Vol. 29 Nos. 9 & 10 - December 2013 - January 2014
Seminar on Corporate Governance: Bhavani Balasubramanian welcoming the gathering. L to R : K.Saraswathi, P.R.Ramesh, Dr. Bhaskar Chatterjee, Prof.P R R Nair.
Programme on Authorized Economic Operator : T.Shivaraman, President, MCCI handing over the memento to the Chief Guest, S.Ramesh, Chief Commissioner of Customs, Chennai
Launch of the project “ENERGIE”( (Energy conservation through Industrial Empowerment) : L to R : Amit Tiwari, Nagesh Kumar, Dr.K Murugan, N. Sreenivas, R. Rangarajan, K.Saraswathi
Management Development Programme on TN VAT at Coimbatore: P.R.Subramaniyan handing over the memento to the Chief Guest Chavan Sajjan Singh Ram Singh IAS, JointCommissioner, Commercial Taxes Department, Coimbatore
T H I S
I S S U E
- Management Development Programme on TNVAT at Coimbatore
- Great British Festival in Chennai - Launch of the project ENERGIE, (Energy conservation through Industrial Empowerment)
Water Expo 2014
- Interactive session with H.E.Ambassador Mr.Gaston Stronck, Ambassador of Luxembourg to India.
- Technical Working Meetings for Discussing Implementation of Energy - Programme on Authorized Economic Conservation Building Codes Operator - 14th Finance Commission Meeting - Seminar on Corporate Governance
XGeneral Committee XExpert Committee XSPOT LIGHT
WTO at Bali, Indonesia XPolicy Watch XRepresentations X Economic Review
Given the extensive media coverage, it is not surprising that fraud, bribery and corruption are seen as significant risks in India for overseas investors. This risk definitely leads to a “transparency discount“ for Indian corporates.
Dear Members, The Crusade Corruption.
As we near elections, we are also entering the season for anti-corruption movements. Suddenly everyone is jumping on the “clean” bandwagon with the AAP apparently converting itself to a single issue party on this. As is usual in India, we are trying to solve a complex problem by throwing vast quantities of paper at it. There are multiple legislations proposed including the Prevention of Corruption Act, Whistleblower Protection Bill and the Judicial Accountability Bill. The fundamental problem of corruption cannot be wished away nor can the scale be minimised- India ranks 94th out of 177 countries on a global corruption perception index. Among India’s BRICS peers, it is behind China (80th), South Africa and Brazil (both 72nd). Apart from the political, moral and ethical issues in bribery and corruption, there is a significant economic angle. Professor Bibek Debroy and Laveesh Bhandari claim in their book “Corruption in India: The DNA and RNA” that the direct cost of public corruption may be as much as 92,122 crores ($18.42 billion), or 1.26 per cent of the GDP. And this excludes the knock on eﬀect due to ineﬃciencies introduced into the system. Corruption has become a particularly significant issue for India Inc., increasing the diﬃculty and cost of doing business.
The tendency of the media (and hence possibly the public) is to focus on and blame corporates for the level of bribery and corruption. The reporting is quite often exaggerated and sensationalised. The inflated estimates of loss published by the CAG in the 2G and Coal cases has added to the perception that corruption is at an all time high. This has also caused a significant decline in the image of business and businessmen. The Prevention of Corruption (Amendment) bill has brought the corporate sector under the Act. It also makes giving bribe an oﬀence. The bill states that any entity whether incorporated in India or abroad but having business in India, and providing services including charitable work, would be liable to prevent corruption by an individual associated with it. The bill provides for punishment between three and seven years in jail to a person who bribes a public servant to further business interests. A senior oﬃcial of the entity can also be jailed for a period of three to seven years if bribery can be attributed to his connivance or negligence. The root cause of corruption in India is excessive regulations, complicated tax and licensing systems, lack of competitive free markets in many areas, a lack of accountability on the part of bureaucracy, and a lack of transparency in the legal system. Public servants have very wide discretionary powers oﬀering them the opportunity to extort undue payments from companies and ordinary citizens.
Many of us remember the time when telephones were a government monopoly. Getting a telephone connection meant either waiting for years or getting “friendly” with the department. Getting a phone repaired needed the cooperation of the lineman. Today, in a hyper competitive environment, retail corruption in the telecom sector is unheard of. A similar development appears to be happening in the issue of Passports. The message is clear – competition and transparency need to be part of the solution to corruption. Unfortunately, many of our media pundits and politicians seem to have taken the opposite lesson from the series of corruption scandals. The direction seems to be in favour of more centralisation, more government control and a greater role for the Public sector. One reaction to the coal “scam” is to give the blocks to Coal India and other PSUs in spite of the fact that they already have more coal assets than they can develop. It is time that Industry starts pushing for a more flexible, more transparent and less centralised regulatory. Without a fundamental change in the way the government thinks and works, the Prevention of Corruption Act and other such bills are in danger of becoming just another piece of legislation to be evaded. There is an appetite for change. We need to move it in the right direction.
T. Shivaraman President
CHAMBER’S ACTIVITIES 11th December 2013
Great British Festival in Chennai The Great British Festival in Chennai was organized by the UK Trade & Investment (UKTI) as part of their global campaign in key markets celebrating UK’s position as a leader in various fields, focusing in particular, on Infrastructure, Manufacturing, Education and Retail. This Festival was to develop UK- India Partnerships. The event was held at the Hotel Leela Palace, Adyar Seaface, MRC Nagar, Chennai – 600 028 on Wednesday, December 11, 2013. While inaugurating the exhibition, Dr.Vince Cable, Hon’ble UK Minister for Business, Innovation and Skill, informed that they have about 1000 Indian Companies in UK and several British investors in India. He further added that they wanted to develop it, as Chennai is a big knowledge and successful centre, besides being the biggest centre in the automobile sector. The Chamber, being one of the Key Industry Partners for this festival took this opportunity to encourage its members to explore business cooperation with the UK companies/organizations. The Chamber had a stall space to showcase itself to the UK and Indian companies visiting this festival. The Hon’ble Minister Dr.Vince Cable visited the Chamber’s stall and was impressed with the activities which were narrated by Ms.Saraswathi, Secretary General. He was presented with a coﬀee table book of the Chamber. The event focused on sector wise interactive sessions apart from the stalls to showcase the UK companies’ products. The sector wise sessions were also a platform for the Indian companies to interact with the UK Companies apart from B2B meetings which was held during the visit of the exhibition by the delegates.
To add color to the event, there were vintage cars from Great Britain on display and cultural performances apart from a networking lunch for the delegates.
• Elaborating on the Architects/ Consultants/Business Promoters/ Realtors’ specific roles in implementation and
More than 25 members of the Chamber had good interactive sessions with their counterparts in UK and this festival paved the way for improving the ties between the UK and Indian businesses.
• Seeking the participants’ feedback on implementation issues in TN and what enabling policies/procedures/ incentive mechanisms are needed for eﬀective deployment.
13th December 2013
Dr. Appavoo, Chief Electrical Inspectorate of Tamil Nadu Electrical Inspectorate (TNEI) addressed the morning session.
Technical Working Meetings for Discussing Implementation of Energy Conservation Building Codes The State of Tamil Nadu has included implementation of the energy conservation building codes (ECBC) in the State as one of the priorities and has proposed to form a ‘State Energy Conservation Mission’. The U.S. Department of Energy (USDOE) team—Brookhaven National Laboratory (BNL) and Alliance to Save Energy (ASE), supports implementation of ECBC at the local level in Tamil Nadu, in collaboration with the Bureau of Energy Efficiency (BEE). The USDOE team collaborates with the Madras Chamber of Commerce and Industry (MCCI) for this project and for supporting the State activities. MCCI, BNL and ASE organized a working meeting with Architects & Consultants in the forenoon and, Building Promoters & Realtors in the afternoon on Friday, December 13, 2013, at MCCI conference room to discuss the way forward in ECBC implementation in the State. The meeting covered the following aspects: • Providing outline of ECBC measures being adapted for Tamil Nadu • Showcasing potential of energy benefits by implementing ECBC measures in a building
He informed that Tamil Nadu has experienced enormous growth in the construction industry since Independence. Since the last two decades, this growth has multiplied several times. Growing construction activity means a growing requirement of land, energy and materials. With the state's demand for power standing at more than 12,000 mega watts (MW), the Tamil Nadu Electrical Inspectorate (TNEI) is contemplating on making energy eﬃciency mandatory in all commercial buildings. The Energy Conservation Building Code (ECBC), launched on June 28, 2007, is a document that lists out the energy performance requirements for all commercial buildings constructed in India. Buildings with an electrical load of 500 KW or more are covered by the ECBC, which is not mandatory as of now. The TNEI state designated agency for the Bureau of Energy Eﬃciency (BEE) is now planning to include the ECBC in the municipal by law and to make it mandatory. He stated that this meeting is organized to sensitize the stakeholders and to get the feedback. He thanked the Chamber for organizing these meetings. Dr.Vatsal Bhatt, representing BNL thanked Dr.Appavoo for the introduction and for the initiatives taken during his leadership with respect to ECBC and requested the delegates to have an open discussion.
CHAMBER’S ACTIVITIES A few delegates requested for incentives to consumers by reducing tariﬀ during non peak hours so that it encourages the consumers to store energy and use it during peak hours. Dr.Appavoo informed that the energy storage system which is followed in a lot of countries definitely helps in saving energy. A few members wanted to know as to whether outside expertise is part of the Government sector to implement the ECBC. Dr. Appavoo clarified that these working meetings are organized to get the feedback, comments from the experts in the private sector to be represented to the Government. He informed that the ECBC code implemented by Government of India will be taken and customized to our local condition keeping in mind the local laws. Some of them expressed their concern that this ECBC implementation should not be another stick and create obstacles while giving approval for a construction. The existing approval process should not be complicated further, they felt. Mr.Pradeep Kumar, Director, India Oﬃce, Alliance to save Energy, explained that the ECBC codes will give the minimum benchmark or performance standards and it is open to the builders/stakeholders to go for a higher standard in their construction. He further informed the participants that in Tamil Nadu, we have a technical committee which interacts with the private sector, public and takes the representations/suggestions to the Empowered Committee which in turn gives its recommendations to the Government. He explained that no other state has the Empowered Committee and we are unique in that respect. Mr. Pradeep Kumar made a presentation on the ECBC implementation right from the evolvement to the current stage as to what ECBC includes, the compliance
process, scope and administration etc. The presentation paved way for discussion where the questions raised were answered. He stated that a draft road map for ECBC implementation in Tamil Nadu has been submitted to the Government. The however clarified that only a draft road map is given to the Government. These meetings are to get the feedback and include it in the recommendations to the Government to add value to enable the government to make the implementation of ECBC as user friendly as possible while making it mandatory. In the meeting held in the afternoon with Building Promoters & Realtors, the same agenda which was followed in the morning was taken up. Mr. Pradeep Kumar made the presentation which he made in the morning session and there was a discussion with the participants seeking their feedback and inputs. The participants made it clear that “Public wants to be Green”. However, the ECBC implementation should not deter the infrastructure growth that is happening in Tamil Nadu by putting obstacles in the approval process. The representation was to include the private sector ’s representative who is an expert in this field in the Committee of the Government which makes decisions to make the ECBC mandatory in Tamil Nadu. There was also a view that there should be “ECBC accredited professionals” recognized by the Government who will be able to certify and approve the construction plan before it is submitted for approval so that the process becomes easier. Dr. Vatsal Bhatt and Mr. Pradeep Kumar expressed happiness in the feedback they have received and thanked the Chamber for organizing this workshop and stated that they would continue to have such sessions as a process for assisting the
Government to bring the ECBC into implementation.
17th December 2013
Launch of the Project ENERGIE, (Energy conservation through Industrial Empowerment) The Project ENERGIE, (Energy conservation through Industrial Empowerment), a Public Private Partnership(PPP) project is an initiative implemented by UL DQS India and ASSIST in association with the Chamber and is co – financed by DEG. The Project was launched at Hotel Park Sheraton on 17th December 2013. ENERGIE is an initiative by the project proponents to capacitate energy management professionals and help in creating energy eﬃcient enterprises and contribute to sustainable industrial development in India. The project is currently in its 1st phase and will run for a span of 18 months covering a wide range of activities benefitting the project beneficiaries. The launch was graced by the presence of dignitaries from the top management of various large and medium enterprises. The key note speakers for the event were Mr.Nagesh kumar, Director, National Productivity Council (NPC) and Mr.Rangarajan, Director, Grundfos Pumps. D r. M u r u ga n , M D & C EO, U L D Q S , welcomed the dignitaries and attendees for participating in the launch of the “ENERGIE” project in Chennai. Dr.Murugan gave a brief introduction of UL DQS and its partners. He also explained in brief about the DEG, Germany and the role played by DEG as a Socio-Economic Development bank in helping companies in developing countries. He lauded the partnership with ASSIST in implementing capacity building projects.
CHAMBER’S ACTIVITIES Mr.Sreenivas Narayanan, Group Managing Director, ASSIST also welcomed the dignitaries and attendees .He gave a short introduction about ASSIST. Mr.Nagesh Kumar spoke on the topic “The Need for Energy Eﬃciency in Indian Industry”. He started with a philosophical note that “it is human nature to chase after elusive happiness”. He continued highlighting the present level of fossil fuel available in the world and its consumption. He drew a comparison between the Energy Consumption of US and the Energy Consumption of India. He stated that the change to renewable energy is not very cost eﬀective at the present and not easily assessable. The only option, left until technology advancement takes place, is efficient use of energy. The only workable solution he said, is to reduce the energy consumption and increase energy eﬃciency by the end user, thereby indirectly saving at the fossil fuel consumption. Mr.Rangarajan, Director, Grundfos, gave an introduction of Grundfos pump and the role played by the organization in the field of energy and water. He also explained that energy eﬃciency and water eﬃciency are interdependent. He shared some case studies and best practices to decrease energy consumption and increase the energy eﬃciency. Mr. Sathappan,Director, ASSIST, explained the need of ISO 50001, which deals with the international standard to be followed for the eﬀective implementation of energy management. Mr.Amit Tiwari, VP – Sales & Marketing, UL DQS, gave the project overview. He explained that “ENERGIE” is a pilot project to build capacity and develop professionals in the field of energy management and help in creating energy efficient enterprises and contribute to
sustainable industrial development in India. After the interactive session, Mrs.Saraswathi, General Secretary, MCCI, gave a brief introduction of MCCI and the role played by MCCI in the field of sustainability through the “Sustainable Chennai Forum” (SCF) and she then delivered the vote of thanks.
16th December 2013
14th Finance Commission – Visit of the Commission to Chennai and Meeting with Industrial Associations The Fourteenth Finance Commission headed by Dr. Y.V. Reddy visited Tamil Nadu and had a meeting with the Trade representatives on December 16, 2013 on the issues relating to Commission’s Terms of Reference (ToR). Besides MCCI, other leading Chambers and Associations like CII,FICCI, ACMA, SICCI , TANSTIA participated in the meeting. On behalf of MCCI, by Mr K.Vaitheeswaran, Chairman, Expert Committee on Indirect Taxes, Mr. Raghuttama Rao, General Committee Member and Ms K. Saraswathi, Secretary General attended the same. The major points from our side were; 1. That the devolution of funds should be scientifically made and the pattern should not be discouraging the performing states. 2. Most of the welfare schemes are delivered ultimately by the States. Hence any reduction in the fund allocation to the States affects the implementation of the social schemes and increases the tax burden on the local businesses. 3. Mr Rao said that Tamil Nadu State has drawn up the Vision 2023 plan and the fund allocation could take these plans also into consideration.
4. It was also emphasized that a design for devolution of funds under GST should also be thought about. A report would be sent from our end to the Commission.
4th January 2014
Seminar on Corporate Governance The Seminar on Corporate Governance was jointly organized by the Chamber with Indian Institute of Corporate Aﬀairs, (IICA) New Delhi, on Saturday, the January 4, 2014 at Hotel Deccan Plaza, Royapettah High Road, Chennai. Ms.K. Saraswathi, Secretary General, MCCI gave the welcome address followed by Ms.Bhavani Balasubramanian, Partner, Deloitte Haskins & Sells and Chairperson, MCCI Expert Committee on Company Law/Corporate Matters, welcoming the speakers and giving an introduction. Ms.Bhavani stated that good governance is required for the companies and with the new Companies Act 2013 in place, this seminar will throw light on the principles and rules in the Act with regard to Corporate Governance. Mr. P.R. Ramesh, Chairman, Deloitte Haskins & Sells, Mumbai, gave an overview of the Corporate Governance (CG) in the Indian context. He stated that Corporate Governance has moved away from being fashionable to necessity. He further added that he will deliberate on the changes in the Companies Act and highlight the aspects directly dealing with corporate governance. He gave the definition of Corporate Governance as per Cadbury report and briefed on Mr. Narayan Murthy’s Committee set up in 2003 to review the code of Corporate Governance. Though corporate governance is an ethical subject, he stated that a minimum level of legislation is required for CG, because
CHAMBER’S ACTIVITIES sometimes it might be diﬃcult to drive behavior without legislation.
drawn between governance and micro management?
He added that the new Companies Act 2013 raised governance to a new level, but the fundamental questions to be answered are :-
The next principle discussed in detail was the evaluation of Director’s performance. Whether the Independent director appointed by the Company can evaluate the Chairman? Will it work in reality?
• Should listed companies have the same governance rules or can it be diﬀerent? • Should governance be rule based or principle based? – For example, if a company has operations in other places apart from head oﬃce, can it be made a rule to conduct the board meeting in one of the branches at least once in a year? Mr. Ramesh stated that the cultural impact can aﬀect the regulations on CG. The First principle discussed was the related party’s transactions. The fundamental principle is, for the rules to be implemented there should be consistency in corporate laws. The concept is vote by the majority of the minority. The concern raised is when the powers will be given to the minority. The second principle is the concept of whistle blowers. The global trend is providing financial incentives to whistle blowers. However, the question is whether there should be incentives in India. In an Indian company having a subsidiary in UK, there were 100s of whistle blowers in UK, but none in India. The Third is the Class action suits enhancing shareholder’s rights. The 4th principle is the emergence of proxy advisory firms. The 5th principle is the emerging concept of disclosures and the changing roles of Directors. In the role of Directors in succession planning, the questions arises as to how much should be disclosed, the impact of announcement and the Boards’ role. While discussing the Director’s role in the involvement of strategy, the question was raised as to where should a line be
Director ’s training is another area where the legislation is almost making it mandatory for the Directors’ to be trained. Should it be a principle or rule? The principle will be to state that the Director has to undergo training whereas the rule would be to state that the Directors’ should have undergone training. He further gave statistics of the Women on Boards and stated that in Norway, 40% of the Board members are women, in Hongkong it is 12% whereas in India it is only 5.3% In the 5.3% if we exclude the family members, whole time Directors, there will only be 2%. The mandate behind this concept is to drive diversity across the company. Mr. Ramesh concluded by stating that Corporate Governance as envisaged in the new Companies Act 2013 would go a long way in the coming years. Dr. Bhaskar Chatterjee, DG&CEO, IICA, New Delhi thanked MCCI for collaborating with IICA to arrange this seminar. He stated that the new Companies Act 2013 has 470 sections and the level of corporate governance is at par with the world. He added that it has taken nearly 57 years to change the law. However, the opportunity has been used well and the legislation has been brought from a particular level to the stratospheric level. When changes are brought, it always causes anxiety and worries and when new ideas are thrown, the corporate, advisors, auditors, stakeholders have diﬃculty in adjusting to the change. IICA will be the bridge between the stakeholders and
the Ministry to assist this process. He stated that as far as Directors’ training is concerned, it is not an easy task. The mindset of the Directors’ is that they are above training. IICA has addressed this issue by having a tie up with the Institute of Directors’, London for a course which will be launched in India by IICA shortly. The state of the art training will be provided to board members. The training has a framework for getting past the ego block of Directors. He further added that IICA is the friendly face of the Ministry and these seminars are platforms for raising issues by the stakeholders for discussions and to work the way forward to make India have the best governed private sector. Mr. B. Ravi, Practicing Company Secretary thanked the Chamber for giving an opportunity to be a part of this Seminar. He debated on the key impact of the Companies Act. He stated that without governance, it is not possible to excel. However, it is unfortunate that legislation is required for governance. He stated that he welcomes the new Companies Act as it is well structured. However, there is no change from the earlier act. Though the sections are reduced, the sub sections are more. He discussed the Companies Act vis-a vis Corporate Governance. He questioned the number of times the disclosures have to be made by the company and said whether these disclosures will pave way for corporate growth have to be seen. He raised the issue of applicability of Companies Act in Corporate and stated some of the sections are not operationable. Some of the sections are given in piecemeal, stating notifications would follow. There is no clarity in such issues.
CHAMBER’S ACTIVITIES He further questioned, Can the Director’s report which requires specialists drafting skills disclose employee remuneration? Can we state that the Directors’ are not eligible for loans in a SPV? These are issues which are debatable. He went on to add that 76 approvals are required to start a company and 348 legislations are applicable. It would be ideal if they simplify the procedures for corporate governance. He further stated that the intention of the act is good, but the provisions have come and rules are yet to come and there are many unworkable sections which are to be addressed. Mr G. Balakrishnan, Sr. President & Company Secretary, The India Cements Ltd, Chennai made a presentation on the roles and responsibilities of the Independent Directors. He gave the definition as per the section 149 (6) new Companies Act 2013. He elaborated on the guidelines for professional conduct of independent directors, roles and functions, duties, power and authority, short notice board meetings and the concerns of independent directors. Mr. Ravi added a few more points on the above subject and critically analyzed the controversial issues such as the Independent Directors’ duty to evaluate the board and the board’s discretion to reappoint the Independent Director. He stated that the code of conduct is given in relative terms and the anomalies have to be addressed. Dr.Bhaskar Chatterjee gave a presentation on the Corporate Social responsibility. He appreciated the courage of the Ministry to bring out this robust legislation He informed that the wisdom of Corporate Governance lie not only in India but globally. After 2 years of consulting all stakeholders, this act is brought into force.
The best practices of other countries have been taken into consideration. As the practices unfold, many inputs will come to IICA and it will be translated to the Ministry which will proactively take the necessary action as and where required. He then addressed the audience on the Corporate Social Responsibility (CSR). When the company enjoys profit, keeping in mind the realities of the lesser privileged in India, the Company can spend a portion of their profits for CSR. This is the intention of CSR in the new Companies Act. He elaborated on the Section 135 which deals with CSR and the Schedule VII which gives the activities to be included in CSR by the companies and the penalty clause in Section 450. Further, he detailed on the guiding principles of CSR and what is CSR and what are not? and about the reporting that has to be done on CSR. He further stated that the idea is not using the penal provisions in section 134 (6) as much as possible. Hence it would be ideal if the policy of the company lists out the CSR activities and the Company implements the same. He added that CSR activities per se, is not mandatory. However, he pointed out that the explanation for doing or not doing should be in the public domain which is mandatory. In the interactive session, to the query, as to whether the private company doing CSR activities would get tax incentives, Dr. Baskar Chatterjee informed that it would come under the purview of Ministry of Finance. However, IICA would give the inputs/feedback received to the Ministry of Finance. Mr. N.Srinivasan, past President of the Chamber and an Independent Director representing many companies made a representation on behalf of Independent Directors stating the roles and responsibilities are clearly understood by persons who are in that position and most of the Independent Directors do perform their roles with integrity and
in the interest of the organization even without legislation. Prof P.R.R.Nair, Head, Centre for Responsible Corporate Governance, IICA stated that this is the 15th seminar conference across the country to get the feedback. He also stated that the rules are being uploaded and will come out in the course of this year. He reiterated that IICA will carry the views expressed to the Ministry .He then proposed the vote of thanks.
20th to 22nd January 2014
Water Expo 2014 Water Today Pvt Ltd organized the 8th Edition of Water Expo from January 20 to January 22, 2014 at Chennai Trade Centre, Nandambakkam, Chennai. The Madras Chamber who has been one of the supporting organizations in the earlier editions of water expo in Chennai, as part of its Sustainable Chennai Forum (SCF) activities, extended its support for this edition as well. Water expo’s objective is to create awareness and disseminate knowledge in the water and wastewater sector. Further the expo aimed to create opportunities for investments, joint ventures and technology transfers through the platform of international exhibitions and conferences. The Conferences had topics on the varied aspects of water and water management, addressed by experts and it was well attended. More than 130 exhibitors took part in this annual expo which was lauded by the leaders of the Industry as one of the largest water expo. It provided state of the art facilities to the exhibitors to showcase their latest technologies in water management. The Chamber was also provided a stall inthe water expo 2014 to showcase its
CHAMBER’S ACTIVITIES activities of Sustainable Chennai Forum (SCF) and this provided a platform for the Chamber to create awareness about its activities of SCF to the participants of this water expo.
25th January 2014
Management Development Programme on TNVAT Act The Chamber had organised a programme on TNVAT at Coimbatore on January 25, 2014 at Hotel CAG pride. This is the 3rd event of MCCI at Coimbatore. The Chamber was represented by Mr. Mr.S.Sankaranarayanan, Deputy Secretary. Mr.P R Subramaniyan, DGM-Corp. Indirect Taxes & Chairman of MCCI VAT Committee welcomed the gathering. He briefed on the activities of the VAT committee and the current issues on the VAT rules and amendments. Mr.Chavan Sajjan Singh Ram Singh IAS, Joint Commissioner of Commercial Taxes, Coimbatore delivered the inaugural address at the programme. He thanked MCCI for the opportunity provided to him. He stated that tax collection is important revenue for the State. Hence, the Government has taken various steps to improve the services provided by the Commercial taxes Department. The online service is assessee friendly. He further stated that in spite of the inflation increasing due to gold and bullion fluctuations, aﬀecting the growth of the manufacturing sector, the tax compliance in Coimbatore is satisfactory. He added that due to power cuts, the industries suffered last year. However, there is an improvement in production and exports this year which will help the Government to achieve its goals as per the Vision 2023.
He highlighted the importance of the training programmes for the Corporate Executives. He appreciated the eﬀorts of the Chamber to do programmes in other cities having its headquarters in Chennai. He requested the participants to make the best use of this programme. In the technical session that followed the inauguration, 4 sessions were handled by experts who made their presentations as follows:- . • Mr.PR Subramaniyan on Deemed Sale -Works contract-TDs issues • Mr.KK Sekar on TNVAT –ITC Scheme and recent amendments • Mr.G.Balakrishnan on Books of Accounts/VAT Audit-Filing of ReturnsAssessment & Appeals • Dr.N.Somasundaram, Retd. Additional Commissioner from Commercial Taxes Department, on Double taxation – VAT & Service Tax and also outlined GST proposals. Mr.K K Sekar, DGM –Indirect taxes, Ashok Leyland Ltd & Co- Chairman of MCCI Expert Committee on Indirect Taxes proposed the Vote of thanks. The programme was well received and the participants sought lot of clarifications with the experts. Around 50 members attended the programme which ended with lunch. The participants have been requested to send their queries/issues relating to TNVAT to enable the Chamber to take it up at the pre- budget meeting with the State Government.
Chamber with His Excellency Mr.Gaston Stronck, Ambassador of Luxembourg to India. He was accompanied by Mr.Ambi Venkatraman, Honorary Consul General of India to Luxembourg and Ms.Suhasini Maniratnam who is to be made the brand Ambassador to Luxembourg in the near future. Mr. S.G.Prabhakaran welcomed the Ambassador and his team. He gave a briefing about the MCCI and its activities. Further, gave a brief profile about Tamil Nadu, its GDP, the industrial sectors which exist in Tamil Nadu and the scope of doing business in our State. His Excellency Mr.Gaston Stronck thanked the MCCI for giving an opportunity to interact with the members to discuss about the opportunities in Luxembourg. He made a presentation on 5 Reasons to be in Luxembourg. He briefed on the location stating it is located in the heart of Europe and is the ideal gateway to the Europeon market with over 500 million consumers. Further, he gave details on the area, population, currency, language etc and went on to explain the stable socio political environment and the favorable legal and regulatory framework. He elaborated on the 5 reasons given below to invest in Luxembourg • An increased access to Capital • A supportive Administration • A competitive Tax environment • A State of the Art logistics hub
27th January 2014
Visit of Ambassador of Luxembourg His Excellency Mr.Gaston Stronck to the Chamber for the interactive session with members An interactive session was held on January 27, 2014 in the conference hall of the
• A knowledge based economy – The R & D landscape. While elaborating, he mentioned about the global brands operating from Luxembourg which includes Pay Pal, Skype, Vodafone among others and stated that Mr.Lakshmi Mittal has invested in Luxembourg.
CHAMBER’S ACTIVITIES He added that his oﬃces would provide all the support to those willing to invest in Luxembourg and invited the MCCI to Luxembourg to get to know the enormous opportunities it has to oﬀer. Mr. Ambi Venkatraman endorsed the views expressed by the Ambassador with regard to the Luxembourg and said he is a living example of a person who has achieved by investing in Luxembourg and encouraged the investors to choose Luxembourg for investment. He added that Luxembourg has launched an awareness drive by travelling across India. The country has entered into student exchange agreements with PSG Group of Institutions in Coimbatore and Great Lakes Institute in Chennai. In the interaction section with the participants, the Ambassador stated that there is scope for setting up R & D division, manufacturing plant, IT companies, and informed that there would be access to all countries in Europe from Luxembourg. As for raising capital, he stated that they have more than 150 banks which would assist in financing the project, if it is viable. Once again, he promised that he would extend all his support to potential investors in Luxembourg. The meeting concluded with hi tea.
28th January 2014
Authorized Economic Operator programme MCCI and Federation of Indian Export Organisations (FIEO) jointly organized a half a day programme on the Authorised Economic Operator on 28th January 2014 at Hotel Savera, Dr.Radhakrishnan Salai, Chennai. Mr.T.Shivaraman, President, MCCI gave the welcome address. He gave an introduction about MCCI and its activities relating to Trade and Industry. He stated that the
Chamber had played an important role in the development of Port in Chennai in the earlier days and now Tamil Nadu boasts of 3 major ports and 22 minor ports. He informed that most of the exporting companies in the Industries are members of the Chamber. International trade is the key cornerstone for developing and developed Countries. The current trend towards global free trade and the recent heightening of international terrorism concerns have seen border security emerge as a priority across all economies. To facilitate global trade smoothly in a secure manner, in 2005 the World Customs Organization (WCO), has adopted the SAFE Framework of Standards to secure and facilitate global trade, which includes the concept of an Authorized Economic Operator (AEO). AEO includes all the players in the supply chain . He added that the Chamber felt it is high time we organized this programme to sensitize the business community about the advantages of getting the AEO certification. He welcomed the Chief Guest Mr.S.Ramesh, Chief Commissioner of Customs and the Resource person, Dr.Venkat Ram Reddy, IRS, Additional Director, Directorate General of Inspection Customs and Central Excise, Chennai and requested the participants to understand the concepts of AEO. Mr. J.Krishnan, Chairman of the Chambers Expert Committee on Logistics gave a bird’s eye view of the AEO programme. Mr. Krishnan stated that competition is not among businesses, but between the various players in the supply chain. Eﬃciency in International Trade is marked by the transportation. The World Customs Organisation under the framework of Standards to secure and facilitate global
Trade (SAFE) introduced the Authorised Economic Operator. This scheme is to expedite and create eﬃciency in the supply chain which includes manufacturers, importers, exporters, brokers, carriers, consolidators, intermediaries, ports, airports, terminal operators, integrated operators, warehouses and distributors. The pilot project of AEO was started in the year 2011. At The recent WTO Ministerial Conference in Bali, Indonesia, where India also was a part, a Trade Facilitation Agreement (TFA) was signed which was meant to ease the flow of goods across borders. This would have lot of impact on the exim businesses, and the concept of Authorized economic operator assumes greater significance than ever before. He added that for the seamless movement of goods, every player in the supply chain has to be AEO certified. In western countries, the question asked during import/exports is “Are you an AEO compliant player”?. Though the AEO concept is in existence for the last few years, the awareness about its benefits is very less. Hence the Chamber deeming it fit as part of its advocacy arranged this programme, he said. Mr.S. Ramesh, Chief Commissioner of Customs, Chennai said it was a privilege to be a part of this programme organized by MCCI & FIEO. He informed that that January 27, 2014 was celebrated as the International Customs Day. The World Customs Organisation has dedicated this year to the theme Communication-Sharing information for better cooperation. This theme is an endorsement of the Indian Customs’ core belief that communication is the key to providing better taxes administration and improved tax payer services. He believed that maintaining a constant dialogue with the trade is a key driver to managing change and ensuring better trade facilitation. He informed that the AEO scheme is a
CHAMBER’S ACTIVITIES unique and path breaking one and the entire edifice is built on the principle that recognizes “business entities” as “secure and reliable” trade partners.It enables ‘business entities” to acquire an internationally accredited certification, which will yield enormous benefits to them in India and abroad, The novel aspect of AEO scheme lies in the fact that almost all players in the International Supply Chain, who closely interact with Customs, are covered under this scheme. There should be active and conscious involvement of the top echelons of the management in ensuring the success of the ‘AEO’ scheme. He complimented Dr.Venkat Ram Reddy and thanked MCCI for organizing such a beneficial programme for the stakeholders in the supply chain. Dr.Venkat Ram Reddy gave the brief introduction about the AEO Programme. He informed that to facilitate global trade smoothly in a secure manner, in 2005 the World Customs Organization (WCO), an organization of 178 Customs administrations, adopted the SAFE Framework of Standards to secure and facilitate global trade, which includes the concept of an Authorized Economic Operator (AEO). He elaborated on the core points of SAFE. The AEO concept is being increasingly adopted by various Customs administrations with the objective of securing the supply chain with resultant benefits for the trading community. He informed that the Director General of Inspection for Customs and Excise, New Delhi are the nodal agency for implementing the AEO scheme. He informed that the Circular No 28/2012 dated 16th November 2012 has all the details of the AEO Programme. His presentation would cover all the points in the circular.
Dr.Reddy stated that there is no minimum threshold for getting the AEO cerification. All the players in the supply chain which includes manufacturer, importers, exporters, brokers, carriers, consolidators, intermediaries, ports, airports, terminal o p e rato rs , i nte g rate d o p e rato rs , warehouses and distributors are eligible to apply for the AEO certification. Those who are engaged in custom related activities will only come within this ambit. He gave a detailed presentation on the Benefits of an AEO Programme. He stated that an AEO can enjoy simplified Customs procedure, declarations, etc. besides faster customs clearance of consignments. He can enjoy a better relationship with the Customs. He gave the benefits for Importers, Exporters, Logistic Service providers, Custodians or Terminal Operators, Custom House Agents and Warehouse Operators. Then the eligibility and procedure for application as to who can apply and how to apply was discussed. As for the processing of application, he mentioned that the nodal agency would check the legal compliance. They would check the track record of the compliance of customs and relevant fiscal laws. Further safety and security compliance aspects which includes, cargo security, premises security, conveyance security, personnel security, business partner security, and IT security were enumerated in detail for the participants to understand the procedures.
Validity which is for 3 years and the renewal process was also given. Further, the review, suspension and the revocation of the AEO license and the right to appeal was presented. In the interactive session, Dr. Reddy clarified that if a company has diverse activities, they can apply for one activity or for all activities. The verification by the nodal agency would be done according to the application made. Similarly for a query, regarding multiple branches, he informed the choice is the company’s either to do it for the main unit or for all units. A single application will do. With regard to markings on all the packages regarding AEO certification, he made it clear that the certification number allotted for the AEO has to be mentioned in the documentation which will take care of the customs formalities and it would not be necessary to mark in the packages. In the supply chain, those who are AEO certified will enjoy the benefits. As for the others, they have to follow the usual procedure. Mr. Udayabaskar Reddy, Co –Chairman, MCCI Expert Committee on Logistics proposed the vote of thanks. He thanked Dr.Reddy for the lucid presentation and requested him to assist the Chamber in conducting the AEO programme in other cities in Tamil Nadu. He further informed the participants to get in touch with the Chamber for clarifications relating to AEO.
Forthcoming Programmes 16th February to 19th February
MCCI Delegation to Dubai
20th February 2014 11.00 a.m – 1.30 p.m
Release of the Study “Manufacturing in Tamil Nadu – a regulatory roadmap”
25th February 2014 9.30 a.m – 1.30 p.m
Trade Meet with Ennore Port Limited
GENERAL COMMITTEE The committee held its monthly meetings in December 2013 and January 2014 and considered the following items: Ease of doing business- The study titled “Manufacturing in Tamil Nadu – a regulatory roadmap” is ready for release. It has been agreed to release the study through the Government or by inviting Mr.Arun Maira, Member Planning Commission. Steps have been taken and Mr.Arun Maira has consented to release the study on February 20, 2014.
EXPERT COMMITTEES 30th December 2013
Finance The RBI’s discussion paper on Framework for revitalizing Distressed Assets in the Economy was discussed in detail with the members of Expert Committee on Finance and few others, on December 30, 2013. Prior to that, a circular was sent to all members seeking their comments on the RBI’s paper and few responses were received. The same were also included for discussion. Some of the points which required clarification were discussed in detail and the consolidated report with our suggestions and clarifications sought has been sent to RBI. Mr. Hari Eswaran, Past President, MCCI took part in the meeting and gave valid suggestions to be included in the representation from RBI. The Representation made is published in page in this bulletin.
21st January 2014
Indirect Taxes & VAT Mr.P R Subramaniyan, Chairman of VAT Committee welcomed the members.
16th to 18th February 2014
MCCI Delegation to Dubai The date of the visit of the delegation to Dubai has been finalized as Feb 16 to 18, 2014. So far, 12 members have given their confirmation to join the delegation. Tickets, room reservations have been made and the delegation is all set to get firsthand experience and to understand the facilities of the state of the art logistics infrastructure at Dubai Port/Airport. Conduct of a Pre-feasibility study on Development of a Large Multi user Non-
The meeting was called to discuss two main issues • Members had received notices from the Commercial Taxes Department, Chennai with regard to Scrutiny of returns filed for November 2013 on account of non-reversal of ITC by the new amendment made under Section 19 (2) of the TNVAT Act in respect of sales made under Section 8 (1) of the CST Act 1956. • Notices issued by the Assessing authorities calling for records pertaining to all earlier years to complete all the pending CST Assessments upto the year 2012-13 before January 31, 2014. With regard to the first issue regarding the new amendment in VAT, the members were not happy and stated that Tamil Nadu will be losing many industries if Government continues with this amendment. The global down trend, the present economic condition will force the industries to set up their units in the neighbouring states. Since the Legal experts stated that it would not be advisable to go for litigation, the members stated it would be ideal to take up the issue with the higher level
Major Port in Tamilnadu - Study awarded to MCCI by State Planning Commission The State Planning Commission (SPC) has accepted the Chamber’s proposal for carrying out a Pre-Feasibility Study for Development of a Large Multi user NonMajor Port in Tamilnadu Capt Suresh Amirapu has agreed to take up this assignment and has prepared the inception report. Further discussions would be held to go ahead with the final report which has to be submitted on or before March 30, 2014.
functionary of the State Government with the support of Senior Industrialists from diﬀerent industrial groups.The Company Secretaries who attended the meeting informed they would appraise their top management. As regards the second issue about CST assessments to be completed before 31st January 2014, the members stated that it would not be possible keeping in mind the volume of business, dealing with various vendors and diﬀerent branches, getting ‘C’ Forms from various parties from other States. It was agreed to send a representation to the Government to consider giving adequate time to complete the assessments. The representation made is published in this bulletin.
Other Meetings Meeting with Ms. Aida Safinaz Allias Minister Counsellor (Economic Aﬀairs), High Commission of Malaysia on 3rd December 2013 Ms. Aida Safinaz Allias Minister Counsellor (Economic Aﬀairs), High Commission of Malaysia had a meeting with Ms.Saraswathi in the Chamber oﬃce premises.
Ms.Saraswathi gave an introduction about the Chamber and its activities and a brief overview on Tamil Nadu.
workshop to discuss on the Public Procurement Policy 2012, which aims to help marketing of the MSME products.
Ms.Aida mentioned about the keenness of Malaysian enterprises to collaborate with enterprises in Tamil Nadu especially in areas like Food Processing and agro based sectors, tourism ,IT , etc. She invited the Chamber to take a delegation to Malaysia to strengthen the business relationships.
Some of the major PSUs like NLC presented to the audience their procurement rules and explained how MSME can participate in such procurement processes. The SME associations and other organizations explained the ground level issues participating in these tenders.
She also informed about the likely visit of Minister of International Trade Malaysia in Feb/ Mar and the proposed seminar to be held in Chennai.
There were vibrant discussions on the current draft policy and many suggestions to help MSMEs emerged.
1 4 1 st D i v i s i o n a l R a i l way U s e rs ’ consultative committee meeting – 20th December: Attended by KS. Ms. Saraswathi attended the said meeting where the GM Southern Railways along with senior colleagues participated and discussed about the issues of the users. He also updated the delegates about some of the recent measures taken by the department to improve the service eﬃciency and safety of the travelers. MSME Consultation workshop on Public procurement policy 2012 on 10th December, 2013 – Attended by KS (At Hotel Radisson Blue) The Ministry of MSME Govt of India, jointly organized a Stake holders Consultation
National Conference on Resource Management and Sustainable Development by MBA Department January 8, 2014
Rane Madras Limited – 12th Supplier Meet on January 23, 2014 Rane Madras Limited had their 12th Supplier meet on January 23, 2014 at Hotel Kohinoor Asiana,Chennai. Ms.Saraswathi, S e c reta r y G e n e ra l M C C I m a d e a presentation on MCCI and the activities of MCCI, especially with relevance to capacity building of suppliers of RML. She elaborated about the skill development activities taken by the Chamber to help industries and community and also about the ENERGIE project launched by the Chamber along with organizations like ASSIST, to help SMEs. Lot of interest has been shown by the participants to avail such assistance from the Chamber.
Ms.Saraswathi, Secretary General was invited as a Moderator for the National Conference on Resource Management and Sustainable Development organized as part of PARADIGM 2014, National Level Management Meet by the MBA student of Ethiraj College for women on January 8, 2014. Ms. Saraswathi addressed the audience on the topic “Corporate Sustainability” and moderated the session which had 8 speakers addressing on topics such as Waste Management resources, Health Care, Technology, Science etc. Her address was appreciated by the participants.
Meeting with Mr.K. Veera Raghava Rao, District Collector, Tiruvallur on 26 December 2013 Mrs Saraswathi met Mr. K. Veera Raghava Rao IAS, District Collector Tiruvallur, to inform him about the Chamber’s Skill development centre at Tiruvallur and The activities in this direction. Mr. Veera Raghava Rao showed great interest in learning about the activities and assured his support for the skill development endeavors of the Chamber.
Name change Metso Power India Private Limited to Valmet Chennai Private Limited’
EPT Engineering Services Pvt Ltd
Valmet Technologies Engineering Services Private Limited
Antosys Recruitment Private Limited
WTO Ministerial Conference Trade Facilitation Decision WTO Ministerial Conference, the top most decision making body of WTO which usually meets every two years takes decisions on all matters under any of the multilateral trade agreements. These decisions help to speed up customs procedures, make trade easier, faster & cheaper and reduce bureaucracy and corruption. It also has provisions on goods in transit, an issue particularly of interest to landlocked countries seeking to trade through ports in neighbouring countries. Part of the deal involves assistance for developing and least developed countries to update their infrastructure, train customs oﬃcials, or for any other cost associated with implementing the agreement. The benefits to the world economy are calculated to be between $ 400 billion and $1 trillion by reducing costs of trade by between 10% and 15%, increasing trade flows and revenue collection, creating a stable business environment and attracting foreign investment. Trade Facilitation Agreement In December 2013, the World Trade Organisation (WTO) finally arrived at its first major multilateral agreement since its inception in 1994, replacing the General Agreement on Tariﬀs and Trade (GATT), creating a new opportunity for economic prosperity for each of the 159 WTO members.
The Agreement has two sections: Section I contains provisions for expediting the movement, release and clearance of goods. It clarifies and improves the relevant articles (V, VIII and X) of the General Agreement on Tariﬀs and Trade (GATT) 1994. Section II contains special and differential treatment provisions for developing and least-developed countries aimed at helping them implement the provisions of the agreement. Gita Wirjawan, chairman of the ministerial conference and Indonesia's trade minister, announced the adoption of a ministerial declaration and "the full Bali package" at the closing ceremony, which marked a historic progress for the 12-year-long Doha Round trade talk. The Bali package which is aimed at lowering global trade barriers was approved by the WTO after the issues raised by: Cuba and other nations namely Bolivia, Nicaragua and Venezuela - with regard to trade facilitation agreement - were resolved and included in the package. I n d i a a n d t h e U. S . re a c h e d a compromise where a permanent solution to the Indian subsidies will be decided in separate future negotiations within four years. The five draft Ministerial Decisions were on TRIPS non-violation and situation complaints, work programme on electronic
commerce, work programme on small economies, aid for trade, and trade and transfer of technology. The ten texts comprising the Bali package are the agreement on trade facilitation; general services; public stockholding for food security purposes; understanding on tariff rate quota administration; export competition; cotton; preferential rules of origin for least-developed countries; operationalisation of the waiver concerning preferential treatment to services and service suppliers of leastdeveloped countries; duty-free and quotafree market access for least-developed countries; and monitoring mechanism on special and diﬀerential treatment. The package addresses several concerns of developing countries including India with regard to food security and trade facilitation. The package also forms part of the Doha Development Round, which started in 2001. Launched in 2001, the Doha Round talk, or the Doha Development Agenda, targeted at helping poor nations prosper through free global trade and has been long-stalled over wide disparity in opinions between developed economies and developing ones. The package has covered four progresses in the Doha Round talks, or the Doha Development Agenda, including trade facilitation, agriculture, cotton production, as well as development and issues of Least Developed Countries (LDCs).
SPOT LIGHT Few comments on the “Bali Package” Indonesian Trade Minister Gita Wirjawan: "The ninth ministerial conference adopted the full Bali package...these are historic achievements but the race is not over. On the contentious issue of public stockholding of grains for food security purposes, Gita said: "We have negotiated a package for food security that will provide food to millions of poor in the world." Robert Azevedo, Director General of WTO, said the package would boost the world economy by the equivalent of 1 trillion US dollars a year. "People all around the world will benefit from the package the WTO delivered, especially the poor, the unemployed and the vulnerable". He said that package has also instructed that a clearly defined work program on the remaining Doha Development Agenda issues shall be prepared within the next 12 months and stated, “This package is not an end,it is a beginning". Commerce and Industry Minister Anand Sharma too described the decision as
historic for India."India has played a major role in the revival and re-energising the Doha Round of talks. The Bali declaration is a positive step," Sharma added. India demands changes in WTO trade facilitation agreement - But industry prefers present form as it will reduce its cost burden Even as the government is collating inputs from industry to chalk out its negotiating strategy in a trade ministers’ meet during December 3-6 in Bali, Indonesia, it has demanded some immediate changes to the Trade Facilitation Agreement (TFA) being discussed at the World Trade Organization (WTO). India has clearly stated that it will not agree to TFA’s conclusion without the changes it suggested. The commerce and industry ministry has the authority to negotiate on behalf of the country. The ministry wants to make it compulsory for customs authorities globally to allow exporters to take back portions of the rejected consignments at the borders before nullifying the entire shipment
“The draft trade facilitation proposal has substantial cost implications for developing countries. Countries will have to amend their laws. Apart from cost implications, the onerous compliance implications are also a matter of concern”. However, Indian industry is strongly batting for the deal to go through in its present form for it will reduce industry’s cost burden. The final agreement contains provisions for faster and more efficient customs procedures through eﬀective cooperation between customs and other appropriate authorities on trade facilitation and customs compliance issues. It also contains provisions for technical assistance and capacity building in this area. The Agreement is expected to enter into force by 2015 and, upon entry into force, member states will be obligated to adopt implementing legislation in accordance with the Agreement’s provisions. The Agreement also provides for the formation of an international Committee on Trade Facilitation and requires member states to form national-level committees to implement and coordinate its provision. Source: Newspapers, websites
New Ne ew Membe Members ers MCCI extends a warm welcome to the following New Members: New Member
Nature of Business
Renewable Energy Harvesting Environment
Re Power – Water Pollution (Sustainability)
Alliance Infrastructure Projects Pvt Ltd
Real Estate Developers
Kriyaa Consultants and Engineers P Ltd .
Emerald Resilient Tyre Manufacturing Pvt Ltd Manufacturing of Industrial Tyres Paramount Shipping Services Pvt Ltd
Custom House Agents/Logistics service providers
Polaris financial Technology Limited
SPOT LIGHT What Happened at the Bali WTO Meet and Why D Ravi Kanth (email@example.com) is a writer based in Geneva reporting on the multilateral organisations headquartered in Switzerland. He was in Bali for the ministerial conference of the World Trade Organisation.
The food security issue was not the only one of importance at the Bali ministerial meeting of the World Trade Organisation; the “Bali package” contained a number of decisions of far-reaching importance for India, other developing countries and possibly for the future of multilateral trade organisations. A report and analysis of the run-up to the meet and what happened at the Indonesian resort island. In just 84 days after assuming office Roberto Carvalho de Azevêdo, the new director general of the World Trade Organisation (WTO) managed to produce a successful outcome to a ministerial meeting, something that had eluded his predecessor for eight years. The WTO’s ninth ministerial meeting during 3-7 December 2013 in Bali, Indonesia, was a “personal triumph” for Azevêdo, who took oﬃ ce only three months before the ministerial. Given the pronounced descent of the organisation towards irrelevance since 2005 under the leadership of the previous director general Pascal Lamy, the “Azevêdo eﬀect” has dispelled the cycle of negative perceptions that the WTO cannot deliver. The Bali outcome has brought WTO back into the negotiating orbit. It has suddenly raised the prospect of a revival of the comatose 12-year-old Doha Round of Trade Negotiations or the Doha Development Agenda (DDA) as it is otherwise called. An Unequal Package The industrialised countries along with a group of advanced developing countries,
including China, left no stone unturned in harvesting, at Bali, a WTO agreement on trade facilitation (TF), an agreement that is meant to simplify customs procedures and ease the fl ow of goods across borders. Although TF forms part of the Doha body, the manner in which it was plucked out from the DDA single undertaking constitutes an important victory for the United States (US) and the European Union (EU). Without having to deliver on agriculture, which was to be the engine of the Doha trade negotiations, or the “developmental” benefi ts promised to the least developed countries (LDCs), the trade elephants succeeded in pushing through a grand but grossly unequal Bali package. Without making any “payment” in the other two pillars – agriculture and development – of the Bali package, the industrialised countries have walked away with a prize that can allow them to close their eyes to the need to rescue the larger 12-year-old DDA. The proclaimed goal of the first “multilateral TF agreement” since the creation of the WTO in 1995 is “to simplify customs procedures by reducing costs and improving their speed and eﬃ ciency”. In reality, the new agreement streamlines market access in developing countries and LDCs, and further expands the WTO’s remit into domestic policy governance. Azevêdo, when he was the trade envoy representing Brazil at the WTO, had argued that TF was nothing but market access for industrialised countries. It is another matter that as the WTO chief he campaigned on a war footing for a binding agreement.
The constant mantra that Azevêdo and think tanks in Washington have chanted endlessly is that the TF agreement will generate an additional $1 trillion to the global economy. There is no consensus on how this estimate has been arrived at, particularly the underlying assumptions. However, this number captured headlines in the global media. “Unfortunately, these figures (about the gains from the TF agreement) depend on too many unjustifiable assumptions to be relied on”, says Jeronim Capaldo, an academic at the Global Development and Environmental Institute at Tufts University in the US. Capaldo argues that the costs of TF agreement will be so high that it would divert resources in developing and poor countries from the provision of social safety services. The future direction of the multilateral trade negotiations will only become clear in the next year. The “post-Bali work” programme – on which there was little discussion either in the run-up to the meeting or at the ministerial – contains five paragraphs in the Bali Ministerial Declaration. On the DDA, the declaration says, We instruct the Trade Negotiations Committee to prepare within the next 12 months a clearly defi ned work programme on the remaining Doha Development Agenda. This will build on the decisions taken at this Mini sterial Conference, particularly on agriculture, development and LDC issues, as well as other issues under the Doha mandate that are central to concluding the Round. Issues in the Bali Package where legally binding outcomes could not be achieved will be prioritised. Work on issues in the package that have not been fully addressed at this Conference will resume in the relevant Committees or Negotiating groups of the WTO. The Bali declaration candidly admitted that there are no legally binding outcomes in the agriculture and development pillars
SPOT LIGHT of the package. There are four issues – general services, public stockholding for food security purposes, understanding of tariﬀ rate quota administration and export competition – in the agriculture pillar. And then, there is the issue of trade-distorting subsidies for cotton (provided mainly by the US) that has been hurting some of the poorest countries in Africa and has not been addressed since the Hong Kong Ministerial Meeting of 2005 which called for an “ambitious, expeditious, and specific” outcome to help the cotton farmers in Benin, Chad, Mali and Burkina Faso. In the development and LDC areas, four issues have been pending since 2005. They include preferential rules of origin for the poorest countries, operationalisation of waiver concerning preferential treatment to services and services suppliers in LDCs, duty-free and quota-free market access for these countries, and a monitoring mechanism on special and differential treatment flexibilities. None of these issues were comprehensively addressed in Bali and nothing was treated on par with TF. Uncertain Future for DDA The Bali declaration, however, contains a caveat on all these unresolved issues which are presented as best endeavour outcomes so to enable the US to turn its back on the declaration. “The work programme will be developed in a way that is consistent with the guidance we provided at the Eighth Ministerial Conference, including the need to look at ways that may allow members to overcome the most critical and fundamental stumbling blocks”, the declaration says. This is where the nub lies: at a time when the two trade elephants – the US and the EU who created the WTO as part of the overarching Uruguay round agreement – are marching ahead with bilateral, regional, and plurilateral agreements, the so-called fresh lease of life from the Bali accord to prepare the “work programme” on the core issues in DDA, especially agriculture, remains
uncertain. Indeed, at an informal closeddoor meeting in Geneva a week after the Bali meeting, the US was already cautioning about member-countries rushing to deal with the diﬃcult issues in the DDA. After the industrialised countries have tasted victory at the WTO thanks to the able leadership provided by a director general from Brazil, it will be a litmus test as to whether the US will support negotiations so that “issues in the Bali Package where legally binding outcomes could not be achieved will be prioritised”. More importantly, those who established the WTO like a banyan tree based on a single undertaking of diﬀerent agreements that include binding dispute settlement rules, intellectual property rules, services, agriculture, and various other traditional areas, now want to ditch the multilateral negotiating format because there is nothing more that the WTO as a multilateral body can now oﬀer after the TF agreement. That the Bali declaration is an eyesore is vividly exposed. A binding TF agreement standing like Mukesh Ambani’s 27-floor residence in Mumbai is now surrounded by many unregularised slumdwellings such as an unbaked deal on public stockholding for food security purposes, and several other agreements in the agriculture and development pillars. How these dwellings of the Bali package will be regularised remains a challenge for the developing and the LDCs in the coming months and years. Dividing Countries The Bali conference provided an early glimpse of what is likely to happen at the WTO. The run-up to the ministerial meeting as well as the proceedings at the conference brought to the fore several inconsistent practices that were adopted to divide the developing and LDCs, and prevent them from adopting common positions on TF and public stockholding
programmes for food security and other issues of interest to them. Azevêdo has deployed all his energies from day one to aggressively pursue a strategy that emphasised that a failure at Bali will reduce the organisation to an “empty building and empty chairs”. Success at the ninth ministerial meeting in Bali, he said in the weeks before the meeting, would restore “confi dence” and “breathe” new life into the multilateral trading system. Otherwise, “the world will not wait for the WTO indefinitely”. “It will move on... and it will move on with choices that will be not as inclusive or eﬃ cient as the deals negotiated within these (WTO) walls”, the director general argued. Several members privately likened Azevêdo’s strategy to “crying wolf” and painting doomsday scenarios for the WTO as unhealthy. At Geneva, ahead of the Bali meeting, the WTO director general opted for a combination of sustained open-ended informal meetings as well as closeddoor small group meetings. Though Azevêdo has said that “transparency and inclusiveness” are his priorities, he also took recourse to practices that are secretive and diﬃ cult to fathom. For example, how descriptive and non-binding outcomes on issues in the development dossier of the Bali package were fi nalised remains a mystery. The four decisions in this area – duty-free and quotafree market access, cotton, preferential rules of origin for the LDCs, and the services waiver – invol ved Nepal (the coordinator for the LDCs), the US, and the director general. In all the four LDC decisions, the US adopted intransigent positions and refused to agree to any binding commitments. Much of the membership was clueless about the actual negotiations. The language that has emerged in the development dossier is all based on a “should endeavour to” text and does not contain any binding decisions. Eﬀectively, the four outcomes failed to provide any “concrete”, “tangible”, and “measureable” immediate market access to bread-and-butter issues of the LDCs.
SPOT LIGHT The development dossier was finalised in Geneva in which the poorest countries agreed to the outco mes with which they remained unhappy. Focus on Trade Facilitation The 31-page TF text basically prescribed how developing countries and LDCs shall publish import procedures, duty rates, and classifi cation/valuation rules; shall issue advance customs rulings where requested; shall provide administrative/judicial review of customs rulings; shall create infrastructure and procedures for expedited shipments of goods coming through air cargo (basically for American courier services); shall establish procedures for pre-arrival processing; and shall allow authorised operators to move their goods on a fast track. While the industrialised countries are not required to make any legislative changes for these disciplines as they already have them in place, the developing countries and LDCs are required to make many legislative changes as well as create new physical infrastructure. The TF agreement is structured into two sections. Section 1 sets out all the new comprehensive binding disciplines that developing countries and the LDCs are required to implement. Section 2 contains the road map for implementing commitments by these groups of developing countries in Section 1, based on technical and fi nancial assistance and a phased time frame. Though the developing and the poor countries sought internal “balance” between the comprehensive binding commitments in Section 1 and the provision of financial and technical assistance to developing countries and LDCs, the language in Section 2 is ambiguous and non-binding as regards the financial commitments by the industrialised countries. Further, the Geneva text on public stockholding programmes for food security was not acceptable to India and Pakistan for different reasons. Argentina expressed reservations on the weak language on export competition
disciplines. Despite the sombre and frank assessment delivered at the last general council meeting in Geneva before members proceeded to Bali, Azevêdo chose to pursue a diﬀerent plan that was not known to members. First, he ensured that the coordinators of the African Group, the Africa, Caribbean and Pacific (ACP), and the LDCs sorted out their diﬀerences with the US and the EU over the language in Section 2 of the TF agreement. On a parallel track, a group of countries who are referred to as Friends of the System goaded the WTO director general to do everything possible to reach an agreement at Bali notwithstanding many unresolved technical and legal issues in the TF. The Friends included Australia, New Zealand, Canada, Switzerland, Norway, Singapore, Korea, Hong Kong, Malaysia, Costa Rica, Chile and Mexico among others. The EU’s trade commissioner Karel De Gucht also encouraged the director general to do everything that he deemed fi t to achieve success at the Bali meeting. The US, however, remained silent without commenting on whether the director general must take things into his hand to deliver an outcome at Bali. But it is an open secret that the director general’s overall strategy was premised on the understanding that nothing would move at the trade body without Washington’s concurrence. And in order to secure US support, Azevêdo believed that issues in the Bali agenda – notwithstanding the structural imbalances – would have to be fi nalised according to the broad parameters decided by the US. Unlike his predecessor Lamy, who failed to secure Washington’s support despite delivering whatever the White House or Congress demanded, Azevêdo built str ong and enduring relationship with key US oﬃcials ever since he negotiated the compromise package with Washington in the cotton dispute that Brazil won at the WTO. Negotiations at Bali So, when the trade ministers started trickling into the Indonesian island,
two things happened. India, which was soft during the fi nalisation of the draft texts on TF and the public stockholding programmes for food security following a series of meetings with Washington since July this year, caused a negotiating tsunami at Bali. Despite the strong understanding between some very senior oﬃcials outside the commerce ministry and key oﬃ cials in Washington on TF and public stockholding programmes for food security, the sudden public uproar at home on the draft text on food security forced the government to change its negotiating position overnight. Although it was well known since last year about the concerted opposition from the US and the EU to the Group of 33 (G-33) (a WTO grouping of like-minded developing countries) proposal on food security, the Manmohan Singh government woke up only at the 11th hour. By the time Union Commerce Minsiter Anand Sharma arrived at Bali on 2 December, the focus had shifted to what India would do. There was a grand effort to isolate India within the G-33 where the Indian negotiators had played a central role in pressing for changes in the agreement on agriculture, especially the need to update the external reference price of 1986-88 (which plays a crucial role in estimating the total size of agricultural subsidies). The G-33 consistently demanded language to ensure that there is an umbilical link between the interim provision giving exemption to subsidies incurred in food stockholding programmes and the final decision. But in Geneva the US had been willing to concede only a peace clause for two years, which it later extended to four years. However, the US, EU, Canada, Pakistan, and others vehemently rejected language providing for a linkage between the interim mechanism and a permanent solution as well as for protection from the WTO’s subsidy and countervailing measures agreement. Meanwhile, at Bali the director general quietly began pursuing negotiations on the TF text with a small group of members on special issues such as expedited
SPOT LIGHT shipments, transit, consularisation, and penalty disciplines. Even though India raised strong reservations on expedited shipments – which is basically a market access issue for the US courier companies – and penalty disciplines, Azevêdo did not invite the Indian minister or his oﬃcials for any discussion on the TF issue at Bali. In the face of growing opposition from several countries who made strong statements about the need to ensure a “balance” at the plenary session, the director general along with the Indonesian chair of the conference, Gita Wirjawan, held a heads of delegations meeting on 4 December. The 50 countries who took part at the meeting stuck to diﬀerent narratives. The so-called Friends of the System gave the director general carte blan che to do anything he deemed appropriate for concluding the Bali package. However, several developing countries such as India, South Africa, Namibia, Kenya, Argentina and Cuba made it known that the draft texts were not ready for concluding the Bali package. Cuba said that the WTO chief had said that there would not be any negotiations at the ministerial conference itself while eﬀorts were being made at Bali to negotiate on issues in trade facilitation and agriculture. Public Stockholding Deal Along with the Indonesian chair, Azevêdo held a series of meetings with the Indian minister on the possible language that could satisfy New Delhi. It was basically a negotiation between Azevêdo and Anand Sharma who was assisted by a senior Indian oﬃ cial. After initial discussions on the linkage between the interim mechanism and the road map to negotiate the fi nal solution for public stockholding programmes, India gave three alternative formulations with language about the interim solution leading to a final solution for food security. In response, the director general informed the Indian minister that the language in
the interim mechanism would be close to what India had proposed. However, the Indian delegation was not given any language. In the face what seemed like a cat-and-mouse act, the final compromise oﬀered to India failed to satisfy New Delhi. When things were drifting, India gave its final alternative in the early hours of Friday, 6 December. Apparently, the US created a “ruckus” on the Indian proposal and was not ready to accept it. That is when India told the director general that if the Indian proposal was not acceptable to the US, New Delhi would reject the Bali package. Finally, there was a face-to-face negotiation between the US, India, and the director general in which the United States Trade Representative accepted the language “in the interim, until a permanent solution is found” for members to refrain from challenging the public stockholding programmes for traditional staple food crops. But, in return, the US, however, inserted strong language on notifi cation requirements as well as safeguard requirements. The US managed to include language that stocks procured under public stockholding programmes “do not distort trade or adversely aﬀect the food security of other Members”. Washington also ensured that there was no explicit protection from the disciplines in the agreement on subsidies and countervailing measures (SCM) as was the case with the previous peace clause that the US and EU enjoyed during 1995-2004. An agriculture trade expert says it would be diffi cult for countries to challenge India under the Bali agreement despite lack of protection from SCM agreement. “Pacta sunt servanda” will ensure that the dispute settlement panels do not make adverse pronouncements against countries availing the interim mechanism. However, India may find it intrusive and diﬃ cult to comply with the notifi cation requirements to avail of the interim solution, he added.
Following this understanding on food security, India meekly agreed to give up its opposition to expedited shipments and several other provisions in the TF text. The Indian minister, who had mentioned New Delhi’s outstanding concerns in the TF text during the first three days of the meeting generously conceded to his American counterpart that New Delhi would remove the square brackets on its sensitive issues in the TF text. These issues require India to carry out legislative amendments as well as create new infrastructure. Perhaps, the Manmohan Singh government seemed more eager to satisfy Washington even though what it got on the food security issue was only a reprieve with several conditions. The Bali outcome on food security is only a prelude to the battle that will unfold between now and the WTO’s 11th ministerial meeting in four years. A WTO beyond the DDA? More importantly, the Bali outcome has provided a ruse to launch negotiations on new issues regardless of what happens to the vitals of the DDA. The Economist magazine which showered wholesome praise on Azevêdo for a successful Bali outcome wants “opening discussions on fresher subjects”. “Investment is one possibility: the WTO could work to rein in subsidies and set rules protecting crossborder investment”, the magazine helpfully suggested. “Trade in environmental goods and services, which covers everything from air filters to green consulting, is another candidate”, it says. “Not all subjects need to be negotiated among all WTO members, as the Bali deal was”, it has cautioned. “Some can be passed to those countries that are eager to press forward (“plurilateral” talks, in the jargon, as opposed to multilateral ones), as long as other WTO members are free to sign up to any resulting agreement”, it said. So will the WTO now abandon the DDA and move into new areas? Source - E & PW,-- Jan 2014
POLICY WATCH FDI policy – Further Liberalisation To attract foreign investments into the country the Government has indicated further liberalisation of the FDI (foreign direct investment) policy. India was rated as the most favoured investment destination globally in 2013. Earlier, the Government had relaxed foreign direct investment (FDI) norms in several sectors such as telecom, defence, PSU oil refineries, commodity bourses, power exchanges and stock exchanges and is now working to relax FDI norms in railways and construction activities. There will be a great push for development of Industrial corridors across the country. As the work commences, a few cities along the Delhi-Mumbai Industrial Corridor would be established. The $90-billion DMIC project aimed at creating mega industrial infrastructure along the DelhiMumbai Rail Freight Corridor, is under implementation. Japan is providing financial and technical aid for the project, which will cover seven states totalling 1,483 km. Greater foreign Investment and technology collaborations will make the Indian Manufacturing companies to move up the value chain and accept competitiveness.
Govt launches India Inclusive Innovation Fund The National Innovation Council and the Ministry of Micro, Small and Medium Enterprises (MSME) have jointly announced the creation of the India Inclusive Innovation Fund (IIIF). Approved by the Union Cabinet, the fund was conceived as a unique concept that seeks to combine innovation and the dynamism of enterprise to solve the problems of citizens at the base of the economic pyramid in India.
The IIIF seeks to create a new class of capital which helps set up and scale entrepreneurial skills and innovation. The fund will invest in innovative ventures that are scalable, sustainable and therefore profitable, but address social needs of the less privileged citizens in areas such as healthcare, food, nutrition, agriculture, education and skill development, energy, financial inclusion, water, sanitation employment generation, etc. The fund will be registered under SEBI’s Alternative Investment Fund Category I guidelines with an initial corpus of Rs 500 crores, with the Ministry of MSME committing to 20 per cent (Rs 100 crores) and the balance being given by banks, insurance companies and overseas financial and development institutions.
Cabinet Note on changes in power tariﬀ policy With the changing dynamics of Power Sector, the Power Ministry will shortly float two cabinet notes one on the Tariﬀ Policy and the other on the Electricity Act ,2003. The note on the Tariﬀ Policy would hopefully come first and the second needs some interactions. Stakeholders, who have submitted their feedback, include the Central Electricity Authority (CEA), the Central Electricity Regulatory Commission (CERC), and principal secretaries of all State governments and chairpersons of power generation, transmission and distribution utilities. To check the growing tendency among states in restricting export of electricity generated within their borders, the government appointed committee had made few amendments on the Electricity Act. One of the suggestions made by the committee was to have a formula, which will ensure that variation in fuel and power purchase cost is recovered by the power generating firms.
Transmission and financial issues for power sector were discussed in the advisory group meetings. The proposed amendments to the Act could result in removal of impediments in the development of competition in the power sector.
Govt relaxes norms for mega power projects to boost supply The Government has decided to further ease the Mega Power Policy in a move that will help nearly 25 projects with investments of more than Rs. 1.6 lakh crore. This is expected to increase power availability in the country and also ensure that consumers are charged reasonably for electricity supply. To benefit from this policy, the developer will have to tie up sales with distribution utilities through long-term power purchase agreements (PPAs). The Mega Power Policy was introduced in November 1995 to provide impetus for setting up of large projects. Thermal power projects of 1,000 MW and hydel plants of 500 MW are eligible for benefits under the policy. The policy has been modified time and again to encourage development of the sector. It will also benefit supercritical projects that are awarded through international competitive bidding with the mandatory condition of setting up indigenous manufacturing facilities. The Cabinet also approved setting up of Power System Development Fund (PSDF). The projects taken up to strengthen the electricity transmission grid can source funding from this Rs. 6,000-crore facility.
RBI flags rising risks for banks from bad loans stressed corporates According to the Reserve Bank of India’s latest Financial Stability Report, the interlinkages among banks heighten the risk
POLICY WATCH in case even one large corporate falters in keeping up with the debt repayment schedule. RBI Governor Mr. Raghuram Rajan said that the stress test assumes extreme conditions but shows that the financial system in India is resilient to pressures at this point in time but there is a need to be vigilant. A large loss caused by a corporate to a bank may not be restricted to that lender alone. It can distress the entire system. “If, in the case of one or more banks, the loss is large enough to cause distress to the bank, there will be further losses (to the entire banking system) due to the contagion caused by the distressed bank”. Five sectors — infrastructure, iron and steel, textiles, aviation and mining — account for about 24 per cent of the total advances of Scheduled Commercial Banks, and account for around 51 per cent of their total stressed advances.
Public sector banks may have to set up insurance broking arms by February The Finance Ministry is planning to make it mandatory for public sector banks to float insurance broking arms by February and sell policies of multiple insurance companies. The insurance regulator is working on a roadmap with the RBI to facilitate the transition of banks into insurance brokers, whereby they will be selling policies of multiple insurance companies. At present, banks are allowed to tie up with only one insurance company and sell products of only that insurer under the corporate agency channel. According to the guidelines finalized by the Insurance Regulatory and Development Authority, as brokers, banks will have
to cap business from their own group companies at 25 per cent for life insurance and a similar cap for non-life insurance business. The Reserve Bank of India has also released stringent draft guidelines on banks becoming brokers. It stipulated that their net non-performing assets (NPA) should be below 3 per cent.
Ministry. The Corporate Aﬀairs Ministry has tried to accommodate as many suggestions as possible and the CSR rules will soon be notified, he said.
Ultimately banks have to move to a broker channel and there is no distinction between public sector banks and private sector banks. The RBI’s final guidelines will decide which banks will be eligible to become brokers.
Land policy approved for major port projects
Employees’ Provident Fund to fetch 8.75% Over eight crore depositors will get a higher interest rate of 8.75 per cent on their provident funds for the year 2013-14, against 8.5 per cent in the last fiscal. After a meeting of the Central Board of Trustees (CBT), Mr Oscar Fernandes, Labour Minister said “We have decided to recommend to the Government 8.75 per cent rate of interest for 2013-14 to its subscribers. The decisions by the trustees will now be forwarded to the Finance Ministry for clearance, after which they will be notified. Employee representatives in the CBT, who were demanding an interest rate of 9.5 per cent, however, maintained that EPFO was in a position to declare 9 per cent for 2013-14.
CSR - More activities included The Corporate Affairs Ministry has revamped a company law schedule to add more activities that may be included by companies in their corporate social responsibility (CSR) policies.
The revamped schedule will be flexible and exhaustive. It will also provide more freedom to the board in choosing their CSR activity.
The Shipping Ministry has approved land policy guidelines for major ports to speed up port development projects that involve leasing or licensing of land. The policy is aimed at optimizing value of land through a tender-cum-auction mechanism. The 12 major ports have a bank of about 2.65 lakh acres, which is used to promote port-related activities and business. “With this policy, port trusts can lease or license land of up to 30 years at their own level. Moreover, the Shipping Ministry can now approve projects that involve leasing of land beyond 30 years, instead of having to go to the Cabinet. The approved policy provides for regular revision of rates of port land, in line with market rates. “The rates can be reviewed once every five years. In less than five years, the rates can be revised only if they are over 2 per cent. The port tariﬀ regulator — Tariﬀ Authority of Major Ports — will do a market valuation of land, after following due process of consultation with all stakeholders. This would provide the necessary regulatory oversight while valuing the port land. The policy provides for meeting the specific requirements of the port sector. The residential area of ports of Mumbai, Kolkata and Kandla will be out of the purview of the land policy.
The revamp comes in the wake of nearly one lakh suggestions received by the
Representations Comments on RBI discussion paper on ‘Early recognition of Financial Distress, Prompt Steps for Resolution and Fair recovery for Lenders for Revitalising Distressed Assets I the Economy’ The intent of the Reserve Bank of India in approaching the problem of Non Performing Assets (NPA) from a monitoring perspective is laudable. As the adage goes, ‘Prevention is better than cure’ and it is important that the lenders focus on preventing the asset from becoming an NPA rather than trying to remedy an asset that has become non-performing. While in normal business and economic conditions, the measures proposed in the discussion paper will be able to help the lender and the borrower, it is also said that extraordinary times require extraordinary measures. The industry firmly believes that we are in extraordinary times and therefore addressing the problem of NPAs only from the prism of the performance of the borrowers may not be the right solution. The other segments of the economy various policy measures have impacted the performance of businesses and without significant improvement in those areas, any amount of rectification and restructuring may not yield the desired results. Monitoring alone will not increase the quality of Assets as it is now established that Asset quality and economic growth have direct correlation. Without improvement in underlying economic growth any extent of monitoring , however detailed and prompt it may be, may not achieve the purpose. The industry’s apprehension is that formation of Joint Lenders’ Forum (JLF) for borrowers in the 61 to 90 day overdue bucket will have the eﬀect of declaring the account as an NPA after 61 days of overdue. The suggestions and clarifications on the discussion paper are summarized below:
Suggestions: 1. The process of forming a JLF and addressing the requirements of the borrower and the lender can be started with sub standard accounts - accounts that have been overdue for more than 90 days - to start with. This will help the process of ‘nursing’ the account and bringing it back to ‘performing account’ status. It will also provide in fine-tuning the process of rectification and act as a ‘Pilot’ for extending the same to accounts with 61 days’ overdue. 2. As regards the Corrective Action Plan (CAP), the steps under ‘Restructuring’ and ‘Recovery’ have been elaborated, but the actions under ‘Rectification’ seem very vague. It only talks of getting a commitment from the promoter and additional capital. However, many of these account may need a ‘work-out’ strategy which includes helping the borrower with additional short term funds where required, strategies for improving the performance etc. The ‘Rectification’ process should be more participatory (with the borrower) and assist the borrower in remedying the situation. 3. While the promoters may be asked to bring in additional funds, lenders should also evaluate the need for additional debt funds and address the cash gap when the account is under the JLF. 4. In cases which are not ‘Wilful default’ the borrowers require support as there is an economic downturn. If these measures are undertaken when the credit market is in the upswing, then
it can be accepted. However, most of the Industries will have diﬃculty if this move is made by the lenders at this stage and may hasten the process of the account lapsing into a NPA. 5. Whether the period of 90 days for reckoning an account as an NPA can be pushed to 120 days may be explored, at least in cases which are not ‘Wilful default’. The criteria for declaring an asset as NPA could be the inherent quality of the asset and the borrower. Due to force majeure condition prevailing (includes acts or delays by Govt. or its undertaking) the Borrower should not be penalised & perhaps to that extent latitude should be provided. In the Indian context, Force majeure has been an important cause of NPAs in many cases. 6. In the case of projects under construction if the equity of Promoter is fully drawn but the commencement is delayed due to Government approvals or factors outside the control of Promoter, extension of date of COD need not be recognised as SMA-1 or SMA-2. 7. If the Lead Bank along with Consortium Members feel that Restructuring along the lines of CDR Mechanism is a must, then Banks can be allowed to implement the process within 60 days even without reference to CDR. This can be termed as Rehabilitation package just to diﬀerentiate from the CDR mechanism. This will speed up the entire process and Banks do have the expertise in this regard. All the provisions like statutory, classification etc. may b e the same as defined in CDR process.
Representations Clarifications 8. Special Mention Accounts (SMA) in the category of SMA - 2 may be very large in number the concern is there will be number of accounts falling in this category due to various other reasons. Practically, it may become possible for the lenders to declare all borrowers in this category. Are there any criteria to filter depending on the performance of the borrower in the earlier years? For instance, can this be linked to those who are in SMA - NF category? 9. The discussion paper seeks to include NBFC-SIs also under this scheme. IN the case of NBFCs unlike banks, the outstanding becomes due on the anniversary of the loan (and not the end of the month or quarter). This means that the NBFC will have to update the CRILC almost on a daily basis which can be an onerous task. Can the updation of CRILC be done at the end of every month? 10. Para 2.1.4 states that the formation of the JLF in case of SMA-2 accounts are mandatory and automatic. However, para 2.2.3 mentions that the JLF will be formed only if the aggregate fund and non-fund based exposure exceeds
JLF. Alternatively, does he have an option to be out of the JLF and such a situation what are the lender(s) rights. While it is clear that in the case of a ‘restructuring’ or ‘recovery’ the process is binding on all lenders, in the case of a ‘rectification’ what are the remedies available to a small lender. This requires clarification
Rs. 1000 million. The two seem to contradict each other. This requires clarification 11. In the paragraph on ‘Restructuring’ [para 2.3 (b)], the last line mentions that the final resolution need to be agreed to by secured and unsecured creditors. Does the term creditors include only the lenders or the other creditors for supply of goods etc as well. This requires clarification 12. Para 2.3.2 stipulates that the decisions have to agreed by a minimum of 75% of creditors by value and 60% of creditors by number in the JLF. Should the condition be ‘or’ in place of ‘and’. The ‘and’ condition has the potential of some small value creditor derailing the entire process. This requires clarification. 13. The entire restructuring process mimics the CDR process and in eﬀect is the account being treated as an NPA even before the 91 day overdue period? 14. If a lender has a very small exposure which is less than the minimum threshold limit for reporting, does he have an option to be part of the
15. During the process of the ‘rectification’ what is the status of the account of the borrower. Can the borrower operate the accounts in the normal course of the business? If there is an additional fund requirement can he access banks or NBFCs for financing? In particular, if Non-fund based limits are required, can the same be accessed from the banks? Is the borrower allowed to access new sources of funds while being in the 61- 90 day period? These points require clarification. 16. It is not clear from the draft whether take-out financing only by Banks from Financial Institutions for extended period is excluded from definition of Restructuring. If Banks relax the conditions of the Term loans are they excluded from definition of Restructuring?
Ms. Mallika Srinivasan Managing Director & CEO Tractors & Farm Equipments, (TAFE) on being conferred the
Padma Shri the fourth highest civilian award of the Republic of India for her distinguished contribution to Trade and Industry. MCCI is proud to have had her as our President and wishes many more laurels in the years to come.
Letter to Ms. Chitra Ramakrishnan - NSE
30th January 2014 Ms. Chitra Ramkrishna Managing Director & CEO National Stock Exchange of India Ltd. Exchange Plaza, Plot no. C/1, G Block, Bandra-Kurla Complex Bandra (E),Mumbai - 400 051.
In this regard, we give below the diﬃculties that would be faced by the members in complying with the above said notices within the said timeframe:-
Dear Madam, Sub: Section 195 of the Companies Act 2013 Many of our members indicated to us that a plain reading of the new Section 195 of the Companies Act 2013, (text enclosed) gave an impression that there is almost a complete ban on the Directors, Key Managerial Personnel or any other Officer of the Company in dealing with the securities of the company even when there is a valid trading window open period whereas, as per SEBI (Prohibition of Insider Trading) Regulations, 1992, which is applicable to listed companies, the above persons (Directors and Oﬃcers) can deal in the securities of the company when there is a valid trading window open period subject to pre-clearance formalities. In the circumstances, we would be thankful if you could kindly clarify and advise us as to whether the Directors, Key Managerial Personnel or any other Oﬃcer of the Company can deal in the securities of the company after 12th Sept 2013 (when Sec 195 of the Companies Act 2013 came into force), subject to complying with all the provisions of SEBI (Prohibition of Insider Trading) Regulations 1992, as amended from time to time (like abstaining from dealing during trading window closure, obtaining preclearance approvals, making disclosures to Stock Exchange and Company in time etc) notwithstanding the provisions of Sec 195 of the Companies Act, 2013. Thanking you Yours sincerely
(i) The collection of various forms prescribed under the CST Act, pertaining to various assessment years. (ii) Collecting and consolidating the information of all the divisions for all the earlier pending assessment years. (iii) The collection of the required declaration forms from the Customers (iv) Collection of ‘C’ Form. – The ‘C’ Form under Large Tax Payer unit LTU) has not been made available to the tax payer in our State for nearly a year. Unless the ‘C’ Forms are given to the supplier, it would bc diﬃcult lo eollecl Form ‘E1’ for completing; assessment on all transit sales. (v) The practice of issuing “C forms’ by most of the customers of our members is only after making the payment of the full dues relevant to a particular contract. Getting the payment is itself delayed due to various reason like reconciliation of payment, verification of inventory, certification from quality control, etc. Many of our members are having tough times in securing fresh orders due to the prevailing economic situation and the stiff competition because of negative growth in the industry etc. Even some of the major Industries have taken steps to reduce the cost including reduction in manpower, lay oﬀ, etc. The entire machinery of our members are trying to be in the business despite facing severe financial crunch and any demand on account of non-submission of pending declaration forms will cause irreparable damage to growth of the trade & industry in our State. Considering the grave implication and diﬃculties as enumerated supra, we appeal to you to consider the following requests:-
K.Saraswathi Secretary General
Letter to the Commissioner of Commercial Tax
23”’ January 2014 Mr. K. Rajaraman Principal Secretary & Commissioner of Commercial Taxes Government of Tamil Nadu Ezhilagam Building Chepaul<, Chennai Sir, Sub :Spurt in notices calling for all CST pending assessments before 31st January, 2014 As you are aware, the Madras Chamber is the oldest industrial associations in Southern India and the constituents of the Chamber are primarily large and medium manufacturing companies. We act as a responsible voice for the industries and, also serve as an eﬀective interface between the industries and the Government. We now would like to place before you one of the pressing issues of some of our member industries. We understand from all our members that notices are issued by Assessing Authorities calling for records pertaining to all earlier years to complete all the pending CST assessments up to the year 2012-13, before 31StJanuary, 2014. We also understand that the instructions have been issued from your oﬃce to the jurisdictional authorities to complete all the pending CST Assessments on or before end of January, 2014.
Our members who contribute nearly 50% of the revenue to the State’s exchequer have voluminous interstate sale transactions and have diﬀerent divisions dealing in diﬀerent products with decentralized control over each division. Further the customers of our members are also scattered throughout India.
(i) Giving instruction to the concerned jurisdictional authorities / assessment officers for completing the pending CST assessments in a staggered way giving our members reasonable time to comply with the necessary requirements. (ii) To give at least three months time for completing each year assessment so that the members can plan accordingly to close all pending assessments on or before December, 2014. (iii) To provide additional time for submission of forms as the assessing authority himself has been vested with power to grant time under Rule 12(7) of the CST which is reproduced as under :“Rule 12(7) ............................................................ provided that if the prescribed authority is satisfied.with the person concerned was prevented by suﬃcient cause from furnishing such declaration or certificate within the aforesaid time, the authority may allow such declaration or certificate to be furnished within such further time as that authority may permit. . We hope that the Commissioner will consider the above request of our members favourably and issue suitable guidelines to the concerned jurisdictional authority. This will be of immense help to all our members especially in the current challenging economic situation. Thanking you, Yours faithfully, K. Saraswathi Secretary General
On the basis of an assessment of the current and evolving macroeconomic situation, RBI has decided to:
Contents 1. 2.
Indiaâ€™s Foreign Trade, December 2013 RBI Mid-Quarter Monetary Policy Review: December 2013
1. Indiaâ€™s Foreign Trade, December 2013 Exports during December, 2013 were valued at US $ 26346.06 million (Rs.163109.25 crore) which was 3.49 per cent higher in Dollar terms (17.24 per cent higher in Rupee terms) than the level of US $ 25457.54 million (Rs. 139119.85 crore) during December, 2012. Cumulative value of exports for the period April-December 2013 -14 was US $ 230335.72 million (Rs 1386496.32 crore) as against US $ 217415.29 million (Rs 1184748.94 crore) registering a growth of 5.94 per cent in Dollar terms and growth of 17.03 per cent in Rupee terms over the same period last year. Imports during December, 2013 were valued at US $ 36486.32 million (Rs.225887.93 crore) representing a negative growth of 15.25 per cent in Dollar terms and a negative growth of 3.98 per cent in Rupee terms over the level of imports valued at US $ 43050.57 million (Rs. 235261.91 crore) in December, 2012. Cumulative value of imports for the period April-December, 2013-14 was US $ 340378.21 million (Rs. 2036568.32 crore) as against US $ 364242.23 million (Rs. 1983940.59 crore) registering a negative growth of 6.55 per cent in Dollar terms and growth of 2.65 per cent in Rupee terms over the same period last year. Oil imports during December, 2013 were valued at US $ 13899.6 million which was 1.1 per cent higher than oil imports valued at US $ 13755.6 million in the corresponding period last year. Oil imports during April-December, 2013-14 were valued at US $ 124958.1 million which was 2.6 per cent higher than the oil imports of US $ 121831.8 million
1. Keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 7.75 per cent; and
in the corresponding period last year. Non-oil imports during December, 2013 were estimated at US $ 22586.7 million which was 22.9 per cent lower than nonoil imports of US $ 29295.0 million in December, 2012. Non-oil imports during April-December, 2013-14 were valued at US $ 215420.1 million which was 11.1 per cent lower than the level of such imports valued at US $ 242410.4 million in AprilDecember, 2012-13. The trade deficit for April-December, 2013-14 was estimated at US $ 110042.49 million which was lower than the deficit of US $ 146826.94 million during April-December, 2012-13.
2. RBI Mid-Quarter Monetary Policy Review: December 2013 Monetary and Liquidity Measures:
2. Keep the cash reserve ratio (CRR) of scheduled banks unchanged at 4.0 per cent of net demand and time liability (NDTL). Consequently, the reverse repo rate under the LAF will remain unchanged at 6.75 per cent, and the marginal standing facility (MSF) rate and the Bank Rate at 8.75 per cent. Assessment The outlook for global growth continues to remain moderate, with an uneven recovery across industrial countries. Activity in major emerging market economies (EMEs) barring China has decelerated on account of weak domestic demand, notwithstanding some improvement in export performance. While volatility in financial markets has receded, it could pick up again following the inevitable taper of quantitative easing in the US, given the large dependence of EMEs on external financing.
Table 1 Indiaâ€™s foreign trade (US $ Million)
Exports (including re-exports) 2012-13
%Growth2013-14/ 2012-2013 Imports
%Growth 2013-14/ 2012-2013 Trade Balance
%Growth 2013-14/ 2012-2013 Source: Ministry of commerce, Govt. of India
In India, the pick-up in real GDP growth in Q2 of 2013-14, albeit modest, was driven largely by robust growth of agricultural activity, supported by an improvement in net exports. However, the weakness in industrial activity persisting into Q3, still lacklustre lead indicators of services and subdued domestic consumption demand suggest continuing headwinds to growth. Tightening government spending in Q4 to meet budget projections will add to these headwinds. In this context, the revival of stalled investment, especially in the projects cleared by the Cabinet Committee on Investment, will be critical. Retail inflation measured by the consumer price index (CPI) has risen unrelentingly through the year so far, pushed up by the unseasonal upturn in vegetable prices, double-digit housing inflation and elevated levels of inflation in the non-food and non-fuel categories. While vegetable prices seem to be adjusting downwards sharply in certain areas, the feed-through to much-too-high headline CPI inflation remains to be seen. Wholesale inflation has also gone up sharply from Q2 onwards, with upside pressures evident across all constituent components. High inflation at both wholesale and retail levels risks entrenching inflation expectations at unacceptably elevated levels, posing a threat to growth and financial stability. There are also signs of a resumption of high rural wage growth, suggesting second round eﬀects that cannot be ignored. High and persistent inflation also increases the risks of exchange rate instability.
export credit refinance, and, in fact, excess liquidity was parked with the Reserve Bank through reverse repo. Anticipating the temporary tightness in liquidity starting from mid-December 2013 on account of advance tax payments, the Reserve Bank conducted additional 14-day term repo auction of `100 billion on December 13, augmenting the normal access to liquidity from the Reserve Bank to the tune of 1.5 per cent of NDTL (i.e., about `1.2 trillion) under overnight repos, term repos, and the export credit refinance facility. The Reserve Bank also opened a refinance facility of `50 billion for the Small Industries Development Bank of India (SIDBI) aimed at addressing liquidity stress faced by medium, micro and small enterprises. Liquidity is being managed with a view to ensuring that there is adequate credit flow to the productive sectors of the economy. The narrowing of the trade deficit since June through November, on positive export growth and contraction in both oil and non-oil imports, should bring the current account deficit (CAD) down to a more sustainable level for the year as a whole. Robust inflows into the swap windows opened by the Reserve Bank during August-November have contributed significantly to rebuilding foreign exchange reserves thus covering possible external financing requirements and providing stability to the foreign exchange market. Looking ahead, these favourable developments should help to build resilience to external shocks. Policy Stance and Rationale
With the normalization of exceptional monetary measures, liquidity conditions have improved, as reflected in the steady decline in the access to the MSF. Capital inflows under the Reserve Bank’s swap facilities for banking capital and nonresident deposits augmented domestic liquidity significantly from the end of November. Over the first two weeks of December, banks refrained from utilising the limits under the overnight LAF repo and
Recent readings suggest that headline inflation, both retail and wholesale, have increased, mainly on account of food prices. While CPI and wholesale price index (WPI) inflation excluding food and fuel have been stable, despite a steady and necessary increase in administered prices towards market levels, the high level of CPI inflation excluding food and fuel leaves no room for complacency. There is, however,
reason to wait before determining the course of monetary policy. There are indications that vegetable prices may be turning down sharply, although trading mark-ups could impede the full passthrough into retail inflation. In addition, the disinflationary impact of recent exchange rate stability should play out into prices. Finally, the negative output gap, including the recent observed slowdown in services growth, as well as the lagged eﬀects of eﬀective monetary tightening since July, should help contain inflation. The policy decision is a close one. Current inflation is too high. However, given the wide bands of uncertainty surrounding the short term path of inflation from its high current levels, and given the weak state of the economy, the inadvisability of overly reactive policy action, as well as the long lags with which monetary policy works, there is merit in waiting for more data to reduce uncertainty. There are obvious risks to waiting for more data, including the possibility that tapering of quantitative easing by the US Fed may disrupt external markets and that the Reserve Bank may be perceived to be soft on inflation. The Reserve Bank will be vigilant. Even though the Reserve Bank maintains status quo today, it can help guide market expectations through a clearer description of its policy reaction function: if the expected softening of food inflation does not materialise and translate into a significant reduction in headline inflation in the next round of data releases, or if inflation excluding food and fuel does not fall, the Reserve Bank will act, including on oﬀ-policy dates if warranted, so that inflation expectations stabilise and an environment conducive to sustainable growth takes hold. The Reserve Bank’s policy action on those dates will be appropriately calibrated. Source: ASSOCHAM & RBI
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The Great British Festival
K. Saraswathi, araswathi Secretary General, General MCCI handing over the Coﬀ Coﬀee ee Table Book to Dr. Vince Cable, Hon’ble UK Minister for Business, Innovation and Skill at the MCCI Stall.
Technical Working Meetings for Discussing Implementation of Energy Conservation Building Codes
Dr.Appavoo, Chief Electrical Inspectorate of TNEI interacting with the Architects and Consultants.
Dr Vatsal Bhatt, representing Brooke Haven National Laboratory, USA & Mr.Pradeep Kumar, Director, India Oﬃce, ASE interacting with Building Promotors and Realtors
Launch of the Project ENERGIE
K. Saraswathi interacti K interacting ng with the audience audience. Others in the picture- L to R: N. Sreenivas, Group Managing Director, ASSIST and R. Rangarajan, Director, Grundfos Pumps
Seminar on Corporate Governance
P.R.Ramesh, Chairman, Deloitte Haskins & Sells delivering the Special Address
Dr.Bhaskar Chatterjee, DG & CEO, IICA giving the Key Note Address
Dr.B.Ravi answering the queries during the Q&A Session. Others seen are L to R : Bhavani Balasubramanian, G.Balakrishnan, Dr.Bhaskar Chatterjee and P.R.R.Nair
A view of the Audience
G. Balakrishnan making a presentation.
Water Todayâ€™s Water Expo 2014
A view of MCCI stall in Water Todayâ€™s Water Expo 2014
Management Development Programme on TN VAT Act at Coimbatore
P.R. Subramaniayan welcoming the Chief Guest and gathering
Chavan Sajjan Singh Ram Singh IAS., Joint Commissioner of Commercial Taxes, Coimbatore delivering the Inaugural Address
K.K. Sekar making a presentation.
A view of the Audience.
Visit of Ambassador of Luxembourg His Excellency Mr.Gaston Stronck
S.G. Prabhakaran, VP, MCCI welcoming His Excellency Mr. Gaston Stronck and Ambi Venkaraman, Honorary Consul General of India.
Delegates interacting with MCCI members.
Programme on Authorized Economic Operator
T. Shivaraman welcoming the Chief Guest and gathering J. Krishnan giving an overview on AEO
S. Ramesh, IRS., Chief Commissioner of Customs delivering his Special Address
Dr. Venkat Ram Reddy, IRS., Additional Director, Directorate of Inspection Customs and Central Excise making a presentation on AEO