CII Communique August 2016 (Vol.38 No.8)

P.R. No. DL(S) - 17/3494/2016-2018Regn. No. 34541/79

Edited, printed and published by:Chandrajit Banerjee, Director General, CII, on behalf of Confederation of Indian Industry from The Mantosh Sondhi Centre, 23, Institutional Area, Lodi Road, New Delhi-110003 Tel: 91-11-24629994-7 Fax: 91-11-24626149 Email: [email protected] Website: www.cii.inPrinted at Lustra Print Process Pvt. Ltd., K No. 51/21, Rohad, Bahadurgarh-124507 (Haryana) Registration No. 34541/79 Postal date on 20th and 21st Total pages 56+Covers

Edited, printed and published by Chandrajit Banerjee, Director General, CII, on behalf of Confederation of Indian Industry from The Mantosh Sondhi Centre, 23, Institutional Area, Lodi Road, New Delhi-110003, Tel: 91-11-24629994-7, Fax: 91-11-24626149, Email: [email protected], Website: www.cii.inPrinted at Lustra Print Process Pvt. Ltd., K No. 51/21, Rohad, Bahadurgarh (Haryana), PIN Code-124507 Registration No. 34541/79

JouRNAL oF THE CoNFEDERATIoN oF INDIAN INDuSTRy

We welcome your feedback and suggestions. Do write to us at [email protected]

Contents Volume 38 No. 8 August 2016

cover story

05 Current Scenario and Recent Developments The Indian taxation system has undergone tremendous reforms during the last decade.

The tax rates have been rationalized and tax laws have been simplified, resulting in better compliance, ease of tax payment and improved enforcement. The international taxation scenario, too, has evolved in recent times. Our cover story looks at the dynamic tax scenario, encompassing interesting contemporary topics like tax policy, BEPS, GST, and PoEM, to provide an insightful overview of the tax arena in the country.

panorama

03 Prime Minister Modi addresses India-South Africa Business Forum

mindspace

15 The Financial Architecture for MSMEs in India

21 Inspections and Regulatory Enforcements for MSMEs

perspecTiVe

26 ‘A pre-paid energy regime could be a game-changer’

focus

29 Global Slowdown could challenge India’s Exports

plus...

SECTORSCAPE

ENGAGING wITh ThE wORld

PORTFOlIO

REGIONAl REVIEw

... and more

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Communiqué August 2016 | 3

PANORAMAindia and the world

CII led a 54-member delegation, including 22 CEOs, to South Africa, on the occasion of the visit of Mr Narendra Modi, Prime Minister of India, on

8 July. The delegation comprised of senior representatives from member companies representing sectors such as FMCG, healthcare, banking and finance, mining, water management, infrastructure, manufacturing, power and energy, and agriculture, among others.

Mr Narendra Modi and Mr Jacob Zuma, President of South Africa, addressed more than 250 business leaders from both countries at the India – South Africa Business Forum. The Prime Minister highlighted the existing Indian investment in South Africa and the immense potential to strengthen it further. he invited businesses on both sides to find new ways to diversify the trade basket in order to complement each others’ needs, and thereby benefit the people of both countries.

Echoing and adding to Prime Minister Modi’s sentiments, President Zuma announced that the two leaders have set an ambitious goal to increase bilateral trade to $18 billion by the year 2018. Achieving this target will require an increase in private sector deliberations as well as government focus on the resolution of barriers that are impeding the expansion of trade, he said.

Earlier, the India-South Africa CEOs Forum met in Pretoria. Fourteen CEOs from the Indian side and more than 30 CEOs from South Africa discussed issues impacting bilateral trade and investment, and made recommendations to enhance collaboration in sectors like financial services, pharmaceuticals and healthcare, mining, manufacturing, infrastructure and

energy, and education and medical schools. Mr Adi Godrej, Past President, CII, and Chairman, Godrej Group, who was the Indian Co-Chair of the Forum, and his South African counterpart, Mr Vivian Reddy, Founder, Edison Group, later reported back on the discussions to the leaders at the India-South Africa Business Forum.

Mr Ramesh Abhishek, Secretary, department of Industrial Policy and Promotion (dIPP), addressing the CEOs Forum, provided the perspective of the Indian Government on future economic engagement with South Africa. Earlier, the Indian members of the CEOs Forum had an exclusive interaction with representatives of dIPP, to discuss specific issues they are facing while doing business with South Africa.

The deliberations in both Forums positively expressed the need and openness to collaborate between Indian and South African companies. during the visit, eight MoUs were signed between Indian and South African companies, a testimony to the keenness of India and South Africa to engage with each other.

Prime Minister Modi addresses India-south Africa Business Forum

Narendra Modi, Prime Minister of India; and Jacob Zuma, President of South Africa, with Adi Godrej, Past President, CII, India Co-Chair, India-South Africa CEOs Forum, and Chairman, Godrej Group (left), and Vivian Reddy, South Africa Co-Chair, India-South Africa CEOs Forum,

and Chairman, Edison Power Group (right) at the India-South Africa Business Forum in Pretoria

Ramesh Abhishek, Secretary, DIPP; Adi Godrej, and Chandrajit Banerjee, Director General, CII,

at the India-South Africa CEOs Forum in Pretoria


COVER STORY

taxation

The Indian taxation system has undergone

tremendous reforms during the last decade.

Tax rates have been rationalized and tax laws have

been simplified, resulting in better compliance,

ease of tax payment, and better enforcement.

To top it all, the passage of the 122nd Constitutional

Amendment Bill on the Goods and Services Tax

(GST) in Parliament offers hopes that the

much-awaited GST implementation in

April 2017 may become a reality.

The international taxation scenario has also evolved,

with India playing an active role in the Base

Erosion and Profit Shifting (BEPS) initiative, and

gradually making BEPS a part of the Indian tax

curriculum. Corporate residence now has a new

determining parameter, where its Place of Effective

Management (PoEM), in that year is.

In this dynamically-evolving tax scenario, our cover

story encompasses interesting contemporary topics

like tax policy, BEPS, GST, and PoEM, to provide an

insightful overview of the tax arena in the country.

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‘GST is India's most significant tax reform in decades. It is expected to usher in a harmonized national market of goods and services and shall lead to a simplified, assesse-friendly tax administration system. Once implemented, it will subsume all of the central and State-level duties and taxes, thus making the country a national market, and would contribute significantly to the growth of the economy.

CI I ant ic ipates that the implementation of GST would reduce transaction costs and boost GdP by 1.5 to 2%.’

dr Naushad Forbes, President, CII, and

Co-Chairman, Forbes Marshall

6 | August 2016 Communiqué

COVER STORY

Taxes are a necessary compulsion for citizens and entities earning revenues. with dynamic and buoyant tax revenues, a nation can undertake

the imperatives of poverty elimination, social security, and creation of public goods such as infrastructure, education and healthcare.

India’s gross tax revenues to the Central Government have more than doubled from ` 6.2 lakh crore in 2009-10 to ` 14.6 lakh crore in 2015-16. The ratio of gross tax revenue to Gross domestic Product (GdP) has drifted upwards from 9.87% in 2011-12 to 10.74% in 2015-16. within this, the shares of direct taxes and indirect taxes have remained more or less constant. Corporate taxes contribute more than a third of the total gross tax revenues, while customs duties, union excise duties and service taxes bring in about 44%.

Recognizing the need for widening the tax base, the Government has progressed towards simplification of tax administration and improving tax dispute resolution. Thus, the Indian taxation system has undergone tremendous reforms during the last decade. Tax rates have been rationalized while tax laws have undergone simplification, resulting in better compliance, ease of tax payment, and better enforcement. The process of rationalization of tax administration is on-going as well. The introduction of the Income disclosure Scheme 2016 to provide an opportunity to assessees to come forward and disclose their income and assets is another step forward.

CII is greatly enthused by the outcome of the recent meetings of the Empowered Committee of State Finance Ministers, and welcomes the release of the Model Goods and Services Tax (GST) law. The passage of the Bill by both houses of Parliament is indeed major progress in the implementation of the much-awaited GST, and encourages Industry to plan for India’s most significant tax reform in decades to become a reality with effect from 1 April 2017.

during the last few months, the Government has been dynamic in its approach, and has invited comments and

suggestions from Industry on a number of taxation matters ranging from GST to Place of Effective Management (PoEM), Real Estate Investment Trusts (REITs), Income Computation and disclosure Standards (ICdS),Corporate Social Responsibility (CSR), Safe harbour rules, the Justice R V Easwar Committee on Income Tax Simplification, Foreign Tax Credit, Minimum Alternate Tax (MAT) for IndAS compliant companies, Indirect Transfer Provisions, General Anti-Avoidance Rules (GAAR) and the India-Mauritius double Taxation Avoidance Agreement.

CII has submitted detailed suggestions on each of these issues, capturing industry perspectives. Through its pre and post-Budget memoranda each year, CII also compiles, evaluates and shares recommendations with the Government.

CII supports the Government agenda for bringing in a stable and predictable system of tax reforms and many of our recommendations have found place in the final legislations. For example, CII has been advocating the deferment of ICdS for another year, and the Government has agreed to postpone its applicability with effect from 1 April, 2016.

CII has made many key recommendations on direct Taxes to the Government, which include:

• Thecorporate tax rate shouldbebroughtdown to22% (all inclusive).

• MinimumAlternateTax(MAT)shouldbeabolishedinview of the removal of all incentives or, alternatively, the rate should be brought down to 10%.

• ThebackloginrelationtopendingapplicationstotheAuthority for Advance Rulings (AAR) and Advance Pricing Agreements (APA) should be cleared to strengthen the investor community’s confidence in the ability of the system to provide clarity expeditiously.

• Rollback provisions in the APA scheme should beissued at the earliest, as these are effective October 2014 as per statute. Also, the draft provisions should

current scenario and recent Developments

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TaxaTion in india


be circulated to the public for consultation.

• The Tax Administration Reform Commission (TARC)recommendations should be implemented.

• The fiscal benefit available to new infrastructure is veryclear in Section 80IA of the Income Tax Act in the present form. however, suitable clarity is required as to whether the Section extends to cases of upgrading the existing set up, as well. The Government should make suitable amendment in the Section to make it amply clear that the upgradation of existing infrastructure is also eligible for the benefit of Section 80IA, so that there is no ambiguity with regard to claims.

• Itwill be extremely useful if the authorities can put togethera handbook on Transfer Pricing guidelines/ methods, on a few significant issues like intangibles, inter-group and intra-group services, selection of comparable and appropriate methods, etc, in line with the Organization for Economic Co-operation and development (OECd) guidelines.

• The investments made by Alternate Investment Funds (AIF)should be deemed ‘capital assets’ (similar to the amendment made by the Finance (No 2) Act, 2014) in the definition of capital assets under Section 2(14) of the Act, to include securities held by foreign portfolio investors. Accordingly, the income earned by the AIFs therefrom should be taxable under the head ‘capital gains’ or ‘income from other sources’ and not ‘business income.’

• Dividend DistributionTax (DDT) rate should be reduced from15% to 10%.

On Indirect Taxes, CII has made, inter alia, the following recommendations to the Government, which are yet to be effected:

• Continuation of 10% peak rates of customs duty to provideprotection to indigenous industry which suffers from certain disadvantages like higher rates of interest and power, etc.

• When the duty rate on inputs is higher than the duty rateon finished products, the duty structure becomes anomalous, which needs to be corrected.

• Continue thegeneral rateof 12.5%exciseduty.

• Allow credit of the Swachh Bharat cess and its utilizationagainst payment of excise duty/ service tax.

• Withdraw the National Calamity Contingent Duty on motorvehicles and crude oil.

CII is hopeful that these, as well as other recommendations, which benefit both Government and Industry, would be evaluated and considered by the Government on a continuous basis. CII will continue to support the Government in its journey towards tax reforms in the country, and bring to light the views of Industry, for mutual benefit.

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COVER STORY

India Inc pins hopes on tax reformsIndustry is looking forward to a clear roadmap for a transparent, stable and certain tax environment

In the current difficult global environment, India has the fortune to stand out for a growth that’s amongst the highest in the

world. The sound economic growth has been built on the foundation of well-crafted macro-economic policies and the Government’s commitment to do what is needed to provide an enabling environment for investments. Taxation policies have been an integral part of the reform measures undertaken by the Government towards this objective.

India’s tax policy is guided by a multiplicity of objectives. In line with global trends, India has announced its intent to lower the tax rates. To enhance its tax-GdP ratio to fund social and infrastructure programs, a concurrent focus has been on expanding the base and preventing base erosion. Significant effort is also being made towards lowering tax uncertainty, improving the ease of paying taxes, and providing a transparent, stable and certain tax environment for attracting investments.

Undeniably, the most awaited reform is the implementation of the Goods and Services Tax (GST). The consultative approach of the Government while framing the laws and regulations has been noteworthy. There is active discussion between the Government and the stakeholders on issues in the current draft which need to be ironed out.

The Finance Minister has announced the


COVER STORY

rationalization of corporate tax rates from 30% to 25%, along with a gradual removal of various incentives in the next 3-4 years. Industry is now looking for a clear roadmap that will include the removal of the legacy surcharges that add 3-4% to the tax burden. The dividend distribution Tax and the Minimum Alternate Tax (MAT), with a creeping increase to nearly 20%, significantly enhance the effective corporate tax burden. It may be time to re-visit the classical system of dividend taxation, namely taxing shareholders at applicable slab rates above the minimum threshold, so as not to burden small shareholders. Also, clear indication about the phased removal of MAT accompanying the reduction in the corporate tax rate will make the corporate tax system simpler and more attractive.

It is notable that, in recent months, the Government has kept its word about following a non-adversarial tax regime. Any issues that created uncertainty, such as the levy of MAT on Foreign Institutional Investors, were quickly resolved. Similarly, the Government took Cabinet approval not to appeal against a favorable order passed by the Bombay high Court ruling against the transfer pricing adjustments carried out by the tax administration in respect of the fresh issue of shares by a subsidiary of a foreign company in India.

To bring about simplification and certainty, the tax department has issued a number of clarifications on contentious issues. There is now greater certainty on the characterization of the investment portfolio of the tax-payer as capital gains instead of business income, rather than leaving it to the discretion of the assessing officer. Similarly, there is clarity on automatic stay of the tax demanded on assessment upon payment of 15% of the demand, if the tax-payer prefers an appeal against the assessment.

Also welcome is the substitution of the low threshold with a risk-based evaluation for the selection of cases for transfer pricing scrutiny, putting greater emphasis on qualitative rather than quantitative factors. Rules have been issued for a special taxation regime to facilitate the location of fund managers of offshore funds in India. The consultative approach of the Central Board of direct Taxes on the applicability of the proposed General Anti Avoidance Rules (GAAR) effective 1 April, 2017 is also welcome.

Many recommendations of the Easwar Committee for simplification of laws have been adopted by the Income Tax department. It is hoped that its suggestions such as withdrawal of provisions on ICdS, which have the potential for creating litigation and uncertainty for tax-payers and conflict with Government’s objective of creating an environment for ease of doing business in

India, will also be considered favorably.

India has been actively involved in the OECd discussions on the BEPS Action Points and has already introduced some changes by way of common country-by-country reporting, master-filing documentation, and an equalization levy for advertising revenues earned by foreign companies. Going forward, recommendations relating to interest cost disallowance, tax avoidance measures, and transfer pricing based on value contributions, may be considered. however, we must guard against over-complicating the law, which may trigger fresh disputes. Balancing the need for attracting investments in the Indian economy while adopting the recommendations under the BEPS agenda will be crucial.

Another welcome move has been the settling of the long-standing controversy of exemption from short term capital gains to foreign investors investing through Mauritius. Providing for a phased withdrawal of capital gains exemption and grandfathering past investments proves the Government’s determination to bring certainty in taxation and provide a level playing field to all foreign investors in respect of their capital gains taxation in India. There are indications that capital gains tax exemption provisions will be revisited for other treaties, including Singapore and the Netherlands.

A number of tax changes implemented over the last couple of years seek to revive growth and investment and promote domestic manufacturing. In this endeavor, the reduced tax rate for new manufacturing companies, extending the benefit of deduction for employment of new regular workmen, and changes to the customs and excise duty rates on inputs, are expected to have a significant impact on India’s manufacturing sector.

Going forward, the Government should iron out persistent on-the-ground issues such as unreasonable demands and summoning of senior executives and directors of companies over minor issue of interpretation of the law. Further, improvement in the dispute prevention/ resolution mechanisms like the Advance Pricing Agreements (APAs) and Authority for Advance Rulings (AARs) will provide much-needed relief to the tax-payers.

In the words of the Finance Minister, India has fashioned tax policies for the 21st century. Its tax administration cannot afford to lag behind.

This article was contributed by rajiv memani, Chairman, CII National Committee on Taxation, and Chairman, India Region and Emerging Markets, Ernst & Young llP


COVER STORY COVER STORY

Base Erosion and Profit Shifting (BEPS) refers to tax planning strategies that exploit gaps and mismatches in the tax rules to

artificially shift profits to low or no-tax locations where there is little or no economic activity. This undermines the fairness and integrity of tax systems because businesses that operate across borders can use BEPS to gain competitive advantage over enterprises that operate at a domestic level. Moreover, when taxpayers see multinational corporations legally avoiding income tax, it undermines voluntary compliance by all taxpayers.

The BEPS project came into existence in November 2012 when the Finance Ministers of G20 countries expressed the need to contain the increased level of shifting of profits to tax-friendly jurisdictions with minimal change in the manner of carrying out business operations. Pursuant to this, in February 2013, the Organization for Economic Co-operation and development (OECd) published its first formal report on BEPS. The crux of the report indicated that, due to lack of coordination between the tax administrators of countries and inconsistent tax practices and interpretations, multinational companies legitimately structured their business models using profit shifting arrangements by deploying multiple tax-saving techniques, leading to tax leakages. Also, with a significant shift in the manner in which business is being carried out around the world, the current interpretation and adoption of tax regulations have somewhat become redundant.

For instance, e-commerce transactions have shrunk the world in such a significant manner that companies do not require physical presence in a country for undertaking business activities. These transactions do not fall within the meaning of Permanent Establishment (PE) agreed under the tax treaty laws between two countries. This enables entities to account for their profits in a jurisdiction where the taxation is the least.

The report was an eye-opener for the nations of the world. The need to tackle BEPS was approached with greater conviction. In July 2013, the OECd developed a

BePs in India

comprehensive action plan to tackle BEPS in a holistic manner. As part of this approach, it was intended to develop 15 Action Plans that would be implemented by countries that had agreed to form part of the BEPS project. Some of the issues/ areas which these Action Plans focused on were – addressing the tax challenges of the digital economy, prevention of treaty abuse, artificial avoidance of PE, enhancing effectiveness of dispute resolution mechanisms, country-by-country reporting under transfer pricing, transfer pricing of intangibles, etc. These Action Plans centered around three aspects: coherence of tax outgo at the international level, realignment of taxation and substance, and transparency, coupled with certainty and predictability.

Post this, drafts of the Action Plans were issued from time to time and the G20, OECd and other participating countries worked together to provide their views. After two years of intensive work, most of the proposed plans were completed, and final reports were issued in October 2015. The final BEPS package containing recommendations has been divided into four broad categories: Minimum Standards, Strengthening Existing International Standards, Common Approach, and Best Practices. The Action Plans were also divided into these categories.

The OECd is now working on finalizing Action Plan 15 on Multilateral Instruments. work on this project is intended to be completed by the end of this year. This ‘master document’ would update the global network of more than three thousand bilateral tax treaties entered into between countries. The Multilateral Instrument would ensure implementation of BEPS measures in tax treaties in a seamless manner without requiring the countries to individually renegotiate their bilateral tax treaties.

however, even though a comprehensive multilateral instrument is being created, this does not preclude countries from agreeing to amend their tax treaties through bilateral negotiations. 2016 is a crucial year since the manner of implementation of the BEPS project by countries would begin to unfold. The participating countries are likely to

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TaxaTion in india

The BEPS action plans aim to address the tax challenges of today’s

inter-connected and digital world


COVER STORY

initiate implementing the BEPS suggestions gradually in their tax regimes.

India has collaborated and contributed in a significant manner throughout the genesis of these Action Plans by the OECd. Also, India is amongst the front-runners in implementing some of the suggestions made in these plans. In the Finance Act 2016, India has introduced certain key provisions which have a live connection with the BEPS project, such as Country-by-Country Reporting (CbCR) and equalization levy on digital advertisements, which are in alignment with the Action Plans on Transfer Pricing and taxation of digital transactions.

In addition to these steps, the much talked-about tax treaty between India and Mauritius has been amended. The amendments are in line with the intent to prevent base erosion through treaty shopping. Recent media reports have suggested negotiations are in progress for amending treaties with Cyprus, Singapore and the Netherlands. These developments reinforce that India is not leaving any stone unturned for adopting the BEPS principles in a proactive manner.

with limited tools available as of now for interpreting these new provisions, it would be interesting to wait and watch as to how the Indian tax authorities would react to these changes. This is imperative, especially when India is trying to make a conscious effort to create an investor-friendly business environment. A larger thrust on implementing and interpreting these changes in a mature manner would help India remain competitive in the global business arena.

This article was contributed by neeru ahuja, Chairperson, CII Sub Group on BEPS, and Partner, deloitte haskins & Sells llP.

Gst: An idea whose time has come

India’s Goods and Services Tax (GST) has seen a chequered journey for the last six years. Successive governments have been trying to create consensus with the spirit of cooperative federalism to

implement this historic indirect tax reform to create a common market, removing cascading, to spur domestic manufacturing and exports.

we are now at the cusp of this reform becoming a reality. The present Government engaged with the entire political spectrum and the States through the forum of the Empowered Committee to create a consensus for the smooth passage of the Constitution Amendment Bill in Parliament. The Government’s intent is evident from the fact that the Union Cabinet has endorsed crucial amendments to the Bill, addressing the concerns of the States and the Opposition, namely, removal of the 1% origin tax, compensation to the States for 5 years, and changes in the construct of dispute resolution. The removal of the 1% origin tax will go a long way in assuaging Industry’s concerns of this imperfection in a destination-based regime.

The only area of dispute that remains is the capping of the moderate GST rate within the Constitution Amendment Bill. The States clearly opposed this move in the Empowered Committee meeting on 26 July 2016 and thus have set the stage for capping of this rate in the law in some form.

Another important milestone has been the release of the Model GST law for stakeholder consultation. The law has been an honest attempt given the dual GST structure, although the convergence of Center and State legacy mind-set has resulted in provisions which will require improvements. CII engaged with policy-makers through its tax and industry committees to try and improve this draft law with suitable recommendations.

One of the key objectives of the GST regime is to eliminate the significant cascading of taxes that prevails in the current Central and State levies. It is heartening to note the attempt by the Model GST law to widen the input tax credit pool, though some minor changes are required to ensure complete clarity.

The second aspect is valuation provisions. Going forward, the GST envisages the concept of ‘transaction value’ for the supply of goods and services which will be a departure from the MRP-based taxation

The GST is an indirect tax reform that will have

various touchpoints across a business, and will

require significant management bandwidth in

its implementation journey

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This article was contributed by Harishanker subramaniam, Chairman, CII Core Group on GST, and National leader- Indirect Tax Services, Ernst & Young llP

prevalent in excise/ customs for goods across several sectors like FMCG, retail, consumer electronics, and pharma, etc. This will create valuation challenges especially on inter-company stock transfers/ transactions. Services transactions would be even more onerous with such provisions. In a GST-like regime where tax will be charged at every stage of value addition across the B2B chain with credit flow, it may be better to explore an invoice value/ payment system to avoid disputes.

with dual GST, the Services sector, especially telecom, financial services and several others, will now have to deal with multiple registrations on the basis of their presence and supplies in the States. This would be an issue from a compliance and ease of doing business perspective. These sectors have had several interactions with law-makers to explain their predicament. A potential solution is to explore the ‘large tax payer unit’ model to carve out a regime with minimal registration at the primary place of business, and use IGST for inter-state transactions to ensure revenue to the States, on the basis of the nature of the transactions. This will require engagement by these sectors with the States to evolve a simpler compliance model, which addresses the concerns of the States.

The ‘Place of Supply’ rules for both goods and services is another important feature of the GST law that requires thorough understanding to ensure that these provisions do not impede the credit flow in the envisaged GST model. Equally important are transition provisions. Businesses will have inventories of both inputs and finished goods embedded with legacy taxes and duties on the date of transition. It is critical that the provisions are such that there is minimal credit loss, failing which this could have significant cost implications for Industry. dispute resolution mechanism is another area that requires changes for early certainty and speedier resolution to avoid the current regime of protracted litigation.

while feedback and engagement on the Model GST law is critical, it is equally important to understand the GST compliance construct. The GST Network (GSTN) will play a key role in this space as all compliances will be electronic, including the critical aspect of input tax credit-matching. Periodic engagement with the GSTN is more of a dialogue process with several interactions in a month through prescribed returns.

This will require companies to look at their IT capability to report correctly and consistently across their value chain. Timely and proper transaction reporting with timely tax payments both by companies and their vendors will become critical from a monitoring perspective for effective utilization of credit to avoid cash flow issues.

The GST is an indirect tax reform that will have touchpoints across business, and will require significant management bandwidth in its implementation journey. It offers organizations an opportunity to reorient their business structure and leverage costs.

Place of effective Management

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TaxaTion in india

Corporate residence now has a new determining parameter– where its place of effective management, in that year is, in India

There is plenty of prose in PoEM, the acronym for ‘Place of Effective Management’, a legal provision

applicable w.e.f 2016-17 onwards.

Essentially, corporate residence now has a new determining parameter– where its place of effective management, in that year is, in India. That means the place where key management and commercial decisions that are necessary for the conduct of business of an entity as a whole are, in substance, made.

Brought into the statute to align with global concepts, besides countering shell companies outside India but controlled and managed from India, the law will be supplemented by guiding principles, expected to be finalized shortly.

Conceptually, PoEM is not unfamiliar. It is an eligibility criterion under the Tonnage Tax provisions, besides representing a tie-breaker test in double Taxation Avoidance Agreements, to resolve cases of dual residence. The OECd, under its recent BEPS paradigm,


recommends that dual residence be resolved mutually by the competent authorities of the two countries concerned, applying relevant factors, including PoEM.

The draft guidelines essentially provide a two-pronged examination for determining PoEM, while mentioning that the exercise would be driven by the facts and circumstances of each case, and that substance would override form. Also, activities over each previous year will be considered, as against a snapshot approach.

The primary test covers ‘active business outside India’ (ABOI) which is achieved when

• Passive income (income from transactions whereboth the purchaser and sale of goods is from / to associated enterprises, and income by way of royalty, dividend, capital gains, interest or rental income) is less than 50% of total income

• Less than 50% of the company’s total assets aresituated in India

• Less than 50%of the total number of employeesare situated in India or are resident in India

• Payroll expenses incurred on such employees areless than 50% of its total payroll expenditure.

(Average data of previous year and two years prior to be considered.)

An ABOI situation coupled with clearing a basic Board of directors test that requires a majority of meetings to be held outside India, shall lead to a presumption of PoEM outside India.

however, if it is established that the holding company or other Indian residents exercise their powers of management of the company, and not the Board, then the PoEM will be in India.

The alternate test is a two stage process which involves

• Identifying the persons who actually make keymanagement and commercial decisions for the business

• Determining the place where such decisions aremade.

The guiding parameters include the location where the board of directors meets regularly, and the directors exercise the authority to govern and make the key decisions. Ideally this would be where the head office is situated, or predominant activity is carried out. For determining the head office, the guidelines envisage different degrees of decentralization of management and provide for alternate parameters such as the place where the senior management is predominantly based,

or meets, or normally returns to, or where the highest level of management and support staff are located.

It recognizes that technology can render physical presence redundant and suggests that the residence of the persons taking key managerial and commercial decisions could be a factor. If the authority to make key decisions is delegated to senior management or committees and routinely ratified by the board, the location of the original decisions will represent the PoEM.

The secondary factors for determining PoEM include the place where the main and substantial activity is carried out, or the place where the accounting records are kept.

The guidelines state that conclusive evidence of PoEM in India would not be constituted merely on account of a wholly-owned foreign subsidiary, or some directors residing in India, or the local management for Indian activities being situated in India, or support functions in India that are preparatory and auxiliary in character.

PoEM, as a residence test, could have multiple consequences, intended and unintended, and needs to be applied as a tax avoidance deterrent rather than a revenue-mopping exercise. Considering the magnitude of its impact, a safe harbor may be justified based on, for example, the tax rates of the other countries involved, or income amounts, listed companies, etc.

Shareholder activities such as providing guidelines, polices, co-ordination, monitoring or decisions by the holding company on the sale or modification of rights attached to its investments, dissolution or liquidation of the company, etc need to be clearly excluded from the realm of PoEM.

The definition of ‘passive’ vs ‘active’ income may merit a review in the context of the established role of entities in a structure, for instance, holding companies, IP holding or finance companies, and their typical income streams and activities.

The wide and subjective sweep of coverage portends some challenges in implementation. Tax payers need to map out their PoEM situation, and educate stakeholders, besides maintaining adequate documentation to support their position, in order to prevent an unwarranted PoEM label.

This article was contributed by s Gayathri, Member, CII National Committee on Taxation, and Senior VP & head direct Taxation, Essar Energy Business

COVER STORY


the Financial Architecture for MsMes in India

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msmes

The Micro, Small and Medium Enterprises (MSME) sector is a critical component of India’s growth story, making significant contributions

to GdP, employment and exports. Born out of individual skills and initiatives, with a low per unit cost of production, MSMEs display high operational flexibility, good propensity to adapt to technological advancements, and strong capacity to innovate and utilize locally available human and material resources, which highlights the importance of these organizations for the nation’s economic prosperity and social development.

According to estimates by the Ministry of MSME, these enterprises contribute around 38% of the national GdP, 45% of the overall exports and 40% of the national industrial output. Around 51 million MSMEs spread across the country provide employment opportunities to around 120 million people.

In spite of their crucial role in shaping the country’s economic landscape, access to finance continues to threaten the vitality and viability of enterprises in this sector. The gravity of the issue can be estimated by the fact that around 93% of all MSMEs are outside the coverage of formal financial channels. According

Key Issues and Government Action


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the Greening of Indian Industry

to a report by the International Finance Corporation released in November 2012, there was a total finance requirement of `32.5 lakh crore in the MSME sector, which comprised of `26 lakh crore of debt demand and `6.5 lakh crore of equity demand. Of the overall finance demand, 78%, or `25.5 lakh crore, was either self-financed or from informal sources. Formal sources catered to only 22% or `7 lakh crore of total MSME debt financing.

As per data from the Reserve Bank of India, aggregate credit outstanding from scheduled commercial banks to MSMEs has in aggregate increased from `6.87 lakh crore in 2012-13 to `9.66 lakh crore in 2014-15, a compounded annual growth of 19%. however, the share of the sector in net bank credit has steadily declined over the years. The problem is more serious for micro enterprises requiring small loans, and first generation entrepreneurs. Equity as a source of financing is under-utilized, and the prevalence of investment by venture capital and angel investors is low, due to lack of awareness about MSMEs as well as the absence of formal governance structures.

MSMEs in India thus rely on friends and family as sources of equity. They also face the problem of delayed payments from their buyers, which are mostly large corporates. This adversely impacts their working capital as well as their next cycle of production by affecting their ability to service existing debt. MSMEs lack adequate information about the various schemes and benefits offered by the Government. In some cases, they lack the technical know-how and the necessary wherewithal to furnish the required information to avail these schemes.

There is a need for widening the delivery of credit. Formal financial institutions face challenges in credit risk assessment of MSMEs, due to the absence of financial information, including historical cash flows, credit track record, and tools to assess credit risk. Outreach to MSMEs, on-boarding them as customers, building up transaction and credit history, and scaling up the utilization of various schemes available is challenged by the lack of a formal legal structure, the non-corporate nature of much of the sector, and the absence of a centralized database and system which can be used to target and track these enterprises.

In an attempt to analyze the financial travails of this sector, the department of Financial Services set up

a ‘Committee to Examine the Financial Architecture of the MSME sector,’ under the stewardship of Mr KV Kamath, President, New development Bank, and Past President, CII, in October 2014. The Committee suggested measures to open up the flow of funds to MSMEs by developing technology-driven platforms for financial inclusion, the establishment of a receivables financing platform, a seven-fold increase in the corpus of the Credit Guarantee Trust for Micro and Small Enterprises, and expansion in the coverage of credit bureaus to include a wider range of credit institutions.

Other top recommendations by the Committee include the creation of an apex national MSME authority to target registration, build linkages between stakeholders and act as a grievance redressal forum; ensure a bank account for every registered MSME; push for compliance simplification in the Companies Act, llP Act and the Income Tax Act; and increase equity flow through dedicated MSME funds.

The Government has launched the MUdRA Bank with a corpus of `20,000 crore and a credit guarantee fund of `3,000 crore to fund small and micro units. Set up as a subsidiary unit of SIdBI, the Bank has already succeeded in reaching out to a large number of micro enterprises.

About 1.5 crore new entrepreneurs have received financial support from various banks and microfinance institutions to set up small businesses under the Pradhan Mantri Mudra Yojna, which was launched last April to support small entrepreneurs. Overall, 3.22 crore new as well as existing entrepreneurs have been sanctioned loans, with women entrepreneurs accounting for about 78% of the total number of borrowers. Funds like the India Aspiration Fund and the SIdBI Make in India for Small Enterprises further add to the financial options made available for MSMEs by the Government.

The national agenda to promote the healthy growth of domestic MSMEs needs to cover a wide range of topics, such as encouraging market access, productivity enhancement, providing a sound competitive environment, formalization of informal MSMEs, capacity development, a concessional business regulatory environment, and technology adaptation for innovative MSMEs. Access to finance needs to form a crucial pivot of such comprehensive national MSME policies.


Expanding the financial access of MSMEs has long been a focus of CII’s MSME developmental roadmap. Recognizing the importance of

expanding the financial access of Indian MSMEs as well as to ensure that these enterprises are provided with credit at cost effective rates to meet their demand for working capital as well as for expansion and diversification, CII has set up an online MSME Finance Facilitation Center (CII FFC). The Centre was launched by Mr Kalraj Mishra, Minister of Micro, Small and Medium Enterprises, in the presence of Mr Madhav lal, Secretary, Ministry of MSME, in New delhi in June 2014.

The Center provides advisory and credit facilitation support to MSMEs, operating as a one-stop-shop, aggregating financing options from multiple large financial institutions. MSMEs can apply for their fund requirements through an online portal set up at mycii.in and gain access to multiple banks and NBFCs partnered by the Center, including the State Bank of India, Indian Overseas Bank, ICICI Bank, Indian Bank, Federal Bank, SIdBI, dhFl, Muthoot Fincorp, Reliance Capital and Religare Finvest, among others.

The CII FFC has received a very encouraging response: business proposals worth over `700 crore from a diverse range of sectors have been processed through the Center since its launch in June 2014.

Further, it has also been observed that delays and other issues related to credit delivery to MSMEs are primarily due to a lack of understanding of the various schemes offered by the

banks and financial institutions as well as the procedures and documentation required for processing credit from the banks. In order to enhance the financial literacy of Indian MSMEs, the CII FFC generates awareness amongst Indian MSMEs by organizing conferences, roadshows, and online webinars. It has also created an online FFC Academy which provides sessions on topics like financial management, credit rating, costing, project management, etc.

The CII FFC roadshows bring stakeholders together and facilitate discussions on measures required to bridge the demand–supply gap in MSME financing. The Center has organized more than 25 roadshows across the country, enabling MSMEs and bankers to interact with each other and understand each other’s concerns, and share information on various financing products and schemes. A series of such awareness sessions have been held in Tier II and Tier III cities across the country.

The Center has launched MSME Credit Rating Services as a new vertical to create awareness amongst MSMEs about ratings, and advise them on practices to follow to improve their ratings. The Center has partnered

with CRISIl, and discussions are in progress to partner with other leading rating agencies this year. CII FFC is also planning to launch new services like SME Compliance & Advisory Services, and SME Insurance.

CII has submitted its inputs to the KV Kamath Committee, the Standing Advisory Committee by the Reserve Bank of India, and other governmental and non-governmental bodies. Some of the recommendations include:

• Allow 120 days for MSMEs

expanding Financial Access for MsMes

Kalraj Mishra, Minister of MSME, at the launch of the CII SME online Finance Facilitation Center in New Delhi in June 2014, with Madhav Lal, Secretary, Ministry of MSME; Chandrajit Banerjee, Director General, CII, and

representatives of some partnering banks

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The CII FFC is a financial construct for MSMEs, making funding considerably easier to obtain in all corners of the country

The globalized nature of business has led to the emergence of boundary-less markets which are only conducive to the growth of the most competitive businesses capable of

attuning themselves to the changing environment. lack of access to adequate and timely credit at competitive cost significantly hampers the comparative advantage that Indian MSMEs enjoy owing to their flexibility in operations, low unit cost, use of regional and local resources, etc. Pervasive efforts are needed to leverage and improve upon the existing MSME financial architecture in order to create a new financial construct wherein financing is considerably easier to obtain, available in all corners of the country, and at competitive rates of interest.

In this regard, the CII Finance Facilitation Center attempts to provide a critical service by addressing the demand supply gap in MSME funding and spreading financial literacy amongst Indian MSMEs. The resounding success of this initiative is evident in the processing of loans worth `700 crore. The Center is continuously evolving, and will soon penetrate other crucial areas in the MSME funding space such as credit ratings, insurance, and financial reporting and compliances.

In the backdrop of emerging needs, new financial services are needed to address the challenges of technology upgradation and modernization, marketing finance, infrastructural facilities, venture capital, microfinance and factoring assistance. The incidence of NPAs in MSMEs is sizeable and this aspect needs to be addressed. An efficient system of receivables factoring/discounting must also be developed for addressing the recurring concern of delayed payments. Expanding the access to finance for MSMEs will not only provide a concerted push to the MSME sector but will also generate collateral benefits for the financial sector, boost employment generation, and support the economic growth of the country.

promoting financial literacy

sreekant somany is Chairman, CII National MSME Council, and CMd, Somany Ceramics ltd

for classification of Non-Performing Assets

• L im i t i n te res t onb o r r o w i n g t o a maximum of base rate plus 2.5%

• Setupdedicatedbanks,as well as equity funds, specifically for MSMEs

• Increase the corpus ofthe Credit Guarantee Trust Fund for Micro and Small Enterprises (CGTMSE) Scheme seven-fold from `4,000 crore to about `28,000 crore over the course of five years

• Implement the TradeReceivables electronic discounting System (TRedS) for the discounting of MSME bills

• Reserve 25% of fundallocation for women entrepreneurs.

Given the importance of MSMEs in the Indian economy, all stakeholders must come together and act in synergy to assist in identifying strategies to expand the availability of equity funds for MSMEs through various existing and new financing options.

To e n a b l e M S M E s to contribute 50% of India’s GdP by 2024, it is necessary to create an enabl ing f inancia l environment. Sustained focus on development of the MSME space is critical to sustain the value generation process through the supply chain, and for the overall economic health of the country.


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Inspections and regulatory enforcements are critical for the smooth functioning of businesses. These visits or checks

are conducted by authorized officials on products or business premises, activities, documents, etc to verify and promote compliance with various official regulatory requirements across a range of areas, including labor laws, taxation, health, safety, and environment protection.

however, inspections in India have often been found to be excessive, imposing significant costs on businesses. The multiplicity of laws and compliances combined with a poorly-integrated inspection system is especially burdensome for Micro, Small and Medium Enterprises (MSMEs) which lack scale economies to deal with the costs and other requirements of a plethora of rules and inspections. A manufacturing company in India, on average, has to comply with nearly 70 laws and regulations. As many as 40 inspectors and government functionaries are authorized to visit factories per annum under various laws and acts!

CII organized a Policy dialogue Session on ‘Inspections and Regulatory Enforcements for MSMEs in India’ on 11 July in New delhi to facilitate discussion on measures to simplify and rationalize the inspection system and reduce the regulatory enforcements for Indian MSMEs.

The complicated and cumbersome inspection system in India, especially for MSMEs, is due to the opacity of the rules, lack of coordination between national, State-level and local compliances, duplication and multiplicity of procedures and regulations, and lack of adequate training and qualification criteria for inspectors.

In order to tackle the problem of Inspector Raj, the Government has announced a host of labor reforms which include initiatives such as the Shram Suvidha Portal for online compliance for 16 out of 44 labor laws,

the Random Inspection Scheme, amendments to the Apprentice Protsahan Yojna, etc. Although these are significant steps in revising the inspections system in the country, sustained efforts are required to rid Indian industry of the prevailing Inspector Raj.

Mr Ashok Saigal, Chair, Sub-Group on Ease of doing Business, CII National MSME Council, and Md, Frontier Technologies Pvt ltd, urged the participants at the roundtable discussions to identify and focus on key priority areas for inspections and regulatory enforcements applicable to MSMEs, and deliberate on measures to simplify and rationalize these. he listed the priority areas as labor laws, sales tax, income tax, environment and pollution-related compliances, and export-import related compliances.

The discussions centered around providing recommendations to address the key challenges with respect to each of the priority areas identified.

Key Recommendations Environment and pollution-related compliances

• Building enhanced awareness amongst MSMEsregarding various environment and pollution-related compliances

• Leveraging technology to develop computerized

Dr Alka Kaul, Chair, Sub-Group on Women Empowerment, CII National MSME Council, and Director, Horizon Industrial Products Pvt Ltd; Ashok Saigal, Chair, Sub Group on Ease of Doing Business, CII National MSME Council, and MD, Frontier Technologies

Pvt Ltd; and Sujith Haridas, Deputy Director General, CII, at the MSME Policy Dialogue Session, in New Delhi

Inspections and regulatory enforcements for MsMes


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systems for compliances

• Notificationof ‘WhiteCategory’enterprises,whichare low risk and can be exempted from environment and pollution-related compliances, at the national and State level

Simplification of labor compliances

• State-level labor law reforms

• Linkages between departments for sharinginformation common to compliances

• Drafting of a model simplified Shops andEstablishments Act to be shared with State Governments

Tax-related compliances

• Abolitionofthesubmissionofhardcopiesofvariousdocuments

• Timelines for clearances and returns

• GreaterflexibilitytoMSMEsformeetingcompliancerequirements

Mr. Indranil Choudhury, Co-Chair, Sub-Group on Ease

of doing Business, CII National MSME Council, and CEO, lexplosion Solutions Pvt ltd, suggested some additional measures towards improving the ease of doing business for MSMEs and promoting a healthy and vibrant economy. These include revocation of redundant and obsolete laws, reduction and eventual abolition of paper-based transactions for compliances, single window online systems, enhanced sharing of data and information between different regulatory authorities appointed by the Government, and shifting the focus of inspections from collection of fines and penalties to greater compliance, among others.

The discussions highlighted that the key challenge for Government is to develop and apply enforcement strategies that achieve the best possible outcomes by achieving the highest possible levels of compliance, while keeping the costs and burden as low as possible for organizations, especially MSMEs. This will be crucial for inspections to achieve their desired outcome, which is to improve the efficiency of businesses, rather than placing disproportionate burden on them.

A

Publication

Therefore I want to appeal [to] all the people world over, from the ramparts of the Red Fort, ‘Come, make in India’, ‘Come, manufacture in India.’

PRIME MINISTER SHRI NARENDRA MODISpeech on Independence Day of India, 15 August 2014

For price and orders, please contact [email protected]

With Insights From:

Adi Godrej Cyrus P Mistry Sumit Mazumder Adil Zainulbhai Deep Kapuria Sunil Kant Munjal Anant J Talaulicar Hari S Bhartia Sunil Mathur Banmali Agrawala Jamshyd N Godrej TV Narendran B Prasada Rao Naushad Forbes Venu Srinivasan Chandrajit Banerjee Rahul Bajaj Vinayak Chatterjee C Narasimhan Sanjay Lalbhai YC Deveshwar


the ‘Make’ Procedure in detail and seek clarifications. Senior officials from the Ministry of defence and the Indian Armed Forces also made presentations on potential ‘Make’ Projects for Industry’s participation.

Incubation of UAV Technology in IndiaGiven the projected requirement coupled with the recently-issued tenders for acquisition of various types of Unmanned Aerial Vehicles (UAVs), CII and the directorate General of Artillery, Indian Army, organized an interaction on ‘Incubation of UAV Technology in India’ on 5 July in New delhi.

Industry was invited to make presentations on its capabilities in the UAV sector during the session. To enable companies to gain maximum benefit from this platform, a parallel technology and product display was also organized to demonstrate Industry’s capabilities to the end users. The event was well attended by senior officials from the Indian Army, Indian Air Force, Indian Navy, Indian Coast Guard, paramilitary forces, IIT Chennai and Kanpur, and CEOs of global and Indian defence and aerospace companies.

sectorscapeDefence CII Delegation to Farnborough International Airshow 2016

The Farnborough International Airshow (FIA) is a global showcase for the aerospace industry, and attracts a truly international audience. A CII defence and Aerospace Industry delegation, led by Mr Baba Kalyani, Chairman, CII National Committee on defence, and Chairman, Bharat Forge ltd, and Mr S P Shukla, Co-Chairman, CII National Committee on Aerospace, and Group President, Mahindra & Mahindra, visited FIA 2016 from 11-17 July, in london, UK.

The delegation had several key engagements with various country pavilions like UK, USA and Canada. The CII members also visited Cranfield University to study the latest technological advancements in the defence and aerospace sector.

The visit to the house of Commons, included a brief about cloudBuy and www.ciitrade.com. The delegates also had a meeting with Mr Navtej Sarna, high Commissioner of India to the UK, in london.

Session on ‘MAKE’ The Ministry of defence approached CII to organize a session on ‘Make’ Procedure (dPP 2016) and Potential Projects under ‘Make’ Category’ with Mr Ashok Kumar Gupta, Secretary (dP), Ministry of defence. The unprecedented event on 25 July in New delhi marked the beginning of a new era in the sector, with the Ministry of defence reaching out to Industry to facilitate the ease of doing business, and bring in the much-needed transparency.

The closed-door session with the top management of over 80 companies, was held to enable them to understand

Baba N Kalyani, Chairman, CII National Committee on Defence, and Chairman, Bharat Forge Ltd; Ashok Kumar Gupta, Secretary (DP); Surina Rajan, Additional Secretary (DP); and Sanjay Garg, Joint

Secretary (DIP), all from the Ministry of Defence, at a session on ‘Make’ in New Delhi

Members of the CII Delegation with Navtej Sarna, High Commissioner of India to UK, in London


Healthcare 2nd Health & Immunization Conference

The 2nd health and Immunization Conference, with the theme of ‘leveraging the last mile opportunity in Immunization’ was organized by CII recently in New delhi, in partnership with Godrej & Boyce.

The global effort to use vaccination as a public health intervention began when the world health Organization (whO) launched the Expanded Program on Immunization in 1974. The Ministry of health and Family welfare launched the Universal Immunization Program in 1985 - a major public health intervention in the country and one of the largest immunization programs in the world. In the inception phase the goal was to extend immunization services to cover 85% of all children and 100% of pregnant women by 1990.

“The Government is targeting to immunize 85% of the child population in the country in the next two years,” stated dr Jagdish Prasad, director General, health Services, who was the Chief Guest at the conference. Mooting a synergy of policy between the Government and Industry in the health sector, he said the Government is ready for all types of linkages and partnerships - with Industry, international players, civil society organizations, and innovators, to achieve 100% immunization. Cold chain logistics and management need to be developed for far-flung areas and this is where we need innovations from the private sector. These innovations must be cost effective and affordable, he said.

dr Prasad visited the Innovation Gallery which showcased the work of innovators from across India in the space of strengthening cold chain technologies and logistics, a critical cog in the wheel for delivering successful immunization programs.

“Immunization and healthcare is of critical importance as a part of the entire mission of ‘health for All.’ Therefore, a high degree of accuracy and efficacy in delivery of vaccines is crucial,” said Mr Jamshyd Godrej, Past President, CII,

immunization cover in indiaIndia runs one of the largest immunization programs across the globe and its biggest success has been the polio immunization campaign. Today, India is polio-free – a goal achieved by consistent and strong political will and support from multiple stakeholders, including international co-ordination. however, much remains to be done: the current immunization coverage is 62%, against a sustainable threshold of over 80%. India faces a huge challenge in ensuring immunization to its 27 million new-born every year. Nearly 44% of young children do not get the full schedule of vaccines and are at risk of contracting life-threatening diseases (and causing disease outbreaks in their communities). Every year, one million children in our country die before they are five years old.

and Md & Chairman, Godrej and Boyce.

dr Nachiket Mor, director, India Country Office, Bill and Melinda Gates Foundation, emphasized that the solution lies in innovation. To provide affordable and quality healthcare, we need to innovate with technologies within the cold chain management system, and target to vaccinate every child, he said.

“Adult and adolescent vaccines are areas that require work, and can bring a big impact in healthcare delivery. The barriers to be addressed are lack of awareness, difficulties in regulatory set-up, limitations in access and affordability, and manufacturing and distribution challenges,“ felt Mr K G Ananthakrishnan, Co-Chair, CII National Committee on Pharmaceuticals, and Vice President & Md, MSd Pharmaceuticals.

Key Recommendations• Increase use of InformationTechnology to develop

user friendly sustainable solutions.

• Adapt best practicesof different sectors to strengthen the immunization supply chain.

• Collaborate for expandingpartnerships beyond the traditional Public Private Partnership (PPP) model.

• Promote p i lo ts andoperational research.

• S e t - u p / d eve l o p a ninnovative model vaccine center in the PPP mode.

• Leverage CSR initiativesfor s t rengthening the immunization program.

Dr Nachiket Mor, Director, India Country Office, Bill and Melinda Gates Foundation; Jamshyd Godrej, Past President, CII, and MD & Chairman, Godrej and Boyce; Dr Jagdish Prasad, Director General, Directorate General of Health Services; and K G Ananthakrishnan,

Co-Chair, CII National Committee on Pharmaceuticals, and Vice President & MD, MSD Pharmaceuticals, at the 2nd Health & Immunization Conference, in New Delhi

SECTORSCAPE


PERSPECTIVE

energy

The walkman was a stellar invention. The Ipod went a step further, and today’s smartphones have ensured that a gramophone or a tape

recorder is consigned to a place of respect in our collective memory. Sony and the likes of Apple in the internet era have succeeded in transforming consumer behavior. Music can now be carried on person in highly efficient electronic devices. Sound quality has improved and one’s favorite music is just a click away. The way music is created, packaged, marketed and consumed has been transformed.

while our nation grapples with multiple challenges on the social and economic front, it is imperative that reforms usher in a change in consumer behavior to realize the intended impact. Efficient economic outcomes will be difficult to achieve without concomitant changes in consumption patterns. A case in point is the Central Government’s repeated attempts at pulling the discoms out of the red. No amount of isolated financial restructuring and introduction of new technology can bring in consumer discipline.

Populism will have its way and a large chunk of consumers will continue to pay a tariff much below the cost of the service. It would be great if the in-built cross subsidy of the annual tariff order could offset the subsidy, but that’s a distant dream. discoms depend heavily on budgetary support from State Governments and borrow much beyond their means from the market. On an average, billing efficiencies are nothing to write home about, and collection efficiencies can drive a sane banker to the verge. losses are blamed on agriculture and, in the absence of real time technology-driven monitoring, it has become very difficult to ascertain

who is consuming what and paying for how much.

Being power surplus by no means implies that we should use the resource inefficiently. There is an urgent need to ring in far greater consumption and measurement discipline. while reforms like Supervisory Control and data Acquisition (SCAdA) are a welcome step, they fall short of impacting the consumer psyche. The focus should be on measures which impact the drawing room decision of a consumer. To that end, pre-paid energy has the potential to impact consumption behavior across a broad spectrum.

while the utilities stand to gain in terms of reduced interest burden, theft reduction, better planning for short term energy purchases, arrear realization and lower bill collection costs; from the consumer’s perspective, a pre-paid recharge would imply greater consumption discipline and economy. In addition, a built-in ‘Time of the day’ tariff a la the STd tariffs of yore, is expected to modify consumption behavior during peak hours, thereby positively impacting capacity peaking.

however, the introduction of a pre-paid regime comes with a set of challenges. Pre-paid meters are priced 3-5 times higher than single phase digital meters. A utility would be required to bear the one-time cost of swapping existing digital/electromechanical meters with pre-paid meters. A distribution company with about 30 lakh consumers would have to deploy a phased investment of about `800-1,000 crore on meters alone. Secondly, vending cost driven by choice of technology and location of recharge needs to focus on consumption ease. Vending machines/recharge counters located at public common services centers

‘A pre-paid energy regime could be a game-changer’Pre-paid energy has the potential to impact

consumption behavior across a broad spectrum


may be a good beginning.

Another challenge which merits concern is the number of tariff lines which can be programmed into the meter and the possibility of tariff revision during a recharge period. This may be addressed by limiting the recharge period and guaranteeing tariff for the period of recharge. In addition, a flexible approach towards the credit limit across slabs may be warranted as different consumption patterns impact the distribution network/billing differently. Finally, arrears collection can be eased into the new regime by pre-programming a percentage of recharge towards outstanding arrears. This methodology can be put to good use in government offices. Government is the biggest defaulter. Assumed transfer pricing within the Government on account of budgetary support to discoms continues to put the latter under financial duress.

Not only will the discoms be equipped with a tool to recover long-pending arrears, this will also provide Government with an effective check on pilferage and theft. Industry should be the next door to be knocked at, followed by domestic consumers.

Internationally, while England has been the pioneer in adopting a pre-paid energy regime, countries like Bangladesh, South Africa and New Zealand have benefitted largely in terms of changed consumer behavior and collection efficiency improvements.

The financial sector’s exposure to gencos and discoms runs into lakhs of crores of rupees. There is a need for UdAY reforms today, as the previous versions of financial restructuring could not impact discom efficiency to the desired level. If distribution companies continue to seek out incremental measurement-oriented reforms, another financial restructuring is round the corner.

we need a game changer a la walkman. we need more responsible consumption. while not a panacea, pre-paid energy may directionally be the right approach to impact consumption behavior for the good.

This article by Kartikeya misra, director, Industries, Government of Andhra Pradesh, was first published in the Financial Express on 27 July. The views are personal.

PERSPECTIVE


The outlook for India’s exports could be challenging for the current year as GdP growth rates in India’s top ten export partners are expected to decelerate.

India’s exports contracted for 18 consecutive months till May 2016, but saw positive growth in June, raising hopes that the slide may have bottomed out.

India’s export performance during 2015-16 was impacted by the slowdown in global growth and trade, the drop in oil prices, and exchange rate fluctuations. As global growth following the Brexit referendum and China’s slowdown will moderate further, proposed policy measures on the trade facilitation and trade promotion side must be intensified to alleviate the challenges faced by exporters.

The International Monetary Fund (IMF), in its post-Brexit world Economic Outlook of July 2016, reduced the forecast for world growth by 0.1 percentage point, to 3.1% for 2016. The world trade volume of goods and services is expected to grow at a slower pace of 2.6% in advanced markets in 2016, as compared to 3.8% in 2015. In emerging economies, the volume of trade would pick up pace from 0.6% in 2015 to 2.9% in 2016.

India’s top ten export partners – USA, UAE, hong Kong, China, UK, Singapore, Germany, Saudi Arabia, Bangladesh and Sri lanka – accounted for half of its total exports in 2015-16. GdP growth rates in eight of these ten countries, barring Germany and Bangladesh, are expected to fall in 2016 as compared to 2015, according to the IMF.

In 2015-16, Indian exports to all ten of its top export destinations contracted. while the contraction in exports to USA was the lowest at (-)4.8%, it was the sharpest for Saudi Arabia at (-)42.7%,largely on account of the steep fall in exports of petroleum products. Exports to

FOCUS

exports

China too declined by over 24%!

Post-Brexit forecasts show that the US, India’s largest export destination, will grow at a marginally slower pace in 2016. As the US accounts for over 15% of India’s exports, we could target further building exports to that country.

India’s second largest market, the United Arab Emirates, is forecast to deflate in 2016, and exports to that country could remain subdued due to a decline in oil prices as forecast by the IMF. Exports to hong Kong depend strongly on diamonds, which experienced a sharp drop in value as well as volumes in 2015-16.

India’s exports to China comprise a large proportion of primary products and prices can be expected to remain around current levels for these, going forward. Moreover, China’s demand for these commodities depends on its policies on stockpiling and dealing with excess capacities. GdP growth in China was 6.7% for the first half of 2016.

with its top ten export partners comprising just half of its aggregate exports, India should devise strategies for boosting exports to smaller export destinations.

In terms of items, the export value of petroleum products, India’s top export item, came down by over $26 billion in 2015-16 as compared to the previous year. This comprised more than half of the aggregate value of decline in exports. The IMF expected oil prices to drop by close to 16% in 2016 in its July Outlook update.

The Government ratified the world Trade Organization (wTO) Trade Facilitation Agreement in April and is in the process of establishing the National Committee on Trade Facilitation. The Committee would help to fast-track export clearances and streamline administrative procedures, adding to the ease of doing business and lowering transaction costs.

Global slowdown could challenge India’s exports

This article was contributed by sharmila Kantha, Principal Consultant, CII.

GdP growth rates in eight of India’s top ten export markets are expected to fall in 2016, calling for intensified policy measures for trade facilitation and promotion


Engaging with the world

A high-profile CEOs delegation, led by dr Naushad Forbes, President, CII, and Co-Chairman, Forbes Marshall, visited the UK from 6 - 7 July. The visit

aimed to restore confidence in India-UK business ties, despite the turmoil in the markets caused by Britain’s exit from the European Union (EU). The delegation of 22 CEOs, one of the largest from CII to the UK in recent times, met with diverse stakeholders – including government, parliamentarians, industry and academia, to strengthen the overall strategic and economic imperatives.

CII’s annual conference on ‘The Future of India-UK Economic Relations,’ supported by the Confederation of British Industry (CBI) and regional partner, Scottish development International (SdI) was held to coincide with the visit of the delegation. Mr Chandrajit Banerjee, director General, CII, opening the proceedings, urged the business community to focus on a positive outlook. while the current scenario is challenging in many ways, it is also full of great promise and opportunity, he said.

dr Naushad Forbes called on the two governments to

seize the unprecedented opportunity and negotiate a fresh trade agreement, given the first mover’s advantage in the current scenario.

Mr Jo Johnson MP, UK Minister of State for Universities & Science, UK, expressed the intent to continue the strong collaboration with India in science and technology “Through our commitment to build on our research collaborations we will ensure both countries lead the world in new technologies, new scientific endeavours and new discoveries,” he said.

The panel lists in the business session featured senior members of the CII delegation, including Ms Shobana Kamineni, President designate, CII, and Executive Vice-Chairperson, Apollo hospitals Enterprise ltd, and Mr Rakesh Bharti Mittal, Vice President, CII, and Vice Chairman, Bharti Enterprises. Nearly 200 participants attended the conference from a cross-section of stakeholders – British, Scottish and welsh companies, Indian companies in the UK, and representatives from UK government departments, chambers of commerce,

cII ceos Delegation to the UK

Sir Dominic Asquith, High Commissioner of India to the UK; Keith Brown MSP, Cabinet Secretary of the Economy, Scotland; Dr Naushad Forbes, President, CII, and Co-Chairman, Forbes Marshall; Jo Johnson MP, Minister of State for Science and Universities, UK;

Navtej Sarna, High Commissioner of India to the UK; Chandrajit Banerjee, Director General, CII, and Carolyn Fairbairn, Director-General, CBI, at CII’s annual conference on ‘The Future of India-UK Economic Relations’ in London

Raghu Kailas, National Chairman, CII Young Indians, and MD, Unimo Exports Pvt Ltd; Sumit Mazumder, Immediate Past President, CII, and CMD, TIL Ltd; Dhruv M Sawhney, Past President, CII, and CMD, Triveni Turbine Ltd; Shobana Kamineni, President Designate, CII, and

Executive Vice Chairperson, Apollo Hospitals Enterprise Ltd; Rakesh Bharti Mittal, Vice President, CII, and Vice Chairman, Bharti Enterprises; Ajay S Shriram, Past President, CII, and Chairman & Sr Managing Director, DCM Shriram Ltd, and Mark Runacres, India Advisor for the

Confederation of British Industry



both British and foreign, investment/ development agencies, city councils, academics and media.

The CII delegation met with Rt hon Sir desmond Swayne, Minister of State for International development, UK, to discuss collaborations in capacity-building and skill development. CII members also interacted with UK MPs, including Ms Seema Malhotra, Mr Alok Sharma, Ms Valerie Vaz, lord Karan Bilimoria, Baroness Virginia Bottomley, Mr Mark Pritchard, Mr Bob Blackman and Mr Stephen Timms, at one-on-one meetings, and during an exclusive India interaction at the house of Commons. The bipartisan interaction of CII leadership with MPs and Peers in westminster, held in collaboration with the Indo-British APPG, and supported by Grant Thornton, infused new ideas and energy. The MPs and Peers were presented with copies of ‘India Meets Britain 2016,’ a report on the 800+ fastest-growing Indian companies in the UK, which boast a collective turnover of GBP 26 billion, and support 110,000 jobs.

A select group of special guests from government, industry and institutional partners attended a grand CII reception at westminster Abbey, a majestic and historic venue, to celebrate CII’s 121st anniversary.

On day 2, the delegates interacted with the Commonwealth Enterprise and Investment Council, to facilitate SME partnerships and met new CommonwealthFirst Export Champions, a group of 25 innovative, mid-sized businesses who will soon be on their first trade mission to India, supported by CII. Rt hon hugo Swire, Minister of State for the Foreign and Commonwealth Office, UK, also addressed the gathering.

A meeting at the Royal Society brought forth science and technology applications for meeting India’s societal and development challenges. Prof lord Kumar Bhattacharyya, Chairman, warwick Manufacturing Group joined the discussions on utilizing India’s academic institutions as R&d hubs, fellowship exchanges, satellite imaging for agricultural monitoring, and other applications in manufacturing and technology.

CII and International Unit collaborated on an Industry-University roundtable with vice

chancellors/ Pro-VCs/ deans and academics from 15 leading UK universities. hosted by dame Nicola Brewer, Vice-Provost (International), University College london, the discussions ranged from education policy and reversing the decline in Indian students at UK universities, to enhancing academic collaboration by faculty, student and intern exchanges, and explored the possibility of a joint internship program.

lord Mayor Alderman, the lord Mountevans of london, hosted the CII delegation at a CII-City of london FinTech Investors Roundtable. The discussion examined the benefits of investing in fintech start-ups in london, as well as the possibilities of innovation–based collaboration with India.

The delegation also met Mr Rajesh Agrawal, recently appointed deputy Mayor of london, for an in-depth discussion on the implications of Brexit on Indian companies in the UK and in India.

Prince Andrew, duke of York, who met the delegation at Buckingham Palace, expressed optimism about the UK’s economic and strategic future post-Brexit, and about developing the India-UK economic relationship further. The discussions spanned the ongoing work under the ‘Pitch at Palace’ Foundation, set up to support entrepreneurs from around the globe through mentorship and network-building.

As a grand finale, for the visit, Mr Navtej Sarna, high Commissioner of India to the UK, hosted a dinner reception at India house. he invited the business leaders to share their candid views and observations about the mission and on the way forward. The majority of them were optimistic and positive, keen to seize the moment, albeit uncertain, and made a case for both sides, at the Government and Industry-level, to forge deeper bilateral economic ties.



first person

The dates for the CEOs delegation to the UK, CII's annual exercise to reinforce India-UK economic and

strategic relations, were set for the first week of July. The overall agenda for two days, spanning 14 specific meetings with a host of diverse stakeholders, planned over the last 4 months, down to the last detail, was set.

In the last week of June, Brexit happened. The British Prime Minister resigned. And then, nearly half the Shadow Cabinet resigned!

As we absorbed the initial shocks and turbulence from governments and markets alike, many asked, is this the right time to visit the UK for this goodwill exercise? will the UK have time for India right now? will we achieve anything?

while we contemplated canceling the visit, we quietly tried to feel the pulse behind the scene.

A noted MP, now a junior Minister in the new Cabinet said at the time, "If I was luke-warm about meeting the Indian CEOs delegation earlier, I am definitely hot about it now." I think that, pretty much, sums up the future of UK-India relations in the post-Brexit era: hot.

Needless to say, we went ahead with

the delegation's london visit, and we were met, well, warmly. we expected the agenda to unravel like a ball of yarn, but surprisingly, very little changed.

At the annual CII UK conference on ‘The Future of UK India Economic Relations,’ supported by the Confederation of British Industry and regional partner, Scottish development International, Jo Johnson, Minister of State for Science and Universities, started by saying that Brexit does not mean that the UK would become more inward-looking. “I want to reassure you about any uncertainty as the UK enters a new phase... more than ever we are going to be an outward-looking, adventurous, optimistic country,” he said. he also announced that the India-UK Technology Summit, a major bilateral initiative to be held from 7-9 November this year in delhi, would go ahead with the UK's full support, as planned.

Our meetings over the next day and a half only confirmed this notion of UK's openness and optimism.

First, we met nearly a dozen MPs and Peers at westminster, including desmond Swayne, Alok Sharma, Bob Blackman, Mark Pritchard, Seema Malhotra, Stephen Timms, Valerie Vaz, Karan Bilimoria, and

India and the UK Building on Fundamental strengths

Our overall economic and strategic engagement with the UK has shifted with Brexit. But the emerging opportunities are encouraging, says Dr Naushad Forbes


Virginia Bottomley, among others.

All of them recounted interests or close personal ties to India, with new ideas and energy to infuse into the bilateral relationship. On top of the agenda was focus on the possibility of fresh India-UK trade agreement negotiations, which may now be easier to accomplish at a bilateral level. we discussed enhancing tourism between the two countries, collaborating on skills and capacity-building programs, and even tying up cultural elements with business, to celebrate 2017 as the UK-India Year of Culture.

An outstanding meeting brought together representatives from several leading British universities. The opportunities to collaborate seemed limitless and we all wished we had had more time to interact.

we met with the Commonwealth Enterprise and Investment Council and discussed collaboration for small and midsized businesses. Over 25 SMEs have been identified by the Council to be led into their first trade mission to India. The companies showcased their innovative business ideas for application in India and for building partnerships with Indian companies.

A meeting at the Royal Society proved that there was much untapped potential in utilizing science and technology-based solutions to address global and societal challenges in development.

we learned more about the Fintech ecosystem in the City of london at a meeting with the Alderman, the lord Mayor, and fintech investors and entrepreneurs.

An impromptu meeting with the just-appointed deputy Mayor of london, Rajesh Agrawal, assured the business community that london will always stay open for business, and that they were making every effort to ensure london's access to single market benefits.

An outstanding dinner hosted by our high Commissioner, Navtej Sarna, brought our visit to a close, with an opportunity for a final sharing of views. All agreed that

the timing of our visit was fortuitous. we stressed the importance of India approaching the UK as an old friend that could be relied upon.

we should not, however, discount real uncertainties that businesses are faced with. Indian companies operating in the UK have expressed concerns on single market tariffs, passporting rights, the patenting and IPR regime, and ease in global talent mobility, all of which will be determined, bit by bit, in the terms of the UK's exit from the EU. They will have to adjust to the new reality of life outside the EU.

we must keep a close eye on unfolding developments and emerging policies, and take every opportunity to communicate our top priorities to policy-makers in India and the UK as Brexit proceeds.

The swift appointment of a new Cabinet under Prime Minister Theresa May is an encouraging start, lending some stability to a fragmented landscape. The appointment of a Brexit Minister will ensure that the interests of the business community, domestic and foreign companies in the UK alike, are well considered, and the appointment of the International Trade Minister will be key to taking forward any discussion on bilateral trade and investment agreements.

Our overall economic and strategic engagement with the UK has shifted with Brexit. But considering emerging opportunities in building a fresh trade pact, strengthening technology and innovation collaboration, enhancing tourism, encouraging fintech, enabling entrepreneurship, and exploring untapped potential, everything does seem like ‘business as usual.’

The fundamental strength of our relationship with the UK is the base on which we must build.


dr naushad forbes is President, CII, and Co-Chairman, Forbes Marshall


HUnGAry

Ties with Hungary CII and the Embassy of hungary organized a meeting of Mr Péter Szijjártó, Minister of Foreign Affairs and Trade, hungary, with a very small select group of CEOs on 5 July in New delhi.

The CEOs, representing the automotive, renewable energy and water sectors, discussed the possibilities and opportunities for cooperation and investment in hungary, as also for hungarian companies to invest in India.

Mr Madhav Shriram, Chairman, CII delhi, and deputy Md, dCM Shriram Industries ltd, spoke briefly on the positive changes taking place in the Indian economy through various reforms and campaigns undertaken by the Government.

InDonesIA

CEOs Delegation to Indonesiadr Naushad Forbes, President, CII, and Co-Chairman,

CII CEOs Delegation with Saleh Husin, Minister of Industry, Indonesia, in Jakarta

Péter Szijjártó, Minister of Foreign Affairs and Trade, Hungary, and Madhav Shriram, Chairman, CII Delhi, and Deputy MD, DCM

Shriram Industries Ltd, at an interaction in New Delhi


Forbes Marshall, led a high profile delegation of Indian CEOs to Jakarta, Indonesia, on 18-19 July. The visit aimed to enhance economic engagement between the two countries, considering the huge potential which still remains untapped and new opportunities that have emerged. The visit was also a follow-up to the India visit of the Indonesian Transportation Minister in February.

The delegation had call-on meetings with Mr Saleh husin, Minister of Industry; Mr Ignasius Jonan, Minister of Transportation, and Coordinating Minister for Economic Engagement with India; Mr Thomas Trikasih lembong, Minister of Trade; and Mr A M Fachir, Vice Minister for Foreign Affairs. They also interacted with Mr Tamba hutapea, deputy Chairman, Investment Coordinating Board of Indonesia (BKPM), and members of the ASEAN Secretariat based in Jakarta.

A business session with the Chairmen and members of the Chamber of Commerce and Industry (KAdIN), and the Indonesian Employers Association (APINdO), was organized on 18 July.

Speaking at the session, dr Forbes stated that with bilateral trade of $15.9 billion in 2015-16, Indonesia has emerged as India’s largest trading partner in the ASEAN region. There is considerable potential for expanding trade between the two countries in automotive components, automobiles, engineering products, IT, pharmaceuticals, bio-technology and healthcare, he said.

Mr Adi Godrej, Past President, CII, and Chairman, Godrej Group, highlighted the potential areas for collaboration between the two countries and the initiatives and reforms undertaken by the Government of India.

The visit included a Business Meeting with the Jakarta City Government, organized by the Embassy of India in association with CII, with the Governor of Jakarta as the Chief Guest. There were presentations on specific


PortUGAl

Horasis India MeetingCII, along with horasis, the City of Cascais, and the Portuguese Government, co-hosted the 8th edition of the horasis India Meeting on 3-4 July in Cascais, Portugal.

The horasis India Meeting gathered a host of decision-makers from business and government from Portugal, Europe and other parts of the world, to discuss India's role in the global economy and to shape the country's future direction. This meeting assumed importance in the wake of the changing realities of the global economic stage and the sustained growth momentum that India has begun to gain over the last 24 months.

Addressing the Meeting, Gen (dr) V K Singh (Retd),

Minister of State of External Affairs and Overseas Indian Affairs, India, observed that, despite excellent ties and constructive cooperation in multilateral fora, bilateral trade and investment relations between India and Portugal, while warm, are well below potential. “while this is perhaps reflective of the global economic situation, it demonstrates fairly clearly that our two countries need to do much more to tap into the tremendous economic opportunities and synergies that exist between us. with shared commonalities, Indian businesses need to look at Portugal as a key European trade and investment partner and a cost-competitive entry point and launch pad for their forays into European and lusophone markets across the world,” he suggested. he also spoke about the reforms taking place in the Indian economy, and the steps taken to ease the process of doing business.

Gen V K Singh said that the EU has emerged as India’s largest trade partner as well as a leading partner in India's transformative socio-economic agenda. The EU and its Member States are actively collaborating with India in its ambitious flagship initiatives, and forging 'win-win' partnerships that provide commercial opportunities for European businesses while contributing

Augusto Santos Silva, Minister of Foreign Affairs, Portugal, Gen (Dr) V K Singh (Retd) MInister of State of Foreign Affairs and Overseas Indian Affairs, India, Dr Frank Jurgen

Richter, Chairman, Horasis, and Chandrajit Banerjee, Director General, CII, at the Horasis India Meeting at Cascais

Dr Naushad Forbes, President, CII, and Co-Chairman, Forbes Marshall; Miguel Pinto Luz,

Vice Mayor of Cascais and the city administration, and Dr Frank Jurgen Richter, at the Cascais

Town Hall

Rakesh Bharti Mittal, Vice President, CII, and Vice Chairman, Bharti Enterprises Ltd; Shobana Kamineni, President Designate, CII, and Executive Vice Chairperson, Apollo Hospitals Enterprise Ltd; Ricardo Costa, MD, Expresso; Gunjan Sinha, Chairman, MetricStream, and Rajive Kaul,

Past President, CII, and Chairman, Nicco Engineering Services Ltd, at the Horasis India Meeting at Cascais


sectors like waste water treatment and management, renewable energy, and IT.

Presentations on the Indian economy and the opportunities for collaboration were made during the business meetings.


to India's socio-economic development, by bringing in much-needed best practices, investment, skills, technologies and human resources. India and the EU are now working together for enhanced collaboration in key areas, including security, counter-terrorism, trade and investment, energy, science and technology, health, water, and stepped-up mobility for legitimate travelers, he said.

Mr Manuel Caldeira Cabral, Minister of Economy, Portugal, discussed how the two nations can forge closer links through cultural exchanges and investment.

dr Naushad Forbes, President, CII, and Co-Chairman, Forbes Marshall, who led a 20-member CII CEOs delegation to the Meeting, highlighted India’s attractiveness as an investment destination for Portuguese and other companies. The Indian Government, he said, has been working on ‘tweaking the system’ in order to make it easier to do business in India. Initiatives such as Make in India, digital India, and Skill India, combined with a concerted effort to improve the ease of doing business, are beginning to bear fruit, he observed, pointing out that India has moved up 12 notches in the world Bank’s Ease of doing Business Report. FdI inflows have expanded by 23% in 2015-16 to $55.4 billion, which reflects international investor confidence in India, he said.

Portugal, said dr Forbes, has potential as a strong economic partner for India and as a base for Indian companies in Europe, given its trading ties with Britain and the EU and its good relationships with its ex-colonies and many countries in Africa.

The deliberations at this edition of the horasis India Meeting suggest that the end of the tepid growth period

Nirmala Sitharaman, Minister of State (Independent Charge) of Commerce & Industry, India, and Denis Manturov, Minister of Trade and Industry, Russian Federation, inaugurating the INNOPROM exhibition in Ekaterinburg, as Devendra Fadnavis,

Chief Minister of Maharashtra, Vasundhara Raje, Chief Minister of Rajasthan, and Chandrababu Naidu, Chief Minister of Andhra Pradesh, look on

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CII Business Delegation to INNOPROMINNOPROM is the main international Industrial trade fair in Russia, organized every year to showcase Russian and global engineering innovations. This year, India was the partner country at the fair, held from 11-14 July in Ekaterinburg, with strong representation from the Government of India, at both the Central and State level.

Ms Nirmala Sitharaman, Minister of State (Independent Charge) of Commerce and Industry, with a number of senior Government of India officials, Ms Vasudhara Raje Scindia, Chief Minister of Rajasthan, Mr devendra Fadnavis, Chief Minister of Maharashtra, and Mr Chandrababu Naidu, Chief Minister of Andhra Pradesh, with teams their respective governments, and a 25-member CII business delegation, led by Mr Shiv

is near and hopes of a steady recovery beginning 2017 are well founded, said Mr Chandrajit Banerjee, director General, CII.

The members of the delegation shared their perspectives on various subjects at sessions of the horasis India Meeting, including those relating to globalization and the rise of India, innovation, renewable energy, ‘Make in India,’ agri and food processing, manufacturing, and infrastructure, etc.

during the two days in Cascais, the delegates also met and interacted with Mr Manuel Caldeira Cabral, and Mr Augusto Santos Silva, Minister of Foreign Affairs, of Portugal, as well as with Mr Miguel Pinto luz, Vice Mayor of Cascais and the city administration.


Signing of the MoU between CII and the Moscow Regional Development Corporation


srI lAnKA

Trade with Sri LankaCII organized an interactive session of select CEOs with Mr Malik Samarawickrama, Minister of development Strategies and International Trade, Sri lanka, on 5 July, in New delhi.

Negotiations to sign an Economic and Technology Co-operation Agreement (ETCA), that is expected to help Sri lanka gain better access to India, have commenced, said Mr Malik Samarawickrama, adding that India-Sri lanka bilateral ties have deepened considerably since Mr Maithripala Sirisena took over as President of Sri lanka in 2015. India is Sri lanka’s largest trading partner, and

CII members with Malik Samarawickrama, Minister of Development Strategies and International Trade, Sri Lanka, at an interactive session in New Delhi

the fifth-largest source of Foreign direct Investment in his country, he said.

Sri lanka is also negotiating similar trade agreements with China, its second-largest trade partner. This would provide an opportunity for Indian investors to set up base in Sri lanka and export to China with preferential access to that country’s market, said the Minister.

Infrastructure will continue to be a major focus for Sri lanka, he said, noting that the Government has reviewed 142 potential projects valued at over $40 billion to be implemented over the next 15 years. India can play a role in the rehabilitation of ex-combatants through infrastructure development and also by creating jobs in the services sector. Potential Indian investors would benefit from Sri lanka’s resilient economy, educated workforce, preferential access to large markets and rapid growth, he said, inviting investors to explore joint ventures with MSMEs.

Ms Renu Pall, Joint Secretary for the Indian Ocean Region at the Ministry of External Affairs, India, called for increasing the momentum of interaction between the two countries. She suggested that India and Sri lanka could send delegations every month to each other’s countries, focusing on specific sectors.

Mr Vinayak Chatterjee, Chairman, CII National Committee on Infrastructure, and Chairman, Feedback Infra Pvt ltd, who chaired the session, pointed out that Sri lanka is a priority destination for Indian companies, and many are already present in the country.

Khemka, Member, CII International Council, and Vice Chairman, SUN Group, attended the event. A large number of Indian companies exhibited their capabilities at INNOPROM 2016, which showcased the technology and engineering prowess of as many as 60 countries, including Russia.

Ms Nirmala Sitharaman, Mr denis Manturov, Minister for Industry & Trade, Russian Federation, and Mr Yevgeny Kuyvashev, Governor, Sverdlovsk Region, inaugurated the India Pavilion. The CII delegation actively participated in sessions on India, and the Indian States.

CII signed a MoU with the Moscow Regional Cooperation at the Russia-India Business Forum, in the presence of both Indian and Russian Ministers.


Business session at INNOPROM 2016


Portfolio for excellence

Green Business MoU with Indian Railways CII, in the presence of Mr Suresh Prabhu, Minister of Railways, and Mr Manoj Sinha and Mr Rajen Gohain, both Ministers of State of Railways, inked a MoU with Indian Railways for Green rating and studies on energy efficiency of production units, in New delhi on 26 July.

The intent of the MoU is to implement the CII Green Company (GreenCo) Rating for all Indian Railways factories and workshops and also implement activities for further accelerating energy efficiency.

The CII GreenCo rating system, the first-of-its-kind in the world, is a robust evaluation process which rates the degree of environmental performance of a company.

As part of the MoU, ICF Perambur, dlw in Varanasi and a workshop in Perambur will be considered for GreenCo rating in 2016. Further, an initial set of activities on capacity-building, engagement with technology suppliers and energy efficiency awards for Indian Railways units will be undertaken during 2016-17. Interactions with engineering and auto companies in the private sector will also be organized in the form of meetings and missions, to facilitate learning from peers.

MoU signing between CII and Indian Railways, in the presence of Suresh Prabhu, Minister of Railways, and Manoj Sinha and Rajen Gohain, both Ministers of State of Railways, in New Delhi

In days to come, CII would also partner with Indian Railways in the design of green buildings the development of green railway stations, and for green procurement policies.

The MoU was inked by Ms Kalyani Chadha, Executive director, Mechanical Engineering (w)/Railway Board, and Mr S Raghupathy, deputy director General, CII.

Green Power 2016 The 15th edition of Green Power, held on 30 June and 1 July in Chennai, focused on scaling up private sector investments in the renewable energy sector, policy initiatives, finance facilitation, national and international trends and technologies, strategies to promote green power, innovative financing tools, and corporate initiatives and success stories.

Mr P Thangamani, Minister of Electricity, Prohibition

P Thangamani, Minister of Electricity, Prohibition and Excise, Tamil Nadu, addressing Green Power in Chennai


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and Excise, Tamil Nadu, stated that the State would generate, 3,000 Mw of power through solar rooftops in the next three years, powering about 3 lakh households and aiding rural electrification.

dr Jagmohan Singh Raju, Additional Chief Secretary, and CMd, Tamil Nadu Energy development Agency, said the State Government is planning to develop ‘green villages’ by making use of locally available resources to produce power.

Key Recommendations

1. long-term policy stability needs to be assured by the Central and State Governments to ensure investor confidence and better bankability of projects. Also, there is a need to create a uniform template and consistent terms for power purchase agreements across all States.

2. Stricter enforcement of Renewable Purchase Obligations (RPO) across all States through an amendment of the Electricity Act or the Indian Penal Code is the need of the hour. The RPO should include renewable thermal energy obligations too. Penalty should be levied for non-compliance. Also, the States need to be incentivized for exceeding their RPO. This would significantly support the growth of the Renewable Energy Certificate (REC) market and industrial consumption.

3. A significant proportion of the corpus from the National Clean Energy Fund (NCEF) should be allocated to the Renewable Energy sector. with the coal cess now increased to `400/tonne, periodic outflow towards project financing from this fund must be earmarked. A major area where the NCEF can be considered is in financing of the secondary debt market.

CII on WorldGBC BoardMr S Raghupathy of CII was elected to the Board of directors of the world Green Building Council (worldGBC) for a 2 year term, starting July 2016. The Indian Green Building Council (IGBC) is one of the founding members of the worldGBC, and CII has been representing India on the council right from its inception in 2002.

The worldGBC is a network of national Green Building Councils in more than 100 countries. It works closely with country councils to promote local green building actions and address global issues such as climate change. Its Board of directors comprises of senior leaders from 15 Green Building Councils around the world, including India, Australia, Colombia, USA and Jordan.

The Future of Media

The CII-Suresh Neotia Centre of Excellence for leadership organized a session with Mr Jawhar Sircar, CEO, Prasar Bharati, on the ‘Future of Media’ on 22 July in Kolkata.

Mr Sircar, dwelling upon the changing facets of the media industry, explained why ‘digital’ would hold sway over other forms of media. In a country of about 1.3 billion where more than 65% of the population is under 35 years, digital is the future, he said.

The digital industry in India is on a high growth trajectory, and, going by revenue trends, the market would double in two years from the current `82 billion to `154 billion in 2018, he said. India is currently the second-largest telecommunication market and has the third highest number of internet users in the world. There is a significant potential for growth and penetration, especially in rural areas, he added.

The Prasar Bharati CEO said that liberal and reformist policies along with strong consumer demand have led to rapid growth in the Indian telecom sector. The Government has created an easy market access for telecom equipment and a fair and proactive regulatory framework has ensured availability of telecom services to consumers at an affordable price. The deregulation of FdI norms has made the sector one of the fastest-growing and one of the top five employment generators in the country, he observed.

Mr Vi resh Obero i , Chai rman, CI I Nat ional Committee on e-Commerce, and Md & CEO, mjunction services ltd, who chaired the session, offered a brief overview of the tectonic shifts in the world of media.

Centre of Excellence for Leadership

Viresh Oberoi, Chairman, CII National Committee on e-Commerce, and MD & CEO, mjunction services ltd, and Jawhar Sircar, CEO,

Prasar Bharati, at a session in Kolkata


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Manufacturing Excellence

Gold Sash Program

The 2nd batch of the Intensive Program on Manufacturing Excellence, the Gold Sash, for industry professionals, was initiated in Mumbai on 11 July. launched by the CII Naoroji Godrej Centre of Manufacturing Excellence, the course aims at developing leaders within industry to set new benchmarks and carry forward next practices. The program offers a wide ranging, ever-evolving and game-changing portfolio of courses.

Highlights

• Industry-driven program, therefore `industryfriendly.’

• Strong on manufacturing strategy and futuristictrends,with a `HowTo’ approach.

• Focusonbothprocessanddiscretemanufacturing.

• Provides a rounded approach, encompassing bothtechnical and management aspects, to change outlooks from being production-oriented to manufacturing-oriented.

The participants were from Bharat Bijlee ltd, Chemtrols Industries ltd, Forbes Marshall Pvt ltd, KhS Machinery Pvt ltd, UTh Beverages, weikfield Foods Pvt ltd, Blue Star ltd, Electrotherm (India) ltd, Galaxy Surfactants, KK Nag ltd, and Siemens ltd.

Scenarios and Strategies CII is spearheading an initiative, the ‘Future of Jobs’,

Participants of Gold Sash Batch 2 in Mumbai

aimed at creating greater understanding of the transformational forces shaping industry, engaging different stakeholder groups, and developing directions for government policies and business strategies, with an aim to create more competitive enterprises. The initiative involves the full-fledged participation of the department of Industrial Policy and Promotion (dIPP), and prominent member companies.

The first workshop, held in Mumbai on 8 and 9 July, brought together 30 thought leaders from diverse groups, for a generative scenario planning process to find ‘known unknowns’ in a fog of complexity. After intense discussion and debate, eight key drivers for jobs and employment growth in the country, were identified:

• Education trends

• Technologyevolution

• Informal/ unorganized sector evolution

• Infrastructuregrowth

• Agri and rural evolution

• Future shapeof enterprise

• Access to capital

• Government policies-understanding currentconstraints

These drivers, as well as their interactions, shape the eco-system that creates the condition of ‘jobless growth’, which needs to be corrected.

Eight specific teams have been formed to learn more about each of these drivers.

The next step would involve combining the knowledge gathered and to see clearly the shape of the system. The team will meet in September to discuss the individual outcomes and to relate the selected drivers cohesively, to arrive at an outcome.

At the workshop on Jobs Scenario and Strategies in Mumbai


Food and Agriculture 39th Session of Codex Alimentarius Commission

COdEX Alimentarius is a set of international food standards, guidelines and codes of practice for the safety, quality and fairness of the international food trade. India is one of signatories of COdEX, and the Food Safety and Standards Authority of India (FSSAI) is the nodal point of contact, representing Indian Industry’s concerns on standard formulations to facilitate trade.

CII was a member of the Indian delegation at the 39th session of the COdEX Alimentarius Commission held in Rome, Italy, from 27 June to 1 July. The delegation, led by Mr Ashish Bahuguna, Chairperson, FSSAI, included representatives from Indian Industry. Various emerging issues were discussed such as anti-microbial resistance, use of antibiotics as growth promoters/supplements in intensive farm practices like the poultry sector, and usage of new chemicals in various food products and their standards. Revisiting the Maximum level (Ml) of heavy metals in various foods, and new standards for fruits and vegetables, were also discussed.

CII is working with FSSAI to represent India’s position in COdEX on these issues, in order to help create a conducive food regulatory ecosystem.

Analytics of Food Safety ElementsReducing the risk of food-borne hazards is possible only by advances in Analytics of Food Safety Elements. It is a continuous loop of detecting such food safety elements to their lower levels and developing protocols to control and monitor them in the food supply chain from farm to fork. Globally, the focus is on food safety elements such as residue monitoring (pesticides, antibiotics, hormones, fungicides, etc) mycotoxins, pathogenic organisms, adulterants, allergens, and heavy metals, among others.

The CII – Jubilant Bhartia Food and Agriculture Centre of Excellence (CII FACE), continuing its objective of building capability in Food Safety and Quality, conducted a two-day certificate course on ‘Advances in Food Safety Analytics’ in partnership with the Association of Analytical Communities, India section, a renowned global organization, and VIMTA labs, a well-known name in food analytics in the country, at the latter’s state-of-the-art facility in Shameerpet, hyderabad, on 14-15 July. The program was held to not only review the current trends in food safety analytics, but also to build capability in Industry.

Around 25 delegates participated in the program representing both food processing companies and government bodies, including Britannia Industries, Ravi Foods ltd, Global Green Co, National Research Center on Meat, Punjab Biotechnology Incubator, and the Indian Council of Agricultural Research (ICAR), to name a few.

Building on this program, CII FACE is planning to conduct two detailed parallel master classes on this subject during the National Food Safety and Quality Summit to be held on 7 december in New delhi.

At the Certificate Course on Advance Food Analytics in Shameerpet, Hyderabad

Tarun Bajaj, Director, APEDA; Ashish Bahuguna, Chairperson, FSSAI; Meetu Kapur, Executive Director, CII; Sunil Bakshi, Advisor,

FSSAI; and P Karthikeyan, Assistant Director, FSSAI, at the 39th session of the Codex Alimentarius Commission, in Rome

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SME Competitiveness CII Clusters T h e c o n c l u d i n g ceremony of the CII-Bata Supplier Cluster 3, which was launched about a year ago, was conducted on 1 July in Gurgaon, while the CII Godrej OEM vendor Cluster 5 concluded on 27 July in Mumbai. The clusters reported achieving savings of `73 lakh and `42 lakh respectively, during their journey towards excellence. The way forward for the motivated participants would be not only sustaining but improving on the achieved parameters.

The CII Cluster program works towards strategically creating fast, flexible and efficient manufacturing processes that connect supply chains to factory processes, production and distribution systems in a seamless, customer-centric manner.

Indo-German Manager Training ProgramThe training for the Indian leg of the Indo-German Manager Training Program (IGMTP) kicked off on 5 July in Gurgaon.

dr SS Gupta, Senior development Officer, department of Industrial Policy & Promotion (dIPP), Ministry of Commerce and Industry, India, advised the participating SME owners to not only focus on export / import but also on technology transfer and bilateral investments during the study and business tour. while training for the Renewable batch was conducted on 5-8 July, the International batch received training from 12-15 July.

“The dIPP is constantly working towards facilitating the Prime Minister’s vision of ‘Make in India.’ The IGMPT is one such program that can help Indian companies become more competitive,” said dr Gupta.

The program, that aims at enhancing the international business and economic potential of Indian enterprises by bringing them in contact with German enterprises,

CII-Godrej OEM Vendor Cluster 5 closing ceremony in Mumbai

has shown outstanding results.

The Indian leg of the training spans topics like macro and micro economic factors, foreign trade, cross-cultural communication, international economic relations, hR management, etc.

Some common objectives of the participants include:

1. Acquisition of sick units in Germany

2. learn the German way of manufacturing

3. develop technical collaborations with German Industry

4. Invite German companies to invest and manufacture in India

5. Explore joint ventures and bilateral investment.

Events & Activities 1 July, Gurgaon: workshop on ‘Team Building and Conflict Management’

5-6 July, Indore: Training program on ‘Cost Reduction Strategies in Manufacturing via Toyota Production System’

20 July, ludhiana: Training program on ‘Improving Quality in Manufacturing through Statistical Process Control’

26 July, Chandigarh: workshop on ‘Problem-solving, decision-making and Influence Skills’

28-29 July, Mumbai: Energy Management System (ISO 50001) Internal Auditor Certification Program.

Training program on ‘Cost Reduction Strategies in Manufacturing via Toyota Production System’ in Indore

Workshop on Problem solving, Decision making and Influence Skills in Chandigarh

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to the Ministry of Education heritage Centre.

Skilling In-service School Teachers The Right to Education Bill has been introduced to boost education in India, but reports suggest that the standard of teachers and teaching is not up to the mark. The implementation of the National Curriculum Framework 2005 places demands and expectations on the teacher, which need to be addressed by both initial and continuing teacher education.

To address this growing concern, the CII Institute of Quality has introduced a certification program in collaboration with Christ University, Bengaluru for up-skilling in-service teachers to improve quality in education.

The MoU for the In-service Certification in Teaching Excellence, CII INCITE, was signed by Rev Fr. Thomas, Vice Chancellor of Christ University, and Ms Greeta Varughese, Executive director, CII Institute of Quality on 18 July in Bengaluru. It aims to reinforce concepts through online e-learning content and face-to-face sessions from education experts from Christ University in a structured, result-oriented program.

QualitySchool Excellence Mission to Singapore

Most education reforms require simultaneous action at many levels – beginning with the leadership. The Education Excellence Team of the CII Institute of Quality, has been collaborating with the National Institute of Education (NIE) International, Singapore, to equip school leaders with the required skills to cope with 21st century demands. Four school excellence learning missions have been organized to Singapore, the fourth between 11-15 July.

This mission comprised 20 school leaders and administrators from 15 schools across India, representing a mix of legacy schools, new age schools and schools chains. It included a 5 day exclusively-designed training workshop on ‘School leadership in the 21st Century’ conducted by NIE, and visits to a junior college, a secondary and primary school, and

Exchange of MoU between CII IQ and Christ University, in Bengaluru

4th CII School Excellence Mission Members at NIE, Singapore

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Building capacitySkill Development India Skills Competition 2016CII has been supporting the biennial worldSkills International, the largest skill competition in the world since 2007. More than 1000 contestants below the age of 22 compete for gold, silver and bronze medals in over 46 skills over a span of four days. CII, through its regional and national workskills competitions, selects the best talent to represent India at the global platform.

In order to select the best talent to represent India at India Skills, the Ministry of Skill development & Entrepreneurship, and the National Skill development Corporation, conducted more than 80 regional competitions in 24 skills/trades including hair styling, welding, car painting, auto body repair, graphic designing,

Manish Kumar, MD & CEO, NSDC; Rajiv Pratap Rudy, Minister of State (Independent Charge) of Skill Development & Entrepreneurship; S Mahalingam, Chairman, CII Task Force on Sector Skill Council & Employment, and Former CFO, TCS, with the winners of the

Hair Dressing Competition, at India Skills 2016, in New Delhi

and robotics, to name a few. Close to 4820 candidates registered to participate in the competitions this year.

CII supported the skills of Beauty Therapy, Cooking, Confectionery, hair dressing, Mechatronics, Restaurant Service and welding. The skills were supported through active technical exchange from consortium partners such as the Sector Skill Councils on Beauty and wellness, Furniture and Fittings, healthcare, and Tourism and hospitality, as well as industry partners including Capell, Festo, Festool, lincoln Electric, Maruti Suzuki India ltd, and Mahindra & Mahindra.

Four regional competitions in each skill, a national competition on 15-16 July, and demonstrations in the skills of health and social care, and cabinet-making, were conducted to make India Skills a success. while each winner was awarded with `1 lakh, the silver

Glimpses of India Skills 2016


BUIldING CAPACITY

and bronze medallists received `75,000 and `25,000 respectively. All participants were given a Certificate of Participation.

The shortlisted candidates from these events will qualify for the final selection for the worldSkills International Competition to be held in Abu dhabi in 2017.

A team of 29 candidates from India participated in 27 skills and won 8 medallions of excellence, at the previous worldSkills International Competition 2015, held in Sao Paulo, Brazil.

Intellectual Property Rights Roadshows on IPR CII, along with the department of Industrial Policy & Promotion (dIPP), organized a series of IPR Road Shows at Goa, Surat, Indore, lucknow and haridwar. Senior officials from dIPP and the Intellectual Property Office (IPO) addressed the sessions across all the locations, to create awareness about Intellectual Property Rights and the advantages of IP filings. They also spoke about the recently-announced National IPR Policy 2016 which will benefit start-ups, businesses, academia, etc.

IPR Session with Custom & Police Officials

Taking forward its objective of building a strong and prolonged partnership between rights holders and enforcement agencies and to strengthen coordination between them, CII conducted separate orientation programs for police officials and custom officials in Patna, on 14 and 15 July.

Roundtables on National IPR Policy CII organized a series of roundtable discussions on

‘Implementation of National IPR Policy: Stakeholders Expectations’ in Kolkata, Patna and hyderabad, on 9, 14 and 22 July respectively. The sessions were held in association with the National University of Juridical Sciences in Kolkata, the Chanakya National law University in Patna, and the Centre for Intellectual Property Rights and Patent Facilitation Services, Osmania University, in hyderabad.

The sessions discussed a roadmap for effective implementation of the policy. The feedback and expectations from the stakeholders have been compiled for submission to the dIPP.

Patentability of Computer Related InventionsThe Andhra Pradesh Technology development and Promotion Center (APTdC) of CII, in association with the United States Patent and Trademark Office (USPTO) - Global IP Academy (GIPA), organized a seminar on ‘Patentability of Software and Computer-Related Inventions (CRI)’ on 22 July in hyderabad.

The seminar discussed various challenges, best practices and recent trends for protecting software and CRI worldwide, and the implications of the new guidelines released by the Intellectual Property Office (IPO).

Roundtable interaction on ‘Implementation of National IPR Policy’ in Hyderabad

IPR interactive session with police officials in Patna

Seminar on ‘Patentability of Software and Computer-Related Inventions’ in Hyderabad


Regional review

EASTERN REGIONE

Financial Market ConclaveAs India is giving a push to building a high-growth economy, robust industrial activity across sectors and creating new jobs, a thriving capital market could be a game-changer, said experts at the flagship Financial Market Conclave, held on 30 July in Kolkata.

There is Brexit, a slowdown in China, and falling demand, but big investments happen only in times of disturbances, said Mr Navneet Munot, Chief Investment Officer, SBI Mutual Fund.

while Mr Tamal Bandyopadhyay, Adviser, Bandhan Bank ltd, described this as perhaps the most bearish bull market ever witnessed, Mr Ridham desai, Md, head of India Research, Morgan Stanley, said India is the “best returning equity market in the world.”

Ms Barnali Mukherjee, Chief General Manager, Securities and Exchange Board of India (SEBI), explained that the role of a regulatory body is to decipher what is happening in the market, assess the potential benefits for the investing public, and protect their interests.

Mr d R dogra, Md & CEO, CARE Ratings ltd, said the factors which determine a thriving corporate debt market are tax reforms, participation from insurance companies and pension funds, credit enhancements, measures for attracting retail investors and developing

the municipal bond market.

Mr Manas Kumar Thakur, President, Institute of Cost Accountants of India, spoke of the need for inclusive

growth. Mr Bijay Murmuria, Chairman, CII (ER) Capital Market Core Committee, and director, Sumedha Fiscal Services ltd, felt that avenues for financing, such as FdI, bank credit, corporate bond market, equity market and external commercial borrowings (ECBs) need to be further developed to meet India’s huge infrastructure investment needs.

A CII-CARE Ratings report, ‘Growth drivers for the Financial Sector’ was unveiled at the inaugural session.

Interaction with Chairman, SEBI

CII Bihar organized an interactive session with Mr U K Sinha, Chairman, Securities and Exchange Board of India (SEBI) to present SEBI’s role in helping businesses, especially SMEs and MSMEs, access finance through the capital market, on 30 July in Patna.

Session with Commerce & Industries Minister, ChhattisgarhCoinciding with the 3rd CII (ER) Regional Council Meeting, CII Chhattisgarh organized an interactive session with Mr Amar Agrawal, Minister of Commerce & Industries, Chhattisgarh on 15 July in Raipur to

Bijay Murmuria, Chairman, CII (ER) Capital Market Core Committee, and Director, Sumedha Fiscal Services Ltd; Ravi Varanasi, CEO – NSE Academy and Group Head - Equity, Equity Derivatives, SME &

EPR, National Stock Exchange; D R Dogra, MD & CEO, CARE Ratings Ltd; C S Ghosh, Chairman, CII (ER) Economic Affairs, Finance & Taxation Sub-Committee, and MD & CEO, Bandhan Bank Ltd;

Barnali Mukherjee, Chief General Manager, SEBI; and Manas Kumar Thakur, President, Institute of Cost Accountants of India, at the Financial Market Conclave in Kolkata

S P Sinha, Chairman, CII Bihar, and Adviser, Bihar Hotels Ltd; U K Sinha, Chairman, SEBI; and T V Narendran, Chairman, CII (ER),

and MD, Tata Steel Ltd, at an interaction in Patna


give members a deeper understanding of the State Government’s efforts to transform Chhattisgarh into one of the most industry-friendly States in the country. Renewing his call for big-ticket investments, Mr Agrawal said the State Government is always there to help investors.

Mr Chhaganlal Mundhra, Chairman, Chhattisgarh State Industrial development Corporation, also shared his perspectives.

Interactive Session with DIPP Secretary16 July, Kolkata

The Government is keen to support start-ups, said Mr Ramesh Abhishek, Secretary, department of Industrial Promotion and Policy (dIPP), at an

interactive session.

Mr Rajiva Sinha, Principal Secretary, MSME and Textiles, west Bengal, said the State Government is promoting a culture of entrepreneurship, and is working on a plan to increase the number of incubators.

Mr T V Narendran, Chairman, CII (ER) and Vice Chairman & Md, Tata Steel ltd appreciated the efforts of both the Central and State Governments to increase the ease of doing business. CII has been working closely with the State Government to facilitate the ease of doing business, and many of CII’s

recommendations have found place in the industrial and other policies of the State, said Mr Umesh Chowdhary, deputy Chairman, CII (ER), and Vice Chairman & Md, Titagarh wagons ltd.

Mahendra Agrawal, Chairman, CII Chhattisgarh, and MD, Mahendra Sponge & Power Ltd; Umesh Chowdhary, Deputy Chairman, CII (ER), and MD, Titagarh Wagons;

Amar Agrawal, Minister of Commerce & Industries, Chhattisgarh, T V Narendran, Chairman, CII (ER) and MD, Tata Steel Ltd, and Chhaganlal Mundhra, Chairman,

CSIDC, at an interaction in Raipur

Umesh Chowdhary; Rajiva Sinha, Principal Secretary, MSME & Textiles, West Bengal, Ramesh Abhishek, Secretary, DIPP, and

T V Narendran, at an interaction in Kolkata

Roundtable on Bamboo with the existing regulatory regime slowing the growth of the bamboo sector and allied activities, the stakeholders have been seeking a review of regulations governing the sector, as well as uniform guidelines, especially in the North East, which houses about 66% of the bamboo available in the country.

CII, in association with the Nagaland Bamboo development Agency (NBdA), organized the third in the series of roundtables on ‘Bamboo Transit and Regulatory Regime in North East India,’ with experts and consultants on bamboo, senior State Government officials and entrepreneurs from the region, on 26 July in dimapur

dr Neikiesalie (Nicky) Kire, Minister of Forest,

Environment and wildlife, Nagaland, described bamboo as a ‘natural vehicle’ for rural development and inclusive growth. home to 52% of the species of bamboo, Nagaland produces 5% of the total bamboo grown in the country, he said, pointing out that all-weather roads and waiver of entry fee on transits from one State to another would support the movement of bamboo.

Amenba Yaden, Parliamentary Secretary, Industries & Commerce, Nagaland, Dr Neikisalie Nicky Kire, Minister of Forest, Environment

& Wildlife, Nagaland, and Naiba Konyak, Adviser, Nagaland Bamboo Development Agency, at the Roundtable on Bamboo in Dimapur

NORTH EAST REGIONNE

REGIONAl REVIEw


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M r A m e n b a Ya d e n , Parl iamentary Secretary, department of Industries & Commerce, Nagaland, said it was essential to collectively formulate a standard national norm to promote the bamboo industry, while Mr Naiba Konyak, Adviser, Nagaland Bamboo development Agency, suggested that all households should have a bamboo garden, for income generation. Mr Neichute duolo, Chairman, CII Nagaland, and Md, Ganpati Stock ltd, felt that the number of forest royalties imposed on bamboo in transit are limiting the growth of this industry.

Organic Value Chain Development Sikkim is India’s first State to be certified as ‘fully organic’ by the Union Ministry of Agriculture and Farmers welfare, and is fast-emerging as the most attractive and viable destination for organic value chains, said Mr Khorlo Bhutia, Secretary, horticulture and Cash Crops development, Sikkim, at the interactive meeting on ‘Mission Organic Value Chain development for North Eastern Region’ organized by CII in association with the Government of Sikkim on 28 July in New delhi. In

At the Interactive Meeting on Mission Organic Value Chain Development for the North Eastern Region, in New Delhi

Sikkim, 76,392 hectares of cultivated land is certified as fully organic, he added, assuring all support to investors to develop products in new markets, promote market channels for domestic as well as export chains, and also develop a range of outlets.

Ms Rani Kumudini, Joint Secretary, Agriculture, stressed the need for commercial viability at each stage – from farming to producers to market linkages, and urged investors to invest in Sikkim.

Mr Puneet Kansal, Secretary, Agriculture, Mr S C Gupta, Additional Chief Secretary-cum-Agriculture Production Commissioner, dr lingappa, deputy director, Spice Board, Gangtok, Sikkim,and officials from APEdA and NABARd were also present.

NORTHERN REGIONNRealty 2016‘Paving the way for sustainable real estate development in India’ formed the theme of the deliberations at Realty 2016, the 12th annual conference on the real estate sector, held on 20 July in New delhi. The Conference presented perspectives on the future of Indian real estate for the next five years.

The session on ‘Improving India’s Real Estate Regulatory Environment – Impact of RERA and Recommendations for Improvement’ focused on the positive impact expected from the introduction of

Getambar Anand, CMD, ATS Group; Anshuman Magazine, Chairman, CBRE - India and South East Asia; Sriram Kalyanaraman, MD & CEO, National Housing Board; Pinaki Misra, MP, and Chairman, Parliamentary

Standing Committee on Urban Development; and Rumjhum Chatterjee, Chairperson CII (NR) and Group MD – HCD, Feedback Infra Pvt Ltd, at Realty 2016 in New Delhi


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the Real Estate Bill, along with the impediments that remain from the development perspective. The deliberations aimed to identify modifications that, if implemented in the right spirit, can make the Bill a game-changing legislation for the real estate sector.

Urbanization is increasing at a rapid pace in India, with approximately 40% of the country’s population expected to be living in urban centers by 2030. The session on ‘India’s Urban development Bottlenecks – Issues to be addressed’ explored ways to bridge the demand- supply gap in housing.

The Government has provided clarity on the impact of dividend distribution Tax (ddT) on the Real Estate Investment Trust (REIT), besides providing leeway on other taxation hurdles as well. The session on ‘REITs – Next wave of Financing for Real Estate’ discussed the policy regime surrounding REITs in India, the remaining gaps, potential investments and the challenges and opportunities that the structure faces/provides.

The session on ‘Challenges in the Real Estate Financing Environment’ deliberated on ways to ease funding for real estate development, such as potential of introduction of new funding instruments, provision of infrastructure status to the sector given the implementation of the RERA Bill, and Government support for foreign funding, among others.

The Par l iamentar y Standing Committee on Urban development would invite CII for its future deliberations of the committee, stated Mr Pinaki Misra, Member of Parliament, and Chairman of the Parl iamentary Standing Committee on Urban development, who was the chief guest at the event. This is vital as vigorous hand-holding by the Central Government is crucial to help the real estate sector grow, he added.

“The real estate sector is set to become a $180 billion industry by 2020. home loan disbursements from the National housing Board (NhB) are encouraging. demand for warehousing space will grow by 35% when the GST Bill is implemented. On the basis of the Smart City projects, land record digitization, and withdrawal of corporate tax from the REIT structure, the real estate sector growth is bound to attract funds and investor confidence in a big way,” said Mr Sriram Kalyanaraman, Md and CEO, NhB.

The Real Estate Regulatory and development Act 2016

will create the much-needed institutional framework to bring back the confidence among investors, said Ms Rumjhum Chatterjee, Chairperson, CII (NR), and Group Md – hCd, Feedback Infra Pvt ltd. The Smart City projects, and raising the cap of REITs assets from 10% to 20% will boost investor confidence in the realty sector which is becoming more professional, she added.

Mr Anshuman Magazine, Chairman, CBRE - India and South East Asia, said a balanced regulatory framework and healthy financing environment are the two key pillars for the sustainable development of the Indian real estate sector.

The CII-CBRE Report on ‘Regulation and Finance: Paving the way for Sustainable Real Estate development’ was released on the occasion.

Advanced Manufacturing for the Auto SectorThe international conference on advanced technologies in the auto industry, held on 29 July in Gurgaon, shared global experiences towards making the Indian auto industry stronger and globally competitive.

In his inaugural address, Mr devender Singh, Principal Secretary Industries and Commerce, haryana, stated that

the State Government is creating a Government-Industry interface to propel industrial growth. Special measures have been put in place to promote a single-roof system, backed by an Act, to facilitate investments, he said.

“The auto industry has the capacity to entirely change the economic landscape of any country. Government and Industry have to become partners to realize the optimum growth of this sector through the latest technology,” said Mr Sudhir Rajpal, Md, hSIIdC, and director General, Industries, haryana.

Emerging Trends in Dairy SectorCII, in association with the National dairy development Institute, organized a conference on ‘Emerging trends in bovine and non-bovine dairy sector’ on 29 July in Chandigarh. The conference to explored ways to develop skill and entrepreneurship, and establish scalable businesses for dairy and dairy food industries.

Devender Singh,Principal

Secretary, Industries & Commerce,

Haryana

Inderjit Singh, Director,

Punjab Dairy Development

Board


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SOUTHERN REGIONSInnovation for Economic DevelopmentInnovation and technical progress account for over half the economic growth of the last two hundred years. Countries that have been the most successful in catching up with the rich world, from South Korea to Singapore to China, have used innovation as their primary instrument, said dr Naushad Forbes, President, CII, and Co-Chairman, Forbes Marshall, at a session on ‘Education and Innovation’ with over 400 students and 70 faculty members from 14 higher education institutions in and around Chennai, organized by CII Southern Region, in Chennai on 29 July.

dr Forbes said that CII has laid special emphasis on innovation, recognizing that India will have to move from resource-led growth to productivity-led growth while simultaneously focusing on innovation-led growth. CII, he added, is strengthening the university-industry linkage program by working closely with several academic institutions and companies to promote industrial research. It is also proposing to set up a start-up center which will be a brick and mortar center for research and incubation, serving start-ups from rural India and from non-IT sectors, said dr Forbes.

Mr Chandrajit Banerjee, director General, CII, spoke about CII’s efforts and initiatives to facilitate both economic and social development.

12th India Innovation SummitThe 12th India Innovation Summit 2016 with the theme ‘Spirit of Innovation – Celebrating the Entrepreneur’

was organized in Bengaluru on 28-29 July.

In his inaugural address Mr R V deshpande, Minister of large and Medium Industries and Infrastructure, Karnataka, reiterated the State Government’s focus on innovation-driven growth. Karnataka is one of the first States in the country to implement a start-up policy to foster entrepreneurship, innovation and job creation, he said, explaining that the objective is to ensure that Bengaluru retains its lead position as a start-up and innovation hub, while other key

cities in the State are developed as start-up destinations. Karnataka currently ranks 3rd after USA and UK as the largest tech-capital of the world, he added.

Mr. S Gopalakrishnan, Past President, CII, and Co-Founder, Infosys ltd, who chaired the Summit, said that 80% of start-ups fail, but entrepreneurs are not failures. Industry needs to encourage them by sharing learnings and experiences so that more and more start-ups are fostered. The spirit of innovation is what transforms into entrepreneurship, he said.

National Conference on Highways Construction TechnologyA two-day National Conference on highways Construction Technology, held on 14-15 July in hyderabad focused on ‘Innovation in Construction Technology – Pathway to Safety, Speed, Success and Sustainability.’

In his special address, Mr Raghav Chandra, Chairman, National highways Authority of India (NhAI) said the organization has a larger vision for development and

S Gopalakrishnan, Past President, CII, Chairman, 12th India Innovation Summit, and Co-Founder, Infosys Ltd; Ambassador

Robert W. Holleyman, Deputy United States Trade Representative; R V Deshpande, Minister of Large & Medium Industries, and

Infrastructure, Karnataka; Ravi Raghavan, Chairman, CII Karnataka, and CEO, Bharat Fritz Werner Ltd and Dr. Gopichand Katragadda, CTO, Tata Group, at the Innovation Summit 2016 in Bengaluru

Dr Naushad Forbes, President, CII, and Co-Chairman, Forbes Marshall and Chandrajit Banerjee, Director General, CII, with senior members,

at a Members Meet in Coimbatore


has changed its approach from output based-thinking to outcome-based thinking. National highway management has moved from a construction-based achievement approach to a service-based achievement approach that would enhance competitiveness and user satisfaction, he said.

Mr Chandra also talked about the Green highways Project and the importance of safety on the highways, which offers a lot of opportunities through the PPP mode. The NhAI is keen to have private players patrol the national highways, to help in traffic management and maintain road discipline, he said.

w WESTERN REGION

Meeting with Chief Minister of Goa A CI I team, l e d b y M r Sudhir Mehta, Chairman, CII ( w R ) , a n d CMd, Pinnacle Industries ltd, called on Mr l a x m i k a n t Parsekar, Chief Minister of Goa, on 8 July, and briefed him on the CII initiatives planned for the year. CII will work closely with the State Government on tourism, IT, electronic design, food processing and start-ups, and create a road map for the growth and development of these sectors in the State, he said.

Mr Parsekar requested CII’s support in promoting investments in high-end and green tourism, software research and development, high-end electronics manufacturing and organic farming.

“The Region has taken up ‘Building Competitiveness: deliberate detail, deliver delight’ as the theme for this year, and the focus will primarily be on building synergy, membership engagement and making MSMEs future-ready. CII has created a co-ordination committee to build synergy across States, zones, sub-committees and task forces, to scale up initiatives. we plan to give MSMEs the necessary exposure to enable them to create the

requisite ecosystem, which would include familiarizing them with topics like 3d printing, robotics, Internet of Things, Manufacturing 4.0, managing social media, e-commerce and m-commerce,” said Mr Mehta.

‘India meets Britain’

CII organized an exclusive networking reception with Mr Colin wells, deputy head of Mission, British deputy high Commission, to celebrate UK’s top Indian companies featured in the CII-Grant Thornton report ‘India meets Britain 2016,’ on 22 July in Mumbai. The report identifies the fastest-growing Indian companies by turnover and the top Indian employers in UK.

GST and FDI Reforms The introduction of GST will mitigate the cascading effect of taxation and will also make businesses more viable in India. The easing of FdI will catapult India into a major financial destination and propel growth across various industries, especially pharmaceuticals, defence and food processing. A session on 22 July in Ahmedabad highlighted the key takeaways of the GST law, and the importance of deciphering the classification of services.

Shekhar Sardessai, Chairman, CII Goa, and CMD, Kineco Kaman Composites – India Pvt Ltd; Laxmikant Parsekar, Chief Minister of

Goa; and Sudhir Mehta, Chairman, CII (WR) and CMD, Pinnacle Industries Ltd,

at an interaction in Goa

The ‘India meets Britain’ 2016, reception Mumbai

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Nrupender Rao, Chairman, CII Telangana, and Chairman, Pennar Industries Ltd; N V Shetty, COO, GMR Highways Ltd;

Raghav Chandra, Chairman, National Highways Authority of India, and Ramesh Datla, Chairman, CII (SR), and CMD, Elico Ltd,

at the National Highways Conference in Hyderabad


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Horticulture Seminar on Cold Chain CII, along with the department of horticulture and Food Processing, Madhya Pradesh, organized a seminar to spread awareness on policies and schemes for cold chain development on 15 July in Indore.

Mr Pawanesh Kohli, Chief Advisor, NCC, department of Agriculture & Cooperation, Union Ministry of Agriculture and Farmers welfare, shared that India currently has 6,300 cold storage facilities spread unevenly across the country, with an installed capacity of 30.11 million metric tonnes. The current capacity is less than 11% of what is produced, he said, pointing to the urgent need for additional capacity of over 30 million tonnes.

Mr Ashok Kumar Varnwal, Principal Secretary,

Seminar on Cold Chains, in Indore

horticulture and Food Processing, Madhya Pradesh, also spoke.

Realty & Infrastructure Conclave The 8th edition of the CII Realty & Infrastructure Conclave was held on 27 July in Mumbai with the theme ‘Steering through Varying Speeds - Championing Various Asset Classes of India Real Estate.’

A report titled ‘Indian Real Estate: Comprehending the varying speeds of growth’ released at the event, offers a detailed study of various macroeconomic factors which are linked with real estate sector trends, presenting a cohesive picture meaningful for all stakeholders – developers, investors, bankers and buyers.

CII Realty & Infrastructure Conclave in Mumbai

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CII Communique August 2016 (Vol.38 No.8)

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Transcript of CII Communique August 2016 (Vol.38 No.8)