one rupee business one rupee tax with four rotations

8/19/2019 One Rupee Business One Rupee Tax With Four Rotations

1/28

TAX REVENUEGENERATIONWHEN WE PURCHASE/SELL

GOODSANNUAL EARNINGS BY INDIA

15 LAKH CRORES TOTAL BUSINESS DONE 120

LAKH CRORE TOTAL WORKING CAPITAL INCIRCULATION SHOULD BE 30LAKH CRORES ASSUMING 4

ROTATIONS

ONE RUPEE WORKINGCAPITAL IN CIRCULATION

SHOULD GENERATE ONERUPEE TAXES EVERY YEAR

IF WE GET

4 ROTATIONS


2/28

•BUT ARE WEGETTING 4

ROTATIONS


3/28

• LET US ANALYSE THE

FINANCIAL STATEMENTSOF THE TWO LEADING

TURNKEY CONTRACTORSIN THE INFRASTRUCTURESPACE

• TATA PRO!ECTS LIMITEDAND

•

LARSEN AND TOUBRO LTD


4/28

TATA PRO!ECTS REVENUE RS3444 CRORES


5/28

VENDOR PAYABLES 2344 CRORESBORROWINGS 1500 CRORE

RECEIVABLE R" 2400 CRORES


6/28

REVENUE OF 3444 CRORESCREDIT FROM VENDORS 2344

RECEIVABLES 2400• THEY DID A TURNOVER OF 3444 CRORES OUT OF WHICH THEY STILL HAVE TO RECEIVE2200 CRORES # ASSUMING 10$ RETENTION% & THUS MORE THAN 50 $ OF THEIR BILLSHAVE NOT BEEN RECOVERED&

• THEIR VENDOR PAYABLES ARE 2344 CR WHICH MEANS ASSUMING # 30 $ MARGIN % THAT THEY HAVE ACHIEVED A TURNOVER OF 3444 WHICH WAS FULLY FUNDED BYVENDORS AS OPEN CREDIT BUT THEY AHVE NOT PAID THE VENDORS& IT IS OBVIOUS

THAT THEY HAVE USED THE RECOVERED FUNDS FOR OTHER PURPOSES AND HAVE NOTPAID THE VENDORS THUS STOPPING THEIR ROTATION& LOOKING AT THE FIGURES IT ISVERY OBVIOUS THAT THE NET REOVERABLE FROM CUSTOMERS IS LOWER THAN THE NETPAYABLE TO THE VENDORS&&

• THEY BILLED 3444 CR COLLECTED 1004 CR MANAGED THEIR EXPENSES AND DID NOTPAY ANYTHING TO THEIR VENDORS

• IN ADDITION TO THIS THEY HAVE FURTHER BORROWING FROM THE BANKS TO THEEXTENT OF 1400 CRORES

• THUS WITH 3'00 CRORES DEPLOEMNT THEY HAVE ACHIEVED 3444 CORRES TURNOVERWHICH IS LESS THAN ONE ROTATION

• THEY HAVE MORE THAN (0$ OF THEIR MONEY OUTSTANDING OF THEIR ANNUAL TURNOVER& ACCORDING TO THE RBI ASSUMPTIONS AND GUIDELINES FOR BANKING ITIS EXPECTED THAT THEY ROTATE THE FUNDS 4 TIMES WHICH MEANS THAT THEIROUTSTANDING SHOULD BE AROUND '00 CRORES WHICH SHOULD BE THE AMOUNTBILLED IN THE LAST )UARTER&

• IT IS VERY OBVIOUS THAT THIS COMPANY HAS USED MONEY VERY VERY INEFFICIENTLYAND HAVE FORCES THEIR VENDORS ALSO INTO INEFFICIENCY


7/28

L*T +TOTAL REVENUE 5(1,4

CRORES


8/28

VENDOR PAYABLES 1'000 CRRECEIVABLES 24000 CRBORROWINGS 14000CR


9/28

L*T

• ON A TURNOVER OF 54000 CRORES 24000 CRORES ISRECEIVABLE AND VENDOR PAYABLES IS 1'000 CRORESWITH A BORROWING OF 1'000 CRORES

• WITH 3,000 CRORES THIS COMPANY IS DOING A

TURNOVER OF 4'000 CRORES WHICH IS BETWEEN !UST 1-2 ROTATIONS

• RECEIVABLE VALUE IS ALMOST HALF

IT.S TURNOVER• SO THE CASE IS SIMILAR LIKE TPLBUT MAY BE A TAD BETTER&&


10/28

ACTUAL SITUATIONINDIAN ECONOMY

THE NET TAX YIELDPER RUPEE

DEPLOYED IN INDIAIS LESS THAN 35PAISE&&WHILE ITCAN BE EASILY

BROUGHT TO R" 2

IN ALL VIBRANTECONOMIES IT IS 4-'

TIMES I&E& NET TAX YIELD

PER RUPEE DEPLOYEDCOULD BE 2 TIMES


11/28

IN A BETTERECONOMYWITH

4 TIMES ROTATION THE AVERAGE TAX YIELD PER RUPEE

DEPLOYMENT 1+1


12/28

IN VIBRANT ECONOMY LIKE

DEVELOPED NATIONSAVERAGE TAX YIELD PERRUPEE DEPLOYED IS 1+2&

GREAT EFFICIENCY INUSAGE OF FUNDS

IF WE ACHIEVE THIS

INDIA CAN EARN A TAXREVENUE OF 120 LAKHCRORE WITHOUT ANY

FURTHER INVESTMENTWITHOUT ANY FDI OR IMF

SUPPORT

WE ONLY NEED TO CHANGEOUR WAY OF WORKINGWHICH IS IN OUR OWN

HANDS


13/28

W " 6 78

• A99 7:"; ? : ":==


14/28

•

!UST THIS ONE STEP CANGET US TO A POSITION OF RS120 LAKH CRORE TAX

COLLECTION ANNUALLYWITHOUT ANY INFUSION OF

FUNDS•

OUR COMPANIES WILL HAVEMONEY TO EXPAND THEIROPERATION BY PROVIDING

MORE EMPLOYMENT• SINCE THERE WOULD BE

PRODUCTION SURPLUS

PRICES WILL GO DOWNINFLATION WILL BE UNDER

CONTROL AND EXPORTAVENUES WILL OPEN UP TO

SERVE IMMEIDATEINTERNATIONAL DEMANDS


15/28

ROOT OF THE PROBLEM

•PSU"

•

URBANINFRASTRUCTURE

DEVELOPERS +BUILDERS


16/28

PUBLIC SECTOR UNITS WORK ON THEPHILOSOPHY OF WITHOLDING FUNDS TO FORCE

THE CONTRACTOR TO COMPLETE THE !OB BYHOLDING HIS BANK GUARANTEE&

EVERY YEAR HUNDREDS OF CRORES ARERETURNED BACK TO THE TREASURY WITHOUTDEPLOYMENT&

LITTLE DO THE PSU" REALISE THAT EVERY SUCHRUPEE HELD WITHOUT UTILIATION RESULTS IN

TAX REVENUE LOSSO:< =;" < ;


17/28

ROOT OF THE PROBLEM+PSU" AND URBAN INFRA BUILDERS

• PSU" GIVE CONTRACTS TO LARGE TURNKEYCONTRACTORS WHO FURTHER SUB

CONTRACT TO SMALLER CONTRACTORS• A< PSU" ; =>; 9


18/28

BANK NPA NORMS HIT SMALLER

COMPANIES

• W9 " 9


19/28

• T 68 = 6 79 =;" =< ?< " "7


20/28

IMMEDIATE STEPS• GIVE STANDING ORDERS TO PSU" NOT TO HOLD PAYMENT

BEYOND 15 DAYS AFTER RECEIPT OF MATERIAL AT SITE& BILLSHOULD NOT BE HELD IN THE NAME OF BILL APPROVAL ETC&RATHER ASK THE PSU" TO GENERATE BILL BY THEMSELVESAND BASED ON DELIVERY CHALLAN&

• ISPECTION TO BE DONE BEFORE DELIVERY OF MATERIAL ATVENDOR.S PREMISES

• ONCE RECEIVED IN SITE MATERIAL CANNOT BE RE!ECTED

• THE LARGE TURNKEY CONTRACTORS SHOULD BE TAXED ONWITHHOLDING FUNDS OF SMALLER COMPANIES& THESYSTEMS COULD BE IMPLEMENTED AS FOLLOWS

– 1ST YEAR COMPANIES ABOVE 1000 CR TOP LINE

– 2ND YEAR COMPANIES ABOVE 100 CR TOP LINE – 3 RD YEAR COMPANIES ABOVE 10 CR TOP LINE

– 4 TH YEAR ALL COMPANIES

• A TAX INCENTIVE SHOULD BE GIVEN FOR ALL ADVANCEPAYMENTS


21/28

SIMPLIFY AND STANDARDISE

CONTRACTING PROCEDURESACROSS ALL SECTORS

ALL LARGE PUBLIC AND PRIVATEENTERPRISES ARE USING COMPLICATEDCONTRACTING PROCEDURES WITHUNINTERPRETABLE SINGLE SIDED

CLAUSES AND IMPOSSIBLE CONDITIONSWHICH AFFECTS FLOW OF MONIES AND

COMPLETIONS OF PRO!ECTSHOW CAN WE ACHIEVE FAST ROTATION

WITH UNCLEAR AND VERY COMPLICATED


22/28

URBAN INFRASTRUCTUREDEVELOPERS AND BUILDERS

• THE URBAN INFRASTRUCTURE BUILDER SECTOR ON WHOM THEWHOLE ECONOMY IS DEPENDANT FOR

CONSUMPTION AND IS SUPPORTED BY THE FINANCIAL POLICY MAKERS INEVERY WAY TO SPUR GROWTH IS ONE

OF THE MOST DISORGANISEDSECTORS


23/28

SIMPLIFY AND STANDARDISE

CONTRACTING

• STANDARDISE CONTRACT PROCEDURES TO BEFOLLOWED BY ALL PSU" AND THEIR MAINCONTRACTORS – DIVIDE ALL MA!OR CONTRACTS INTO TWO PARTS

• CORE TECHNOLOGY PART # ACTUAL TECHNOLOGY WHICHIS NON GENERIC

– KEEP RETENTION ONLY IN CORE TECHNOLOGY PART

• NON CORE TECHNOLOGY PART – EX CIVIL PIPING ELECTRICAL CABLE LAYING

– DO NOT HAVE RETENTION PERCENTAGE AND PERFORMANCEGUARANTEE IN THE NON CORE TECHNOLOGY AREAS

– AWARD NON CORE TECHNOLOGY TO SMALLER VENDORS UNLESS THE !OBS ARE BEYOND A CERTAIN LEVEL OF COMPLEXITY


24/28

SIMPLIFY AND STANDARDISECONTRACTING

• CONTRACTS ARE GIVEN AS TURNKEY CONTRACTS TO BIGCONTRACTORS LIKE L*T TPL SP ETC& MAKE SURE THAT THESECONTRACTORS GIVE UNIT RATE CONTRACTS WITH ESACALATIONCLAUSES TO THEIR FURTHER SUBCONTRACTORS

• MAKE SURE THESE CONTRACTORS ALSO MAKE PAYMENTS TO THE VENDORS WITHIN 15 DAYS OF DELIVERY OF MATERIAL& IF THEY DO NOT DO THE SAME THE PSU" SHOULD IMMEIDATELYMAKE PAYMENT TO THE VENDORS

• LD CLAUSE SHOULD BE MADE PRORATA AND SHOULD NOT BE

DEDUCTED IN THE END OF THE CONTRACT & THE BIGCONTRACOTRS SHOULD NOT LEVY LD IF THE OVERALL PRO!ECTIS DELAYED BY THEM OR IF THERE HAVE BEEN ANY KIND OFPAYMENT DELAYS BY THEM


25/28

• MINIMUM PAYMENT OF ,0$ SHOULD BE MADEON DELIVERY OF MATERIAL

• FITTINGS SHOULD BE )UANTIFIED AND 5-15

PERCENT PAYMENT SHOULD BE MADE PRORATA ON DELIVERY OF FITTINGS / ACCESSORIES

• ERECTION SERVICES OF STEEL SHOULD BEPAID AT NOT LESS THAN 30 PERCENT AND NOT

MORE THAN 40 PERCENT• THERE SHOULD NOT BE MORE THAN 2&5

PERCENT FOR CERTIFICATION


26/28

SIMPLIFY AND STANDARDISECONTRACTING

• GIVE STANDING INSTRUCTIONS TO THE BUILDERS/PSU" TO FOLLOW A PRESET CONTRACTINGMETHODOLOGY AND NOT TO DELAY PAYMENT OF ANYVENDOR / CONTRACTOR BY MORE THAN 45 DAYS

• SECURITY AND INSURANCE OF THE PREMISES ANDMATERIAL SHOULD BE IN THE SCOPE OF THE ENDCUSTOMER STEEL PLANT POWER PLANT OR BUILDERAND NOT THE SMALLER CONTRACTORS

• LABOUR INSURANCE AND PROVIDENT FUND SHOULDALSO BE IN THE SCOPE OF THE END CUSTOMER

• ELIMINATE ALL METHODS OF STOPPING PAYMENT ANDCREATING DIFFICULTY FOR SMALLER CONTRACTORS


27/28

BAIL OUT URBAN INFRASTRUCTURE

COMPANIES• IN MOST OF THE CASES THE URBAN INFRA

COMPANIES ARE STUCK UP WITH HUGE LAND BANKSAND SO NOT HAVE MONEY TO COMPLETE THEIR ONGOING PRO!ECTS& CUSTOMERS ARE STUCK UP

• GET INTO DETAILED ANALYSIS OF THESE COMPANIESAND GIVE THEM LI)UIDITY BY TAKING CHARGE ON

THEIR ASSETS AND DISALLOW THEM FROM FURTHERBUYING LAND

•

THROUGH CREDAI MEETINGS CONVENED BY AGOVERNMENT REPRESENTATIVE ASK BUILDERS TOMUTUALLY EXCHANGE LAND BANKS LI)UIDITY ANDRECHARGE THEMSELVES

SUMMARY PSU" BUILDERS LARGE CONTRACTORSFAST ROTATIONSSIMPLIFY CONTRACTINGFAST ROTATIONS


28/28

SUMMARY PSU" BUILDERS LARGE CONTRACTORSFAST ROTATIONSSIMPLIFY CONTRACTINGFAST ROTATIONS

BUILDERS

one rupee business one rupee tax with four rotations

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