ftapcci 2016/fr 201… · · 2016-08-24arvind kedia v.v. sanyasi rao prakash chandra garg ......

Aug 10, 2016 || FAPCCI Review || 3

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ESTD. 1917 Weekly Journal of the Federation of Andhra Pradesh Chambers of Commerce & Industry

Vol.XVI - No.32 Aug 10, 2016 Rs.15

Editor : T. SUJATHA, Dy.Director

Editorial Advisory Board

M. GOPALAKRISHNA, I.A.S. (Retd.)

OMPRAKASH TIBREWALA NITIN K. PAREKHPast President, FAPCCI Member – FAPCCI

Dr. C.V. NARASIMHA REDDYDirector, Dept. of Information & Public Relations, Govt. of AP (Retd.)

The views expressed by the authors in their articles published in this magazine aretheir personal views and do not necessarily reflect the views of FAPCCI.

Contents

PresidentRAVINDRA MODI

Senior Vice-PresidentGOWRA SRINIVAS

Vice-PresidentARUN LUHARUKA

Immediate Past PresidentANIL REDDY VENNAM

Managing Committee

VENKAT JASTIM.S.P. RAMA RAO

MANOJ KUMAR AGARWALARUN KUMAR DUKKIPATI

MEELA JAYADEV ANIL AGARWAL

C.V. ANIRUDH RAOB. P. SINGHAL

K. RAMABRAHMAMA. PRAKASH

ATHUKURI ANJANEYULURAMAKANTH INANI

SHYAM SUNDER AGARWALAVINASH GUPTADr .M. APPAYYA

SURESH KUMAR SINGHALRAJ KUMAR AGRAWAL

PREM CHAND KANKARIAK. BHASKER REDDYGOWRA L. PRASAD

ARVIND KEDIAV.V. SANYASI RAO

PRAKASH CHANDRA GARGSURESH KUMAR JAINABHAY KUMAR JAIN

RADHA KRISHAN AGARWALCHALLA GUNARANJAN

SHYAM SUNDER PASARIDR. K. NARAYANA REDDYJITENDER KUMAR GUPTA

SHIV KUMAR GUPTAR. RAVI KUMAR

RAJENDRA AGARWALKARUNENDRA S. JASTI

UMA GHURKA

Head Office

Federation House, FAPCCI MargRed Hills, Hyderabad - 500 004

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e-mail : [email protected]� Website : www.ftapcci.com

The Federation of Andhra Pradesh Chambers of Commerce and Industry

Branch Office

38-5-4, G F-1 Satyavati Apts,Punnamathota, 1st Lane,Near Montessori College,Venkateswara Puram, Vijaywada-10Ph : +91 866 2499055 | Fax:+91 866 2499056e-mail : [email protected]

Power News 4

Economy Watch 6

ARTICLES

Concept Paper on GST 8

Representations on Model GST Law to CBEC 11

Embrace Zero Defect Zero Effect (ZED) Philosophy 14

Green Banking in India 16

Internal Controls-Global and India’s Scenario 18

Disinvestment Policy in India – A Myth and a Reality 20

FTAPCCI EVENTS 22

GENERAL

FTAPCCI Expert Committees NominationsRequested 24

FORTHCOMING EVENTS

Meeting with Dr. Tony Boccanfuso, President,University Industry Demonstration Partnership, USA 25

Seminar on ‘Brussels - Gateway of Investmentsto Europe’ 25

FTAPCCI LIBRARY 26

4 || FAPCCI Review || Aug 10, 2016

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Regulatory hurdles trip open access market forenergy consumers: ICRA

Regulatory hurdles like high cross subsidy charges andresistance from utilities are affecting the growth of openaccess market for energy consumers, domestic ratingsagency ICRA said.

“...regulatory challenges, especially levy of high cross-subsidy surcharge (CSS) and other charges, andresistance from utilities is adversely impacting powergenerating companies (GENCOs) and high tension (HT)customers and thus affecting the growth of the openaccess market,” ICRA said in a release.

“ICRA notes that the high level of open access chargesto avail energy supply by HT consumers, primarilyowing to the increase in CSS coupled with the levy ofadditional surcharge by regulators in a few states likeAndhra Pradesh, Gujarat and Rajasthan, hasconstrained procurement from the open market for suchconsumers.

“This apart, the open access market has also faceddiscouragement from utilities and state governments insome states, which has restricted growth,” ICRARatings Senior Vice President Sabyasachi Majumdarsaid.

Under the provisions of the Electricity Act, 2003, openaccess is permitted and involves the non-discriminatoryuse of transmission and distribution infrastructure ofthe licensees by any consumer with demand greaterthan or equal to 1 MW to procure electricity from thesource of their choice.

This is subject to the regulations and charges asapproved by the respective State Electricity RegulatoryCommissions (SERCs), which are to be paid by theconsumers for using the transmission and distributioninfrastructure.

Among the states studied by ICRA, namely AndhraPradesh, Gujarat, Karnataka, Maharashtra, Rajasthanand Tamil Nadu, the CSS level remains high in TamilNadu and Maharashtra, while there has been asignificant y-o-y increase in other states like AndhraPradesh, Karnataka and Gujarat.

In the absence of the phase out/reduction of cross-subsidisation of domestic and agriculture tariffs byindustrial and commercial tariffs, the upward pressureon open access charges is likely to continue, ICRA said.

In addition to CSS, SERCs in states like Rajasthan,Gujarat and Andhra Pradesh have approved anadditional surcharge in the last two-year period. Theadditional surcharge is levied to meet the fixed costobligation of the distribution utilities arising out of theirobligation to supply.

The open access charges, therefore, remain high acrossthe states under study, varying between Rs 2.8 - 4.5per unit, except in Karnataka, where the open accesscharges are relatively lower i.e. at Rs 1.9 per unit, itsaid.

With this, procurement under open access remainsviable for industrial consumers if the power is availableat a tariff ranging between Rs 4-5 per unit across amajority of the states, except in Andhra Pradesh, itsaid.

Source: http://energy.economictimes.indiatimes.com/news/power/regulatory-hurdles-trip-open-access-market-for-

energy-consumers-icra/53508954

2 new units of Lower Jurala hydel projectcommissioned

The Telangana Power Generation Corporation hasbegun operations of the Unit 3 and 4 of Lower JuralaHydro Electric Project (6x40 MW). The installedcapacity test for declaration of commercial operationof Unit 3 and 4 of each 40 MW capacity augurs wellfor the State which can harness the power of hydelprojects during peak times.

According to Ch Venkata Rajam, Director, Hydel, TSGenco, the average loads during test on Unit 3 is 41.3MW and Unit 4 is 41.55 MW. With TS Genco adding80 MW to the grid through these two units, it would bein a position to supply 120 MW during peak hours andadditional power during overflow in the river.

Source: http://www.thehindubusinessline.com/todays-paper/tp-others/tp-states/2-new-units-of-lower-jurala-hydel-

project-commissioned/article8936555.ece

Green’s the colour for Hyderabad’s IT hub

Once a fad, green buildings are fast becoming the normin the city’s western corridor. From residentialapartments to office spaces, buildings in the IT hubare turning environment-friendly as well as stylish.

According to data available with the Indian GreenBuilding Council (IGBC), of the 250 IGBC-rated green


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building projects in Hyderabad, 63 are in the IT belt.These swank high-rises are now packed withsustainable features ranging from vertical gardens, amethod of urban gardening that uses as limited spaceas possible by planting on walls, to installing ‘sunpipes’- aluminium structures used to transport natural lightinto dark spaces.

“There is an increased focus on using renewable energyto power the campus. In addition to adding many moretrees to the landscape, all the overhead lights wererecently replaced with solar-powered lights. Evendisposable cups and plates have been banned from ourcanteens and replaced with crockery that can be reusedafter washing,” said Harshit Jain, an IT professionalworking with a leading IT company whose campus,located at Lingampally, is a ‘Platinum’ rated (highestrating as per IGBC norms) green building.

The count of such buildings, experts assert, is growingat a fast pace now as against five years ago whencompanies were not so forthcoming in adapting greenfeatures. And a primary reason is the pricing, whichhas since then dropped significantly. While the cost ofinstalling a photovoltaic system (solar powered) in anoffice was priced at a whopping Rs 3 lakh earlier, thesame now costs Rs 70,000-80,000.

“Many buildings are now installing combined wind-solarHybrid Technology-driven turbines, of 1 KW or 1.5KW. These structures ensure that there is renewableenergy flowing in - from solar power during the dayand wind power during the night. Many companies inthe IT belt are also trying to replicate the evaporativecooling system that was installed by the Ascendas VITcampus recently,” said S Srinivas, deputy executivedirector, CII Godrej GBC. He explained that the system,which sprays water on the condensers of air-conditioners, is capable of enhancing the power andefficiency of the device by nearly 20%.

The furniture being used in the offices have alsoundergone an overhaul, with many preferring to usedesks and chairs made from Bagasse - a byproduct ofsugarcane and essentially a waste product. In addition,they have also installed their own sewage and wastetreatment plants, formed ‘green teams’ and areindulging in habits such as switching the elevators offpost 6 pm, forcing employees to take the stairs instead.

A few green steps

* Vertical gardens: A method of urban gardening thatuses as limited space as possible by planting on walls

* Sunpipes: Aluminium structures used to transportnatural light into dark spaces

* Wind-solar Hybrid Technology-driven turbines: Theseensure that there is renewable energy from solar powerduring the day and wind power during the night

* Evaporative cooling system: It sprays water on thecondensers of airconditioners, enhancing the power andefficiency of the device by nearly 20%

* Bagasse furniture: Bagasse is a byproduct ofsugarcane and is essentially a waste product. Officesare switching to desks and chairs made of bagasse

Source: http://energy.economictimes.indiatimes.com/news/

renewable/greens-the-colour-for-hyderabads-it-hub/53486432

Maharashtra consumers cry hoarse over powerbilling pattern of pvt companies

It is not just “inefficient handling” of supply by theMaharashtra State Electricity Distribution CompanyLimited (MSEDCL) that the consumers arecomplaining about. Various consumer organisationshave come forward to file petitions with theMaharashtra Energy Regulatory Commission (MERC),accusuing the state power utility as well as privatepower producers of “pickpocketing” .

Atul Pawar, an industrialist who submitted a petition toMERC during its hearing here, said when the MSEDCLorders closing of generation plants of the state powergeneration utility, the Maharashtra State ElectricityPower Generation Company Limited under the MeritOrder Dispatch (MOD) mechanism evolved by theenergy regulator, it forces companies with higher powercosts to go off the grid as the demand drops.

He said. “The Bhusawal Thermal Power Station(BTPS) units with 500 MW capacity each producing24 million units collectively aday have been shut downsince July 3. But power is being bought from privateplayers at higher rates.”

Incidentally, power supply from a private company isbeing bought at a rate higher than the units of BTPSproviding power at Rs 2.88 per unit that have been puton ‘reserve shut down (RSD)’ - they are off the gridand have stopped producing power.

“The MOD mechanism has been designed in a waythat consumers get power at lower costs. Yet, thesystem is not being implemented in totality and this islargely because of grey areas in its implementation,” asuperintending engineer with the Maharashtra StateElectricity Power Generation Company Limited saidon the condition of anonymity.

Source: http://energy.economictimes.indiatimes.com/news/power/maharashtra-consumers-cry-hoarse-over-power-

billing-pattern-of-pvt-companies/53483571


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Ease of doing biz: TS leads the race

Hyderabad: In the rat race among several statesin the country to get a good ranking in the Ease ofDoing Business (EoDB), Telangana has beenmaintaining its top position. According to Uniondepartment of industrial policy and promotionwebsite, TS tops the list with61.14 pc store.

Source: Indian Express- Hyderabad 04/08/2016

Green light for ‘one nation, one tax’ - GST

The introduction of a unified goods and services tax(GST) across the nation is the most important indirecttax reform since Independence. It has taken almost 16years from the date of inception of the idea, formationof a task force, to passage in Parliament. It representsa Herculean, nationwide, multi party consensus buildingexercise which is finally bearing the fruit.

The Rajya Sabha passed the Bill to amend theConstitution paving the way for the roll-out of the Goodsand Services Tax (GST) on Wednesday evening by two-thirds majority, as all political parties with the exceptionof the AIADMK pledged support.

The amendments moved by Union Finance MinisterArun Jaitley were also put to vote. The Bill will now bereturned to the Lok Sabha for its approval. TheConstitutional amendment will enable both the Centreand the States to simultaneously levy the GST, whichwill subsume all indirect taxes currently levied, includingexcise duties and service tax. It will be levied onconsumption rather than production.

After the mere formality of its passage in the Lok Sabhafor an approval of the amendments made, it will haveto be considered and approved by a majority of StateAssemblies before it can be sent to the President forassent. For now, Parliament’s stamp is historic as theproposed tax will alter the powers of taxation that Statesenjoyed under the Constitution and usher in a uniformconsumption-based tax structure across the land foralmost all goods and services. Only potable alcohol isproposed to be excluded from the GST’s ambit,according to Finance Minister Arun Jaitley, withpetroleum products set to be pegged at a zero per centrate till such time as the proposed GST Council reaches

an agreement with the States and the Centre on anacceptable framework for taxation.

http://www.thehindu.com/todays-paper/green-light-for-one-nation-one-tax/article8939891.ece

GST to have short term inflationary impact:Nomura

The implementation of the Goods and Services Taxwould have an inflationary effect on the economy inthe near-term.”We estimate that the GST would driveup headline CPI inflation by 20-70 bps in the first yeardue to i) higher prices of electricity, clothing & footwear,health/medicine, and education after accounting forinput taxes; and ii) potential asymmetric pricingbehaviour by firms where tax increases may be quicklypassed on to output prices, while firms refrain fromfully passing-on tax savings to consumers,” accordingto a report by Nomura.

http://www.thehindu.com/todays-paper/tp-business/gst-to-have-short-term-inflationary-impact-nomura

article8939854.ece

Service sector growth touches 3-month high inJuly: PMI

The pace of activity in India’s service sector picked uppace in July after slowing in June, a private surveyshowed on Wednesday . The Nikkei India ServicesBusiness Activity Index was at its three month high of51.9 in July compared with 50.3 in June. A readingabove 50 on the index indicates economic expansionwhile a figure below that indicates contraction. Thegrowth is attributed to faster increase in new businessunderpinning stronger growth of output and boostingconfidence. Part of the upswing in incoming new workwas supported by price discounts. Output charges werelowered for the first time in nine months, while inputcosts also decreased.

“The Indian service economy started the secondsemester on a solid footing, posting its strongestperformance since April and thereby indicating thatunderlying demand conditions remained reasonablyfirm”, said Pollyanna De Lima, economist at Markit,the agency which compiles the index.

http://economictimes.indiatimes.com/news/economy/indicators/service-sector-growth-touches-3-month-high-

in-july-pmi/articleshow/53519274.cms


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India’s first e-court opened at Hyderabad HighCourt

India’s first e-court was opened at High Court ofJudicature at Hyderabad on 17 July 2016. It wasinaugurated by Supreme Court judge Justice Madan BLokur who heads the e-Committee of the SupremeCourt. Hyderabad High Court is the common high courtfor the states of Andhra Pradesh and Telangana.

The purpose of e-court is to ensure speedy justice forthe litigants. These e-Courts will ensure easy and betteraccess to justice for public. It will also provide solutionfor large number of pending cases in the country andalso make the work of judges, advocates and all thoserelated with judiciary a lot more effective.

Integrated Criminal Justice System (ICJS)

Besides the launch of e-court, SC judge Justice MadanB Lokur also announced that India’s first IntegratedCriminal Justice System (ICJS) will be launched in HighCourt of Judicature at Hyderabad. The system willintegrate the courts, police stations, prosecution, forensicscience laboratories and jails.

http://timesofindia.indiatimes.com/city/hyderabad/Countrys-first-e-court-opened-at-Hyderabad-High-

Court/articleshow/53252771.cms

Sensex surges 364 points on positive global cues

Driven by positive global cues, the Nifty and the Sensexspurted up to close significantly higher on Friday.TheNifty closed 1.54 per cent (or 132.05 points) up at 8,653,while the Sensex ended 1.31 per cent (or 363.98 points)higher at 28,078.Among the Sensex stocks that sparkledwere HeroMoto Corp, Bajaj Auto, Tata Motors,Mahindra & Mahindra, Axis Bank and State Bank ofIndia.Dipen Shah, Senior V-P & Head Private ClientGroup Research, Kotak Securities, said: “Markets endedthe week on a strong note, buoyed by supportive globalcues. European stocks had finished in positive territoryyesterday as investors celebrated the Bank ofEngland’s latest decision to cut UK’s key interest rateto a record low and to create a new Term FundingScheme .”

http://www.thehindubusinessline.com/todays-paper/sensex-

surges-364-points-on-positive-global-cues/article8950250.ece

Govt sets up panels to help meet Paris climatechange pact targets

The Union environment, forests and climate changeministry has set up five inter-ministerial groups that shallproject the changes in schemes, programmes and lawsrequired for India to achieve its greenhouse gas emissionintensity reduction targets under the Paris Agreement.

The thematic inter-ministerial groups, with somerepresentation from industry groups on board, areexpected to present their reports by the end of the year.

India had committed to reducing the emission intensityof its economy by 33-35 per cent below 2005 levels by2030. To achieve this target, it had made internationalcommitment on two sectoral targets as well.

India has committed to achieve 40 per cent cumulativeelectric power installed capacity from non-fossil fuel-based energy resources by 2030 and create a carbonsink of 2.5 to three billion tonnes of CO2 equivalentthrough additional forest and tree cover by 2030.

http://www.business-standard.com/article/economy-policy/govt-sets-up-panels-to-help-meet-

paris-climate-change-pact-targets-116080400036_1.html

Rajya Sabha passes amendments to the ChildLabour Act :

The Rajya Sabha passed the amendments to the ChildLabour Act, paving way for complete prohibition ofemployment of children below the age of 14 but at thesame time allowing minors to work in family enterprises

Following this, children younger than 14 years can nowwork in family enterprises and farms after school hoursand during holidays. Children working as artists in theaudio-visual entertainment industry, includingadvertisement, films, television serials or any such otherentertainment or sports activities, except the circus, havealso been granted exemption, provided the work doesnot affect their school education.

http://economictimes.indiatimes.com/articleshow/53287449.cms?utm_source=contentofinterest&utm_medium=

text&utm_campaign=cppst

Centre’s flagship initiatives likely to get additionalfunds

National industrial corridors, ‘Make In India,’ ‘Start-up India’ and the national Intellectual Property Rights(IPR) policy may get a major fillip later this year interms of additional Budgetary allocation.TheDepartment of Industrial Policy and Promotion (DIPP)— the nodal agency for industrial corridors and theabove-mentioned flagship initiatives — has begun workon revamping its schemes.It aims to complete thisexercise before the Winter Session of Parliament andis likely to propose additional Budgetary support thisfiscal for industrial corridors, ‘Make In India, Start-upIndia and IPR policy implementation, official sourcessaid.

http://www.thehindu.com/todays-paper/tp-business/centres-flagship-initiatives-likely-to-get-additional-

funds/article8939851.ece


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Concept Paper on GST

1.Introduction

The Constitution (One Hundred and Twenty-SecondAmendment) Bill, 2014, seeks to amend the Constitutionof India to facilitate the introduction of Goods andServices Tax (GST) in the country. The proposedamendments in the Constitution will confer powers bothto the Parliament and the State legislatures to makelaws for levying GST on the supply of goods andservices on the same transaction.

2. Rationale behind moving towards GST:

2.1 Presently, the Constitution empowers theCentral Government to levy excise duty onmanufacturing and service tax on the supply of services.Further, it empowers the State Governments to levysales tax or value added tax (VAT) on the sale of goods.This exclusive division of fiscal powers has led to amultiplicity of indirect taxes in the country. In addition,central sales tax (CST) is levied on inter-State sale ofgoods by the Central Government, but collected andretained by the exporting States. Further, many Stateslevy an entry tax on the entry of goods in local areas./p>

2.2 This multiplicity of taxes at the State andCentral levels has resulted in a complex indirect taxstructure in the country that is ridden with hidden costsfor the trade and industry. Firstly, there is no uniformityof tax rates and structure across States. Secondly, thereis cascading of taxes due to ‘tax on tax’. No credit ofexcise duty and service tax paid at the stage ofmanufacture is available to the traders while payingthe State level sales tax or VAT, and vice-versa. Further,no credit of State taxes paid in one State can be availedin other States. Hence, the prices of goods and servicesget artificially inflated to the extent of this ‘tax on tax’.

2.3 The introduction of GST would mark a cleardeparture from the scheme of distribution of fiscalpowers envisaged in the Constitution. The proposeddual GST envisages taxation of the same taxable event,i.e., supply of goods and services, simultaneously byboth the Centre and the States. Therefore, both Centreand States will be empowered to levy GST across thevalue chain from the stage of manufacture toconsumption. The credit of GST paid on inputs at everystage of value addition would be available for thedischarge of GST liability on the output, thereby ensuringGST is charged only on the component of value addition

at each stage. This would ensure that there is no ‘taxon tax’ in the country.

2.4 GST will simplify and harmonise the indirecttax regime in the country. It is expected to reduce costof production and inflation in the economy, therebymaking the Indian trade and industry more competitive,domestically as well as internationally. It is also expectedthat introduction of GST will foster a common orseamless Indian market and contribute significantly tothe growth of the economy.

2.5 Further, GST will broaden the tax base, andresult in better tax compliance due to a robust ITinfrastructure. Due to the seamless transfer of inputtax credit from one stage to another in the chain ofvalue addition, there is an in-built mechanism in thedesign of GST that would incentivize tax complianceby traders.

3. Salient features of proposed GST:

3.1 Dual GST: Both Centre and States willsimultaneously levy GST across the value chain. Taxwill be levied on every supply of goods and services.Centre would levy and collect Central Goods andServices Tax (CGST), and States would levy and collectthe State Goods and Services Tax (SGST) on alltransactions within a State. The input tax credit ofCGST would be available for discharging the CGSTliability on the output at each stage. Similarly, the credit


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of SGST paid on inputs would be allowed for payingthe SGST on output. No cross utilization of credit wouldbe permitted.

3.2 Inter-State Transactions and the IGSTMechanism: The Centre would levy and collect theIntegrated Goods and Services Tax (IGST) on all inter-State supply of goods and services. The IGSTmechanism has been designed to ensure seamless flowof input tax credit from one State to another. The inter-State seller would pay IGST on the sale of his goods tothe Central Government after adjusting credit of IGST,CGST and SGST on his purchases (in that order). Theexporting State will transfer to the Centre the credit ofSGST used in payment of IGST. The importing dealerwill claim credit of IGST while discharging his outputtax liability (both CGST and SGST) in his own State.The Centre will transfer to the importing State the creditof IGST used in payment of SGST.

3.3 Destination-Based Consumption Tax: GST willbe a destination-based tax. This implies that all SGSTcollected will ordinarily accrue to the State where theconsumer of the goods or services sold resides.

3.4 Central Taxes to be subsumed:

i. Central Excise Duty

ii. Additional Excise Duty

iii. The Excise Duty levied under the Medicinal andToiletries Preparation Act

iv. Service Tax

v. Additional Customs Duty, commonly known asCountervailing Duty (CVD)

vi. Special Additional Duty of Customs-4% (SAD)

vii. Cesses and surcharges in so far as they relateto supply of goods and services.

3.5 State Taxes to be subsumed:

i. VAT/Sales Tax

ii. Central Sales Tax (levied by the Centre andcollected by the States)

iii. Entertainment Tax

iv. Octroi and Entry Tax (all forms)

v. Purchase Tax

vi. Luxury Tax

vii. Taxes on lottery, betting and gambling

viii. State cesses and surcharges in so far as theyrelate to supply of goods and services.

3.6 All goods and services, except alcoholic liquorfor human consumption, will be brought underthe purview of GST.

i. Petroleum and petroleum products have beenconstitutionally included as ‘goods’ under GST.However, it has also been provided that petroleum andpetroleum products shall not be subject to the levy ofGST till notified at a future date on the recommendationof the GST Council. The present taxes levied by theStates and the Centre on petroleum and petroleumproducts, viz. Sales Tax/VAT and CST by the States,and excise duty the Centre, will continue to be leviedin the interim period.

ii. Taxes on tobacco and tobacco products imposedby the Centre shall continue to be levied over and aboveGST.

iii. In case of alcoholic liquor for humanconsumption, States would continue to levy the taxespresently being levied, i.e., State Excise Duty and SalesTax/VAT.

3.7 GST Council: In the GST regime, a Goods andServices Tax Council is being created under theConstitution. The GST Council will be a joint forum ofthe Centre and the States. This Council would functionunder the Chairmanship of the Union Finance Ministerand will have Minister in charge of Finance/Taxationor Minister nominated by each of the States & UTswith Legislatures, as members. The Council will makerecommendations to the Union and the States onimportant issues like tax rates, exemption list, thresholdlimits, etc. The recommendations made by this Councilwill act as benchmark or guidance to Union as well asState Governments. One-half of the total number ofMembers of the Council will constitute the quorum ofGST council. Every decision of the Council shall betaken by a majority of not less than three-fourths ofthe weighted votes of the members present and votingin accordance with the following principles:-

i. The vote of the Central Government shall havea weightage of one-third of the total votes cast, and

ii. The votes of all the State Governments takentogether shall have a weightage of two-thirds of thetotal votes cast in that meeting..

This is to protect the interests of each State and theCentre when the Council takes a decision and is in thespirit of co-operative federalism.

3.8 Floor rates of GST with band: GST rates will beuniform across the country. However, to give fiscalautonomy to the States and the Centre, there will a


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provision of a tax band over and above the rate of thefloor rates of CGST, SGST and IGST. Initially, the ratesof CGST, SGST and IGST are expected to be closelyaligned to the Revenue Neutral Rates (RNR) of theCentre and the States.

3.9 Goods and Services Tax Network (GSTN): Anot-for-profit, Non-Government Company called Goodsand Services Tax Network (GSTN), jointly set up bythe Central and State Governments will provide sharedIT infrastructure and services to the Central and StateGovernments, tax payers and other stakeholders.

3.10 GST Compensation: Due to a shift from originbased to destination based indirect tax structure, someStates might face drop in revenue in the initial years.To help the States in this transition phase, the Centrehas committed to compensate all their losses for a periodof 5 years. Accordingly, clause 19 has been inserted inthe Constitution (122nd) Amendment Bill, 2014 toprovide for compensation to States by law, on therecommendation of the Goods and Services TaxCouncil, for loss of revenue arising on account ofimplementation of the goods and services tax for aperiod of five years 4. Salient features of theConstitution (122nd) Amendment Bill, 2014:

The salient features of the GST Bill as introducedin the Lok Sabha are as follows:-

i. subsuming of various Central indirect taxes andlevies such as Central Excise Duty, Additional ExciseDuties, Excise Duty levied under the Medicinal andToilet Preparations (Excise Duties) Act, 1955, ServiceTax, Additional Customs Duty commonly known asCountervailing Duty, Special Additional Duty ofCustoms, and Central Surcharges and Cesses so faras they relate to the supply of goods and services;

ii. subsuming of State Value Added Tax/Sales Tax,Entertainment Tax (other than the tax levied by thelocal bodies), Central Sales Tax (levied by the Centreand collected by the States), Octroi and Entry tax,Purchase Tax, Luxury tax, Taxes on lottery, betting andgambling; and State cesses and surcharges in so far asthey relate to supply of goods and services;

iii. dispensing with the concept of ‘declared goods ofspecial importance’ under the Constitution;

iv. levy of Integrated Goods and Services Tax on inter-State transactions of goods and services;

v. levy of an additional tax on supply of goods, notexceeding one per cent. in the course of inter-Statetrade or commerce to be collected by the Government

of India for a period of two years, and assigned to theStates from where the supply originates;

vi. conferring simultaneous power upon Parliamentand the State Legislatures to make laws governinggoods and services tax;

vii. coverage of all goods and services, exceptalcoholic liquor for human consumption, for the levy ofgoods and services tax. In case of petroleum andpetroleum products, it has been provided that thesegoods shall not be subject to the levy of Goods andServices Tax till a date notified on the recommendationof the Goods and Services Tax Council.

viii. compensation to the States for loss of revenuearising on account of implementation of the Goods andServices Tax for a period which may extend to fiveyears;

ix. creation of Goods and Services Tax Council toexamine issues relating to goods and services tax andmake recommendations to the Union and the States onparameters like rates, exemption list and thresholdlimits. The Council shall function under theChairmanship of the Union Finance Minister and willhave the Union Minister of State in charge of Revenueor Finance as member, along with the Minister in-charge of Finance or Taxation or any other Ministernominated by each State Government. It is furtherprovided that every decision of the Council shall betaken by a majority of not less than three-fourths ofthe weighted votes of the members present and votingin accordance with the following principles:—

a. the vote of the Central Government shall have aweightage of one-third of the total votes cast, and

b. the votes of all the State Governments takentogether shall have a weightage of two-thirds of thetotal votes cast in that meeting.

x. levy of an additional non-vatable tax on supply ofgoods of not more than 1% in the course of inter-Statetrade or commerce, for a period not exceeding 2 years,or such other period as the GST Council mayrecommend, to protect the interests of the producing/manufacturing States. This additional tax on supply ofgoods will be levied and collected by the Governmentof India, over and above the IGST levied under theproposed Article 269A (1). This tax shall be assignedto the States from where such supplies originate..

Source:The Associated Chambers

of Commerce and Industry of India


FTAPCCI

Reccommendations submitted to Shri Ram Tirath, IRSSpecial Secretary & Member (Budget / GST),

CBEC, Government of India

FTAPCCI has submitted its reccommendations withregard to the Model GST Law to Shri Ram Tirath, IRS.,Special Secretary & Member (Budget / GST), CBEC,Government of India, New Delhi at GST – Knowledgesharing & outreach programme held on July 11, 2016at FTAPCCI.

AT the outset FTAPCCI welcomes the initiative takenby the CBEC with Hyderabad Zonal Commissionerateand Govt. of Telangana in holding this discussionmeeting on Model GST Law.

FTAPCCI as the Apex Chamber for Telangana andA.P. represents a wide cross-section of trade,commerce and industry comprising of LargeManufacturing Units, Large Service Providers, Industryand Trade Associations who are Members ofFTAPCCI, MSME sector, Professionals and SoleProprietary business. Therefore the points raised willbe of interest to all categories of Members.

1. Trading community in agri crops ( Chilies, Cottonetc) and commodities in Telangana and A.P. operatealso through the system of commission agency. UnderSec 3(2A) of the Model GST Law ( GST Law) thescope of supply is extended to cover supply or receiptof goods or services on behalf of a principal. Thistransaction between a principal and agent is “deemedto be a supply” and would therefore by necessaryimplication invite the levy of GST.

Our View: This provision in the context of goods likeagri commodities would have a significant implicationon the trade since these being on consignment basisare currently taxed under the VAT law only upon sale.This provision would have an effect on a large sectionof small and medium consignment traders in the Statesof Telangana and A.P. which are also Agri CenteredStates. This provision would necessitate a re-look toprotect the interests of the consignment dealers incommodities.

2. In States like Telangana and A.P. and particularlyin Hyderabad there are significant clusters of job workmanufacturers who represent the “make in India”initiative of the Government of India. This is the caseeven on a national scale. It is stated in the GST Lawthat supply of goods by a taxable person to a job workeris not to be treated as supply of goods. Sch II (3) deals

with the treatment or process which is being applied toanother person’s goods and this is supply of service.While so Sec 43A regarding special procedure forremoval of goods contemplates a special permissionby the Commissioner for dispatch of goods by a taxableperson to a job worker. Under the existing Rule 4(5)(a)of the Centvat Credit Rules, 2004 and the subsequentliberalisations direct supplies from job worker premisesis permissible and they do not contemplate any priorapproval of the Commissioner. There is no reason torequire a special order since it is common practice toengage job workers for manufacture. Besides theMSME sector, the large units in drugs and pharma thathave a significant presence in Telangana and A.P. willbe subject to this prior approval procedure. This shouldbe revisited and the job worker manufacturer procedureshould be made user friendly with least transaction costburden.

3. In some of the industries like Jewellery andconsumer durable or electronic goods it is notuncommon to send goods on approval or return basis.The provision of Sec 12 (6) regarding sale on approvalin the context of reckoning of “time of supply” whichdecides when payment of tax is to be made employsthe expression: “when it becomes known” that thesupply has taken place subject to a time cap of 6 monthsfrom the date of removal of goods. This expression“when it becomes known” in the absence of anylegislative aid to determine “knowledge of supply”taking place could lead to disputes particularly in thejewellery industry and even in respect of consumerdurables and electronic goods. This requires revisitation.

4. There is also a concern in the Large industryparticularly with respect to the application of Sec12(2)(c) which deals with receipt of payment withrespect to supply of goods for purpose of payment oftax in terms of the “time of supply” rules. This is adeviation from the current VAT procedure and will leadto myriad complications in accounting, reconciliationand also involve additional working capital. This willrequire re consideration.

5. There are various market committees which areunder separate legislative enactments of the StateGovernment and are therefore a “governmentalauthority” providing functions under article 243 W of


FTAPCCI

the Constitution ( Schedule IV (3) to the GST Law)However when it comes to the definition of taxableperson under Sec 9(2) the deeming provision does notcover the Governmental authority. This may be lookedinto once again.

6. Adjustment as in the case of Rule 6(3) of theService Tax Rules 1994 with regard to cancellation ofcontract and return of the entire sums with the tax etcwill be required to be incorporated in Chapter X onRefunds.

7. Under the IGST Law Chapter V read with Sec29 payment of tax is required to avail input tax credit.This is as against the period of 3 months under the

current provisions as applicable to Service Tax and nosuch requirement in the case of Capital Goods. Thiswill be a severe burden on industry and trade and willaffect the working capital immediately. This requiresreconsideration

8. The provisions regarding withholding of refundsSec 38(9) and application to the First Appellate authorityby the Department under Sec 79(4) relating to “seriouscase” are deviations and would affect genuine businessinterest in the absence of sufficient safe guards. It issuggested that these safeguards may be provided inthe GST Law itself

Critical Analysis of Model GST Law by FTAPCCI

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The manufacturing sector’s contribution in Indiato national GDP is expected to rise from current16 per cent to 25 per cent by 2025. With the

orientation to manufacture products at right quality andwith zero defects for the first time, the national GDPcan even rise beyond.

Zero Defect Zero Effect (ZED)Zero Defect meansGetting It Right For The First Time. Is this possible?Yes. Every one in the industry can play a vital role inoperationalizing the zero defect philosophy. Zero effectrefers to zero adverse impact on environment andecology and preserving them in their purest form. ZEDis a Philosophy enunciated by our beloved PrimeMinister Sri Narendra Modito all of us engaged inproduction. This implies that there should not be anydefects in our products produced rendered while, inthis process, ensuring zero adverse environmental andecological effects.

ZED Mark and MSMEsMSMEs that carry ZED Markon their products are quality ambassadors and becomenatural choice for foreign investors.The ZED MaturityAssessment Model is developed based on a matrix of50 quality productivity and environment parametersused to facilitate, assess and rate the organizations asper the sector of operation and type of industry. If it isMSME, only a minimum of 30 parametersare used asper the processes and systems available at theMSME.The performance for every parameter isevaluated at five maturity levels under categories foreach parameter ranging from bronze to silver to gold todiamond.

MSMEs are encouraged, handheld and trained toachieve a higher level for each parameter and thustoelevate further in the maturity model. As part ofcommitment to ZED Model, there are consistent effortsat Government of India level to promote awarenessand sensitization through training programmes andworkshops, industry clusters and companies throughmanagement consultants and trainers.

Six Sigma and ZEDInfact, manufacturing organisationsstruggle to reach six sigma quality level (to achieve SixSigma, a process should have less than 3.4 defects permillion opportunities) which itself is a dream for everyone. Zero Defect is much more stringent philosophyand this can be operationalized if organizations reorientthemselves to embrace agility, alignment, adaptabilityin various permutations and combinations.

Embrace Zero Defect Zero Effect (ZED) Philosophy

Every one in the industry can play

a vital role in operationalizing the

zero defect philosophy.

Zero effect refers to zero adverse

impact on environment and

ecology and preserving them in

their purest form.

DrA.R.Aryasri *


FTAPCCI

ZED philosophy offers a ZED Maturity AssessmentModel with an integrated and holistic certificationsystem based on the organizational efforts for quality,productivity, energy efficiency, pollution mitigation,financial status, human resource and technologicaldepth, including design and Intellectual Property Rights,both in product and process of manufacturing. It is timethat industry takes corrective measure to attain frugalengineering.

ZED constitutes the essence of Managementphilosophy. What type of mindset we need to developamong our employees and entrepreneurs?Entrepreneurs are the champions who constantly keepon providing all the resources, both financial and non-financial, as demanded by the employees and the onusof responsibility lies on the shoulders of the employeesat all levels.

To translate this philosophy into concrete action, ZeroDefect Zero Effectsets direction and pace in terms ofhigh quality standards and minimising the impact on theenvironment where as Make in India, the major initiativeof Government of India focuses more on job creationand skill enhancement in 25 sectors of the economy.

ZED is way for Global presence Climbing the ZEDladder is the straight way to reach excellence andenhance competitiveness in the global marketplace.ZED promotes brand in national and internationalmarkets. Low quality products cannot empower Indiawhich the signatory of many international treaties. Theonly way to address the pressure from regulatory bodies,supply chain players and consumers is to produce qualityproducts.

Never go for cheap machinery Invest in high-qualityand reliable machines to produce quality products.Cheap machinery is not suitable in the long run nor issuitable to produce products with high quality andprecision.

Every defect adds to inventoryReduce wastage andGrow faster has been the modern philosophy foreconomic growth and development. Reduce dischargesand wastes at every stage of operation. Enhance theenvironmental sensitivity of processes. Also,minimisethe time to get a product out in the market while ensuringthat it is cost-effective, has high quality and agile design.

Learn, innovate and Excel Get ready to introspect onthe current bottlenecks, empower the senior executivesto remove them. Make use of Government of Indiaschemes such as Lean Manufacturing Competitiveness(LMC) Scheme. Use the digital technologies for highdegree of accuracy and precision. This will improve

the manufacturing capacity. Provide them globalexposure for appropriate quality orientation. It is timethat we all need to learn, innovate and excel and getoriented to translate ZED Philosophy into clearidentifiable and measurable results.

There is no short cut for developing competencies forZero Defect Zero Effect. Learn to engage employeesproductively, minimize presentism, train the seniormanagement to provide high performance work culture,focus on quality circles, Business processreengineering, value engineering, sustainable supplychain management practices, Just in Time (JIT)systems, global practices relating to waste management,and environmental protection. All these look to be veryfamiliar and simple but their complexity lies in learningand implementation adding value to the stakeholders.

Low quality products cannot

empower India which the

signatory of many

international treaties. The

only way to address the

pressure from regulatory

bodies, supply chain players

and consumers is to produce

quality products.

* Professor, School of Management StudiesChaitanya Bharati Institute of Technology (CBIT)

Hyderabad

Dear Readers,

Please note that the author of the article on“Organizational Development (OD)and Industrial Relations (IR)”published in FTAPCCI Review July 27th

edition is S.L. Narasimha Rao,Managing Director, Agastya SistaManagement Consultants Private Limited(ASMCPL)


FTAPCCI

The present era of industrialization andglobalization has added a lot of comfort andluxury to the human life but at the same time it

also has certain adverse impacts on ecological andsocio-economic systems, leading to the alarmingsituations like increasing rate of global warming,environmental degradation and depletion of scarceresources incorporated with all the involved businessactivities. Thus, all productive sectors are facing thechallenge to deal with the environmental problems andtheir related impacts in their day to day activities allover the world. Hence, building awareness about theimportance of the environment is very necessary. Inthis regard, a proactive action is essential to be takenby the government, regulatory agencies, corporatebodies, NGOs and individuals to combat global warming& environmental degradation.

The financial sector (especially the banks) also plays asignificant role in promoting environmental sustainability,by modifying their activities and adopting strategies thatensure protection to our natural resources andenvironment. This concern for environmentalsustainability by the banks has given rise to concept ofGreen Banking.

Green banking which is also known as ethical orsustainable banking, considers all the social andenvironmental factors with an aim to protect theenvironment and conserve natural resources. It meansto avoid paper work as much as possible and rely ononline/electronic transactions for processing; for, lesspaper work implies less cutting of trees. So, some ofthe steps should be taken for green banking consideringall the three aspects of triple bottom line approach i.e.the people, the planet and the profit.

Online banking is one way of promoting green bankingas it helps in additional conservation of energy andnatural resources by paying bills online, transferring

funds online etc. It also allows us to make bankingtransactions safely and securely and also change theclient habits by operational improvements andtechnology. We can get access to our bank accountsanytime, anywhere and also keep track of accountbalances to avoid overdraft fees. This in turn createssavings both in terms of time and energy from lesspaper, less energy, and less expenditure of naturalresources.

Ministry of New and Renewable Energy in associationwith some nationalized and scheduled banks has alsoundertaken an initiative to go green, by providing lowinterest loans to the customers who would like to buysolar equipments. The Green Home Loan Scheme ofSBI will support environmental friendly residentialprojects and offers various concessions. Also, as a partof its green banking initiative, SBI has installed 10windmills with an aggregate capacity of 15 MW in thestates of Tamil Nadu, Maharashtra and Gujarat. Someof the banks have also introduced Green Credit Card.The benefit of using a green credit card is that bankswill donate funds to an environment-friendly, non-profitorganization from every rupee we spend on the creditcard to a worthwhile cause of environment protection.

An observance of the global trends shows that the banksin India are far behind the schedule. It is very importantthat Public Sector Banks or the Private Sector Banksadopt “EQUATOR PRINCIPLES” of riskmanagement framework for determining, assessing andmanaging environmentally and socially risk projects. Asof today, only few of the Indian Banks are signatoriesto UNEP-FI (United Nations EnvironmentProgramme - Finance Initiative). Further, very fewbanks are signatories to Carbon Disclosure Project

“Green Banking in INDIA”S.Sai Ankitha*

Online banking is one way

of promoting Green

Banking as it helps in

additional conservation of

energy and natural

resources by paying bills

online, transferring funds

online etc.

Profit

Planet People


FTAPCCI

(CDP) which is an initiative to prevent dangerousclimate change and protect our natural resources. Asa key note, it is vital to have specific RBI guidelines onGreen Banking.

Besides being environment-friendly, green banking isalso associated with various other benefits likeminimizing the risk, saving costs, enhancement of banksreputations and contribution to the common good ofenvironment. Thus, it serves both the commercialobjective of the banks as well as their socialresponsibility. Also, banks as intermediaries betweenseveral companies and investment projects whichdirectly contribute to pollution can create awarenessto business people about environmental and socialresponsibilities enabling them to do an environmentalfriendly business practices.

To mention few other advantages of green banking, asa result of the unfamiliarity with clean energytechnologies, traditional bankers in India often face high

risk financing, whereas, Green banks can offer productssuch as partial credit guarantees, insurance, or loan-loss reserves that can reduce the risk and cost of capitaland also offer low rates of interest & long term financing.Further, green banking also facilitates in improving theasset quality of the banks in future.

Thus, it is important that Indian Banks should realizetheir responsibilities towards the environment as wellas the society in order to compete and survive in theglobal market; for, “Green Banking” is a concept,mutually beneficial to the banks, industries and ultimatelythe economy.

* Research AssistantFTAPCCI

Press Meet

FTAPCCI suggests incubation centres for start-ups inthe Press Conference held on 5th August, 2016 atFederation House, FTAPCCI, Hyderabad.

The Federation of Telangana and Andhra PradeshChambers of Commerce and Industry, has requestedNITI Aayog (National Institution for TransformingIndia) to be allowed to set up incubation centres forstart-ups, one each in Andhra Pradesh and Telangana,with the latter’s assistance and matching grant of theState governments. Sri Ravindra Modi, President, Sri

Gowra Srinivas, Sr Vice-President and Sri ArunLuharuka, Vice President informed that FTAPCCIproposed the centres in the area of engineering andmanufacturing in Telangana and agriculture and alliedsubjects in AP. The effort was to provide all supportfor free to start-ups at the incubation centres. Mr. Modialso infprmed that Shri Pranab Mukherjee, Hon’ble President of India had agreed to address the centenarycelebrations of FTAPPCI in December.


FTAPCCI

Internal Controls-Global and India’s Scenario

Every day, during the normal course of our lives,we come across various controls or safeguards.Ranging from our smart phone passwords,

password to log onto your computer or an access codeto use a copier machine or identification badge at placeof work, controls are a way of life.

What are Internal Controls?

Broadly defined – internal control is a process. It’s aseries of actions that govern one’s activities in order toensure that the desired objectives are achieved.

Every business has certain risks attached to it.

Risk is the uncertainty which impedes the achievementof organization objectives. To manage risks, controlsare placed to bring the likelihood and consequence toacceptable levels of the entity

Examples of Risk are:

a.Entity’s missions or goals are not achieved.

b.Operations are not operating effectively/efficiently

c.Financial reports are unreliable

d.Assets are not adequately safeguarded against loss;

e.Non compliance with laws and regulations

Types of Internal Controls

Threats to Internal Controls

Global ScenarioCOSO Framework

The Committee of Sponsoring Organizations of theTreadway Commission (COSO) is a joint initiative offive private sector organizations, established in theUnited States, dedicated to providing thought leadershipto executive management and governance entities oncritical aspects of organizational governance, businessethics, internal control, enterprise risk management,fraud, and financial reporting.COSO Internal Controls- Integrated Framework, is oneof the widest and most acceptable frameworks oninternal controls globally. The Framework assists increating an effective internal controls environment,defines boards’/audit committees’ oversight roles andresponsibilities, lays strong emphasis on key controlsto manage risks and enforces a robust ethicsprogramme to identify and report fraud risks.

* USA: Post Enron scandal, the Securities andExchange Commission of the United States of Americaadopted Rules for the implementation of Sarbanes –Oxley Act, 2002 (SOX) that required certification of

CA Shakeel Ahmed Khan


FTAPCCI

*****

the Internal Controls over Financial Reporting by themanagement and by the auditors.

* United Kingdom: Internal Control: Guidance forDirectors on the Combined Code (1999) also knownas the “Turnbull Report” was a report drawn up withthe London Stock Exchange for listed companies. Thereport informed directors of their obligations under theCombined Code with regard to keeping good “internalcontrols” in their companies, or having good audits andchecks to ensure the quality of financial reporting andcatch any fraud before it becomes a problem

* Japan: In June 2006, the Financial Instruments andExchange Act (J-SOX) was passed by the Diet, theNational Legislature of Japan. The requirements of thislegislation are similar to the requirements of internalcontrols over financial reporting under SOX.

India’s Scenario

The concept of internal financial controls is not new inIndia for listed companies. Clause 49 of the EquityListing Agreement requires certification by the CEO /CFO stating that they accept responsibility forestablishing and maintaining internal controls

Now the Companies Act 2013 has significantlyexpanded the scope of internal controls to be consideredby the management of companies to cover all aspectsof the operations of the company and statutory auditorresponsibility to report on adequacy and operationaleffectiveness of internal controls

Management Responsibility

Listed Companies

SEBI

Clause 49 of the Equity Listing Agreement requirescertification by the CEO / CFO stating that they acceptresponsibility for establishing and maintaining internalcontrols for financial reporting and that they haveevaluated the effectiveness of internal control systemsof the company pertaining to financial reporting andthey have disclosed to the auditors and the auditcommittee deficiencies

Companies Act 2013

Clause (e) of Sub-section 5 of Section 134 to theCompanies Act requires the directors’ responsibilitystatement to state that the directors, in the case of alisted company, had laid down internal financial controls(IFC) to be followed by the company and that suchinternal financial controls are adequate and wereoperating effectively.

All Companies

Rule 8(5)(viii) of the Companies (Accounts) Rules,2014 requires the Board of Directors’ report of allcompanies to state the details in respect of adequacyof internal financial controls with reference to thefinancial statements, commonly referred as internalcontrols over financial reporting (ICOFR)

Auditor Responsibility

Clause (i) of Sub-section 3 of Section 143 of theCompanies Act, 2013 requires the auditors’ report tostate whether the company has adequate internalfinancial controls system in place and the operatingeffectiveness of such controls.

To summarize, internal controls are crucial for anyorganization for attainment of objectives managingrisks, ensuring compliance of laws, reliable financialreporting and safeguard of assets. Having suchsignificance, the countries have bought in therequirement in the legislature to ensure that internalcontrols are implemented, effective and operational.

*****


FTAPCCI

Disinvestment Policy in India –A Myth and a Reality

Privatization as a managerial approach hasattracted the interest of many categories ofpeople, academicians, politicians, government,

players of private sector and public on the whole. Tomention in simple terms, it is a process by which thegovernment transfers the productive activity from thepublic sector to the private sector. Disinvestment policyis one of the kinds followed in India. Its salient featuresinclude sale of only a part of equity holdings held bythe government to the private investors. This processleads only to dilution of ownership and not transfer offull ownership (reduction in Government’s shareholdingin a PSU, may or may not lead to a transfer ofmanagement). Thus, disinvestment may be convenientlytermed as “partial privatization”. Privatization whichfirst began in UK under Margaret Thatcher’s regimein 1980’s has taken a this different form of disinvestmentin India as, it having a flavour of socialist economy hasto work not only with the motive of driving profits, butfor the welfare of the people. Hence, it has been feltthat complete privatization would lead to the entry ofprivate sector whose top-most objective would be profitmaximization, even into the strategically very importantindustries which are for the welfare of the people. Whilethis is in theory, how far is this objective being adheredto, and how well have we succeeded in realizing thetargeted receipts is open to question.

Hence it is the need of hour to know why, when andhow the disinvestment policy is carried out, what itsmyths are and how we are differing in reality.

Disinvestment policy was adopted in India way back in1991 as a result of liberalization reforms with some ofthe major rationale to:

* Raise capital from market for the PSUs and improvetheir efficiency and growth through restructuringthe sick units and closing chronologically loss-makingones or to completely privatize them. For,disinvestment was regarded as a tool for enhancingeconomic efficiency.

* Help finance and develop PSU dominated sectorslike infrastructure etc.

* Encourage wider participation and promote greateraccountability and transparency.

* Aid social programmes like education, health, midday meals scheme etc through spending on social

sector schemes. This has been made even moreimportant through the setting up of a separate fundcalled “NATIONAL INVESTMENT FUND”(NIF), 2005 which comprises the proceeds fromdisinvestment of public sector undertakings. Out ofthe total funds, 75% of the annual income would beused to finance selected social sector schemes whilethe residual 25% would be allocated to meet thecapital requirements of profitable and revivablePSUs, thus helping to enlarge their capital base tofinance expansion & diversification.

On these lines, the current disinvestment has thefollowing features:

1. Public Sector Undertakings are the wealth of theNation and to ensure this wealth rests in the handsof the people, promote public ownership of CPSEs;

2. While pursuing disinvestment through minority stakesale in listed CPSEs, the Government will retainmajority shareholding, i.e. at least 51 per cent ofthe shareholding and management control of thePublic Sector Undertakings;

BS Mekhala *


FTAPCCI

3. Strategic disinvestment by way of sale of substantialportion of Government shareholding in identifiedCPSEs up to 50 per cent or more, along with transferof management control.

However the statistics show that in the entire historyof 25 years of disinvestment in India, except for 4 years,in all the rest of the years, the realized receipts havebeen much lower than the target. During 2006-10, therehave been no disinvestment targets at all. Even for theFY 15-16, the disinvestment target was Rs 69,500 crore,which was again revised to only Rs 25,312 crore. Thereasons for such low proceeds against the targets canbe multiple including the factors like volatility in thecapital market, regulatory approvals, due diligence ofthe company et al. Some of the procedures take toolong a time (due to red tapism) which may result in thedelays in disinvestment process. In addition there arevarious other macro problems like prevalence ofwidespread corruption, under-valuation of assets,insufficient competition, unclear stakeholders’agreements, etc. A glance at the present scenario thoughshows that the government has budgeted Rs 56,500crore of revenues from disinvestment next fiscal,including Rs 20,500 crore from strategic sales,considering our past experience and the various reasonsmentioned, meeting these targets is again doubtful.

Unlike the said objective that 75% of the receipts wouldbe used for social-sector schemes and 25% onexpanding the capital of existing PSUs, most of theproceeds are being merely used to bridge the fiscaldeficit. This has become the primary purpose ofdisinvestment today rather than to improve theefficiency of PSUs. With this thought process, thegovernment is redefining the very meaning ofdisinvestment as selling not just some shares of poorlyperforming PSUs but also profit making ‘navaratnas’like BHEL, REC, NMDC etc, confining the scope ofdisinvestment merely to making profits from sales andin reducing the fiscal deficit. Thus the scope hasundergone change as to, how we grow the PSUs, andhow we can leverage from them! However, it must beacknowledged that once a PSU is privatized, thegovernment is deprived of future yields from thatenterprise. This implies a huge long term loss in caseof a profit making PSU. This points out at theshortsightedness of the government’s disinvestmentprogramme. At the same time, it is also a violation ofthe initial rational with which the policy was initiated inIndia.

It is often assumed that following privatization, marketsarise quickly to fill up the gap where as the actual fact

shows that many government activities arise becausemarkets failed to provide essential services. To makeanother point, at times, the sale of PSU to a privatecompany can only result in the mere substitution of apublic monopoly by a private monopoly not serving theoriginal objective of increasing the public participationand transparency. All these very clearly show the gapsbetween myths with which the policy began in Indiaand the reality which exists today. Hence, we need tolearn that to improve the efficiency of inefficient units,it is necessary to create competitive market structure;it is a competitive environment rather than ownershipthat promotes allocative efficiency.

As a concluding note, it is needless to say that India isa dynamic economy that is showing tremendouspotential of growth. Globalization, Liberalization andPrivatization are the key strategic mandates foreconomic policies. Market oriented reforms aresustainable and are gaining due acceptance withresistance to privatization going down due its to variousbenefits like enhanced efficiency through target orientedmanagement and disposition of public funds into socialand physical infrastructure of the country. Privatizationhas undoubtedly contributed a great way to India’sGDP. However, if all the myths (objectives) with whichthe disinvestment policy was adopted into India turninto a reality, privatization would prove even moreeffective and efficient for growth in developingcountries like India.

The government hence ought to make a forward move,keeping in view the global experience as a cushion andcaution agent to improve the efficiency of inefficientunits and create competitive market in the present bloodthirsty environment to enable the PSUs to workefficiently for the good health of the economy. For,dreams do come true if right decisions are taken at theright time!

References:

* Department of disinvestment, official website :

http://dipam.gov.in/ Dis_Current.asp

* Nagaraj, R. Disinvestment and Privatization in

India: Assessment and Options.

Economic and Political Weekly .

* Rastogi, M., & Shukla, S. (2013). Challenges and

Impact of Disinvestment on Indian Economy.

* Research AssistantFTAPCCI


FTAPCCI

FTAPCCI Events

FTAPCCI jointly with FICCI Telangana state councilorganized a Meeting on Income Declaration Scheme-2016 on 30th July 2016 at 4.30 pm at FTAPCCIAuditorium, Hyderabad.

Sri Ravindra Modi, President, FTAPCCI in his welcomeaddress sated that the tax to GDP ratio of India is thelowest globally. India’s overall tax to GDP is about5.4% points less than that off comparable countries.Undisclosed income is ferreted away year after yearand it is currently estimated to run into trillions ofRupees. He called on the delegates to declareundisclosed income and contribute to the welfare ofthe country as a citizen of Indiaand be proud of part ofthe National building.

Sri Devendra Surana, Chairman, FICCI TelanganaState Council said that there is a sea change in theattitude of the departmental officials towards thetaxpayers.

Sri Suresh Kumar Jain, Chairman, Direct TaxesCommittee, FTAPCCI in his introductory remarks statedthat the Finance Act has given opportunity to thepersons who have not declared their incomes earlier todeclare now before September 30, 2016 to avoid penaltyand other penal actions.

Sri A K Shrivastava, IRS, Principal Chief Commissionerof Income Tax (Addl. Charge), Hyderabad in hisaddress stated that the Scheme has given opportunityto voluntarily disclose their income and pay the tax of45% on such income.

Sri S.K. Sahai, IRS, Member (IT), CBDT in addressstated that the the income declaration scheme has agood opportunity for anyone who was partialcomplainant, non-complainant can declare income orassets by paying 45% tax on that. He further statedthat those who declare income under this scheme neednot worry about collateral damage as a source fromwhom they bought the assets would not be probed.The IT department would not question valuation ofthe assets and most importantly the data of those whodeclare income will be kept confidential.

He emphasized that the government will not extendthe deadline of the scheme beyond September 30, 2016.He said that those who failed to utilize the schemewould face heavy repercussions if they are caught withundisclosed income after the deadline.

He further stated the department’s “project insight”which would use techniques like data mining, dataanalysis and electronic tracking of financial investmentand returns of individuals would make tax evasion verytough. He had explained the respondents would haveto pay 30 % of income tax as usual along with 7.5 %of surcharge and another 7.5% Krishi Kalyan Cess.They can declared the undeclared assets beforeSeptember 30, 2016 by paying 25% and balance 25%by March 31, 2017 and remaining 50% by September30, 2017 they can pay the three installments. Theywill not be any inquiry. A number of doubts clarifiedby the Board Member on the Scheme.

The meeting ended with vote of thanks by Sri GowraSrinivas, Sr. Vice President, FTAPCCI

Meeting on Income Declaration Scheme- 2016

Sri Ravindra Modi, President, FTAPCCI addressing the meeting on July 30, 2016 at Federation House, FTAPCCI, Hyderabad


FTAPCCI

Awareness Program on Intellectual Property Rights(IPRs) was held 0n 30th July 2016 at D.R. UtthamaHotel, Nellore. The Programme is supported bythe Ministry of Small and Medium Enterprises,Government of India under the IPR Awareness Scheme.

The objective of the program is to enhance awarenessamong the Micro, Small and Medium Industries aboutIntellectual Property Rights (IPRs) and measures tobe taken for protecting their ideas and businessstrategies.

Sri Imtiyaz Ahmed, IAS, Joint Collector Potti SriramuluNellore District has inaugurated the Programme andaddressed the participants Sri Y.L. Pradeep Kumar,GM, DIC, Nellore District has also participated in theprogram.

Sri Imtiyaz Ahmed, IAS, in his inaugural speechappreciated FTAPCCI, for organizing an importantknowledge sharing program for the benefit of MSMEsin Nellore District. He stated that IPR can be dividedin to specified areas, such as Intellectual propertylaws, trademarks, copy rights, geographical indications.He also cited the examples of Basmati rice andturmeric for geographical indication and ‘Dettol’ fortrademarks. He called young entrepreneurs to haveawareness of laws relating to IPRs and make use ofthe Laws to develop brand building.

He also asked the entrepreneurs to use the hugeresources of India instead of depending on imports andcreate employment opportunities to local people.

Addressing the participants, Sri Y.L. Pradeep Kumar,stated that Nellore district has good potential for settingup of industries and identified 14,000 acres for industrialpurpose. He assured to provide all the support toentrepreneurs from his department.

Earlier welcoming the Chief guest, Sri AtukuriAnjaneyulu, Member, Managing Committee, FTAPCCIstated one way to gain competitive advantage by theMSMEs is the use of Intellectual Property Rights (IPR).The IPR enables MSMEs to become more competitivethrough technological gains. If innovation is to play apart in enhancing the competitiveness of MSMEs, IPRmust also have a role to facilitate innovations. He saidthat IPR helped the entrepreneurs in patents in the newtechnologies, trademarks in building consumerconfidence and designs in creating buyer appeal.

In the Technical sessions Sri S L N Kumar, DeputyDirector, MSME Development Institute, spoke on Overview of the new IPR Policy- MSME sector and alsoon Fundamentals of Technology Transfer VenkatesanRajamani, Sr. Examiner of Trade Marks & G.I.,Chennai on Trade Marks Law & Registrationprocedure & Importance of Geographical IndicationShri T.V. Madhusudhan Deputy Controller of Patents& Designs, Patent Office Chennai. Patenting andPatent Laws and - Enforcement of Rights; Sri. Mohd.Hafeez, Advocate, Nellore on Copy Rights and Designs.Smt. Swapna, Associate Faculty Member NationalInstitute for Micro, Small and Medium Enterprises (Ni-MSME),Hyderabad, spoke on Services of IPRFacilitation Centre

Awareness Program on Intellectual Property Rights (IPRs)

We are happy to inform that the Jet Airways have agreed to offer Special Discounted Fares to FTAPCCIMembers by offering 7.5% discount on their domestic flights bookings made on their official website,www.jetairways.com. This offer would be extended to all members of FTAPCCI who make only DOMESTICbookings on their website and avail the special offer.

Kindly note there would be special code which needs to be mentioned on the promotionalcode column in booking engine to avail the discount.

Promotional code : 9WCCI Discount : 7.5 %

Members are requested to avail this opportunity and reap the benefit.

Special Discounted offers to

FTAPCCI MEMBERS By JET AIRWAYS


FTAPCCI

FTAPCCI Expert Committees

Nominations RequestedFTAPCCI has reconstituted the following ExpertCommittees for the year 2016-17 to discuss, debate andconcretize the expert views on various issues broughtto its notice of State/National importance. Also theCommittees will hold various brainstorming sessions /workshops / conferences to interact with policy makers

1. Industrial Development including HR & IR

2. Environment

3. Tourism, Hospitality, Health Care and Entertainment

4. Direct Taxes

5. Indirect Taxes

6. FTAPCCI Ladies Wing

7. Trade and Commerce & civil supplies

8. Banking, Finance & Insurance

9. Corporate Laws and Legal

10. Agriculture, Food Processing & Dairy

11. Infrastructure & Real Estate

12. Information Technology, E-Commerce & Start-ups

13. International Trade

14. Energy

15. Youth Affairs

16. Event Coordination

17. Pharma

18. Alternative Dispute Resolution (ADR) &Intellectual property Rights (IPR)

Members interested to serve on the committees asmembers may send their applications in the prescribedformat, printed on or before August 20, 2016

Note :

1) Member should be on the Rolls of FTAPCCI as onApril 30, 2016

2) One person from an organization may opt for notmore than two committees

3) Two or more persons belonging to a memberorganization should not apply for membership ofthe same Committee. More than one person froma member organization can apply for membershipof different Committees.

4) A separate application from should be sent for eachCommittee.

Application for Membership ofExpert Committees 2016-17

Applicant Full Name : ......................................….

............................................................................

............................................................................

Designation : ..................................................…..

Name of the member Firm / Company:………….....

............................................................................

............................................................................

Mailing address : …………......................................

............................................................................

............................................................................

PIN Code : …………................................................

FTAPCCI Membership No. ……………......................

Panel :…………………..............................................

e-mail : …………………….........................................

website : ……………...............................................

Fax : ………….........................................................

Telephones (with STD code) :……….......................

............................................................................

Cell No :……….......................................................

............................................................................

Name of the Committees interested

(in order of priority):…......................................…

1) .............................................................………..

2) ............................................................…………

I hereby assure that I will attend the expert

committee meetings regularly and actively

participate in its programs and projects.

Date : ................…. Signature of the

Applicant


FTAPCCI

Brussels continues to hold its position as a favouritedestination for many foreign companies accessing theEU markets. A strategic location with clear logistics,cultural and economic advantages, Brussels continuesto be the investment gateway. Britain’s proposed exitfrom the EU membership (BREXIT) has created flurryof diverse thoughts among the investor community, whoconsidered London/UK for EU market access for tradeand investment. In the wake of events, which is shapingthe socio-economic- political future of EU as a strategicmarket bloc, Brussels plays a significant role.

So now to access the EU market, probably no othercity in Europe rivals Brussels for its strategic locationat the nexus of economic and political decision-makingin Europe, not to mention its location at the heart of aEuropean market of 100s of million consumers. Brusselsis a truly an international city, situated at the crossroadsof Anglo-Saxon, Latin and Germanic cultures. The

location, infrastructure and human capital is makingBrussels unique and thus portraying it as an attractivebusiness hub.

World Investment Report, 2012 by UNCTAD hasranked Belgium in the 2nd Position in terms of FDIattractiveness. Brussels Invest & Export (BIE) is apart of the Ministry of Brussels Capital Region,Belgium, responsible for inward investments to Brusselsand helping Brussels’ companies successfully findingoverseas markets. SAS Partners is a multi-disciplinaryadvisory organization, closely associated with BIE inIndia for helping Indian companies leveraging thestrategic competencies, Brussels can offer for theirEuropean expansion.

To take advantage of the enormous potential that exists,FTAPCCI, Brussels Invest & Export and SAS PartnersCorporate Advisors is organizing a Seminar on

Seminar on ‘Brussels - Gateway of Investments to Europe’24th August, 2016 at 4.30 p.m. at Federation House, Hyderabad

FTAPCCI in association with US Consulate General isorganizing a Meeting with Dr. Tony Boccanfuso,President, University Industry DemonstrationPartnership, USA on 18th August, 2016 at 4.30 p.m. atJ.S. Krishna Murty Hall, Federation House, Red Hills,Hyderabad.

Dr. Anthony (Tony) Boccanfuso possesses a PhD inInorganic Chemistry and has more than 25 years ofresearch and commercialization experience managinga variety of administrative, programmatic, and strategyinitiatives for academic, government, and private sectorfirms such as The University of South Carolina, theNational Science Foundation, the National Institutes ofHealth, and PricewaterhouseCoopers. Since 2007, Dr.Tony has led the University Industry DemonstrationPartnership (UIDP – uidp.org), a project oriented,membership organization committed to improvingpartnerships between the academic and corporatesectors. Dr. Tony has vast experience in forging andnourishing University-Industry partnerships across theU.S.

Meeting with Dr. Tony Boccanfuso, President,University Industry Demonstration Partnership, USA18th August, 2016 at 4.30 p.m. at Federation House, Hyderabad

Forthcoming Events

The objective of the meeting is to understand WhyUniversity-Industry Partnerships Matter, InnovativeModels in University-Industry Partnerships, BestPractices in University-Industry Partnerships: WhatDoes and Doesn’t Work and Building Strong University-Industry Partnerships. The academic-corporateengagement improves the lives of people and the humancondition through the development of transformationalproducts, new medicines and creation of newinformation and approaches that lead to better decision-making.

There is no participation fee, however prior registrationis must.

Members are requested to kindly participate in themeeting and join us at Hi-Tea.Please confirm your participation toMr. R. Kulkarni, Joint Director, FTAPCCI,Phone: 98482 86640, 8008579625,e-mail : [email protected];to enable us to make necessary arrangements.

*****


FTAPCCI

‘Brussels - Gateway of Investments to Europe’ on 24thAugust, 2016 at 4.30 p.m. at J.S. Krishna Murty Hall,Federation House, Hyderabad. Mr Laurent Verbiest,Project Manager – Inward Investment, Asia, MsKathlijn Fruithof, First Secretary – Trade andInvestment, Brussels Invest & Export, ConsulateGeneral of Belgium in Chennai, Mr Alex T Koshy,Consultant to Brussels Invest & Export - Director, SASPartners Corporate Advisors Pvt Ltd have consentedto participate and address the Seminar.

The objective of the Seminar is to interact with therepresentatives from Brussels and understand fromthem more about Brussels and the support that BrusselsInvest & Export can offer in taking your business to

Brussels. The Representatives will be presenting anoverview of the growing trade and investmentopportunities with Europe, strategic imperatives ofBrussels, impact of BREXIT on potential investors andthe assistance provided by BIE for Indian investorswho intend to set up their operations in Brussels.

There is no participation fee, however priorregistration is must.

Members are requested to kindly participate in theSeminar and join us at Hi-Tea. Please confirm yourparticipation to Mr. R. Kulkarni, Joint Director,FTAPCCI, Phone: 98482 86640, 8008579625,e-mail: [email protected]; to enable us tomake necessary arrangements.

*****

The Embassy of the Arab Republic of Egypt (Commercial Office) in New Delhi has informed that anEgyptian Company, M/s. Egyptian Dairy & Foodstuff Company (EDAFCO) wants to do business withIndian Companies. This company is looking for export of Food and Beverage Products to India.

For further information, please contact – Mr. Mohammad Eltahrawy, (Official of the export), M/s. EgyptianDairy & Foodstuff Company (EDAFCO), Industrial Zone Al, Tenth of Ramadan City, Egypt. Ph: +2015410497;Fax: +2015410498; Mobile: +201281403838/201010788800; email: [email protected];[email protected]

The Embassy of the Arab Republic of Egypt in New Delhi has informed that Egyptian Railways Maintenance& Services Co. (IRMAS) is inviting Tenders to Supply Electrical Spare Parts for Locomotives.

For details, please contact - Egyptian Railways for Maintenance & Services Co, (ERMAS), subsidiary ofEgyptian National Railways, Diesel workshop, Al Sabita Street, Cairo-Egypt. Tel: (+202)25768035 Fax:(+202)25761318

Trade Enquiry

1. Assocham Bulletin – July, 20162. FICCI Business Digest – July, 20163. Indian Infrastructure – July, 20164. Indian Engineering Exports – July, 20165. Vijayawada Chamber – 16th – 31st July, 20166. Praveg’s Energy – July/September, 20167. Indian Factories and Labour

Reports – 15th July, 20168. Unews – July, 20169. IDMA Bulletin – 15 to 21 July, 2016

10. Kassia – July, 201611. Spice India – July, 201612. Janabalam – July, 201613. Hyderabad Circuit – July,201614. Industrial Scan – 1-15th July, 201615. ni-msme Bulletin – June, 201616. Vanijyavani – June, 201617. Al Tijarah – June, 201618. anmi Journal – June, 201619. Hindustan Chamber Review – May, 201620. Indo-German Economy – Issue 3, 2016

The following Latest Books & Journals have been added to the Library of FTAPCCI

FTAPCCI Library

ftapcci 2016/fr 201… · · 2016-08-24arvind kedia v.v. sanyasi rao prakash chandra garg ......

Documents