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Vol. 26 No.5 August 2012

S Ramadorai, Vice-Chairman, TCS addressing the AGM.

S N Subrahmanyan, Senior Executive Vice-President, L&T delivering a Special Address at the AGM.

IN 4 4

THI S

President’s message Chamber’s Activities • 176th AGM of the Chamber • FFT on Realising SME Aspirations • Interactive Session on Current Global Scenario – Problems and Prospects of Indian Exports • Presentation-cum-Discussion on Leveraging Social Media for Business

I SSUE 4 General Committee 4 Expert Committees 4 SPOT LIGHT SPECIAL ECONOMIC ZONES 4 Policy Watch 4 Economic Review


176th AGM of the Madras Chamber Business Session

T T Srinivasaraghavan flanked by the newly elected President, T Shivaraman and Vice- President, S.G.Prabhakharan. Also seen is K.Saraswathi, Secretary General.

Public Session

T T Srinivasaraghavan, President, MCCI welcoming the gathering

Logo of MCCI Centre for Vocational Training & Skill Development.

T T Srinivasaraghavan presenting a memento to S N Subrahmanyan

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S Ramadorai launching the logo of MCCI Centre for Vocational Training & Skill Development.

T T Srinivasaraghavan presenting a memento to S Ramadorai

A view of the audience


President’s Message

Dear Members The Indian economy appears to be at a critical moment. The Indian growth story is definitely not what it was a year ago. Corporate capital investment growth rate has hit a 5 year low and industrial production growth rate has also been slowing. Growth in the manufacturing sector in April to July ’12 was 0.6% which is a serious matter of concern. Business confidence is at its lowest ebb in recent memory. The relative paralysis of the Central Government, caused by opposition, which created deadlock of Parliament has held up over 30 Bills in the monsoon session. Without going into the reasons which triggered the deadlock, the ground reality is that decision making in Parliament has been held hostage.

The recent decisions of the Government after the end of the session have definitely helped to give a sense of direction to the economy. The Government seems to be in a mood to take the hard decisions that are possible by executive order. The action on petroleum product pricing including diesel price increase and reduction in the subsidized LPG consumption are very welcome as are the liberalization in other areas including FDI in multiple sectors. While these measures would give some impetus to the business environment, sustained growth would definitely require more clarity in the Government. Resumption of normal functioning of Parliament is critical so that decisions that require passing of Acts including Insurance and Pension reform, GST, etc., can resume. Winston Churchill once said “Democracy is the worst form of Government except for all the alternatives”. While we celebrate Parliamentary democracy, we must not allow opposition

for sake of opposition and the holding of Parliament hostage to prove a political point. The International economic environment is very unfavourable and this is absolutely the worst time for India to accept policy paralysis and political gamesmanship on both sides. I am sure that many of you would share my view that there is an urgent need to take positive and practical decisions to get the economy moving again. Corruption is definitely everybody’s concern but paralysis in decision making is not the solution for corruption. With best wishes

T Shivaraman

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CHAMBER’S ACTIVITIES 4th August 2012

176 th Annual General Meeting

were also appointed to the various Expert Committees of the Chamber. The proceedings of the Business Session appear in the following pages.

Public Session

Business Session The 176th AGM of the Chamber was held on 4th August at Sheraton Park Hotel & Towers. Before proceeding with the agenda items, the President, Mr T T Srinivasaraghavan highlighted the activities of the Chamber during the year. The General Body, in appreciation of his leadership during the last two years, and especially during the 175th year celebrations of the Chamber, gave a standing ovation to him. Later Mr T Shivaraman, Managing Director & CEO, Shriram EPC Ltd. was elected as the President and Mr S G Prabhakharan, Chairman, XS Real Properties Pvt. Ltd. was elected as the Vice-President for the year 2012-13. The list of those declared elected as members of the General Committee appears in the proceedings of the Business Session. The Chairmen/Co-Chairmen

The Public Session of the AGM was organised soon after the Business Session. Mr T T Srinivasaraghavan, President delivered the welcome address and the same is reproduced below. Ms K Saraswathi, Secretary General, made a brief presentation on the new initiatives of the Chamber such as the Food For Thought programmes, Launching of Sustainable Chennai Forum (SCF), and more particularly on setting up of MCCI Centre for Vocational Training & Skill Development. Mr S Ramadorai, Vice-Chairman, Tata Consultancy Services was the Chief Guest. Addressing the gathering, he said Industry cannot stand by and complain about lack of job-ready skills among new recruits but must take partial responsibility for training as well. He also urged company representatives to show leadership and work out an institutionalised process of

recruiting interns. Launching the logo of the MCCI Centre for Vocational Training and Skill Develoment, Mr Ramadorai said it was a call for leadership from the demand side with the commitment to invest in training. The full text of his address is published in this Bulletin for the benefit of readers. Delivering a Special Address, Mr S N Subrahmanyan, Wholetime Director & Senior Executive Vice-President (Construction), Larsen & Toubro Ltd. said infrastructure development in the country is complicated and going forward, it will get more complicated. Many projects are being planned by the Government through public-private partnership model. However, they are not delivering good returns on investment to companies. He made a presentation on “Infrastructure Key for Development”. This was followed by an interaction with the audience after which Mr. T. Shivaraman, President-elect, proposed the vote of thanks.

Welcome address by Mr T T Srinivasaraghavan, President, MCCI Respected Chief Guest, Mr S Ramadorai, Vice-Chairman, TCS Ltd., Mr S N Subrahmanyan, Senior Executive VicePresident, L & T, past and present General Committee members of the Chamber, representatives from member companies, invitees, press and media, ladies and gentlemen: It gives me great pleasure to welcome you all for the public session of our 176th AGM. Just before this we had the business session and I was telling our members how fortunate we all have been to be part of this Chamber at a historical point of time. The Chamber celebrated its 175th Anniversary last September. Despite the

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fear of repetition, for the sake of our guests and others who have joined now, I would like to quickly mention what our major activities for this special period had been. We wanted to look beyond businesses and our Food for Thought monthly lectures helped us to do that. We introduced this at the beginning of our 175th year and this has now become part of our monthly agenda. We have had very thoughtful and interesting discussions on a variety of topics like Right to Education, corruption, nuclear power, food security and the like. These are apart from the Chamber’s regular activities of advocacy and lobbying

for business friendly policies. The major initiative is the launch of Sustainable Chennai Forum. The most critical factor in the longevity of an organization, in my opinion, is its internal vitality and its capacity to remain relevant and contemporary and its agility to continuously reinvent and reinvigorate. The secret of the 176 years of journey of the Chamber is this adaptability. We have remained as contemporary as much as our long heritage. In fact at the beginning of the 175th year we took up a study on ourselves to find out whether we are future ready. There was lot of introspection and it is this which made


CHAMBER’S ACTIVITIES us to have the theme for this period as Sustainable Development. We are aware there is no ready solution for sustainable development nor that we could take up all aspects of sustainability. We therefore took up few very special activities like our efforts to set up the Skill Development Centre which we know will have enduring value. We have made a modest beginning in this and our dream is to develop this as a worthwhile gift to the society and the industrial community by the time we reach our bicentennial. The State Government targets to train and build employable skills for 20 million people in the next 11-12 years. The National Skill Mission also aims to train 500 million people in this period. We share this vision and would like to play an active role in this. We a re ex t re m e l y h a p p y t h at Mr S Ramadorai, the advisor to the Prime

Minister in the National Skill Development Council is here as the Chief guest for this AGM, the central theme of which is the skill development. We wholeheartedly welcome you Sir, and your presence today is a great fillip to us. The logo for our Skill Development Centre is getting launched today by him and we know this will be a midas touch. We talked about social infrastructure – upskilling and educating our youth. The physical infrastructure is another key for achieving and sustaining development. The heart of vision 2023 document of Tamil Nadu released few months back, which aims to bring Tamil Nadu to a number one position is the provision of world class infrastructure. The vision document talks about Rs. 1500000 crore investment in the infrastructure in the next 11 years. We will be happy to hear from Mr Subrahmanyan, Senior

Executive Vice-President of L & T, how infrastructure will drive the development and we extend a very warm welcome to Mr Subrahmanyan. M C C I ’s 1 7 5 ye a rs j o u r n e y i s a n acknowledgement of the support we have had from the trade and industry over the years and the untiring work of many Chamber leaders. The Chamber has always been proactive and acted with responsibility. We will continue to play that role and much more, to facilitate and ensure sustainable development. With these few words, I once again welcome our distinguished guests and every one of you present here today. Thank you. Everyone thinks of changing the world but no one thinks of changing himself – Leo Tolstoy.

“Building India’s Skills base for Sustainable development” Address by Mr S Ramadorai Mr.Srinivasaraghavan, Mr.Shivaraman, Ms.Saraswathi, Mr.Subrahmanyan, ladies and gentlemen, Good afternoon to all of you. It is a pleasure to be here in Chennai in the midst of many old friends and acquaintances. With a 176 year old legacy, the Madras Chamber of Commerce and Industry would perhaps be one of the oldest such bodies in India. Given that all leading businesses in the State are your members means that the esteemed guests in this room collectively represent the key drivers and decision makers of the economy of Tamil Nadu. I could not have missed the opportunity to share my thoughts with you. I am aware that the focus of MCCI is on Sustainable development and I have chosen to

interpret Sustainable development in its broadest sense not limited to simply eco-friendly development. After all sustainable development takes place when there is positive change and progress in all important aspects of our lives, be it economic, environmental and social. With one of India’s highest per capita income, the economy of Tamil Nadu is one of the most dependable, consistent and urbanized within the country. Being a Chennai citizen I am particularly proud that this State is the second largest software exporter in the country. I am sure part of the success has been due to MCCI’s valuable contributions over the years, to the development of industrial, commercial and social interests in Tamil Nadu. Although the State has a vibrant growing

economy, the question that comes to mind is where do we go from here? What should we aspire to ? When I was here last December for “Connect” I attempted to answer this question. I believe that Tamil Nadu has the potential to become an International destination of choice and Chennai the opportunity to grow into a global city. Those of you who were present then, may recall my mentioning that the aspiration should be to become a global hub in sectors where we have leadership such as Automotives, Textiles, Manufacturing, Biotech and Pharma, Animation and IT. Chennai must be mentioned in the same league as Singapore or New York or London. As the body that represents the voice of business, MCCI can play a critical role in

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CHAMBER’S ACTIVITIES that journey. Your mission is to proactively influence public policy and practice on issues which impact economy, trade, commerce and industry as also social processes such as education and health, infrastructure and environment. In a politically vibrant and active democracy like ours issues of importance sometimes do not get the attention it deserves. So if it was not for Anna Hazare, we would accept corruption as fait accompli. While I may not endorse his methodologies I give him credit for keeping the issue alive, reigning in support from citizens and getting the Government to act. He and his followers have been the pressure group; similarly the MCCI must be a pressure group on the Government in enabling the right policies, whether it is in ease of starting a business, or promoting the growth of existing industrial zones and clusters. My past year or two experience with Governments have given me to believe that while Governments have the intent, getting them to act is quite another thing, there are just too many issues demanding attention. But whenever we have relentlessly pursued a specific agenda it has worked. For instance, recently the Indian Banks Association approved making loans for vocational education part of priority sector lending; however I recall that the first meeting I had with representative banks was quite a disaster. Continuous dialogue and collaboration, a little give and take achieved the goal. On another front we are working on easing the Apprenticeship Act which you will agree defeats the purpose of serving the interests of the workers. India produces only 2.4 lacs apprentices annually; in comparison Germany has 60% of its student population entering the field of work as apprentices. Learning on the job is an accepted best practice. Even as we work with the Central Ministry on regulatory changes, industry can come

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forward by initiating internship programs. Today mainly professional courses such as MBA and engineering programs have an embedded internship element. Some institutions such as the Madras Christian College have taken a pioneering step in making internships part of graduation and I hope more colleges will follow. But this is a supply side push. I would like to urge all companies represented here to show leadership and work out an institutionalized process of recruiting interns. This is a call for leadership from the demand side with the commitment to invest in training. Industry cannot stand by and complain about lack of job ready skills, it must take on part responsibility of training as well. Not just for itself but for a larger good and betterment of the sector as a whole. By impacting the ecosystem eventually all organizations within, benefit. The IT industry is a standing example. Today we reap the benefits that were made way back in the 70’s in working with academia in developing talent. MCCI could play a stellar role in enabling this; you could be a role model for other industry bodies to follow and the country may eventually see an Internship Act being promulgated in the future. A positive development on the policy front is the HRD Ministry’s call to Universities to leverage their physical infrastructure as well as their knowledge expertise to run vocational education courses during slack periods. SASTRA is one University that has taken on the challenge and is even funding a year’s training of underprivileged students in the community; they have tied up with companies located close by to employ the deserving students. More Universities will follow only if more companies collaborate to make this initiative a success. As part of your educational commitment I strongly urge MCCI to create forums and seminars for

engaging with academia to formalize many more such initiatives. I am not aware of how much representation there is of small and medium industry in the MCCI. But the SME sector is yet another sector where enough attention is not given. The needs of this sector as we all know are different, the kind of people they require need different skill sets, the cost structure they function in are different. For instance for all the software engineers that Tamil Nadu produces, an SME organization may require a network administrator with basic IT skills rather than a full fledged engineer. However in the mad race for engineering, no one is catering to this demand for lower skilled IT people for which I can assure you there is great demand not just in Tamil Nadu but in all industrialized Zones with SME’s. As we all know, India is a nation of entrepreneurs, and the State of Tamil Nadu accounts for the largest number of MSMEs in India (15.07%) with almost 7 lakh registered MSMEs. Producing over 8,000 product varieties for a total investment of Rs.32,000 crores. The State is promoting micro and small enterprises by developing clusters under the Cluster Development Programme. The fact that many of these SME’s are feeder organizations for large businesses, MCCI could have a role to play. Textiles, Leather, Auto components are largely operating out of SME clusters in the State. Given that you are focusing on environmental sustainability one immediate measure is to look at SME clusters for whom environmental issues are fairly low on priority simply due to cost factors. The best way to advocate for clusters with low carbon footprints is to demonstrate and certainly with the talent and innovation available within the State, role models could be created. The new Manufacturing Policy very


CHAMBER’S ACTIVITIES specially emphasizes the creation of green National Industrial Manufacturing zones or NIMZS and if some these zones will be in Tamil Nadu, as I am sure they will be, I would like to see the guests here today take on the challenge of developing role models. While the Govt has stated a broad vision of what needs to be achieved, the “how to achieve” part will need to come from industry innovation and innovation is not new to this State. In the preparation for this talk, I was curious to see what other Chambers of Commerce across the world had achieved and I was quite impressed by US Chamber of Commerce that has on its website published best practice documents on varied topics from Governance, finance, to community development. In India on the other hand we do not collaborate enough. With the advent of modern technology we must share and learn a lot more from each other than we do presently. The rules of competition in today’s world have changed; it’s not so much about guarding the recipe for success and keeping big secrets or keeping knowledge close to your heart. Today it’s about sharing and learning and in the process constantly raising the bar. In the world of technology we have had no other way; a big idea or new technology is out in the open within seconds of it being thought of, and this is exactly why those who want to stay ahead have to immediately go onto the next big idea. This philosophy is at the heart of dynamism and success of the global IT industry. The pursuit of economic development does not mean the degradation of our environment, or our value systems. However bringing environment concerns to the forefront in a country where half the population is striving for basic necessities is a challenge. India’s dichotomy in terms of haves and have nots necessitates hybrid models of development, “green

urban slums” or “green clusters”. Indian style needs to be thought of rather than implanting western ideas. Chennai is flooded each year whenever there is a heavy shower, water shortages and shortage of electricity are issues faced for years and they have become an acceptable way of living leading to complacency amongst people. We must demand for better services, we must demand for better infrastructure. Tamil Nadu is already innovating in some area, it has made rain water harvesting mandatory, invested in desalination of sea water and in wind power, infact its installed capacity is over 40% of the national capacity. Singapore is doing some stellar work in re-cycling and water management and there is much to learn from them. Exploring areas of collaboration with other nations is one way of fast tracking change. As we become more environment conscious as a nation, thousands of green jobs will be created by experts in various areas of alternate energies, and across various levels from those that could install solar panels in a village to those who conduct research on more efficient solar cells. Industry along with Universities need to plan for that today; courses and curriculum needs to be jointly developed and a pool of experts in these areas needs to be developed. An ecosystem around this needs to be invested in. I would like to reiterate what I said at Connect that Tamil Nadu has the opportunity to become a role model for other States by adopting a ‘Sustainable Tamil Nadu Action Plan. A starting point for this would be to develop a system to measure ecological performance, which can then be translated into economic and social terms. The measurement system must be built around the six forces of ecological competitiveness –

LEWWAC – Land, Energy, Water, Waste, Air and Carbon. By establishing targets and benchmarks the State can create a score card on the performance to achieve those targets. A centralized Project Monitoring System could track the progress of projects across the State and establish a measurement and reporting mechanism through the same. No State has attempted this and it would make Tamil Nadu a pioneer of sorts. From a National perspective nearly 13 million new entrants to the workforce are required by different industry verticals in the country every year, while India’s education and vocational training system churns out 3-4 million workers, leaving a yawning gap between demand and supply. The number of people that need to be trained are so numerous that they vastly outweigh the capacity of current skills training infrastructure and programs. And this is where progressive States like Tamil Nadu, and proactive Chambers like the MCCI can play an important and active role. I must step back at this time and congratulate MCCI for its efforts to set up a Vocational Training and Skill Development Centre and the launch of “Sustainable Chennai Forum”. This is most commendable and I hope the future plans include scaling up of such initiatives. The well documented success of certain industries in Tamil Nadu like Automotive, Textiles, Animation and IT services, etc could also provide the initial impetus for select initiatives in rapid skills development and deployment. MCCI enlisted Member companies could come forward in several ways creating training hubs and spoke models leveraging technology to reach for greater numbers as an example. There are new ways of learning including the use of Haptics in

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CHAMBER’S ACTIVITIES skill based training which could see greater penetration in the future. Another area of impact is creating a pool of Master Trainer Programs. There is an acute shortage of trainers and local language content in skill based training. To address these an academy for Trainers is badly required. Encouraging retired industry personnel to take up second careers in training is another way to address the issue. If a digital registry of trainers is created all companies could direct their retired personnel to register themselves on this portal and training providers could access this portal when in need of trainers. Time and again I hear that skilled labour is a disappearing breed in Tamil Nadu. This has a deep socio-cultural context. There is a tendency for Indians to view vocational trades through the lens of caste

traditions and other socio-cultural filters. Vocational practitioners like carpenters, farmers, masons, vehicle drivers, retail shop keepers, etc would rather see their children move to more ‘respectable’ white collar jobs than excel at a trade that could generate good income, or drive entrepreneurship. This widespread belief system naturally influences young people and their own attitudes towards vocational education, when compared to other professions. Here is where powerful ‘pro-skill’ advocacy initiatives driven by Chambers like the MCCI, in partnership with good advocacy NGOs could also help. So, friends, it is an ironic situation. Even as 40 million Indians remain unemployed, and over a million Indians join the

workforce every month – today, and for the foreseeable future – there is an acute shortage of vocationally trained and qualified people, needed to meet the needs of a trillion dollar economy growing at over 6% every year. Clearly, time is not on our side. But while we face many challenges in the area of skills development, we also see opportunities to enable livelihoods for millions of Indians. And if we are to truly reap the so-called ‘demographic dividend’ that could ensue from being the world’s youngest country by 2025, there is really no choice, but to make that effort. Thank You.

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CHAMBER’S ACTIVITIES 176th Annual General Meeting Proceedings of the Business Session Time: 10.15 am - Date: 4th August 2012 Venue: Sheraton Park Hotel & Towers, Chennai-600018 Present: Mr.T.T.Srinivasaraghavan Mr.T.Shivaraman Ms.K.Saraswathi

President Vice-President Secretary General

Representatives of Members: Mr K S Pasupathi Mr M R Venkatesh Mr P R Subramaniyan Mr V K Vijayaraghavan Mr T P Vivekanand Mr N Srinivasan Mr George Zachariah Mr M C Kapur Mr Deepak Appukuttan Ms. Anuradha Mr S R Dhruvan Mr G V Raman Mr V S Ramana Mr K Jagannathan Mr M V S Srinivas Mr M V Ananthakrishna Mr S Madhavan Mr R Srinivasan Mr. T.T.Srinivasaraghavan, President, chaired the meeting and conducted the proceedings. Before taking up the agenda items for discussion, he apprised the members about the activities of the Chamber during the period. The full text of the President’s speech is reproduced below: “ A warm welcome to all of you to the Business Session of the 176 th Annual General Meeting of the Madras Chamber. Before we take up the agenda items, I wish to give a snap shot of what your Chamber did during last year. As you all know, 2011-12 was a momentous year for the Chamber, marking the

Mr G Krishnakumar Mr S Pattabiraman Mr P V Chandrasekaran Mr S Balakrishnan Mr R Subramanian Mr T A B Barathi Mr R Mohan Mr L Sabaretnam Mr G Natarajan Mr S Gopal Mr G Srinivasan Mr D P Devnath Mr S Mohan Mr N Ramesh Mr Preetham Surana Mr Clynton Almeida Dr K V Rajendran Dr R Mahadevan

Mr R Raghuttama Rao Mr S Krishnan Mr P Krishnakumar Mr N Guruswamy Mr V Elango Mr S Ravindra Mr V Ranganathan Mr Vijay Chordia Mr S J Muralidharan Mr R Narasimhan Mr Bhaskar Chatterjee Mr Prabakar Col. C Sukumar Raju Mr Srinivasan K Swamy Mr Shanker Gopalkrishnan Mr U Udayabhaskar Reddy Mr R Vittal Raj

completion of 175 years of service to trade and industry, in this part of the country. We are indeed fortunate to have been part of this slice of history, especially when we realise that there are very few institutions in the world that have existed for 175 years! This is indeed a great milestone in the history of the Chamber and we do owe a debt of gratitude to all the supporters of the Chamber – past and present- who have worked tirelessly to make this possible. The Chamber undertook several new initiatives as part of the 175th year celebrations. The Food for Thought programme, launched during 175th year, has been well received and is now part of

the Chamber’s monthly agenda. We have also made a modest beginning with the Skill Development Centre and I hope, with your support, it will blossom into a Centre of Excellence. It is my fond hope that this will be a landmark initiative of the Chamber and emerge as a proud showpiece, when we reach our bicentinnial. The Chamber launched a Sustainable Chennai Forum (SCF) on the occasion of World Habitat Day in November 2011, with the vision to be a leading advocate on sustainable development and make Chennai an inclusive, sustainable, clean and green metropolis. This too will be of enduring value to the society at large. A Coffee Table Book “Championing

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CHAMBER’S ACTIVITIES Enterprise – 175 years of the Madras Chamber of Commerce & Industry” authored by the noted historian V Sriram was released by His Excellency Dr.K.Rosaiah, Governor of Tamilnadu, on the occasion of the 175th Chamber Day. The book, which chronicles the history and heritage of the Chamber and its contribution to the development of trade and industry in the region, has won great appreciation and received good reviews from The Hindu and Business Line. “Championing Enterprise” is certainly a collector’s item and a jewel in our crown. A number of Seminars and workshops on subjects of topical relevance were organised during the year. We have also been trying to have outreach programmes and these were organised in Coimbatore and Sriperumbudur for the benefit of companies located in those places and the responses are very encouraging. Our first foundation course on Logistics was organised for the MBA students of MOP Vaishnav College for Women. 59 students had enrolled and have successfully completed the course. It is our endeavour to take this course to other colleges and industries as well during the current year. We had several visiting delegations during the year, notably, the Parliamentary delegation from Western Australia, the Port and Maritime Sector delegation from US and the Minister of State for Foreign Affairs, UK. The Chamber commissioned a study on Tamil Nadu Ports which was released by Hon’ble Mr.G.K.Vasan, Minister for Shipping, Government of India, at a major Seminar on Development of Ports inTamilnadu. One of the noteworthy developments for the Chamber is that it has regained its

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rightful position on the Board of Trustees of the Chennai Port Trust, after a gap of 12 years! It is documented history that the Chamber was instrumental in setting up of the Port, more than a century ago, and it is only appropriate that the Chamber is represented on the Board. I am happy that our persistent efforts over the last few years have yielded results. The last two years have been turbulent ones for businesses, big and small, due to external and domestic factors. The Chamber, true to its long tradition, has continued to actively lobby for business and economy-friendly policies and, as always, been tirelessly petitioning the Government, both at the Centre and the State – on issues ranging from taxation to port congestion. Many of our representations met with success, while some did not. My tenure has been fulfilling, rewarding and enjoyable and I was indeed fortunate to be a part of the Chamber’s 175 th Anniversary celebrations. The Chamber Day, marking the conclusion of the 175th year celebrations, was certainly the high point. Presided over by Dr.K Rosaiah, Governor of Tamil Nadu, it was an evening of great dignity. It was as much an occasion for nostalgia, as it was to look ahead and it also afforded us the opportunity to honour our Past Presidents and Secretaries, to whom the Chamber owes so much. The Chamber is taking several initiatives to make it more useful and relevant to members, as well as to trade and industry in general. Being an instituion that is focused exclusively on Tamil Nadu and given our long and distinguished record of service, I am sure that the Chamber will scale greater heights as our State sets out to realise the ambitious dreams of Vision 2023!

It is said that all good things come to an end and so it is for me, as my tenure as President of this great institution, comes to an end. It has been a rare honour and privilege to serve as the President of this august Chamber for two terms. I thank each one of you for the faith reposed in me and for your support and cooperation. I am confident that you will continue to do the same for my successor. After presenting the above, he took up the agenda items for consideration. 1. To adopt the Annual Report for the year 2011-12 The President referred to the Annual Report which had already been forwarded to the members, detailing the activities of the Chamber during the year 2011-12. He mentioned that the Report was fairly exhaustive and had also come out very well. The General Body also unanimoulsy appreciated the Report. In the absence of any queries, he proposed that the Report be adopted. Mr.S.G.Prabhakharan, seconded the proposal. Put to vote, the general body unanimously adopted the Report. 2. To adopt the Audited Statement of Accounts for the year 2011-12 The President referred to the audited Statement of Accounts for the year 201112 sent to members as part of the Annual Report. Since there were no questions, Mr.S.Gopal proposed that the audited statement of accounts for the year 2011-12 be adopted. This was seconded by Mr.G.V.Raman. The President thanked M/s RGN Price & Co. for auditing the Chamber’s accounts.


CHAMBER’S ACTIVITIES 3. To determine the Rates of subscription payable by different classes of members for the year 2012-13: The President informed that there was no proposal to revise the subscription for the year 2012-13 and the old rates of subscription would continue. He recalled that Members had paid one year’s additional subscription last year in view of the 175th year celebrations and he thanked the General Body for their support. He then proposed that the present rates of subscription be adopted for the year 2012-13. This was seconded by Mr.M.R.Venkatesh. 4. To declare the election of Members of the General Committee for the year 2012-13: The President informed the General Body that considering the overall expansion of the activities of Chamber, we had increased the strength of the General Committee from 10 to 20, including President and Vice President. Accordingly nominations for the Committee had been called for and the Chamber received the nominations from eligible members. The President requested the Secretary General to read out the names of the elected members of the General Committee for the year 2012-13.

Mr.R Arjun Durai San Media Ltd. Mr.N.S.Balachandra Datta Hyundai Motor India Ltd. Mr.T.A.Brahmendra Barathi Wheels India Ltd. Mr.S.Gopal Chemplast Sanmar Ltd. Mr.Gautam Venkataramani India Pistons Ltd. Mr.Ishwar Achanta Viking Shipping (Chennai) Pvt.Ltd. Mr.J.Krishnan S.Natesa Iyer & Co. Mr.S.Mohan Patel Mohan Ramesh & Co. Mr.V.Murali Victor Grace & Co. Mr.R.Raghuttama Rao ICRA Management Consulting Services Ltd. Dr.K.V.Rajendran Neophyll Agrisciences Pvt.Ltd. Mr.G.V.Raman Shriram Group of Companies Ms.Rupa Gurunath The India Cements Ltd.

done by him in the last two years. Mr Srinivasaraghavan conveyed his sincere thanks for the members’ support and thanked the General body for the words of appreciation. 5. To appoint auditors for the year 2012-13: The President informed that M/s RGN Price & Co. had been auditing the Chamber’s accounts for the last many years. He said that last year the Chamber had paid a sum of Rs.30000/- plus service tax and out of pocket of expenses as Audit fee. He sought the approval from the General Body for their appointment for the current year 2012-13 on the same terms. The General Body unanimously accepted the remuneration of Rs.30000/- plus out of pocket expenses & Service tax and also agreed for the re-appointment of RGN Price & Co. as Auditors for the year 2012-13. The motion was carried over unanimously. 6. To declare the appointment of members of the Expert Committees:

Dr.Vinod Surana Surana & Surana International Attorneys

The President informed the General Body that the Expert Committees have been a great source of strength for the Chamber. There were many programmes organised by various expert committees on topics of current relevance and there were active deliberations on topical issues concerning the members.

The General Body congratulated the President and other members of the General Committee on their election for the year 2012-13.

For the current year nominations for the Expert Committees had been called for and as usual, there was good response for core Committees.

Members:

The General Body also placed on record its unanimous appreciation for Mr TT

Mr.R.Anand Ernst & Young Pvt. Ltd.

Srinivasaraghavan for his excellent leadership and the commendable work

The Secretary General read out the names of the Chairmen and Co-Chairmen of the following Expert Committees appointed for the year 2012-13.

The Secretary General read out the names of the elected members for the respective offices for the year 2012-13 as follows: President: Mr.T.Shivaraman Shriram EPC Ltd. Vice President: Mr.S.G.Prabhakharan XS Real Properties Pvt. Ltd.

Mr.K.Vaitheeswaran K.Vaitheeswaran & Co. Mr.Vijay P.Chordia Stonecolour Exim Pvt.Ltd.

9


CHAMBER’S ACTIVITIES Name of the Committee

Chairman

Co-Chairman

Company Law / Corporate Matters

Ms.Bhavani Balasubramanian Deloitte Haskins & Sells

Mr.P.Viswanathan Sundaram Finance Ltd.

Direct Taxes

Mr.Sriram Seshadri BMR & Associates

--

Economic Affairs

Mr.Bhaskar Chatterjee Larsen & Toubro Ltd.

--

Energy

Mr.P.Krishnakumar Orient Green Power Co Ltd.

Mr.B.V.Gautam B&G Infrastructure Co.Pvt.Ltd.

Environment, Pollution Prevention & Control

Mr.P.L.Subramanian The India Cements Ltd.

Mr.M.Ramakrishnan WS Industries India Ltd.

Financial Sector

Ms.Subashri Sriram Shriram City Union Finance Ltd.

Mr.V.Sriram ICRA Management Consultancy Services

HRD & CSR

Mr.K.S.Pasupathi Wheels India Ltd.

Mr.T.Kannan Symrise Pvt.Ltd.

Indirect Taxes

Mr.K.Vaitheeswaran K.Vaitheeswaran & Co.

Mr.K.K.Sekar Ashok Leyland Ltd.

Industrial Development/ Infrastructure

Mr.N.Baskara Raju Larsen & Toubro Ltd.

--

IT& ITES

Mr.Clynton Almeida Redington India Ltd.

Mr.B.Srinivasan Larsen & Toubro Ltd.

Legal Affairs

Mr.V.Srinivasan Sundaram Finance Ltd.

Mr.Sujay Banerjee VA Tech Wabag Ltd.

Logistics

Mr.J.Krishnan S.Natesa Iyer & Co.

U.Udayabhaskar Reddy Sanco Trans Ltd.

Manufacturing

Mr.K.Sridharan Balaji Ashok Leyland Ltd.

Mr.Suresh Hariharan Tecpro Systems Ltd.

VAT

Mr.P.R.Sudhakar Brakes India Ltd.

Mr.P.R.Subramaniyan Larsen & Toubro Ltd.

Since there were no other issues to be informed to the General Body, the President thanked the Members of the Chamber, Members of the General Committee, Members of the Expert Committees and the Secretariat for the wonderful and excellent work done for the Chamber and requested for their continued support. He then requested the Members to join the fellowship and attend the Public Session to be held at 11 am.

Chennai 9th August 2012

10

K.Saraswathi Secretary General


CHAMBER’S ACTIVITIES 17th August 2012:

Interactive Session on Current Global Scenario – Problems and Prospects of Indian Exports The Madras Chamber in association with Federation of Indian Export Organisations organised an interactive session with Mr H A C Prasad, Senior Economic Advisor, Ministry of Finance, Government of India. Welcoming the gathering, Mr S G Prabhakharan, Vice-President of the Chamber expressed that Indian businesses are in a state of restlessness now. The global economic crisis, more particularly the Euro zone crisis, is contracting the global demand. This has a cascading impact on all countries and every country including ours has started feeling the pinch. Till some point, everyone was saying that we would not be affected much and that we would show due resilience as we did during the last melt down. But now the realities are hitting us on our face. The depreciating rupee, the falling exports and the falling industrial production, the slow down or withdrawal of FDIs, all such indications point out that we are not insulated against the global economic slowdown. Though we cannot attribute every adversity to only external factors and there are some local inertia adding fuel to the fire, yet it cannot be denied that the external conditions do affect us and more particularly our exports. It is stated that India’s exports fell for the third successive month in July due to contracting demand in the EU and the US, sliding 14.8% to hit the lowest figure of $22.4 billion this fiscal. The products that suffered the steepest decline in exports during the month include engineering goods, petroleum products, gems and

jewellery, fruits and vegetables and iron ore.

The Union Finance Ministry had chalked out a road map to perk up exports.

The WTO has estimated global demand to decelerate to 3.7% in 2012, which is even lower than last year’s slow growth of 5%, attributing to the global economy losing momentum due to a number of shocks, including the European debt crisis.

”Just go outside of India and see for yourself. People there are appreciating the performance of the Indian economy. You need one dose of it to overcome the gloom. India’s performance is not that bad. India’s down movement has started just now. However, it is least compared to other economies such as US, European countries, Japan, Hong Kong, China and Singapore,” he said.

Due supports and fillips are required to boost exports. The Annual Supplement to Trade Policy introduced a few months back tries to give some respite through the interest subvention scheme, introducing a new post export EPCG scheme, encouraging green technology products etc. But given the depth of the problems these may not be adequate. What we require most is export infrastructure to be improved greatly to bring down the transaction cost and time which is very critical in today’s market. The woes of exporters who depend on Chennai port could speak volumes about what needs to be done. The strikes, the congestion, the recovery surcharges multiply the problems of exporters many fold. The need of the hour is quality infrastructure in terms of ports, roads, railway connectivity and timely implementation of projects proposed or already commissioned. Mr M R Venkatesh, Economic Analyst who presided, referred to the present global economic scenario which has been the cause for worry. He said serious policy initiatives were needed for boosting exports. He also referred to the connectivity problems being faced at the Chennai Port by the exporters which need urgent attention. Mr Prasad in his address said that though the United States and European countries were hit by slowdown, India’s major trading partner was United Arab Emirates.

To overcome the present crisis, Mr. Prasad said it was time to look at new destinations and new commodities to bring down the trade deficit. He expressed concern over the high and growing trade deficits with China and Switzerland due to large volume of imports and asked the manufacturers to focus on exporting value added items such as handicrafts, carpets, leather and textiles. Mr. Prasad called for building the business confidence among the trade, which is very low, through greater trade facilitation by removing delays and high costs due to procedural and documentation factors. He also sought information from the trade on specific sectors and the support needed from the Ministry on the issues concerning Special Economic Zones and infrastructure projects. Mr K Unnikrishnan, Director(SR), FIEO proposed the vote of thanks.

If we command our

wealth, we shall be rich and free; if our wealth commands us,

we are poor indeed. -Edmund Burke

11


CHAMBER’S ACTIVITIES 25th August 2012

FFT on Realising SME Aspirations The Chamber organised its monthly Food for Thought Programme on Realising SME Aspirations on 25th August. Mr T Shivaraman, President, while welcoming the members expressed that SMEs play a very great role in nation building. Indian SMEs despite their odds have also been playing a commendable role. However, in the back of our mind, there is always this question - is this their optimum performance? Is there a level playing ground for them? What probably will be handicaps for them - both internal and external? To have a more open discussion in line with our FFT objective, this programme was organised. The panelists then made their presentations as follows: Mr S Seetharaman Chairman & Managing Director, Super Auto Forge Pvt. Ltd. He expressed that SMEs are a result of the entrepreneurial urge in some individuals, a basic desire to be an entrepreneur or an employer than employed. He pointed out to the definition of Indian SME for Manufacturing sector and services sector. He also gave the comparative figures of GDP contribution by SMEs of various countries. The GDP contribution by Indian SMEs is 22% and the lower contribution is because of the wide gap in classification. He also explained the issues and problems faced by SMEs such as ability to deal with Government agencies, acute shortage of power, high interest rates, poaching of trained manpower from SMEs by bigger organizations, high transaction cost particularly to exporters because of factors like lack of connectivity to the

12

Chennai port, withdrawal of DEPB export incentives, rising prices of raw materials and consumables, etc. He added that, however, all is not gloom for SMEs and there are a number of positive factors too. He also touched upon the various opportunities that are available for SMEs which are huge, advancement of IT, technology upgradation, learning of established business practices with more and more MNCs coming into business in India, etc. In conclusion he said that in the era of globalized competition, firms that are able to adapt quickly to changing needs and work for continuous improvement/ upgradation will alone succeed. Prof. Padmanand International SME Expert for UN Organisation Prof. Padmanand elaborated what probably needs to be done both by the entrepreneurs and the Chambers and SME Associations to enhance the performance of the SMEs. He mentioned that collective lobbying for necessary policy framework and utilizing optimally the existing schemes meant for SMEs would help SMEs realize their aspirations. He also expressed concern that while in other parts of the country, many of the SMEs promotional measures and schemes of the government were taken full advantage, SMEs and their Associations in Tamil Nadu lagged behind in making use of them. He also cited the example of Cluster Development schemes and how many of the other States harness them to their advantage. Mr Parag Patki Chief Executive Officer, SMERA Ratings Ltd. Mr Parag Patki explained that SMERA is a joint initiative of Small Industries

Development Bank of India and Dun & Bradstreet Information Services India Private Ltd. There are 17000 SMEs rated across India and it is a full fledged Credit Rating Agency and a SEBI registered organisation. It has signed MOUs with 30 Banks/Financial Institutions as well as Trade Associations. He highlighted the SMERA ratings which enable SMEs getting credit from Banking sector on better terms. SMERA ratings evaluate management, industry, financial and basic governance. He also highlighted the benefits of SMERA Rating and also showed some case studies. He also briefed about the challenges of rating the SMEs such as inconsistency in supply of information, resistance to share sensitive information like orders in hand, net worth, group company details, source of funds etc, frequent changes in management and its constitution, ambiguity in the financials provided, lack of proper documentation, inability to understand the information requirement, lack of seriousness in complying with rigour of rating procedure, lack of appreciation of the changes in the regulatory environment etc. The programme was very well attended.

Money never starts an idea; it is the idea that starts the money – W J Cameron


CHAMBER’S ACTIVITIES 31st August 2012

work for the companies.

Presentation-cumInteraction on Leveraging Social Media for Business

To understand the importance of the social media as a business tool, the Chamber organised a presentation cum discussion on the subject. Mr. Hareesh Tibrewala, CoFounder and CEO of Social Wavelength, India’s largest social media agency from Mumbai made a presentation. He explained that Social Media is the online technologies and practices that people use to share opinions, insights, experiences and perspectives. He explained the power and volume of social media and how big it is – e.g. Twitter -200 million global visitors, You Tube – every minute 30 hrs worth of new video uploaded. He added that if Face Book was a country, the population was more than 850 million and the number of

Today Social media has become a part of the modern life. Besides connecting people and bringing them together, this could also mean a lot to businesses. Modern businesses are looking at social media as a powerful and cost effective marketing tool. The problem with social media advertising is that many companies do not have clear understanding of how to leverage social media for their business. There are a growing number of businesses whose primary focus and business model is to help organisations leverage social media and coordinate the social media

blogs worldwide is 200 million growing at a rate of 900,000 a day. He explained that social media for business could be used for the following: o Brand building o Generating sales leads o Reputation management o Real time consumer survey o Customer service o Co-creating products o Creating b2b relationships He also explained about creating a social media strategy, the challenges, building a community - where to build and how to build, reaching out to the community, connecting with influencers and also the social media mega trends etc.

Forthcoming Programmes: 29th September 2012

Chamber Day 11 am at ITC Sheraton Park Hotel & Towers, Chennai 600018 followed by Lunch. Chief Guest: Mr Ajay Shankar, IAS (Retd) Member-Secretary, National Manufacturing Competitiveness Council, New Delhi.

6th October 2012

Discussion on Business Responsibility Reports to be addressed by Mr Henry Richard, ROC, Chennai @ Deloitte Haskins & Sells, T.Nagar

12th & 13th October 2012

All India Workshop on Indirect Tax Laws@ Hotel GRT Grand, T. Nagar, Chennai

Participation fee: Members: Non-members:

Rs 4500/- plus service tax (Rs.5056) Rs.5500/- plus service tax (Rs.6180)

10% discount to those sponsoring 3 or more delegates.

13


General Committee 2012-13 PRESIDENT

VICE PRESIDENT

T Shivaraman Managing Director & CEO Shriram EPC Ltd.

S G Prabhakharan Chairman XS Real Properties Pvt. Ltd.

MEMBERS

14

R Anand Partner - Tax & Markets Ernst & Young Pvt. Ltd.

R Arjun Durai Managing Director San Media Ltd.

T. A. Brahmendra Barathi Vice-President (Supply Chain) Wheels India Ltd.

B C Datta Senior General Manager Hyundai Motor India Ltd.

Gautam Venkataramani Executive Director – Corp. Affairs India Pistons Ltd.

S Gopal Managing Director Chemplast Sanmar Ltd.

Ishwar Achanta Managing Director Viking Shiping (Chennai) Pvt. Ltd.

J Krishnan Partner S. Natesa Iyer & Co.

S Mohan Senior Partner Patel Mohan Ramesh & Co.


General Committee 2012-13 MEMBERS

V Murali Senior Partner Victor Grace & Co

G V Raman Executive Chairman Shriram Group of Companies

R Raghuttama Rao Managing Director ICRA Management Consulting Services Ltd.

Rupa Gurunath Director The India Cements Ltd.

K V Rajendran Advisor Neophyll Agrisciences Pvt. Ltd.

K Vaitheswaran Advocate & Tax Consultant

EX OFFICIO

Vijay P. Chordia Director Stonecolour Exim Private Ltd.

Vinod Surana CEO & Partner Surana & Surana International Attorneys

T. T. Srinivasaraghavan Managing Director Sundaram Finance Ltd.

MCCI Congratulates you on your election to the respective offices and looks forward to your active support and co-operation to take the Chamber to greater heights.

15 15


GENERAL COMMITTEE 11th August 2012

General Committee The President welcomed the members to the first meeting of the reconstituted Committee for the year 2012-13. He also appreciated the wonderful tenure of Mr T T Srnivasaraghavan as President for the past two years and expressed that we have a major task on our hand to keep up the standards set by him. The Committee then discussed the following:

Study to assess the social and economic health of Tamilnadu – Status paper on TN Economy The Committee noted that points had been received from Dr R Mahadevan regarding Manufacturing Sector and Mr J Krishnan regarding Logistics sector. The Committee suggested that these will be forwarded to ICRA without waiting for additional comments. As regards Vision 2023, the Committee deliberated at length about the creation of a mega port in Tamil Nadu and also about the connectivity problems. It also suggested

to plan a Seminar and to undertake a Study. Mr T T Srinivasaraghavan suggested that international experts from Rotterdam and Port of Antwerp may be invited to address. The Committee was of the view that the major focus should be on Ports and Skill Development, since power and manufacturing sector are being taken up by many others.

own premises and start our operations from there at the earliest.

MCCI – Skill Development Centre & Construction Process

The President then reported on the various programmes organised during July as well as the forthcoming programmes.

Members were informed that the Logo of- MCCI Vocational Training and Skill Development Centre was launched by Mr.S.Ramadorai, Vice Chairman of TCS on the occasion at the MCCI AGM held on 4th August. Alternate rented premises have been taken at Manavalan Nagar, Tiruvallur (8 kms from our land) since accessibility was very difficult to the existing location and the next batches of courses will commence soon. The Secretary General informed that the new location is taken on rent temporarily for a period of 11 months, but the whole idea is to try to construct at least 5000-6000 sq. ft in our

She also said that the second batch of Computer Skills course and basic fitter course have been completed and certificates issued to them. The Committee also discussed about the fund raising for the Centre.

Chamber Day – 29th September 2012 It was decided to approach any of the following dignitaries to be the Chief Guest for the Chamber day. 1 Mr. P. Chidambaram, Union Finance Minister 2 Mr. Raghuram G Rajan, Chief Economic Advisor to the Prime Minister 3 Mr. Azim Premji, Chairman, Wipro Ltd.

OBITUARY Dr Verghese Ver erghese Kurien er

Mr G Dattatr atr

Fatherr of White Revolution and Founder of the co co-operati o-operative dairy movement in the country, passed passed away on 9th September 2012.

Chennai Former Chief Urban Planner, Chenn nai Development (CMDA) Metropolitan Dev velopment Authority (CMDA DA) passed away on 12th 12 2th September 2012.

The “milk man of India” saw India emerge emerrge from m a milk deficient country into the largest largeest s milk p producer roducer in the world.

supporter He was a guiding fforce orce and a great supporte er Chennai of Sustainable Ch hennai Forum (SCF) of the th he Chamber.

MCCI conveys ys its profound sorrow and deep sympathies to the bereaved bereaaved av families.

16


EXPERT COMMITTEES 11th August 2012

Meeting with Chairmen / Co-Chairmen of all Expert Committees The President and Vice-President met the Chairmen/Co-Chairmen of all Expert Committees on the 11 th August. The Chairmen/Co-Chairmen detailed the action plan of their respective Committees for the year 2012-13. The President and Vice-President requested the help of members to increase its membership strength. SMEs would be the focus. He also informed the members that they can contact the Secretariat for arranging meetings etc. The President mentioned that the main focus areas for the Chamber for the current year would be on Port Infrastructure and Skill Development. 21st August 2012

Expert Committee on Manufacturing The first meeting of this Committee was held on 21st August 2012. The Committee discussed the terms of reference and finalised the same. It decided to plan 3-4 events and a major conference before the year end on Promoting Brand Tamil Nadu through Manufacturing. The Committee felt that the Chamber could organise some basic programmes in areas like Labour Act, Factories Act, PF & ESI etc. The other activity could be arranging

study visits for SMEs to the large scale manufacturing factories which would help them to understand the whole process and the areas for improvement. 22nd August 2012

Expert Committee on Energy The reconstituted Expert Committee on Energy met on 22nd August. Members expressed concern at the power situation in the State and felt that the new projects proposed are not coming up in time. The Committee decided to organise an interactive meeting with the senior officials of the Electricity departments like TNEB, TANGEDCO, TEDA and TNERC to discuss the ground realities and seek possible solutions. The Asia Pacific Centre for Technology Transfer (APCTT), an UN organisation, is planning to organise a two day seminar on Renewable Energy on 15th & 16th October 2012 jointly with C-WET (Centre for Wind Energy Technology). The Committee agreed to the idea of MCCI partnering in this regard. The Committee also agreed to organise training programmes on REC/ RPO, Energy Conservation in association with PCRA, Green building programmes, etc. at the appropriate time. A major one day conference is being scheduled in association with India Energy Forum, New Delhi on 15 th December 2012 in Chennai on “Tamil Nadu Power Dynamics and the Future Perspectives”.

The venue will be Larsen & Toubro auditorium, Manappakkam. Suitable speakers and sponsors would be identified by the Chamber and the India Energy Forum. 23rd August 2012

Expert Committee on Indirect Taxes At the first meeting of this reconstituted Committee, the Terms of Reference were approved. As regards Workplan for the year 2012-13, an All India workshop on Indirect Tax laws, a flagship event of the MCCI, has been planned on 12th and 13th October 2012 at Chennai, jointly with the VAT Committee. A communication from the Chamber would be sent to the Members shortly with more details about this workshop. Further, Training Progammes on excise, service tax, customs will be organised periodically. The Chamber had already organized excise & service tax programmes in Sriperumbudur and Coimbatore and responses were very encouraging. More such outreach programs in places like Trichy, Madurai etc. which were likely to meet with good response are being thought of. Once GST gets implemented, the Chamber would plan more conferences and training programmes on this subject. The Committee also discussed the draft Circular on Leviability of service tax on staff benefits and employment related transactions as well as the re-organisation of jurisdiction of Service Tax Divisions on Territorial basis.

Success in business requires training and discipline and hard work. But if you’re not frightened by these things, the opportunities are just as great today as they ever were. – David Rockefeller

17


27th August 2012

Expert Committee on VAT At its first meeting held on the 27th August. It was decided that the Committee would meet once in two months. As regards workplan, the Committee decided to organise ™ A Workshop on Indirect Tax Laws

jointly with the Expert Committee on Indirect Taxes – Tentatively fixed for 12th and 13th October. ™ Training programme for the executives

on VAT ™ More outreach programmes and

The terms of reference tabled at the meeting were approved.

On IFRS, the Committee felt that India is going to go slow.

The Committee considered the recent circulars and developments with regard to Tamil Nadu VAT and also about Online filing of ‘C’ Forms. However, it was of the view that the Department should keep some blank printed forms for some more time. The Committee suggested the Chamber to send a suitable letter to the Commercial Taxes department on their new initiative.

Members were apprised of Chamber’s website and the new facility “Ask the Experts” which will be activated shortly. As regards workplan, the Committee proposes to organise: -

A half a day Seminar on issues relating to Shareholders in SEBI, MCA and Stock Exchange.

-

Takeover Code and FEMA can be combined with India Corporate Week.

-

A half a day Seminar on Risk Management on 2nd November. The focus would be on manufacturing, infrastructure, Real Estate, Financial services etc.

-

Risk management in labour to be covered by the HRD committee.

-

As regards Takeover Code and FEMA, it can be combined with the India Corporate Week.

28th August 2012

Expert Committee on Company Law/Corporate Matters

™ Certificate course on VAT

It was decided to organise programmes on VAT at places like Madurai, Trichy, Hosur where a number of industrial units are located. It was decided that certificate courses could be planned under the auspices of this committee.

The first meeting of the reconstituted Expert Committee was held on 28 th August. With regard to Companies Bill, the committee expressed that nothing has been done by the Parliament and the plan to hold the Seminar on Companies Bill has not been successful so far.

New Members: The Chamber extends a warm welcome to the following members: Metronic Engineering Pvt.Ltd. Business: Building automation and building security Corporate Consulting Group Business: Consultants Solverminds Solutions & Technologies Pvt.Ltd. Business: Software Development Taces Engineering (India) Pvt. Ltd. Business: Engineering

18

Congratulations.... MCCI conveys its congratulations and best wishes to Thejo Engineering Pvt. Ltd. which entered the Capital Market and has the unique achievement of being the first one to be listed on the SMEs platform of the National Stock Exchange, EMERGE. MCCI feels proud that the Company is a Member of our Chamber. EMERGE is a credible and efficient market place to bring about convergence of sophisticated investors and emerging corporates in the country. It offers opportunities to informed investors to invest in emerging businesses with exciting growth plans, innovative business models and commitment towards good governance and investor interest.EMERGE will have customized processes and systems which will help prospective issuers in their journey of metamorphosing into listed public companies.


SPOT LIGHT India was one of the first in Asia to recognize the effectiveness of the Export Processing Zone (EPZ) model in promoting exports, with Asia’s first EPZ set up in Kandla in 1965. With a view to overcome the shortcomings experienced on account of the multiplicity of controls and clearances, absence of worldclass infrastructure, and an unstable fiscal regime and with a view to attract larger foreign investments in India, the Special Economic Zones (SEZs) Policy was announced in April 2000.

SPECIAL ECONOMIC ZONES

This policy intended to make SEZs an engine for economic growth supported by quality infrastructure complemented by an attractive fiscal package, both at the Centre and the State level, with the minimum possible regulations. SEZs in India functioned from 1.11.2000 to 09.02.2006 under the provisions of the Foreign Trade Policy and fiscal incentives were made effective through the provisions of relevant statutes. To instill confidence in investors and signal the Government’s commitment to a stable SEZ policy regime and with a view to impart stability to the SEZ regime thereby generating greater economic activity and employment through the establishment of SEZs, a comprehensive draft SEZ Bill was prepared after extensive discussions with the stakeholders. A number of meetings were held in various parts of the country both by the Minister for Commerce and Industry as well as senior officials for this purpose. The Special Economic Zones Act, 2005, was passed by Parliament in May, 2005 which received Presidential assent on the 23rd of June, 2005. The draft SEZ Rules

were widely discussed and put on the website of the Department of Commerce offering suggestions/comments. Around 800 suggestions were received on the draft rules. After extensive consultations, the SEZ Act, 2005, supported by SEZ Rules, came into effect on 10th February, 2006, providing for drastic simplification of procedures and for single window clearance on matters relating to Central as well as State Governments. The main objectives of the SEZ Act are: (a) generation of additional economic activity (b) promotion of exports of goods and services; (c) promotion of investment from domestic and foreign sources; (d) c r e a t i o n o f e m p l o y m e n t opportunities; (e) development of infrastructure facilities; It is expected that this will trigger a large flow of foreign and domestic investment in SEZs, in infrastructure and productive

capacity, leading to generation of additional economic activity and creation of employment opportunities. The SEZ Act 2005 envisages key role for the State Governments in Export Promotion and creation of related infrastructure. A Single Window SEZ approval mechanism has been provided through a 19 member inter-ministerial SEZ Board of Approval (BoA). The applications duly recommended by the respective State Governments/UT Administration are considered by this BoA periodically. All decisions of the Board of approvals are with consensus. The SEZ Rules provide for different minimum land requirement for different class of SEZs. Every SEZ is divided into a processing area where alone the SEZ units would come up and the non-processing area where the supporting infrastructure is to be created. The SEZ Rules provide for: ·

Simplified procedures for development, operation, and maintenance of the Special Economic Zones and

19


SPOT LIGHT

·

Single window clearance for setting up of an SEZ;

·

Single window clearance for setting up a unit in a Special Economic Zone;

·

Single Window clearance on matters relating to Central as well as State Governments;

The functioning of the SEZs is governed by a three tier administrative set up. The Board of Approval is the apex body and is headed by the Secretary, Department of Commerce. The Approval Committee at the Zone level deals with approval of units in the SEZs and other related issues. Each Zone is headed by a Development Commissioner, who is ex-officio chairperson of the Approval Committee.

·

Simplified compliance procedures and documentation with an emphasis on self certification

Once an SEZ has been approved by the Board of Approval and Central Government has notified the area of the SEZ, units are

for setting up units and conducting business in SEZs;

allowed to be set up in the SEZ. All the proposals for setting up of units in the SEZ are approved at the Zone level by the Approval Committee consisting of Development Commissioner, Customs Authorities and representatives of State Government. The performance of the SEZ units are periodically monitored by the Approval Committee and units are liable for penal action under the provision of Foreign Trade (Development and Regulation) Act, in case of violation of the conditions of the approval.

While many countries have set up special economic zones, China has been the most successful in using SEZ to attract foreign capital. In fact, China has even declared an entire province (Hainan) to be an SEZ, which is quite distinct, as most SEZs are cities.

Incentives and facilities offered to the SEZs The incentives and facilities offered to the units in SEZs for attracting investments into the SEZs, including foreign investment include:·

Duty free import/domestic procurement of goods for development, operation and maintenance of SEZ units

·

100% Income Tax exemption on export income for SEZ units under Section 10AA of the Income Tax Act for first 5 years, 50% for next 5 years thereafter and 50% of the ploughed back export profit for next 5 years.

·

Exemption from Minimum Alternate Tax under Section 115JB of the Income Tax Act.

·

External commercial borrowing by SEZ units upto US $ 500 million in a year without any maturity restriction through recognized banking channels.

·

Exemption from Central Sales Tax.

·

Exemption from Service Tax.

·

Single window clearance for Central and State level approvals.

·

Exemption from State sales tax and other levies as extended by the respective State Governments.

The major incentives and facilities available to SEZ developers include:·

Exemption from customs/excise duties for development of SEZs for authorized operations approved by the BOA.

·

Income Tax exemption on income derived from the business of development of the SEZ in a block of 10 years in 15 years under Section 80-IAB of the Income Tax Act.

·

Exemption from Minimum Alternate Tax under Section 115 JB of the Income Tax Act.

·

Exemption from Dividend Distribution Tax under Section 115O of the Income Tax Act.

·

Exemption from Central Sales Tax (CST).

·

Exemption from Service Tax (Section 7, 26 and Second Schedule of the SEZ Act). Source : Ministry of Commerce

20


SPOT LIGHT Special Economic Zones in India: The law and the experience In this paper, the author analyses the motivation, framework and the socio-economic impact of India’s Special Economic Zones (SEZ) Act of 2005.

Special Economic Zones (SEZs) have been touted to be magic pills for nations to kick-start exports, develop infrastructure, and increase employment by adhering to the principles of free markets and minimum distortions caused by effective administration and low or no taxes (Tantri, 2010, p26). Owing to the success of China and other countries, India took up the development of SEZs with much enthusiasm, but the outcome has not entirely been as desired. In an attempt to understand India’s experience with SEZs, this article will first look into the motivations of setting up SEZs. It will then assess the framework the SEZ Act of 2005, and finally, move on to scrutinise the social and economic impact of this policy.

(Muchlinski, 2007, p229). Effectively, the SEZ is “outside” the territory of the host State with respect to trade and investment. Figure 1 below explains this relationship.

The Rationale of the SEZ

The host States can expect inter alia to earn increased export earnings, benefit from increased employment opportunities, improved training and skills, and transfer of modern technology (Muchlinski, 2007, p227). In return, foreign investors are offered incentives such as tax exemptions, duty free imports, exemptions from import quotas, capital mobility to remit profits, export allowances and subsidised interest rates within the SEZ. A significant incentive offered by the host State involves the legal control of labour relations. Specifically, the right to establish trade unions or take industrial action may be limited within the SEZ (Muchlinski, 2007, p229).

Special Economic Zone (SEZ)

Political Border of the State

Keeping in mind these objectives and demands, India embarked on a journey to use SEZs as engines of economic growth. India set up Asia’s first EPZ in Kandla in 1965. The Government announced the SEZ policy in April 2000, claiming “to overcome the shortcomings experienced on account of the multiplicity of controls and clearances; absence of world-class infrastructure, and an unstable fiscal regime and with a view to attract larger foreign investments in India” (SEZ India, 2011a, Introduction). The Foreign Trade Policy provisions governed SEZs in India prior to the implementation of the SEZ Act, 2005 in February, 2006 (Chandrasekhar and Ghosh, 2007).

Figure 1

Salient Features of the SEZ Act (2005)

An SEZ is a geographically delimited area administered by a single body, offering a certain incentive regime to businesses which physically locate within the zone (The World Bank Group, 2008, p2). An Export Processing Zone (EPZ) is a type of SEZ which is legally defined as a “policy enclave” within the host State territory, to which distinct regime of custom and trade regulations apply (Muchlinski, 2007, p226). These policy enclaves are instruments to realise micro and macro-economic, and political objectives. Microeconomic issues include employment generation, while political objectives include implementing regional economic development strategies (Guangwen, 2003, p20). The SEZ is a subset within the geographical boundaries of the State. The rest of the host State is legally referred to as the Domestic Tariff Area or the DTA

Political and economic stability, reliable infrastructure, inexpensive labour, market access, and efficient bureaucracy are factors that determine not only how attractive investors will find the SEZ, but are factors that eventually determine the success of the SEZ (UNIDO, n.d., p27).

‘The Special Economic Zones Act, 2005’ was passed on the 23rd June, 2005, in an attempt to give a framework to the implementation of SEZs in India. It includes several regulatory and investment fostering mechanisms. i. Creation of SEZs and general administration The Act explicitly mentions a few guiding principles for the Central Government regarding the creation of SEZs. The objectives of the government, as stated by the Act, must be to generate additional economic activity, promote exports of goods and services, create employment opportunities, and develop infrastructure, all while maintaining the “sovereignty and integrity” of India (SEZ Act, 2005, p8). Thus, SEZs have come to be justified as an engine of growth and employment generation, and not in terms of exports

21


SPOT LIGHT expansion alone (Sharma, 2009, p18). The Act calls for the creation of the “Board of Approval”, which, as the name suggests, looks into applications to set up SEZs and gives approval to them if they meet the required criteria. This acts as a single-stop-shop for investors (called ‘developers’) to get the required regulatory permission to set up an SEZ. SEZs may be established under this Act either jointly or severally by the Central Government, State Government or any legal person. The Central Government, however, can suo moto set up SEZs, and can prescribe other requirements at a later stage (SEZ Act, 2005, p1-6). The position of a Development Commissioner is established (p14), and this position is responsible for the general overview of the SEZ, from presiding over the Approval Committee (p17-18) to running the SEZ Authority, which is in charge of provision of infrastructure, promoting exports. reviewing the functioning and performance of the SEZ, and other such functions (p28-29). ii. Ta x E xe m p t i o n s , F i n a n ce a n d Banking By definition, SEZs are so-called “tax havens”. The Act specifies all those taxes and duties that the developers would be exempted from in the SEZs. There is exemption from Custom Tariff Act, 1975, Central Excise Act, 1944, Central Excise Tariff Act, 1985 and other similar laws (p24). 100% Income Tax exemption on export income for the first 5 years, and 50% for the next 5 years is offered (SEZ India, 2011a, Facilities and Incentives). Attention is also given to the trade between the SEZ and the DTA. The Act (SEZ Act, 2005, p8) prescribes the exemption from the payment of duties, taxes or cess under all enactments of the First Schedule for trade between DTA to SEZ. However,

22

any goods moved from the SEZ to the DTA would be subject to safeguarding duties, anti-dumping regulations and other instruments (p26). The Act also specifies the financial governance structure of the SEZ. Bank branches in SEZs, for example, are defined as ‘Offshore Banking Units’ (SEZ Act, 2005, p3-4), and can be set up after the approval of the Reserve Bank of India (RBI), which is India’s central bank (p20). Other financial activities in the SEZ would be monitored by the relevant regulatory authorities in the DTA (p21). iii. Law Enforcement If illegal activities take place, the Act states that the Development Commissioner would have the cases investigated, and the cases would be heard at the court(s) appointed by the State Government and the Chief Justice of the State High Court (SEZ Act, 2005, p22). The Act also explicitly states that in case there is any inconsistency of this law with other laws, then this Act would have an overriding effect over others (p34). iv. Amendments Over the years, several amendments have been made to the Act. They have primarily revolved around specifying the provision of infrastructure and requirements for establishment of SEZs. The minimum area requirements vary across industries and regions. As an example, a multi-product SEZ has to be between 1000 and 5000 hectares, and at least 50% of the area needs to be earmarked for developing the processing area (SEZ India, 2010, ch II sec. 5, sub-sec 2 a). Amendments also allow for the generation, transmission and distribution of power within an SEZ (sec. 5, sub-sec 5 c). Importantly, in the case of an Information Technology related SEZ, 24 hours of

uninterrupted power supply is to be provided, apart from reliable connectivity (sec. 5, sub-sec 5A). Importantly, a stated objective is the generation of positive net foreign exchange earnings, as it is specified that a unit would achieve positive net foreign exchange, calculated cumulatively for a period of five years from production (ch VI sec 53). The Act is clear in specifying the framework regarding the implementation of an SEZ promotion strategy. The Act, however, remains conspicuous in its silence on land acquisition and labour laws, which has become the bone of contention on the implementation of the policy.

A Brief Overview of SEZs in India Prior to the enactment of the SEZ Act, 2005, there were 19 SEZs across India. The government has now approved 581 SEZs (SEZ India, 2011b) with a further 154 with in-principle approvals (SEZ India, 2011c). 130 of these SEZs are operational today. 283 of the 581 approved SEZs are in the three States if Andhra Pradesh, Maharashtra and Tamil Nadu (SEZ India, 2011d). Of the sectors, the Information Technology and IT enabled services sector has a 61% share of SEZs, while the biotech, pharma, textile sector and multi-product SEZs have less than 10% share each. Apart from these, there are three airport based multi-product, and eight port-based multiproduct SEZs (SEZ India, 2011e). The Indian experience in the implementation of SEZs has brought to light major areas of concern in the economic and social spheres. In the economic sphere, these are related to fiscal costs, net employment generation and exports. The social experience of SEZs has brought up issues of worker rights, and those of land transfer, dispossession and displacement.


SPOT LIGHT after its implementation, and it stands at 121.40% in 2009-2010 (SEZ India, 2011a, Export Performances). Note that these figures are inconsistent with the estimates of losses by the Finance Ministry. An example of a successful SEZ in this regard would be the Mundra SEZ. This SEZ houses India’s largest private port and has been most successful in seeing an increase in exports. It is expected to handle 100m tonnes of exports by 2013, with a growth rate of 40% in these years (Thakkar, 2008).

Source: SEZ India, 2011e

The Economic Experience i

Fiscal issues and investment

Tax holidays in the SEZ are generous, and provide 100% exemption for Income Tax on profits for the first 5 years of production and 50% for the next five years, apart from the tax breaks discussed above. In addition to this, land is given by the government to developers at low rates (Dutta, 2009, p23). Estimates by the Finance Ministry show that the losses to the State exchequer in terms of foregone revenue would be £24 billion for an investment of £50 billion (Chandrasekhar and Ghosh, 2007). Owing to the perceived lost revenue, the Finance Ministry announced a Minimum Alternate Tax on the book profits of developers and units operating in SEZs in the 2011-12 Budget. The Commerce Ministry, however, wants to see a roll back of this tax and sees SEZs as “engines of growth” (Pannu, 2011). This points to differences between the Finance Ministry and the Commerce Ministry on the issue of SEZs. In fact, Arunachalam (2010, p25) shows that the investment as of 2009 in approved SEZs stood at £416million, and not the figures cited by the Finance Ministry.

He argues (2010, p20) that Indian SEZs failed to attract FDI as it would have liked because firstly, India has not used SEZ policies to test reforms which would later be adopted nationwide; secondly, Indian SEZs are small in size (especially when compared to their Chinese equivalents), and finally, because of the lack of labour market flexibility. ii. Exports The Ministry of Commerce and Industry claimed that the value of exports from functioning SEZs increased from £1.9 billion in 2003-04 to £30.6 billion in 2009-10 (exchange rate £1 = INR72 as of 16th March, 2011). The growth rate of exports over the previous years increased from 25% before the SEZ Act, 2005 to 52%

However, the Comptroller and Auditor General of India has pointed out that most of the SEZs sell goods within the country as “deemed exports” rather than actually exporting them overseas. This seems plausible as the exponential rise of exports from SEZs corresponds with stagnant national exports. The Finance Ministry speculates that some units have merely shifted to these zones from the DTA to avail tax benefits (Pannu, 2011). iii. Employment generation (or the lack thereof) Proponents of SEZs have claimed that SEZs lead to employment generation, in addition to exports. The total employment by all types of SEZs across India as of 2008 was about 370,000 (Reddy, Prasad and Kumar, 2010, p87), Mahanta (2010, p199) and this shows that acquisition of agricultural land by SEZs lead to a fall in food-grain output and agricultural

Exports from the functioning SEZs during the last three years are as under Year

Value (Rs. Crore)

Growth Rate (over previous year)

2003-2004

13,854

39%

2004-2005

18,314

32%

2005-2006

22,840

25%

2006-2007

34,615

52%

2007-2008

66,638

93%

2008-2009

99,689

50%

2009-2010

2,20,711.39

121.40%

Source: SEZ India, 2011a, Export Performances

23


SPOT LIGHT employment. Importantly, he shows that this fall in agricultural employment is not offset by the increase in employment in SEZs. Another point to note is that compared to countries around the world, Indian SEZs have not seen a high proportion of female workers. In 2003, only 37% of the workforce was female (Varma, Prasad and Krishna, 2010, p320-322). The claims of benefits of the generation of employment by SEZs are hence called into question.

The Social Experience i. Land acquisition and displacement Land acquisition is the ‘hot topic’ of India’s SEZ policy. The SEZ Act, 2005 makes no mention of it. The out-dated Land Acquisition Act, 1894, is applicable in this regard. Even the Land Acquisition (Amendment) Bill, 1998 has come under fire for several shortcomings. For instance, land losers could have their land acquired even if a stated compensation isn’t paid (Asif, 1999, p1564). Land acquisition is especially contentious and problematic when the land being acquired is populated with people living off the land, which is often the case with agricultural land, as was the case in Nandigram, West Bengal. In addition to this, Chandrasekhar and Ghosh (2007) argue that real-estate developers can engage in major land grab in the guise of setting up SEZs as the SEZ rules require only 25 per cent of the land to be used for industrial processing purposes. While approved SEZs are to consume 95,000 hectares of land, (Balasubramanian, 2010, p53), the Ministry of Commerce stated that as of 2008, the land allocated to SEZs was about 0.070% of the total land area and 0.128% of the total agricultural area of the country (Reddy, Prasad and Kumar, 2010, p87). While this may seem low, it has proven to be problematic

24

because of the high population density in some of these areas. An illustration of the flawed acquisition mechanism by the Government would be the case of the State of Andhra Pradesh, where land is being acquired from the poorest people who had been earlier allocated land by the government in “land-for-the-poor schemes”. Legally, this land belongs to the government, so the government takes it back often without compensation on behalf of SEZ developers (Oskarrsson, 2010, p368). On the other hand, the Commerce Ministry has cited examples of how rise in land rates in barren, unproductive land has brought wealth to the poor and SEZs have brought infrastructure to the hinterland, as is the case with Mundra in the State of Gujarat (Bhatt, 2007). The wastelands in the coastal regions of Gujarat are mostly owned by the Government, hence leaving out land acquisition out of the picture. Moreover, States like Tamil Nadu have seen the rural population welcome SEZs, because several years of social upliftment by the government has made the populace less dependent on agriculture for their livelihood (Murugesan and Bandgar, 2010). ii. Labour relations While the SEZ Act, 2005 makes no mention of changes in labour law, Tanwar (2010, p231) writes that changes to the prevailing pattern of application of labour laws have been made in SEZs. All units operating in SEZs are categorised as “Public Utility Service”, meaning that many labour laws become irrelevant. A Public Utility Service is defined to be a service that is of great value to the society, and the lack of provision of which can affect the life of everyone. In this case, employees have to give a 14 day notice before going on strike. Additionally, employees in SEZs don’t have protection in the form of a notice period

or compensation against retrenchment. It follows that employees will be reluctant to raise a voice against their employers when the need arises. Moreover, employers in SEZs have the right to change the terms and conditions of service at any point of time. Mahanta (2010, p200) raises concern regarding the lack of labour unions, stating that the possibility of fall in real wages is high, although experience shows that SEZ wages are at par with nonzone wages (Varma, Prasad and Krishna, 2010, p326).

Conclusion This article has dealt briefly into a few contentious issues that arise with the establishment of SEZs in India. With significant employment not being generated, and with no real rise in national exports has taken place, the rationale of this establishment is called into question. The issue remains volatile, as was seen in the case of Nandigram, where the conflict continued to simmer after plans to establish the SEZ there were scrapped (Dohrmann, 2008, p76). However, governments are unlikely to give up on establishing SEZs, and it is imperative that laws are amended in order to make trade and investment flourish without disempowering the people who are displaced or the workforce in SEZs. The Land Acquisition Act of 1894 need to be looked into, and a transparent rehabilitation law needs to be put in place (Dohrmann, 2008, p79). In fact, the people need to be made stakeholders in the progress of the nation. Failure to do so may further prove former Indian Prime Minister VP Singh correct in his assessment of the SEZ policy of India, when he said (Dohrmann, 2008, p1), “the current promotion of SEZs is unjust”, and that it acts as a “trigger for massive social unrest, which may even take the form of armed struggle.” Courtesy : Siddharth Singh is a Macroeconomic Research Analyst with an Emerging Markets Consultancy and Editor, InPEC (www.inpec.in)


SPOT LIGHT Policy watch TN ups fight against plastic waste Tamilnadu is determined to carry forward its fight against use of low quality plastic, considered an environmental hazard. One of the pioneering States to ban use of plastic less than 40 microns, Tamilnadu is now gearing up to ban use of plastic with a thickness of less than 60 microns. A legislation is in the offing to enforce the new standard.

Industrial Growth crawls up to 0.1% in July – Efforts on to find practical solutions

Policy roadmap to boost entrepreneurship

and over the long run, higher productivity, particularly in the food supply chain.

A high power committee has made a number of recommendations to the Planning Commission to invigorate the start up ecosystem. Major ones are:

FM eases approval norms for foreign borrowings:

-

Provide tax breaks and concessions to drive angel investment in the country

-

Allow pension and insurance funds to invest a small portion of their corpus in early stage venture capital

-

Inculcate culture of entrepreneurship in educational institutions

-

Increase collaboration between start ups and established industry players for greater M&A activity

-

Create National Entrepreneurship Mission under the PM‘s Office, which will work with all stakeholders

The weak industrial performance during July has prompted industry to clamour for at least a 50 basis point cut in policy rate at the upcoming monetary policy review meeting of the RBI. Given the inflation situation, the Central Bank is expected to keep the policy rates unchanged. But it may consider a policy rate cut in its midyear monetary policy review meeting in October.

The report also recommends pension and insurance funds be permitted to invest up to 2% of their corpus in early stage venture funds.

The Government is intensively engaged with industry on the constraints that affected industrial production and will continue its efforts to find practical solutions to the problem said P Chidambaram, FM.

The RBI retained the indicative policy rates at the current level while cutting the Cash Reserve Ratio by 25 basis points to 4.50 percent, injecting a liquidity of around Rs 17,000 crore into the banking system.

Governance issues to be highlighted in 12th PLan

The short term policy rate and repo rate unchanged at 8 percent and Reverse repo rate at 7 per cent. Repo rate is the rate at which banks borrow funds from the RBI and Reverse repo is the rate at which banks park their funds with the Central Bank.

With the issue of corruption gaining centre stage, the Planning Commission has included a special modified chapter on Governance in the document for the 12th five Year Plan. Another key issue the document addresses is inflation. For the 12th Plan period, the Plan panel wants inflation kept below five per cent and current account deficit at around 2.5 per cent.

CRR cut to inject Rs 17,000 crore:The RBI keeps the key rate unchanged:

The Government undertook long anticipated measures towards fiscal consolidation by reducing fuel subsidies and clearing sale of stakes in select public enterprises. Further, steps taken to increase foreign direct investment should contribute to both greater capital inflows

In a further impetus to reform initiatives of the UPA Government, the Finance minister approved the operational features of the Rajiv Gandhi Equity Savings Scheme to attract first time investors to the stock market through a tax saving mechanism so as to provide an alternative to investment in gold assets and thereby suppress demand for the yellow metal. The FM also announced the government’s decision to grant approval to all foreign borrowings -as a measure of easing of norms instead of case by case approvals – by way of loan agreement and long term infrastructure bonds that satisfy certain conditions so as to enable Indian companies to procure low cost borrowings abroad in the current global environment of low interest rates.

Centre walks the talk, clears entry of MNCs into multibrand retail: Notifies FDI in multi brand retail, aviation and power sectors: Unmindful of the political crisis it is faced with, threatening the survival of the Central Government, the Prime Minister and the UPA Government went ahead and notified 51 per cent foreign direct investment in multi brand retail, 100 percent FDI in single brand retail and 49 per cent FDI each in the civil aviation and power sectors, putting an end to speculation about a possible roll back of its decisions. The notification about 5l per cent FDI in multi brand retail which operationalises the September 14 cabinet decision, comes within the enabling clause asserting that State Governments /Union Territories would be free to take their own decisions in regard to implementation of the policy. A minimum of $ 100 million will be required to be invested by the foreign investor.

25


ECONOMIC REVIEW CONTENTS 1. 1.1 1.2 1.4

Macroeconomy India’s Foreign Trade, July 2012 Interest subvention for providing short term crop loan to farmers Saving Scheme in Post Offices

2. 2.1 2.2 2.3

Corporate Sector Foreign Tourist Arrivals and Foreign Exchange Earnings in August 2012 Growth of Rubber Cultivation Production of Textiles Industry

1. Macroeconomy 1.1 India’s Foreign Trade July, 2012 Exports during July, 2012 were valued at US $ 22442.96 million (Rs. 124546.75 crore) which was 14.80 per cent lower in Dollar terms (6.45 per cent higher in Rupee terms) than the level of US $ 26340.73 million (Rs. 116998.69 crore) during July, 2011. Cumulative value of exports for the period April-July 2012 -13 was US $ 97646.92 million (Rs 531602.74 crore) as against US $ 102848.24 million (Rs 459162.24 crore)registering a negative growth of 5.06 per cent in Dollar terms and growth of 15.78 per cent in Rupee terms over the same period last year. Imports during July, 2012 were valued at US $ 37936.18 million (Rs.210526.07 crore) representing a negative growth of 7.61 per cent in Dollar terms (growth of 15.43 per cent in Rupee terms) over the level of imports valued at US $ 41059.75 million ( Rs. 182376.73 crore) in July, 2011. Cumulative value of imports for the period April-July, 2012-13 was US $ 153195.59 million (Rs.833792.71 crore) as against US $ 163801.20 million (Rs. 731377.31 crore) registering a negative growth of 6.47 per cent in Dollar terms and growth of 14.00 per cent in Rupee terms over the same period last year. Oil imports during July, 2012 were valued at US $ 12229.1 million which was 5.52 per cent lower than oil imports valued at US $ 12943.0 million in the corresponding

26

period last year. Oil imports during AprilJuly, 2012-13 were valued at US$ 53814.1 million which was 2.76 per cent higher than the oil imports of US $ 52368.0 million in the corresponding period last year. Non-oil imports during July, 2012 were estimated at US $ 25707.1 million which was 8.57 per cent lower than non-oil imports of US $ 28116.7 million in July, 2011. Non-oil imports during April -July, 2012-13 were valued at US$ 99381.5 million which was 10.82 per cent lower than the level of such imports valued at US$ 111433.2 million in April -July, 2011-12.

The trade deficit for April -July, 2012-13 was estimated at US $ 55548.67 million which was lower than the deficit of US $ 60952.96 million during April -July, 2011-12. Please refer Table 1 for relevant figures 1.2 Interest subvention for providing short term crop loan to farmers The Government of India has since 2006-07 been subsidizing short-term crop loans to farmers in order to ensure the availability of crop loans to farmers for loans upto Rs.3 lakh at 7% p.a. This interest Subvention Scheme has been further continued for 2012-13 for PSBs, RRBs and Cooperative Banks. In the year 2009-10, an additional subvention of 1% was provided to farmers who repay their loans on time. This has been increased from 2% in 2010-11 to 3% in 2011-12 and 2012-13. Banks have been consistently meeting the target set for agriculture credit flow in the past years. For the year 2012-13, the target for agricultural credit flow has been raised to Rs.5,75,000 crore from

Table 1 India’s foreign trade (US $ Million) July

April-July

EXPORTS(including re-exports) 2011-12 2012-13 %Growth2012-13/ 2011-2012

26340.73 22442.96 -14.80

102848.24 97646.92 -5.06

IMPORTS 2011-12 2012-13 %Growth2012-13/ 2011-2012

41059.75 37936.18 -7.61

163801.20 153195.59 -6.47

-14719.02 -15493.22

-60952.96 -55548.67

TRADE BALANCE 2011-12 2012-13

Source: Ministry of Commerce and Industry, Govt of India * Provisional


ECONOMIC REVIEW Rs,4,75,000 crore in the year 2011-12. ¾ To continue interest subvention to Public Sector Banks (PSBs), Regional Rural Banks (RRBs), Cooperatives Banks and NABARD to enable them to provide short-term crop loans up to Rs.3 lakh to farmers at 7% p.a. during the year 2012-13. ¾ To provide additional interest subvention of 3% p.a. to those farmers who repay on time, i.e. within one year of disbursement, their short-term crop loans taken during the year 2012-13. ¾ To permit the release of Rs.10,901 crore as interest subvention for 2012-13 of which Rs.3267 crore subvention to NABARD for refinance to Cooperatives Banks and RRBs and Rs.7634 crore to Public Sector Banks, RRBs & Cooperative Banks for subvention on their own funds. ¾ To provide interest subvention to small and marginal farmers having Kisan Credit Card for loan against negotiable warehouse receipts for post harvest at 7% p.a. interest for a period of six months i.e. on the same rates as applicable for crop loans. ¾ To permit the release of Rs.442 crore as interest subvention to small and marginal farmers having Kisan Credit Card against negotiable warehouse receipts, for post-harvest. 1.3

Saving Scheme in Post Offices

The gross deposit of Small Savings Scheme in Post Offices declined in the financial year 2011-12 as compared to the year 2010-11. The decline of gross deposit in small savings schemes is, among other things, due to investor’s choice of alternative instruments for effecting savings. The Government has taken following measures to make the small saving schemes more attractive:

¾ The rate of interest on Post Office Savings Account (POSA) has been increased from 3.5% to 4%. The ceiling of maximum balance in POSA 1 lakh in single account and 2 lakh in joint account) has been removed. ¾ The maturity period for Monthly Income Scheme (MIS) and National Savings Certificate (NSC) has been reduced from 6 years to 5 years. ¾ A new NSC instrument, with maturity period of 10 years, has been introduced. ¾ The annual ceiling on investment under Public Provident Fund (PPF) Scheme has been increased from Rs. 70,000 to Rs. 1 lakh. ¾ Liquidity of Post Office Time Deposit (POTD) – 1, 2, 3 & 5 years – has been improved by allowing pre-mature withdrawal at a rate of interest 1% less than the time deposits of comparable maturity. For pre-mature withdrawals between 6-12 months of investment, Post Office Savings Account (POSA) rate of interest has been allowed. ¾ Central and State Governments take various measures from time to time to promote and popularise small saving scheme through print and electronic media as well as by holding seminars, meetings and providing training to the various agencies involved in mobilising deposits under various small savings schemes. The rate of interest on Small Savings Schemes has been aligned with Government-Security rates of similar maturity with a spread of 25 basis points (bps) in all schemes except 10 Years National Savings Certificates and Sr. Citizens Savings Scheme where the spread of 50 bps and 100 bps has been given respectively (100 bps are equal to 1%). Interest rate for every financial year will now be notified before 1st April of that year.

There were 26,01,69,920 number of operational small savings accounts in the Post Offices as on 31.03.2012 and the amount deposited therein upto the end of March 2012 was Rs. 190732.73 crore and 2,84,10,593 accounts were closed by customers during financial year 2011-12.

2. Corporate Sector 2.1 Foreign Tourist Arrivals and Foreign Exchange Earnings in August 2012 Foreign Tourist Arrivals (FTAs) during the Month of August 2012 were 4.56 lakh as compared to FTAs of 4.45 lakh during the month of August 2011 and 4.22 lakh in August 2010. There has been a growth of 2.5% in August 2012 over August 2011 as compared to a growth of 5.3 % registered in August 2011 over August 2010. FTAs during the period January-August 2012 were 42.18 lakh with a growth of 6.2%, as compared to the FTAs of 39.73 lakh with a growth of 10.0% during January-August 2011 over the corresponding period of 2010. Foreign Exchange Earnings (FEEs) during the month of August 2012 were Rs. 7260 crore as compared to Rs. 5734 crore in August 2011 and ‘Rs.4620 crore in August 2010.The growth rate in FEEs in Rupee terms in August 2012 over August 2011 was 26.6 % as compared to 24.1% in August 2011 over August 2010. FEEs from tourism in Rupee terms during JanuaryAugust 2012 were Rs. 59409 crore with a growth of 23.7%, as compared to the FEEs of Rs. 48013 crore with a growth of 15.9% during January-August 2011 over the corresponding period of 2010.FEEs in US$ terms during the month of August 2012 were US$ 1306 million as compared to FEEs of US$ 1264 million during the month of August 2011 and US$ 992 million in August 2010.The growth rate in FEEs in US$ terms in August 2012 over

27


ECONOMIC REVIEW August 2011 was 3.3% as compared to the growth of 27.4% in August 2011 over August 2010. FEEs from tourism in terms of US$ during January-August 2012 were US$ 11273 million with a growth of 5.6%, as compared to US$ 10678 million with a growth of 18.7% during January-August 2011 over the corresponding period of 2010.

the Twelfth Plan proposals have not yet been finalised.

2.2 Growth of Rubber Cultivation

As per the Rubber Board studies, the estimates of development/cultivation cost per ha of rubber plantations at 2011-12 prices in traditional, non-traditional other than North East and North East regions are Rs.3,13,000, Rs.2,30,000 and Rs.2,14,500 per ha respectively.

Rubber cultivated area increased by 3.6% in 2011-12 over the previous year. The annual growth rate of rubber cultivated area in 2011-12 is comparable to the growth rates recorded in the two previous years at 3.6% and 3.7% respectively. Decision on planting rubber is mainly influenced by rubber prices. During 11th Five Year Plan, subsidy for new planting and replanting of Rubber was 20% of development cost of raising rubber plantations in traditional regions (Kerala and Tamil Nadu) and 25% of the development cost in non-traditional regions including North East. However,

The rate of subsidy for new planting and replanting of rubber in traditional regions during 11th Plan was Rs.19,500 per ha. The rate of subsidy of new planting and replanting of rubber in nontraditional regions including North East during 11th Plan was Rs.22,000 per ha.

2.3 Production of Textiles Industry Cotton production has increased from 305 lac bales in 2009-10 to 339 lac bales in 2010-11 and an estimated 353 lac bales in 2011-12. Cotton yarn production has varied from 3079 million Kg in 2009-10 to 3490 million Kg in 2010-11 and an estimated 3126 million kg in 2011-12.

A decline was witnessed in cotton yarn production in 2011-12 due to stress levels of Textiles industry. The trend has been reversed in 2012-13. The production of cotton yarn declined in 2011-12 due to sudden crash in prices of cotton/cotton yarn leaving industry with high cost inventories. Given the stress levels in Textiles industry, Government has issued directions to Banks for restructuring of textiles industry loans on a case by case basis in accordance with the Reserve Bank of India’s prudential guidelines on re-structuring of advances by banks. The debt restructuring package covers around 307 Textiles Mills in private sector and around 200 readymade garments (RMG) factories in SME sector. The debt restructuring exercise will help boost textiles industry’s growth in the country and provide re-employment to textile workers. Source: Assocham

LOOKING FOR A CORPORATE GIFT TO YOUR CLIENTS? MCCI’s Coffee Table Book – Championing Enterprise – 175 Years of The Madras Chamber of Commerce & Industry – is an ideal corporate gift which can be presented to select clientele of yours.

tion. Not just for the way it is packaged but also for the wealth of information it contains. Even a quick flip through the pages will fetch you an insight into something or the other of the past.

Authored by the noted historian Mr V Sriram, the book is a journalist’s delight and a collector’s item.

This would be an ideal corporate gift – to know more about our State and our City.

During its 176 years of existence, the Chamber has undergone a major metamorphosis. A sense of history is very important for Internet age youngsters to appreciate the pains of the past and place the future in perspective. The Coffee Table Book of the Chamber is indeed a revela-

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28


Interactive Session on Current Global Scenario – Problems and Prospects of Indian Exports

l to r K. Unnikrishnan, M.R. Venkatesh, Dr. HAC Prasad, S.G. Prabhakharan and K. Saraswathi

Dr HAC Prasad interacting with members and making a presentation on Emerging Global Economic Situation and its impact on Indian Exports

A view of the audience

FFT on Realising SME Aspirations

K Saraswathi, Secretary General,MCCI welcoming the speakers and the gathering. l-r : S Seetharaman, T Shivaraman, Prof Padmanand and Parag Patki

A view of the audience

Presentation –cum-Discussion on Leveraging Social Media for Business

K Saraswathi welcoming the gathering

Hareesh Tibrewala making a Presentation on New Age Marketing Social Media.

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