghats, a unique part of the world that has landscapes ranging from scrub to evergreen forests, be given utmost protection as scientists document its richness.

If amphibians are considered indicators of the health of ecosystems, their fate around the world is cause for worry. Of about 7,300 known species, a third are threatened and their populations are declining owing to habitat destruction, chemical pollution, climate change, disease and invasive species, among other factors. In the Western Ghats the threat level is high for an estimated 40 per cent of amphibian species, even as more are being discovered. Deficiency of data for a third of the frogs and related species here highlights the need for continuous and intensive research. In the case of the ancient purple frog from the same region, which surprised the world with its unusual appearance, colour and small size when it was described a dozen years ago, there is a persistent threat in the form of excessive hunting of tadpoles by tribals for food. Fortunately, the efforts of scientists to explain the uniqueness of such animals is beginning to yield results, and tribal communities are willing to consider alternatives to mass capture during the breeding seasons. It is this rich diversity that the Western Ghats Ecology Expert Panel led by Madhav Gadgil recognised, and sought, correctly, to protect from unsustainable human pressures. Frogs may not have the charismatic stature of many bigger animals, but often they are the keystones that hold together the arch of life represented by several diverse animals.

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