India newsletter 01 2014

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Published by the Embassy of India, Vienna Year 4 • Issue 37 • January 2014

FEATURED INDUSTRY INDIAN POWER SECTOR

India Newsletter • 1

Embassy of India, Vienna

NEWS FLASHES

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Spice exports from India increased to 378,755 tonnes worth Rs 6,118 crore (US$ 981.55 million) during AprilSeptember 2013 registering a 43 per cent increase in value terms and a 20 per cent growth in volumes.n

02

India exported 39,800 tonnes of coffee during OctoberNovember 2013, an increase of 29 per cent year-on-year.n

03

Net direct tax collection in India increased by 14.6 per cent to Rs 310,317 crore (US$ 50.33 billion) during AprilNovember 2013.n

04

India’s foreign exchange reserves (Forex) increased by US$ 5 billion for the week ended November 29, 2013, to US$ 291.3 billion.n

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India’s apparel exports grew by 15.5 per cent year-on-year during April-October 2013 to reach US$ 8.2 billion.n

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Indian exports stood at US$ 24.61 billion in November 2013, up 5.86 per cent, as compared to US$ 23.25 billion in November 2012.n

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The direct selling industry in India stood at Rs 7,164 crore (US$ 2 • India Newsletter

1.15 billion) in 2012-13, registering a 12.2 per cent growth over last year.n

08

Around 45 per cent of the world’s top 500 R&D spenders are investing in India, and the country can potentially create over 200,000 new R&D jobs by 2018.n

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Indian companies signed deals worth US$ 21.4 billion in AprilNovember 2013, up 61 per cent as compared to the same period last year.n

10

India produced 237.21 million tonnes (MT) of fruits and vegetables during 201213.n

11

Indian airlines flew 55.83 million passengers during JanuaryNovember 2013, as compared to 53.42 million in the same period last year, registering a growth of 4.52 per cent.n

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Indian information technology (IT) services market is expected to grow at 8.3 per cent yearon-year in 2013, reaching a value of Rs 44,219.9 crore (US$ 7.09 billion).n

13

India’s iron ore pellet exports have grown by almost 11 times to 435,000 tonnes in the

first seven months (AprilOctober) of the current financial year, as compared to 40,000 tonnes exported in 2012-13.n

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Around 708 mergers and acquisitions (M&A) transactions, involving Indian companies, were announced during January-November 2013, amounting to US$ 23.9 billion.n

15

The enterprise mobility market in India is expected to increase almost 5-fold to touch US$ 1 billion by mid-2015.n

16

Bilateral trade between India and Hong Kong is projected to reach US$ 50 billion by 2020.n

17

Foreign institutional investors (FIIs) invested Rs 1.13 trillion (US$ 18.22 billion) in the domestic stock market in 2013.n

18

Coffee exports from India stood at 312,382 tonnes in 2013, up from 305,247 tonnes exported in 2012.n

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The combined Index of Eight Core Industries stood at 153.5 in November 2013, registering a y-o-y growth of 1.7 per cent. n

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NEWS ARTICLES Anand Sharma Expresses Optimism for Economy in 2014

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he Union Minister of Commerce & Industry Shri Anand Sharma expressed optimism for the economy in 2014. In a statement, Shri Sharma said: In 2013, India was rated as the most favoured investment destination globally. The bold decisions of the UPA Government for liberalizing Foreign Direct Investment Policy in key sectors such as civil aviation, retail and telecom have resonated with the global community and we have seen results in the last few months. The Government will continue its endeavour for liberalizing the FDI Policy further in the coming weeks to ensure that India retains its leadership position for attracting foreign investments.

I am also happy to see that manufacturing seems to be on the mend and there is visible rebound in industrial activity. The Indian economy has inherent strengths which give it resilience from external pressures and the series of steps taken by the Government both on the fiscal and current account front have yielded positive results.

The coming months will see a greater push for development of industrial corridors across the country and work will commence for establishment of the first few cities along the Delhi-Mumbai Industrial Corridor. I expect that with greater foreign investment and technology collaborations, Indian manufacturing will also move up the value chain and acquire greater competitiveness globally.

There is also optimism about the scenario on the export front. Inspite of weak demand in traditional markets, exports have done reasonably well and in the first eight months of the current financial year, exports touched US$ 204 billion, registering a growth of over 6% over

the same period last year. It was also reassuring that the trade deficit also came down to US$ 99.9 billion during this period as compared to US$ 129 billion during the same period last year. I am sure that the in the remaining period of this financial year, exports will show a strong and dynamic growth.n

India can achieve 7.5-8 per cent growth rate: Montek

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ndia can bounce back to a growth rate of 7.5 per cent to eight per cent from the present five per cent, provided it makes use of the turnaround taking place in the global economy and solves its own economic problems, Montek Singh Ahluwalia, Deputy Chairman of Planning Commission, said.

Delivering the ninth V. Narayanan Memorial Lecture at Shanmugha Arts, Science, Technology and Research Academy (SASTRA) on ‘Global in India and India in global’, Mr. Ahluwalia said the country’s growth rate in 2008-09 was 6.3 per cent after the global economic crisis and 9.3 per cent in 2009-10. But during 2011-12, the growth rate dipped to 6.3 per cent, and in 201213 and 2013-14 to five per cent.

“We cannot say that the global economy doesn’t have an impact on the Indian economy. We should be much more globally integrated.

The global economy is stabilising now. When we achieved nine per cent growth rate, obviously we were benefiting from the global boom.”

Talking about domestic problems, Mr. Ahluwalia said the power situation was very important.

Though investments in the power sector had increased, along with generation pf power, investments in fuel supply did not take place. Fuel supply agreements had not been implemented. India is an energy deficit country, he said.

“People can pay for power. It need not be cheap. But they have every

right to ask for uninterrupted quality power [supply],” he said. He called for infrastructure development and management of the energy economy. He also regretted that the country was not generating as much employment as it should.

Despite the inevitable uncertainties of general elections now, India can hope to achieve a 7.5 per cent to eight per cent growth rate, provided it takes measures to do so, he said.

Mr. Ahluwalia appreciated the University for converting the house of mathematician Srinivasa Ramanujan into a monument, after purchasing and renovating it.n

Efforts to liberalise FDI policy to continue in coming weeks: Sharma

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he Government will continue its efforts to liberalise the foreign direct investment (FDI) policy in the coming weeks, the Commerce and Industry Minister, Anand Sharma, said.

Expressing optimism for the economy in the New Year, Sharma said the coming months would also see a greater push for development of industrial corridors across the country and work would commence for establishment of the first few cities along the Delhi-Mumbai Industrial Corridor.

He said in 2013 India was rated as the most favoured investment destination globally, which, Sharma claimed, was due to the “bold decisions” of the UPA government for liberalising the FDI policy in key sectors, such as civil aviation, retail and telecom. “I expect that with greater foreign investment and technology collaborations, Indian manufacturing will also move up the value chain and acquire greater competitiveness globally”, he said in a statement. Sharma was also optimistic about the export scenario.

“In spite of weak demand in India Newsletter • 3

Embassy of India, Vienna

traditional markets, exports have done reasonably well and in the first eight months of the current financial year, exports touched $204 billion, registering a growth of over 6 per cent over the same period last year,” he said, adding that it was reassuring that the trade deficit had come down to $99.9 billion during this period.n

Focus on manufacturing to boost exports: Anand Sharma

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ndia will achieve the modest export target of $ 325 billion for the current fiscal but to enhance it substantially, the country needs to boost its manufacturing capability, Commerce and Industry Minister Anand Sharma said.

“India has to grow in manufacturing led exports because we are not a country very much endowed when it comes to some of the natural resources which are needed for our economic growth particularly energy. Therefore, India has to become competitive in manufacturing and exports,” Mr. Sharma told PTI in an interview.

The manufacturing sector declined by 2 per cent in October as against a growth of 9.9 per cent in the corresponding period last year.

During the April-October period of 2013-14 fiscal, the sector’s output contracted 0.3 per cent compared to a growth of 1.1 per cent in same period last year.

The dip in the growth rate of the sector has also cast its shadow on the country’s exports which has slowed down to about 6 per cent in November.

During April—November, exports grew by 6.27 per cent to $ 204 billion while imports aggregated at $ 304 billion.

Trade deficit stands at $ 100 billion.

Mr. Sharma expressed confidence that India would achieve its exports target of $ 325 billion for the current fiscal.

He said the government

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has announced the national manufacturing policy (NMP) to boost the sector’s growth and increase its share in the country’s GDP to 25 per cent from the present 15-16 per cent in the next decade. It also aims creating 100 million new jobs by 2022.

It envisages facilitation by the government in infrastructure development and improvement of the business environment through rationalisation and simplification of the regulatory framework.

The NMP would be a key enabler for setting up of National Manufacturing and Investment Zones (NMIZs), which are industrial townships, benchmarked to the best manufacturing hubs in the world.n

PM asks industry to invest in education, research

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rime Minister Manmohan Singh, urged the country’s private sector and industry to invest in enhancing education and research in the country as India looks to increase its gross enrolment ratio from a meagre 18 per cent to 30 per cent by 2020.

“Today, our universities depend largely on grants for undertaking research. Greater support from industry will not only lead to better research outcomes but also enable industry to utilise these outcomes for meaningful practical application.

It may be worthwhile on the part of our university academics to make a detailed study of how this interface works in other countries so that we can replicate the international best practices”, Singh said during the diamond jubilee celebrations of the University Grants Commission (UGC).

Singh’s request for funding comes at a time when a number of bills proposed by the Human Resource Development Ministry are pending in Parliament including the National Accreditation Regulatory Authority Bill and Foreign Educational Institutions Bill. In addition, proposals to amend the AICTE

Act and setting up a regulator for distance education has been pending at various stages.

The Prime Minister also expressed concerns about the lack of quality of education at India’s premier institutes and the shortage of faculty in the country. “This brings me to the related issue of shortage of faculty in our institutes of higher education.

This problem is likely to become even more acute with the expansion that is planned in the coming years,” PM added. The government is currently in the midst of rolling out the Rashtriya Uchchatar Shiksha Abhiyan (RUSA) which will create 278 new universities and 388 new colleges in addition to converting 266 colleges to model degree colleges by the end of the 13th FiveYear Plan.

Singh also hinted at the need to create new models of financing for the higher education sector as the funding from the central government has declined in real term over the past years. “Although the demand for higher education has increased enormously over the years, the central and state governments’ financial support to institutions of higher education has declined in real terms. New models of financing higher education, based on well established norms, and improvements in the existing system of funding by the central and state governments, therefore, are critical concerns”, the PM said.

Higher educational institutes in the country had come in the line of fire after none of them could figure themselves amongst the Top 200 institutes in the world.n

India likely to become global production hub for compact superbikes

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aving changed the dynamics of lowcost manufacturing and become a global hub for small cars, India is now poised to emerge a centre for producing compact superbikes as Indian customers graduate to the next level of biking.

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Several global and Indian bike makers plan to utilise India’s massproduction base of 16-million bikes and scooter to roll out sports bikes in the 250cc capacity.

British firm Triumph has finalised its strategy to roll out its next global platform of the 250cc version of the Daytona from its greenfield facility near Bangalore, and its American rival Harley-Davidson is expected to follow suit. Chennai-based TVS Motors is developing new platform for German luxury automaker BMW, while Hero MotoCorp would showcase its all-new 250cc bike, made in collaboration with its American subsidiary Erik Buell Racing, in the 2014 Auto Expo.

“India is poised to become one of the largest sports bikes market in the 250cc segment,” Vimal Sumbly, managing director at Triumph India, said.

“It is the most promising segment as we expect a large number of customers moving up the value chain and we are already working in that direction to tap the potential market,” he told ET. Triumph plans to roll out its bikes from India in the next two years.

Specialist bike makers are trying to cash in on Indian customers’ increasing preference for higher displacement and bigger engine bikes, backed increasing aspiration levels and growing incomes of the new generation of buyers.

Automotive research and advisory firm Emerging Markets Automotive Advisors expects sale of big bikes in India to jump 50 per cent this year to 167,000 units from nearly 112,000 big bikes in 2012. EMMAAA forecasts superbike sales to rise to 708,000 units in 2022.

“The introduction of big brands like Harley and Triumph in the last few years has created this thirst for top-rated motoring experience and motorcycle enthusiasts have finally found access to global spec, highpowered speed machines,” Deepesh Rathore, director at EMMAAA, said. “Going forward global

manufacturers like Triumph, BWM and Harley-Davidson are rushing to develop smaller capacity machines to grow the market and quench the thirst of Indian bikers,” he added.

The average motorcycle engine displacement index (AMEDI) has increased by around 8 per cent in the past decade. EMMAAA expects this index to climb much faster going by the shift in customer’s preference and higher disposable incomes.

Bajaj Auto has the largest portfolio of sports bikes in the country, thanks to its Austrian subsidiary KTM. In the past Royal Enfield ruled the Indian big bike market with its 350-500 cc Bullets.

In Asia, sales of superbikes — having engine displacement in excess of 1,000 cc and costing upwards of Rs 10 lakh — increased 20 per cent last year, second only to 26 per cent growth in Latin America.

But in India super bike sales have slowed this year due to rapid devaluation of the rupee that has made imports expensive. This has forced manufacturers to go for smaller engine sizes to improve affordability and have a wider larger customer base in the coming years.

Harley-Davidson recently unveiled its Street range, the smallest Harleys with engine sizes of 750cc and 500cc. Its entry-level Superlow bike range starts at Rs 5.7 lakh.

Global players are also assembling bikes here to benefit from lower taxes of around 30 per cent compared to 100 per cent import duty on fully built bikes and scooters. Local assembly helped Harley cut the price of its iconic Fat Boy by almost 30 per cent to around Rs 15 lakh. Triumph, too, assembles six of the 10 bikes it sells in India at its facility in Manesar.

Harley-Davidson plans to convert its Haryana CKD facility into a fullfledged manufacturing base.

100 % FDI allowed in storage and warehousing of farm products

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00% Foreign Direct Investment (FDI) is allowed under automatic route in storage and warehousing including warehousing of agriculture products with refrigeration (cold storage).

The National Centre for Cold Chain Development (NCCD) has been established as an autonomous body and registered as a Society under the Societies Registration Act 1860.

The main objectives of the Society are: To recommend standards and protocols for cold chain infrastructure/building including post-harvest management so as to harmonize with international standards and best practices and suggest mechanism for bench marking and certification of infrastructure/building, process and services provided by cold chain industry.

To undertake and coordinate Research and Development (R&D) work required for development of cold chain industry in consultation with stakeholders.

To undertake and coordinate the task of Human Resource Development (HRD) and capacity building, conduct in-house training, short-term/long courses relevant for cold chain development.

To launch publicity campaign to educate the stakeholders including awareness building about the benefits of integrated cold chain.

To recommend appropriate policy framework relating to development of cold chain.

To facilitate and foster the development of multi-modal transportation facilities for perishable agricultural, horticultural and allied commodities.

This information was given today

by Minister of State for Agriculture and Food Processing Industries, Shri Tariq Anwar in a written reply to Rajya Sabha questions.

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Embassy of India, Vienna

Despite economic slowdown, India’s exports to US, Europe rise

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espite global economic slowdown, India’s exports to the US and Europe have grown in the first seven months of the current fiscal year, government data showed.

“In the first seven months of current fiscal year, 2013-14 exports to Europe and the US have increased in comparison to the corresponding period last year,” said minister of state for commerce and industry EM Sudarsana Natchiappan in the Rajya Sabha.

“Exports to the USA have not declined in the previous three years.

However, exports to Europe had shown slight decline. But exports to European countries in 2013-14 have shown improvement.”

According to Natchiappan, who was quoting the figures given out by the directorate general of commercial intelligence and statistics (DGCI&S), India’s exports to Europe grew by 5.99 percent in the period between April-October 2013 and stood at $33.15 billion form $31.28 billion shipped-out during the corresponding period of 2012-13.

For the US, India’s exports grew by 8.64 percent at $23.35 billion in the period under review from $21.49 billion shipped-out during the corresponding period of last fiscal year.

Natchiappan addded that it has been the government’s endeavour to encourage both product diversification and market diversification of its export, so that downturn in one geography does not affect the complete export scenario.

“Government has identified certain markets under the focus market scheme (FMS) in the foreign trade policy. Such identified markets include countries from Africa, Latin America, Commonwealth of Independent States (CIS) and Association of Southeast Asian Nations (ASEANs),” Natchiappan

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added.n

Frugal innovations to keep India healthy

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rom a smart medicine pack that keeps a tab on a person taking tuberculosis medicines to technology that identifies the right blood vessel for an intra-venous procedure, innovations are now coming in small packages.

And research competitions are challenging these “Edisons of tomorrow” — students, scientists and entrepreneurs — by encouraging them to think-up novel solutions in healthcare.

Prototype development Take the ‘Grand Challenges in Tuberculosis Control’ programme for instance. Winners get $30,000 as a grant for six months to develop a prototype. And those who scale this challenge get $100,000 each to integrate the innovation into India’s healthcare system.

The TB-control challenge, an initiative from IKP Knowledge Park, has the US Agency for International Development and the Bill and Melinda Gates Foundation, as partners.

Big innovations are required and will continue, but the idea here is to open opportunities for effective, highvolume and low-cost solutions, says Gopichand Katragadda, Chairman and Managing Director of GE India Technology Centre (GE-ITC). GE’s Edison Challenge gives the winner a Rs 10-lakh grant, and the runner-up, Rs 5 lakh.

Exposure to market The challenge gives university research an exposure to market needs, as perceived by the industry, he says, adding that GE would be open to absorbing an innovation that “fits the bill.”

Globally, such initiatives are not unknown. In fact, the Breakthrough Prize in Life Sciences, collectively founded by Facebook founder Mark Zuckerberg and Google co-founder Sergey Brin, among others, also looks to russel up the excitement around

science and research.

One of the 15 recipients of IKP’s first round of funding for TB-control solutions is Bill Thies, a researcher with Microsoft Research India. His team’s innovation helps ensure that a patient takes the TB medicine regularly and without the direct supervision mandated in the Government-run system.

The innovation involves giving numbers, hidden behind the pills in a strip of TB medicines. On taking the medicine, a four-digit code is revealed to the patient, who has to combine it with a six-digit number printed on the pack and give a missed phone call to that number. And this gets captured at the monitoring end.

TB control falters, since patients default on taking their medicines regularly. Thies’ team’s innovation seeks to plug this gap. The grant money goes to Innovators in Health, a non-profit organisation in Bihar that partners and co-evaluates the initiative, says Thies.

In the GE Edison challenge, this year’s winner was a mobile application to diagnose skin cancer and related abnormalities from IIT (Kharagpur).

And last year’s runner-up, Vellore Institute of Technology’s VeinLoc (blood-vessel detector), has taken the innovation a step further, by applying for a patent.

The five-year Edison challenge encourages awardees to continue interacting with mentors at GE — a no mean exposure — since GE’s centre at Bangalore is its largest multidisciplinary research, development and engineering centre outside the US. Intellectual property Explaining the academia-industry misfit, Katragadda says universities are flush with funds, but are not tied to deliverables and market insight. Besides, there are trust issues between universities and the industry on matters such as intellectual property.

The Edison challenge looks to bridge the gap, by including interactions with technology resource persons

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and angel investors, to awaken researchers to market-place realities.n

Foreign investors pump in nearly Rs 4 lakh crores in four years ended December 2013

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he numbers are staggering by any yardstick. In one of the most aggressive buying sprees since liberalisation, foreign investors pumped in nearly Rs 3,71,342 crore into Indian stocks in the four years ended December 2013. This is more than the combined investment in the nine years beginning 2001, and dwarfs all that was invested in the boom years of 2005-08.

That the investment was made in the backdrop of sliding economic growth and falling corporate profits is surprising and can be attributed to global factors such as Fed Reserve’s easing programme and prospects of a change at the Centre after the May 2014 general elections. The stock indices, bereft of any other trigger, rose to life highs in a dramatic Uturn in November just months after growth slipped to a decade low and the rupee had followed suit, sinking to a life low. This dollar tsunami didn’t just lift indices.

It has also resulted in the highest ever ownership by foreign institutional investors (FIIs) in Indian stocks. The aggregate holding of offshore funds in benchmark Nifty companies was 18.12 per cent in the September quarter versus 17.86 per cent in June, and 18.08 per cent in the March quarter.

FII stakes in companies such as Axis Bank, M&M, HCL Technologies, Tata Power Company, NTPC, Wipro and Sun Pharma hit a record high in the September quarter. Some marketmen worry that a fast-rising FII ownership may not be that good for Indian markets as the funds could soon run out of stocks to buy. In the past four years (with the exception of 2011), foreign institutional investors have invested about $20 billion every year.

If FIIs maintain their pace of investments, they would pump in about $100 billion in five years and buy out large chunks of the stocks that they own today. “If foreigners want to buy each and every stock that they own today, out of what is remaining in their foreign investment quota, they can only pump in another $100 billion. (Then) There will be no stock available for them in the markets,” says Sunil Singhania, head (equities), Reliance Capital Asset Management. This is not an implausible scenario.

FIIs own substantial stakes in some of the country’s biggest blue chips, such as Infosys (about 55 per cent), HDFC (73 per cent) and ICICI Bank (67 per cent). The headroom for further investments has already shrunk and may become zero in the coming weeks and months if they buy more.

In TCS and ITC, the FII ownership is close to the ceiling and further purchases may not be possible.

Tempting though it may be for those who resent FII domination of the market, the scenario is unlikely to come to pass. In the next year or so, companies and the markets are going to adjust themselves to this rising trend of FII ownership.

The objective will be to facilitate further FII purchases, not restrict them. Here are four things that are likely to happen, and what it means for the markets and investors: First, wherever possible, companies are likely to increase the ceiling for FII purchases. This especially applies to cases where there is a divergence between the government policy of higher foreign direct investment and an FII ceiling that has remained unchanged for several years.

Companies may have let status quo remain for a number of reasons. One could be that they are waiting for the right opportunity and time. Now that FII holding is approaching the danger mark, and demand for stocks is increasing, expect managements to be more proactive. Second, promoters of some of India’s leading companies will use this opportunity to sell some of their stake.

This will broaden ownership and allow foreign and domestic funds to buy more shares of the companies.

In both TCS and Wipro, promoter holding is more than 70 per cent.

The absence of free float means lack of buying opportunities for both FIIs and domestic funds.

If Tata Sons and the holding companies owned by Azim Premji sell some of their stakes, investors and the stock prices of both the companies will reap the benefits.

Much of the rally in IT and consumer goods stocks in the past one year has been driven by heavy FII buying.

“Currently, FIIs can directly invest up to 24 per cent in Indian companies.

But in many sectors the ceiling is much higher. I am sure when there will be demand for paper, companies will seek shareholders’ approval and raise FII limits,” said UR Bhat, MD, Dalton Capital Advisors.

Third, a number of quality stocks beyond the top 100 on the BSE and NSE are likely to come into play even if FII limits are increased. Experts believe that many good stocks can be found in the broader market and this can be an opportunity to test FIIs’ stock-picking skills.

“There are many good-quality midcap companies worth investing in. Currently, liquidity may be an issue. But that will improve once FIIs start investing. Till about 2000, FIIs used to invest in less than top 50 companies, now they are investing in over 100 companies.

As the economy grows, institutional participation also gets wider,” said Saurabh Mukherjea, CEO (institutional equities) at Ambit Capital.Fourth, scarcity of goodquality stocks will provide an opportunity for highquality, unlisted companies to go for IPOs. Insurance companies have been allowed by the regulator to float their shares, but market conditions and the financials of many companies may be deterring them from taking this step.

“I think Indian markets are poised for rerating by foreign investors.

What is required is confidence in the markets, which is only possible India Newsletter • 7

Embassy of India, Vienna

by strong government reforms, and then we might see even PSU stocks getting FII attention. Some of the expected IPOs from insurance companies, asset management companies, exchanges, etc, may also find FII attention,” said Deven Choksey, MD and CEO, KR Choksey Shares and Securities. A number of private, unlisted companies are doing very well, but ownership in them is restricted.

If and when the economy improves, the appetite among FIIs is likely to force promoters, and in some cases private equity investors, to look to the market for raising money or securing an exit. Some of the big Indian IPOs are probably just waiting in the wings for things to turn around.n

Hypo Austria aims to build bridges with India

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ypo Alpe Adria AG, the domestic banking unit of Austrian nationalised lender Hypo Alpe Adria International just sold to a British-Indian investor, said it aims to build bridges to develop business between Europe and India.

The bank said it would strengthen its existing business in retail banking and the financing of public projects in its home province of Carinthia, but also aimed to become a trade bank for European exporters to India and Indian firms in Europe.

The 66 million-euro ($91 million) sale is so far the only successful disposal of a unit of Hypo Alpe Adria International, which is committed to a wind-down or sale of its operations in the Balkans and Italy by an agreement with the European Union.

Hypo Alpe Adria AG said its acquisition by Anadi Financial Holdings closed following the agreement of German landesbank BayernLB - a former owner of Hypo Alpe Adria International - to waive its veto.

“I am very pleased that the deal is finally done,” said Sanjeev Kanoria, a London-based investor who set

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up the Anadi holding company to make the Austrian acquisition, and whose brothers run India’s Srei infrastructure finance.

Hypo Alpe Adria International has received 4.8 billion euros so far in aid from the Austrian government, after driving itself to the brink of insolvency by using guarantees from Carinthia to fuel unbridled expansion abroad.

The bank named Martin Czurda, a 54-year-old Austrian banker who previously held senior positions at Raiffeisen Zentralbank and Amsterdam Trade Bank, as its new chief executive.

“For the first time in years, we can work free of the problems of the Hypo Alpe Adria group and be more active for our customers,” Czurda said. “I believe the employees have been freed from a rather large burden.”

He said the bank had no ambitions to grow at its previous break-neck speed. “We will in no circumstances repeat the mistakes of the past,” he told a news conference. “We will grow our balance sheet by 10 or 15 percent per year, maximum.”

Czurda and Kanoria said they saw potential initially in helping to finance exports of machinery and commodities to India from Austria and elsewhere in Europe.

Kanoria, a surgeon who runs a healthcare group in Britain, is the designated head of the bank’s supervisory board and said he planned to be in Austria once a month. “I’ll be very involved,” he said.

World Bank keen to finance solar projects in India

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he World Bank has launched consultations with the ministries of finance and new and renewable energy for financing solar projects under phase II of the National Solar Mission.

“The World Bank is really impressed with the performance of phase I of the National Solar Mission wherein, the installed capacity has risen to 2,000 Mw from 30 Mw. The World

Bank was engaged with the ministry of new and renewable energy during phase I in working out the policy and putting in place necessary guidelines but had not provided funds. However, during phase II, the World bank is quite keen to finance solar projects,” Ashish Khanna, lead energy specialist told Business Standard. He however, declined to divulge further details in this regard.

The total requirement of funds is of the order of Rs 80,000 crore ($13 billion) of which, as high as Rs 54,000 crore ($9 billion) will be debt based on a 70:30 debt equity ratio.

The World Bank has expressed that it was keen to partially finance debt requirement.

Khanna said of the total debt requirement of Rs 54,000 crore, much needed to come from the scheduled commercial banks.

“During the first phase, commercial banks had lent $700 million and they need to scale up to the levels envisaged. In order to make investment in solar power more attractive for scheduled commercial banks, the government will need to strategically use scarce public resources to leverage commercial financing, address structural barriers that prevent commercial banks from participating and facilitate appropriate technology deployment,” Khanna added.

Khanna said the role of facilitating public funding in leveraging commercial lending on a sustained basis through risk reducing instruments as well as innovations in financing is significant and imperative for moving solar development to a largely nonrecourse financing mode in India.

The World Bank in its report titled, “Paving the way for a Transformational Future: Lessons from Jawaharlal Nehru National Solar Mission Phase I”, suggests that the government could offer multiple financial solutions involving viability gap fund, generation-based incentives, credit guarantees, credit lines to banks at a concession to cut interest rates and subordinate public finance to extend the tenor

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of loans. According to the World Bank, using public financing for extending the tenor of a loan and providing subordinated debt is least expensive among all other options, with the objective of reducing the solar tariff to Rs 5.50 per unit.n

US welcomes Indian firms

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he US will do more to help Indian companies of all sizes to set up operations there, said the US Ambassador Nancy Powell while addressing CII-AP members.

The envoy welcomed Hyderabadbased businesses to participate in the Select-USA Road Show planned for April 2014.

The initiative is promoted by the US Department of Commerce. In her interaction with CII members, Powell enumerated the many reasons why Indian investment in the United States is now easier than ever before, including record low energy costs, a streamlined approval process, world-class universities and labour, and access to over 20 additional markets through high-level bilateral and multilateral international trade agreements.

During the meeting, Rajesh Datla, past chairman of CII Andhra Pradesh, and Managing Director, Elico Ltd., shared his experience in doing business with the U.S. He pointed out that CII is focusing on establishing contacts amont small and medium enterprises in the two countries.

Earlier in his welcome address, Suresh Chitturi, Vice-Chairman, CII Andhra Pradesh, and Vice-Chairman & Managing Director, Srinivasa Hatcheries Ltd, said the Indo-US trade has become broad-based and multi-sectoral.n

Indian solar power mission set to make India a global leader in the sector

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he latest World Bank report on the the state of India’s solar power mission has said the Jawaharlal Nehru National Solar Mission Phase 1 (JNNSM), which was launched in

2010, is well-poised to make India a global leader in the development of solar power. The report says the Mission mode project has, in a span of three years, taken India forward in implementing its green growth agenda by increasing its installed capacity of solar power from around 30 MW to more than 2,000 MW. What is significant is that JNNSM has been instrumental in bringing down the cost of solar power to a level that is competitive across the world, says the report. It has reduced the costs of solar energy to $ 0.15 per kWh, making India amongst the lowest cost destinations for grid-connected solar Photovoltaic (PV) in the world.

The report, ‘Paving the Way for a Transformational Future: Lessons from JNNSM Phase1’, says solar power can reduce India’s dependence on imports of diesel and coal for power generation, reduce greenhouse gas emissions, and contribute to energy security. Growth in this sector will help India increase its share of clean energy and help meet its target of reducing emissions per unit of its GDP by 20-25 percent by 2020 over 2005 levels.

The report identifies two unique features of the solar program which has helped reduce tariffs - bundling of solar power with unallocated thermal generation and adoption of reverse auctioning. Such bundling of solar power with cheaper conventional power helped reduce solar power tariffs for distribution utilities. The reverse bidding mechanism enabled qualified bidders to benefit from declining global prices for solar components, thereby reducing the purchase price of both solar PV and Concentrating Solar Power (CSP) for the utilities.

“In a short span of three years, India has made impressive strides in developing its abundant solar power potential. With more than 300 million people without access to energy and industry citing energy shortage as key growth barrier in India, solar power has the potential to help the country address the shortage of power for economic

growth,” said Onno Ruhl, World Bank Country Director in India. “However, while India is clearly emerging as a global leader in the area of solar power, to achieve its target of adding 20,000 MW of solar capacity by 2022, it needs to address the key barriers and constraints that could come in the way of scaling up the solar program,” Ruhl added.

The report highlights several challenges that could act as a barrier to India achieving its solar targets by 2022. These include lack of access to low cost financing; inadequate solar infrastructure; lack of raw materials for several solar PV manufacturers; and an underdeveloped supply chain leading to high inventory costs.

“Building on the success of Phase 1, the program now needs to focus on promoting financing of solar projects by commercial banks, developing shared infrastructure facilities such as solar parks and identifying comparative advantage of Indian manufacturing across the supply chain”, said Ashish Khanna, Lead Energy Specialist and one of the authors of the report. The report also identifies various key challenges, including the need for active participation of commercial banks to scale up to investments in the solar power sector. The government, the report says, also needs to design risk reducing financing instruments such as subordinated public finance in order to attract long-term commercial lending to ensure longterm viability, the report says.

The report recommends publicly developed infrastructure such as solar parks to help increase efficiency and lower costs. A Solar park in Charanka (Patan district) in Gujarat is today the largest solar park in Asia. Such shared infrastructure facilities helps in developing critical infrastructure, including facilities for power transmission, roads and water, thereby ensuring the rapid development of solar projects as well as local employment generation, the report adds. In addition, India’s plans to develop ultra-mega solar projects will help showcase the potential India Newsletter • 9

Embassy of India, Vienna

for large scale grid connected solar projects to the entire world, it says.

Facilitating public funding, creating an enabling environment for manufacturing and focusing on cluster-based project development will go a long way in achieving the outcomes of JNNSM during the subsequent phases, the authors conclude.n

International Cooperation in the Field of Food Processing

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inistry of Food Processing Industries has entered into agreements with some developed countries viz. Germany and France for bilateral co-operation in the field of Food Processing, which generally include processed food segments including fruits & vegetables.

Besides, the Department of Agriculture & Cooperation has entered into number of umbrella agreements with some developed countries like USA, France, Canada, The Netherlands, Argentina, Austria, Brazil for bilateral co-operation in the areas of agriculture and allied sectors which generally include agro and food processing, cold chain etc.

Apart from this, MoUs have been entered into by the two institutions of the Ministry, namely National Institute of Food Technology Entrepreneurship & Management (NIFTEM) & Indian Institute of Crop Processing Technology (IICPT).

These MoUs relate to collaboration in teaching and research in the food processing sector.

This information was given today

by Minister of State for Agriculture and Food Processing Industries, Dr. Charan Das Mahant in a written reply to Lok Sabha questions.n

2 more investment zones, chilli park for Karnataka

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nion Commerce Ministry has approved the Karnataka Government’s proposal to set up a chilli park at Haveri.

Addressing reporters after a meeting here to review the pending projects,

10 • India Newsletter

Union Commerce Minister Anand Sharma said, “We have cleared the proposal. The land for setting up the chilli park will be finalised by the State government. Spices Board and the State government will take it forward.”

The Ministry also cleared the Karnataka Government proposal to include pepper under the National Horticultural Mission (NHM).

“Karnataka is the second largest pepper producer. The State will be brought under NHM. For setting up a pepper park, the State will coordinate with the Spices Board,” said Sharma.

Export facilitation To facilitate export from Karnataka, Commerce Ministry has approved few more projects. Prominent among them are to take up construction of a convention centre.

An assistance of Rs 20 crore is being given to Karnataka Trade Promotion Organisation (KTPO) to take up construction of the centre.

In order to increase agri-exports from Karnataka, Agricultural and Processed Food Products Export Development Authority (APEDA) will take up construction of cold storage and warehousing facilities at the new airport (BIAL).

“This will increase State’s share of agri-exports and create additional infrastructure facility at the airport,” said Sharma.

Of the seven mega leather clusters proposed in the country, Karnataka will get one.

The regional sub centre of the National Institute of Design (NID) in Bangalore is will be upgraded to a full-fledged campus.

The Indian Institute of Packaging’s proposal to set up a centre in Bangalore has been cleared.“A proposal was approved some time back but it will be taken up with the State government’s help,” Sharma said.n

To boost supply, Govt relaxes norms for mega power projects

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he Government decided to further ease the Mega Power Policy in a move that will help nearly 25 projects with investments of more than Rs 1.6 lakh crore.

This is expected to increase power availability in the country and also ensure that consumers are charged reasonably for electricity supply.

Benefits To benefit from this policy, the developer will have to tie up sales with distribution utilities through long-term power purchase agreements (PPAs). The amendment allows project developers to tie up for only 65 per cent of generation capacity through competitive bidding with the State distribution utilities against the earlier norm of 85 per cent.

The amendment allows the developer to sell up to 35 per cent of installed/net capacity under regulated tariff as per the specific host State policy. This dispensation would be one time and limited to 15 projects located in the States having mandatory host State power purchase policy under regulated tariff. States such as Odisha, Chhattisgarh and Madhya Pradesh insisted on buying up to 25-30 per cent of electricity from power stations for their respective States.

The Government has also extended the maximum time for furnishing final mega certificates to tax authorities to 60 months instead of 36 months from the date of import for provisional mega projects (25 projects).

The Mega Power Policy was introduced in November 1995 to provide impetus for setting up of large projects. Thermal power projects of 1,000 MW and hydel plants of 500 MW are eligible for benefits under the policy. The policy has been modified time and again to encourage development of the sector.

It will also benefit supercritical

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projects that are awarded through international competitive bidding with the mandatory condition of setting up indigenous manufacturing facilities.

Development fund The Cabinet also approved setting up of Power System Development Fund (PSDF). The projects taken up to strengthen the electricity transmission grid can source funding from this Rs 6,000-crore facility.

“The utilities that break grid discipline pays fine. Part of the fine is paid to compensate any utility that encounters losses. Currently, about Rs 6,000 crore has been accumulated in the fund, which would now be utilised for grid strengthening projects,” a senior Power Ministry official told Business Line.

Powering ahead Will encourage setting up of large power plants Simplify procedure for grant of mega certificate, encourage capacity addition Power System Development Fund to be used for creating necessary transmission lines Renovation and modernisation of transmission and distribution systems to relieve congestion Fund to be operationalised within three monthsn

Technology firms in India foresee US$ 18 billion opportunity using IoT data: Cisco

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ndian technology firms are expected to reap the benefits of Internet of Things (IoT) data, considered to be a US$ 18 billion opportunity, to help clients improve productivity and asset utilisation as well as to enhance end-customer experience, as per networking firm Cisco.

The IoT includes all forms of data generated by a network of Internetconnected devices like sensors, routers, smartphones, smart TVs and security cameras.

Cisco projections further highlight that with improved business process execution and capital

efficiency, companies can utilise their assets better (US$ 1.4 billion), while enhanced employee productivity presents a US$ 0.9 billion opportunity. The other IoT opportunities include improved supply chain logistics (US$ 8.3 billion), enhanced customer experience (US$ 2.7 billion) and strong innovation, including shorter time to market and additional revenue streams from new business models and opportunities (US$ 4.7 billion). Furthermore, according to Cisco’s study ‘Internet of Everything Value Index’ IoT is expected to generate at least US$ 613 billion in global corporate profits this year.

The technologies like predictive analytics and Big Data can help companies to further enhance productivity and increase operational efficiency. “Use cases for IoT are plenty, be it for energy companies that can build smart grids to reduce T&D losses or for the food industry where there is a lot of wastage due to lack of proper warehousing and logistics,” according to Mr Jeff White, President (India and SAARC), Cisco.

Big Data and analytics are also transforming other sectors like healthcare and hospitality. Mr White further elaborated the usage by citing an example, “Using IoT, one can have virtual doctors in villages, where specialists are not available.

Through telepresence, these doctors can conduct checkups, dispense health advice, or even alert people to possible health problems before they become serious.”

Smarter networks not only help companies plan better but also reduce operational inefficiency and increase productivity, Mr White added. With IP-enabled devices connected to a common network and communicating with each other, door locks, thermostats, set-top-boxes, mini-fridges, light switches and other things can be automated to provide better experience to hotel guests, driving greater customer loyalty, Mr White added.n

TCS to set up world’s largest training centre in Kerala

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ata Consultancy Services (TCS), India’s largest software services exporter said it would set up the world’s largest corporate learning and development centre, with a capacity to train 15,000 professionals at one time and 50,000 professionals annually.

The proposed TCS Learning Campus in Thiruvananthapuram will come up on a 97-acre plot in the Technopark area of the city. To be built over 6.1 million square feet, it will include residences for professionals and faculty.

N Chandrasekaran, chief executive officer and managing director, said, “TCS has been present in Thiruvananthapuram since 1997 and since then it has been the hub of our global learning and development efforts. The TCS Learning Campus will be the new benchmark for corporate learning worldwide and this iconic facility will produce world class professionals to meet the future needs of the information technology (IT) industry.”

During the construction period of four years, the project is expected to provide direct jobs to around 2,000 locals. An integral part of the project will be skill development programmes run by TCS for the local youth.

TCS is one of the largest private sector employers in India, with around 285,000 professionals worldwide, and plans to hire 50,000 in 2013-14. It spends around 15 million hours on learning and development programmes for its employees every year. Over the past five years till date, the company has trained 143,000 IT professionals in India and abroad. n India Newsletter • 11

Embassy of India, Vienna

INTERVIEW

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n an interview with ET Now (The Economic Times), David Redfern, Chief Strategy Officer, GSK Plc, talks about the parent company’s open offer for GSK Pharma and shares their business outlook. Excerpt: Explain the rationale behind GSK’s open offer.

India is a strategically important market for GSK. We have a very long history here with the pharmaceutical business in Mumbai. It goes back over 90 years for our consumer businessbased in Delhi. It has taken the further commitment and the investment reinforcing that commitment in India.

As India develops, there will be a growing focus on more medicines and vaccines which are required. Hence, we can make a significant contribution to that.

What is the cash on your books and how do you expect to fund the open offer?

The open offer will be funded by GlaxoSmithKline Plc and we are bringing over $1 billion into India.

Hence, the cash would be coming from outside India to the shareholders. It actually follows a similar offer we made for the consumer business about a year ago. Therefore, together, the two represent an inward investment into India from Plc of about $2 billion.

Will it all be through internal accruals?

It will all be through our existing cash facilities and resources from the international business. It would not impact the cash that sits in the Indian pharmaceutical company.

The acceptance ratio is 50 per cent. What if the tendering is soft of a close to or a minimal kind - at the current price? Would you raise the price?

We would not raise the price. We think this is a very fair price for the shareholders. It represents premium of about 26 per cent declared previously.

The pre-offer price is up about 20 per cent this year. Overall, this represents a return over the last year well over 40 12 • India Newsletter

per cent to the shareholders and it is well over 130 per cent over the last five years.

Therefore, it is a very fair price to the shareholders and we have no intention of increasing it. Obviously, it is up to the shareholders to decide whether to take advantage of this liquidity opportunity to realise some gains and some cash.

Some research analysts who track your company spoke to us and said that despite the open offer price, the company is looking good to continue to stay invested.

If indeed, investors believe the same and do not tender it, will you be happy with whatever little you may get via this open offer?

We think it is a very fair price and we think those investors that want to realise some liquidity will accept the offer. We have no intention of increasing it. We did not increase the price in the consumer offer a year ago.

Obviously we should see what level of acceptances we get. The offer will be open probably somewhere around February 7 to February 20. The company will remain listed. We have no plans to de-list.

What is the response that you are getting from your major shareholders about the value of the open offer?

We have not had a big response yet as it is a little early in London and the US, where the predominance of our shareholders is.

They will understand that India is a strategically important market, for it is a growing market and that they will understand why we want to invest more in India. Hence, there will be support for the investment. We got strong support for the investment we made in the consumer business.

Emerging markets and our Indian businesses are well understood by the international investors and they also understand GSK Pharmaceuticals.

Hence, I am hopeful to get a positive response.

Are things back to normal with regards to sales in India? What about your negotiations with stockists? How are things shaping up?

That is a question for the Indian management rather than me. My understanding is that things are beginning to normalise.We are in a much better position with the trade.

The situation is returning to normal and our products are being distributed as normal across India.

India is a strategically important market for us David Redfern Chief Strategy Officer, GSK Plc

www.indianembassy.at

INDUSTRY The Indian Power Sector

Market Size

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E

lectricity production in India stood at 911.6 terra watt hour (TWh) in FY13, a four per cent growth over the previous fiscal. Over FY07–13, electricity production has expanded at a CAGR of 5.5 per cent.

The Planning Commission’s 12th Plan projects that total domestic energy production would reach 669.6 million tonnes of oil equivalent (MTOE) by 2016–17 and 844 MTOE by 2021–22.

As of April 2013, total thermal installed capacity stood at 151.7 gigawatt (GW), while hydro and renewable energy installed capacity totalled 39.6 GW and 27.5 GW, respectively. Nuclear energy capacity remained broadly constant from that in the previous year, at 4.8 GW. For the 12th Five-Year Plan, a total of 88.5 GW of power capacity addition is targeted, of which 72.3 GW constitutes thermal power, 10.8 GW of hydro power and 5.3GW of nuclear power. The capacity addition target for 2013–14 is 1,198 MW of hydro power, 15,234 MW of thermal power and 2,000 MW of nuclear power. Total capacity target is 18,432 MW.

■■ Welspun Energy Ltd has launched a 55 MW solar plant in Rajasthan.

The Rs 500 crore (US$ 80.60 million) project, stated to be Asia’s largest single-location solar plant ■■ Sterlite Grid has commissioned a 23 km 400 kilo volt (KV) doublecircuit quad transmission line connecting Purnia and Bihar Sharif district substations in Bihar, with an investment of Rs 500 crore (US$ 80.60 million) ■■ NHPC Ltd plans to take over private hydropower projects and is ready to invest equity worth Rs 20,000 crore (US$ 3.22 billion) over the next five years ■■ Suzlon Energy has won orders to supply wind turbines totalling 48 MW from French energy company Valorem ■■ Sanofi India has signed an agreement with Suzlon Energy Ltd (SEL) for a 2.1 MW offsite windmill installation, to generate renewable power for captive consumption at its Ankleshwar manufacturing site ■■ GE Energy Financial Services India has invested Rs 257 crore (US$ 41.43 million) in the hydropower project developed by Gati Ltd in Sikkim

the country is required.

Investments

The country offers unlimited growth

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Government Initiatives

ndia has the world’s fifth-largest electricity generation capacity and

demand is expected to surge in the coming years owing to growth in the economy. The power sector is high on India’s priority as it offers tremendous potential for investing companies based on the sheer size of the market and the returns available on investment capital.

The Indian power sector is one of the most diversified sectors in the world. Power in India is generated from commercial sources like coal, lignite, natural gas, oil, hydro and nuclear power as well as other viable non-conventional sources like wind, solar, agriculture and domestic waste. The demand for electricity in the country has been growing at a rapid rate and is expected to increase further in the years to come. In order to meet the increasing requirement of electricity, massive addition to the installed generating capacity in

potential for solar photovoltaic (PV) industry as well. India is endowed with vast potential of solar energy and is quickly developing itself as a major manufacturing hub for solar power plants. Besides, it is expected that, the annual PV-installed capacity will grow at a compound annual growth rate (CAGR) of around 49.5 per cent during 2010-2014 to reach 1,500 megawatt (MW) by the end of 2014, according to RNCOS research report titled, ‘Indian Solar Energy Market Analysis’.

he investment climate is very positive in the power sector.

Due to surge in the sector, the power sector has witnessed higher investment flows than envisaged.

The Ministry of Power has set a target for adding 76,000 MW of electricity capacity in the 12th Five Year Plan (2012-17) and 93,000 MW in the 13th Five Year Plan (20172022).

The industry attracted foreign direct investment (FDI) worth Rs 37,335.68 crore (US$ 6.01 billion) during April 2000 to July 2013.

Some of the major investments made into the Indian power sector are as follows:

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he Government of India has set a target to generate 10,000 MW of power through solar energy by 2017. The Phase I of the Jawaharlal Nehru National Solar Mission has been very successful, wherein 1,685 MW of solar power was generated, said Dr Farooq Abdullah, Union Minister for New and Renewable Energy, Government of India.

In order to attract foreign investments in the power sector, FDI up to 100 per cent is permitted under the automatic route for projects of electricity generation (except atomic energy), transmission, distribution and power trading.

India has offered to help Cuba India Newsletter • 13

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develop its renewable energy resources. Dr Farooq Abdullah, Union Minister of New and Renewable Energy, Government of India, is visiting Cuba along with a high level delegation of experts to explore greater opportunities for cooperation and collaboration.

Under the Union Budget 2013-14, the government plans to construct a transmission system from Srinagar to Leh at an investment of Rs 1,840 crore (US$ 296.63 million).

Some of the initiatives taken by the Government of India to boost the power sector are: ■■ To facilitate flow of renewable energy into the national grid, the Government of India plans to roll out Rs 43,000 crore (US$ 6.93 billion) ‘green energy corridor’ project ■■ Ministry of Power and Ministry of Water Resources have drawn up a framework for speedy technical clearances to power projects by Central Electricity Authority (CEA) and Central Water Commission (CWC) ■■ The Government of India plans

ADVANTAGE INDIA

14 • India Newsletter

to set up 4,000 MW of solar thermal power capacity in Rajasthan. “We have discussed the plant with the Rajasthan government and we aim to set up a solar thermal capacity near the Sambhar salt lake in Jaipur,” said Mr Farooq Abdullah, Union Minister for New and Renewable Energy, Government of India ■■ India plans to strengthen its ties with Iraq in the energy sector. A formal memorandum of understanding (MoU) on cooperation in the sector would be signed during the four-day visit of Mr Nouri al-Maliki, Prime Minister of Iraq, to India ■■ The Government of United Kingdom (UK) has agreed in principle to share the best practices with the Government of Andhra Pradesh (AP) in energy efficiency and energy conservation initiatives ■■ Hydro Projects worth 2,500 MW across various states have been given clearance by the Forest Advisory Committee (FAC) and Ministry of Environment and Forest (MoEF)

Road Ahead

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enewable energy is fast emerging as a major source of

power. Wind energy is the largest source of renewable energy in India; it accounts for an estimated 87 per cent of total installed capacity in renewable energy. The country aims to increase the importance of wind power even further; there are plans to double wind power generation capacity to 20 GW by 2022.

Biomass is the second largest source of renewable energy, accounting for 12 per cent of total installed capacity in renewable energy. There is strong upside potential in biomass in the coming years.

Solar energy accounts for one per cent of total renewable energy installed capacity. However, the share is not indicative of the country’s true potential, which stands at an estimated 5,000 TWh per annum..n

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EVOLUTION OF THE INDIAN POWER SECTOR

MAJOR PLAYERS IN THE POWER SECTOR

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EXPERT BUSINESS ADVICE The article below was extracted from Dezan Shira & Associates’s publication entitled “India Briefing”. For further corporate assistance, consider contating Dezan Shira & Associates, a specialist in foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in emerging Asia. For further details or to contact the firm, please email Mr. Olaf Griease under olaf.griese@dezshira.com or visit www.dezshira.com

Preparing Foreign-Invested Entities for Annual Audit in India

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ndia is often perceived as an investment destination full of red tape and bureaucracy, yet in fact with some attention to detail, the legal and financial operational procedures can be relatively easily expressed – if you know what you are doing. As always, forearmed is forewarned, and any successful business should have its operational procedures laid down and working efficiently. Annual audit procedures help assess companies for purposes of taxable income, but they can also provide a working blueprint of the company which can help management evaluate company efficiencies and deficiencies. This article explains the procedures that a foreign-invested enterprise (FIEs) in India canexpect to go through during the audit process, and outline some of the guidelines to prepare yourselves for the inevitable questions your auditors will have.

Firstly, it is important for FIEs about to be audited to make sure that the auditor is familiar with the company’s business operations. This means spending some initial time with your auditors explaining your regular business activities.

■■ Briefing Your Auditor To ensure you get the best possible feedback from your auditor, they should be given some brief background knowledge regarding 16 • India Newsletter

the nature of your business, the activities you are carrying out, the procedures you follow while making purchases and sales, and to what extent you are following internal control procedures. This latter point your auditor will check as part of the “kick the tires” exercise, but it helps if you first explain to them how you think this operates. Their report – even if it contains criticisms – should help you better manage your business in the future and close any potential operational loopholes.

■■ Identify the Production Process You should provide your auditors with a list of the major raw material inputs you are using in production.

They will want to note the steps you are following for the conversion of raw material into finished goods, as well as verify internal controls at the time of inputting raw material.

■■ Opening Balances Verification Your auditor will ask you to provide the opening balances report from your management accounts and will verify whether the opening balances have been carried forward correctly from the previous year’s audited financial statements. It is not uncommon for some minor adjustments to be necessary.

■■ Vouching of Purchases Your auditor will also ask to examine the purchasing procedures and may ask you to draft a flow chart explaining this - which is very relevant for their understanding of

company operations. It is common for parasitical employees to insert favored suppliers into your supply chain in the form of family businesses or those paying backhand commissions. Your auditors will want to conduct price surveys on your major purchases to ensure that you are not being overcharged for your most popular supplies.

They will also compare purchase vouchers with the pertinent taxable invoices received from the seller, and material received notes (MRNs) to confirm whether or not the quantities and amounts match. This requires a considerable amount of time. As such, it is recommended that you have a properly trained internal accounting team in place to satisfy this request and make it easier for your auditors to evaluate your paper trail.

Auditors will also check whether the rates of materials on invoices tally with purchase orders raised by the company, and whether the dates on MRNs relate to the current accounting period.

■■ Vouching of Journal Vouchers, Tour Bills, Cash and Bank You may also expect your auditor to verify whether the supporting bills tallied with the journal vouchers and the expenditures relate to the current period. While verifying the journal vouchers, the auditor will ensure that the appropriate tax deduction at source (TDS) was deducted wherever

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applicable; it is a relatively common internal mistake that TDS is not calculated. Again, the better your internal processes are, the easier it is to go through and pass an audit examination with confidence.

For travel and related expenses, your company should be prepared to provide supporting documentation.

Executives racking up air miles and trips overseas may be asked to provide evidence of the necessity of these expenses in their job descriptions and employment terms, so be careful over this issue.

Your auditors will want to verify whether these expenses are within the prescribed limits set for the position in question.

When dealing with cash purchases and petty cash, auditors will want to verify whether any cash payments have exceeded INR20,000 (in accordance with regulation Section 40A(3)) and also check for credit balances in cash. They may also spot-check for verification of cash, as well as check whether the Bank Reconciliation Statement is correct.

■■ Reconciliations During the course of the audit process, your auditors will want to reconcile the following items: • VAT returns with purchases and sales; • Provident fund contributions; • Professional tax contributions; and • Employee state insurance contributions.

These payments are statutory and applicable to all companies in India.

■■ Inventory Stock Audit Manufacturers For manufacturing entities, you will need to demonstrate that your business maintained its RG 23 books and stock registers when manufacturing or processing materials. To do this, your auditors will need to ascertain whether the RG 23 A Part II / RG 23 C Part II are aligned with your purchase registers and that input credits have been recorded correctly.

The auditors will also verify your

Personal Ledger Account (PLA) register to determine whether payments were made through PLA after considering your input credit, and will also carry out a Physical Stock Verification to ensure that the physical quantity of goods reconciles with the inventory register.

■■ Miscellaneous Rental Agreements Has your office or factory rent been paid per the rental agreement? Are rental agreements up to date?

PAN Numbers for Contractors Is your company maintaining photocopy PAN cards for contractors? Starting from the 2011-2012 accounting year, every company now has to maintain the PAN numbers of all persons who come under the TDS applicability for your company. If the PAN is not provided to the company who is deducting TDS, the company needs to deduct TDS at a rate of 20 percent - applicable for the time being as per the recent changes to the Finance Act.

TRADE FAIRS INTERESTED IN VISITING A TRADE SHOW IN INDIA? In case your company is interested in visiting a tradeshow/B2B event in India, be it one listed here or another one that came to your attention, get in contact with us via marketingofficer@indianembassy.at to get more information about possible assistance/subsidies.

India Newsletter • 17

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18 • India Newsletter

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INVEST INDIA Federation House, Tansen Marg New Delhi—110 001 0091-11-23765085, 23487278 investindia@ficci.com www.investindia.gov.in

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nvest India is the country’s official agency dedicated to investment promotion and facilitation. Set up as a joint venture between FICCI (51% equity), DIPP (35% equity held by the Department of Industrial

policy and Promotion, Ministry of Commerce & Industry) and State Governments of India (0.5% each), its mandate is to become the first reference point for the global investment community.

It provides granulated, sectorspecific and state-specific information to a foreign investor, assists in expediting regulatory approvals, and offers hand-holding services. Its mandate also includes assisting Indian investors make informed choices about investment opportunities overseas.

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Embassy of India, Vienna

TOURISM The King of the Indian Jungle cordially invites you.

Meet the welcome party: Lion, tiger, elephant, leopard, black bear, panther, sloth bear, sambar, chital, wild boar, porcupine, peafowl, red jungle fowl, partridge, goral, chousingha, swamp deer, hog deer, barking deer, great Indian bustard, blackbuck, chinkara, blackjack, jackal, fox, wolf, crocodile, wild elephant, deer, wild pig, estuarine crocodile, Gangetic dolphin, flamingo, duck, barheaded goose, sandpiper, ruddy shelduck, gull tern, whitebellied sea eagle, dolphin, fishing cat, blackjack chital, mouse deer, flying squirrel, mugger, Asiatic lion, striped hyena, chital,chousingha, wild ass, pheasants, brow-antlered deer, water bird, clouded leopard, snow leopard, goose, takin, hoolock gibbon, slow loris, musk deer, binturong, red panda, Assamese macaque, hornbill, great Indian onehorned rhino, wild buffalo, leopard cat, otter, golden langur, pigmy hog, jungle cat, python, cobra, white tiger, green pigeon, red spurfowl, Siberian crane, cormorant, stork, spoon bill, quail, coot, heron, teal, blackbuck, wild boar, Nicobar macaque, babbler, broad billed roller, shaheen falcon civet and many more...

In fact a trip into the Indian wild is like an introduction to the who#s who of the animal kingdom. Plaese remember that most of them are revered and worshipped. So be careful how your treat them.

Wildlife Protection Act, 1972 Offences under Section 9, 39, 40(2) 1) Hunting, keeping or breeding of any wildlife or animals.

2) Acquiring, receiving, keeping in control, custody or possession,selling wild animals like monkeys,snakes, bears etc. or any wild birds.This includes parakeets and mynahs.Selling skins or meat of wild animals. This includes monitorlizard oil or oil made of any other creature like stuffed squirrels, 20 • India Newsletter

snake,skins, peacock feathers.

Penalty: The offender shall be punished with imprisonment for a term of not less than one year, which may extend to six years, and also a fine The Indian peninsula is a continent in itself, whose geographical diversity has encouraged the flourishing of a whole range of wildlife with over 350 species of mammals and 1200 species of birds in the country. While there is an overlap in the habitats of many species, each region has something special to offer.

WILDLIFE SANCTUARIES AND NATIONAL PARKS North India ■■ Dachigam Wildlife Sanctuary (Kashmir). Broad valley; mountain slopes; rare hangul deer, black and brown bear, leopard; heronry.

Airport: Srinagar 22km. Railhead: Jammu Tawi 311km. Season: June - July. Accommodation: Srinagar: Houseboats on Dal and Nagin Lakes.

■■ Govind Sagar Bird Sanctuary (Himachal Pradesh). Bird Sanctuary with crane, duck, goose, teal. Airport: Chandigarh 135km.

Railhead: Nangal 13km. Accommodation: available at Bhakra.

■■ Corbett National Park (Uttar

Pradesh). Himalayan foothills near Dhikala; Sal forest and plains; tiger, elephant; leopard and rich bird life. Excellent fishing in Ramganga river. Airport: Pantnagar 115 km.

Railhead: Ramnagar 51km. Season: November-May. Accommodation: Within the Park.

■■ Dudhwa National Park: (Uttar Pradesh). Nepal border; tiger, sloth bear and panther. Airport: Lucknow 251km. Railhead: Dudhwa 4kms. Season: November-May. Accommodation: Within the Park.

■■ Flower Valley National Park (Uttar Pradesh). When in bloom this “roof garden” at 3,500 metres is a glorious blaze of colour. Location: Badrinath 44km. Railhead: Rishikesh 280km.

Season: June-July.

■■ Sariska National Park (Rajasthan).

About 200km from Delhi. Forest and open plains: sambar (largest Indian deer), cheetal (spotted deer), nilgai (Indian antelope), blackbuck, leopard, tiger; good night viewing. Airport: Jaipur 160km. Railhead: Alwar 35km (bus connections). Season: FebruaryJune. Accommodation: Within the Park.

■■ Ranthambhor (Sawai MadhopurRajasthan). Hill forest, plains and lakes; simbar, chinkara (Indian gazelle), tiger, sloth bear, crocodiles The Indian Museum, ca. 1905

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and migratory water birds. Location: Railhead: Sawai Madhopur 11km.

Airport: Jaipur 162km.

■■ Bandhavgarh National Park (Madhya Pradesh). Situated in the Vindhya Mountains, this park has a wide variety of wildlife including panther, sambar and gaur. Airport: Jabalpur 166km. Railhead: Umaria 34km. Accommodation: Forest Lodge in the park.

■■ Bharatpur National Park (Keoladeo Ghana Bird Sanctuary) (Rajasthan). India’s most outstanding bird sanctuary; many indigenous water birds; huge migration from Siberia and China; crane, geese, stork, heron, snake bird, etc. Airport: Agra 52km Railhead: Bharatpur 5km.

Road: Jaipur 176km, Delhi 177km.

Season: September - February.

Accommodation: Within the Sanctuary.

■■ Kanha National Park (Madhya Pradesh). Sal forest and grassland; only home of barasingha (swamp deer), tiger, cheetal, gaur (Indian bison), monkey. Airport: Nagpur 270km. Railhead: Jabalpur 170km.

Season: November - March.

Accommodation: Within the Park; Kanha and Kisli.

■■ Shivpuri National Park (Madhya Pradesh). Open forest and lake; chinkara, chowsingha (four-horned antelope), nilgai, tiger, leopard, water birds. Airport: Gwalior 120km.

Railhead: Jhansi 95km. Season: February-May. Accommodation: Forest Rest House, Motel.

Borvili 3km. Season: October-June.

Accommodation: Tourist Cabins.

■■ Tadoba National Park (Maharashtra). Teak forest and lake; tiger, leopard, nilgai, gaur. Viewing by night. Airport: Nagpur 208km.

Railhead: Chandrapur 45km. Season: March-May. Accommodation: Within the Park.

■■ Sasan Gir National Park (Gujarat), Forested plains and lake; only home of Asiatic Lion, sambar, chowsingha, nilgai, leopard, chinkara and wild boar Airport Rajkot 153km. Railhead: Sasan Gir 0,5km. Season: JanuaryMay. Accommodation: Within the Park.

■■ Nal Sarovar Bird Sanctuary (Gujarat). Lake; migratory water birds; indigenous birds include flamingos. Airport: Ahmedabad 64kms. Railhead: Viramgam 40km.

Season: November-February.

Accommodation: Available near the lake.

■■ Little Rann of Kutch Wildlife Sanctuary (Gujarat). Desert; herds of khur (Indian wild ass), wolf, caracal.

Airport: Ahmedabad 195km. Railhead: Dhrangadhra 25km.

Season: October-June.

AccommodationWithin the Sanctuary/Dhrangadhra. Arrange access at Bhuj.

■■ Velvadar National Park (Gujarat): New Delta grasslands, large concentration of blackbuck.

Airport A Railhead: Bhavnagar 65km. Season: October- June.

Accommodation: Within the Park.

WILDLIFE SANCTUARIES AND NATIONAL PARKS Western India

WILDLIFE SANCTUARIES AND NATIONAL PARKS South India

■■ Krishnagiri Upavan National Park (Maharashtra).

Formerly known as Borvili, this park protects an important scenic area close to Bombay. Kanheri Caves and Vihar, Tulsi and Powari Lakes; water birds, smaller types of wildlife. Outdoor movie, nearby Lion Safari Park.

Airport: Bombay 20km. Railhead:

■■ Periyar Wildlife Sanctuary (Kerala). Large artifical lake; elephant, gaur, wild dog, black langur, otters, tortoises, rich bird life including hornbill and fishing owl.

Viewing by boat.

■■ Vedanthangal Water Birds Sanctuary (Tamil Nadu). One of the most spectacular breeding grounds

in India. Cormorants, herons, storks, pelicans, grebes and many others.

The Vedanthangal Bird Sanctuary has been protected by the local people for well over 250 years. The sanctuary gets its name from a nearby village and is only 75 Km from Chennai. The bird life (resident & visitors) includes Cormorants, Darters, Herons, Egrets, Open billed Stork, Spoonbill and White Ibis, Little Grebe, Indian Moorhen, Black Winged Stilts, a few migratory ducks and occasionally Grey Pelicans.

November to February is the ideal season to visit the sanctuary.

■■ Point Calimere Bird Sanctuary (Tamil Nadu). Particularly noted for its flamingos, also for herons, teals, curlews and plovers and black buck and wild pig.

■■ Pulicat Bird Sanctuary (Andhra Pradesh). Flamingos, grey pelicans, herons, terns. Airport A Railhead: Madras 60km. Accommodation: Available at Nellore.

■■ Dandeli National Park (Karnataka).

Park with bison, panther, tiger and sambar. Easily accessible from Goa. ■■ Jawahar National Park (This includes Bandipur and Nagarhole National Parks (Karnataka), and the Wildlife Sanctuaries of Mudumalai (Tamil Nadu) and Wayanad (Kerala).

Extensive mixed forest; largest elephant population in India, leopard, gaur, sambar, muntjac, giant squirrel. Birds include racquettailed drongo, trogon & barbet.

■■ Bandipur (Karnataka): Airport: Bangalore 190km.

Railhead: Mysore 65km. Approachable from Coimbatore and Ootacamund.

Accommodation: Within the Park.

■■ Mudumalai (Tamil Nadu): Location: Airport: Coimbatore 16km.

Railhead: Ootacamund 68km.

■■ Nagarhole (Karnataka): Airport: Bangalore, Railhead: Mysore.

Accommodation: 2 Traveller Bungalows.

■■ Wayanad (Kerala): Airport: Cochin 300km. Railhead: Calicut 111 km.

Accommodation: Forest Rest House India Newsletter • 21

Embassy of India, Vienna

WILDLIFE SANCTUARIES AND NATIONAL PARKS - East India ■■ Kaziranga National Park (Assam).

Elephant grass and swamps; one horned Indian rhinoceros, water buffalo, tiger, leopard, elephant, deer, rich bird life. Elephant transport available within the park. Airports: Jorhat 96km, Guwahati 217km.

Railhead: Furkating 78km. Season: February-May. Accommodation: Within the Park.

■■ Manas Wildlife Sanctuary (Assam). On the Bhutan border, rain forest and grassland and river banks; rhino, water buffalo, tiger, elephant, golden langur, water birds; fishing permitted. Airport: Gauhati 176km.

Railhead: Barpeta 40km. Season:

22 • India Newsletter

January-March. Accommodation: Within the sanctuary.

■■ Palamau Tiger Reserve (Bihar).

Rolling, forested hills; tiger, leopard, elephant, sambar, jungle cat, rhesus macaque (monkey), occasionally wolf. Airport: Ranchi 155km.

Railhead: Daltenganj 19km. Season: February-March. Accommodation: At Betla.

■■ Hazaribagh National Park (Bihar).

Sal forested hills; sambar, nilgai, cheetal, tiger, leopard, occasionally muntjac (lager barking deer).

Airport: Ranchi 100km. Railhead: Hazaribagh 67km. Season: FebruaryMarch. Accommodation: Within the Park.

■■ Sunderbans Tiger Reserve (West Bengal). Mangrove forests; tiger,

fishing cat, deer, crocodile, dolphin, rich bird life, Transport: access and travel by chartered boat. Airport: Calcutta 48km. Season: February - March. Accommodation: None available in or near the sanctuary.

■■ Jaldapara Wildlife Sanctuary (West Bengal). Tropical forest and grassland; rhino, elephant, rich bird life. Airport: Bagdogra 155km, Railhead: Madari Hat 11 km. Season: March - May. Accommodation: Rest House at Jaldapara.

■■ Similipal Tiger Reserve (Orissa) Immense Sal forest; tiger, elephant, leopard, sambar, cheetal, muntjac and chevrotain. Airport: Bhubaneshwar 310km. Railhead: Baripada 50km. Season: NovemberJune. Accommodation: Several Tourist Rest Houses in the vicinity

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India Newsletter • 23

Embassy of India, Vienna

INDIAN MOVIE EVENING AT THE EMBASSY Due to limited capacity, seats will be given on a first come, first served basis. Therefore, you are highly encouraged to reserve your seats online at www.indianembassy.at, via email under infoasstt@indianembassy or via phone at +43 1 505 866633 (Ms. Lily John).

Luck by Chance - Liebe, Glück und andere Zufälle

R

efusing to accept the same fate as her sisters, Tara and Meghna, and get married to a boy from the same Caste, Kanpur-based Sona Mishra alienates herself from her accountant father, and re-locates to Mumbai in order to act in movies. She meets with Satish Chaudhary who offers to assist her in getting a lead role. Years later, all he could manage was bit parts, leaving her frustrated but hopeful. She meets with another struggling actor, Vikram Jaisingh, and both become fairly intimate. When a lead role with Satish does not materialize, and his wife, Pinky, becomes suspicious, she decides to depart. Disappointment and shock also await Vikram when he is candidly told by his friend, Abhimanyu Gupta, that he has no talent and must consider returning to Delhi to assist his businessman father. It does look like the end of the road for both Sona and Vikram - leaving the question open whether they will continue with their relationship &/or return to their respective homes.

■■ Director: Zoya Akhtar ■■ Stars: Farhan Akhtar, Konkona Sen Sharma, Rishi Kapoor ■■ Genre: Drama ■■ Duration: 156 min ■■ Release Year: 2009 ■■ Language: Hindi ■■ Subtites: German

Showtime January 31st, 18:00 Indian Embassy Business Centre (1st Floor, Kärntner Ring 2, 1010 Vienna) 24 • India Newsletter

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NOTICE BOARD EMBASSY’S LIBRARY ■■ The EMBASSY’S library is opened mondays and wednesdays from 11am to 1pm without appointment.

■■ For scheduling an appointment outside the opening hours, please contact the information assistant under infoasstt@indianembassy.at or 01 505 8666 33

BUSINESS CENTRE ■■ The EMBASSY’S Business Centre is opened DAILY from 11am to 1pm without appointment.

■■ For scheduling an appointment outside the opening hours, please contact the commercial wing under the contacts given below.

■■ Marketing Officer: marketingofficer@indianembassy.at or 01 505 8666 30 ■■ Marketing Assistant: marketingassistant@indianembassy.at or 01 505 8666 31

STUDENTS WELFARE OFFICER ■■ Mr. Pawan T. Badhe, Third Secretary in this Embassy has been designated as Officer to look after welfare of Indian Students in Austria and Montenegro.

■■ His contact details are: 0043 1 505 866 15 and cpolitical@indianembassy.at

MINISTRY OF EXTERNAL AFFAIRS GOES MOBILE Now you can...

■■ Avail services : passport, visa, consular assistance ■■ Ask your Minister : on the go, anytime, anywhere ■■ Follow your PM : on his visits abroad ■■ Find the nearest Indian Mission/Post : for emergency consular assistance ■■ Be informed : about India’s Foreign Relations on the move and form your own opinions ■■ Know more : about how to undertake Kailash Manasarovar Yatra and Haj Pilgrimage ■■ Download and watch : pictures & documentaries on India ■■ Play and Personalize : what you need, when you need ■■ Share and contribute : your views, pics & suggestions All this & much more on your smartphone Ministry of External Affairs proudly presents “MEAIndia” – an integrated smart app for mobile and other hand held devices ‘MEAIndia’ is now available for download on App Store and Google Play Store..

FACEBOOK ■■ Our Facebook page targets the India-Austria community and covers subjects such as Business, Culture, Embassy News, India-related events and programmes in Austria, and much more.

■■ We have just reached the 1000 followers mark!

■■ ‘Like’ our facebook page and be the first to know!

www.facebook.com/IndianEmbassyVienna India Newsletter • 25