Governance Today January 2016

Pragmatic and futuristic p.46

I

Bihar: At critical juncture p.52

JANUARY 2016 VOL. - 02 ISSUE - 04 `60 RNI NO: UPENG/2014/62662 ISSN 2455-0426 PR NO: UP/GBD-212/2015-17 Date of Publishing 04-01-2016 Date of Posting 07-01-2016

Giriraj Singh MoS, MSMEs

“Our basic motto is to make India more competitive” P. 17

MSMEs: PUSHING THE AGENDA

Editor-in-Chief Ajit Sinha Editor Anand Mishra Senior Copy Editor Ramesh K Raja Correspondents Lekshmi Parameswaran, Praveen Raman Ritika Bisht, Sagarika Ranjan Guest Writers & Contributors Dr Ragini Agrawal Graphic Designer Girdhar Chandra Fuloria, Sarvesh Dixit Web Architect Farhan Khan CORPORATE OFFICE Strategy Head Ajay Kumar VP Sales Gautam Navin gautam@governancetoday.co.in I 07840086704 Siddharth Verma siddharth@governancetoday.co.in I 9990091298 VP Strategic Alliance & Branding Salil Dhar salil@governancetoday.co.in I 7840086708 SALES & MARKETING (CORP) Manoj Padaliya, Anupam Gupta, Shubham Gupta, Anjana Yadav, Vaishali Gupta, Sangeeta Mavi sales@governancetoday.co.in I 0120-4234008 GOVERNMENT ALLIANCE Vaibhav Jaiswal I 07840086705 ADVERTISEMENT Abhijeet Srivastava I 09990098572 Stuti Bhushan I 09999371606 Karamjeet Singh I 09990098732 HR & ADMIN Aarti Tiwari ACCOUNTS EXECUTIVE Yogesh Chikara FOR SUBSCRIPTION CONTACT subscription@governancetoday.co.in ADVISORY BOARD Terry Culver Associate Dean, SIPA, University of Columbia Vinit Goenka National Co-Convener, IT Cell, BJP Amod Kanth General Secretary Prayas JAC Society Pratap Mohanty Former Dy Educational Advisor, MHRD, GOI Ranjit Walia Managing Counsel Walia & Co. Published By Ajit Kumar Sinha 713, 3BA - Tower No. - 4, River Heights, Raj Nagar Extn - Ghaziabad Uttar Pradesh-201003 Printed & Published by Ajit Kumar Sinha on behalf of Odyssey Infomedia Pvt. Ltd. Printed at Rama Offset Printers A-43, Sector - 10, Noida, UP - 201301 Editor-In-Chief: Ajit Kumar Sinha @ All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic, and mechanical, including photocopy, or any other information storage or retrieval system, without publisher’s permission.

4 I January 2016

14 Pushing the MSME agenda

GLOBALLY, MICRO, small and medium enterprises (MSMEs) perform the crucial function of being the prime employer, thus having an economic as well as social context of existence. Because large manufacturing and services sectors cannot absorb the entire workforce, MSMEs are important also from the perspective of bridging rural urban divide in terms of employment, and to achieve financial inclusion.

Because MSME segment provides stability during economic downturns, many developed and developing economies provide special care to this segment.

While Indian government also provides benefits to this segment, the impact is somewhere lost in multiple problems in operational environment. But this segment can become a catalyst for socioeconomic transformation of the country, and as such, deserves utmost importance in the overall economic planning of the country.

With emergence of new technologies in computing, communication and operational management, the MSME sector has an immense scope for transitioning from a highly inefficient, and technologically and managerially challenged entities to modern, efficient and nimble entities. www.governancetoday.co.in

17

OUR BASIC MOTTO IS TO MAKE INDIA MORE COMPETITIVE

20 22

Giriraj Singh MoS, MSMEs, Govt. of India

25 28 30 32 18

34

WAREHOUSING INDUSTRY UNDER TRANSFORMATION STAGE

37

K. U. Thankachen MD, CRWC

40 43 46 48

58

SMART ICT SOLUTIONS WOULD ALLOW HIGHER REVENUES FROM NEW BUSINESS MODELS Pawan Kadyan, IAS Commissioner, Bidhannagar Municipal Corporation

52 56 60 68 70 72

www.governancetoday.co.in

INFUSING FLEXIBILITY CHAINED DOWN HARD TIMES TRYST WITH TECHNOLOGY PERFORMING AGAINST ODDS TIME FOR A SINGLE LABOUR LAW PROMISING AVENUE THE UNSAFE LOT SMALL YET SIGNIFICANT GAINS A MISMANAGED CITY PRAGMATIC AND FUTURISTIC DUTY REDUCTION REQUIRED TO INCENTIVIZE DOMESTIC IT HARDWARE PRODUCTION AT CRITICAL JUNCTURE SHUTTING DOORS FOR HOPE FED HIKES RATES OSTRACIZED FOREVER? SPREADING WINGS BASTAR BAND

January 2016 I 5

Pragmatic and futuristic p.46

I

Bihar: At critical juncture p.52

JANUARY 2016 VOL. - 02 ISSUE - 04 `60 RNI NO: UPENG/2014/62662 ISSN 2455-0426 PR NO: UP/GBD-212/2015-17 Date of Publishing 04-01-2016 Date of Posting 07-01-2016

Giriraj Singh MoS, MSMEs

“Our basic motto is to make India more competitive” P. 17

MSMEs: PUSHING THE AGENDA

Editorial

MSMEs in need of an ecosystem INDIA IS primarily agricultural country with most of the population depending on agriculture and allied activities and living in villages and small towns. This is despite a large number of people migrating towards urban centers and deserting agriculture. In such an environment, it is essential that industry, both manufacturing and services are made strong and vibrant enough to absorb a huge number of people and provide job opportunities close to the native place of people so that unwanted migration can be prevented which is burdensome for people and for cities.

By their nature MSMEs are most suited to do both. They can remain scattered geographically besides providing localized employment.

This is not possible for large scale manufacturing or services which because of internalization of across-the-spectrum functions, need to be concentrated at a particular location where people need to come from far and wide. Secondly, big industries cannot provide employment to so many people, especially in a high tech and mechanized paradigm. It is not without reason, therefore, that MSMEs are the major job providers and GDP contributors in most major economies of the world.

Indian MSMEs are also big contributors to national economy, employment and exports. But sadly, this lot is in a bad shape today. They suffer from poor infrastructure, which hurts them more because they cannot afford alternative or captive infrastructure the way biggies can. On the other hand, because of the intrinsic weaknesses, which emerge out of their “key person� structure, most MSMEs are constrained as far as operational and managerial capabilities are concerned. Further, they lack scale. All of these prevent them from achieving their latent potential. On top, because of their weak fundamentals, they find it hard to get loans, which is the biggest problem area for Indian MSMEs. What is required is to realize that in the highly competitive and technology driven world, MSMEs need to move up the value chain. As such, small players need to be financially strong and operationally smart, equipped with latest IT, communication and operational tools. It is true that all these cost money, but in the long run, they allow much higher returns per rupee invested. The government is trying to empower by various schemes to improve operational capabilities of Indian MSMEs. It is also making efforts to enhance managerial skills of promoters. Banks have also been asked to increase lending to this segment.

Because of India’s rich agro based knowledge and capabilities, Indian MSMEs can dominate the agro based product markets, which is exploding globally. Indian MSMEs also have very strong tradition in leather, gems and jewelry and apparels. Lately, Indian MSMEs have also shown tremendous capabilities in engineering production. But to win global markets, Indian players need hand holding in exports, which is also being tried now.

Over the last decade, global markets have become more integrated than ever before and as such, Indian MSMEs would need to upgrade to fit in the global value chain which is highly competitive as well as quality demanding. MSME players of the country have displayed resilience and capability and shown what they are capable of. They now want a proper ecosystem to play a bigger role in the economy, which they richly deserve.

Best regards

Ajit Sinha Editor-in-Chief www.governancetoday.co.in

January 2016 I 7

THUS THEY SPOKE Startup India, Standup India will bring about a big opportunity for the youth of the country. On January 16, the government will launch the complete action plan of the project. All IIMs, IITs, central universities, NITs will be joined with this programme through live connectivity

Narendra Modi Prime Minister

As for the concerns about employment loss, I have already asked COMFED (Bihar State Milk Co-Operative Federation) to consider offering Sudha milk and dairy product counters to whoever wants it from among those losing liquor sales counters

Nitish Kumar Chief Minister, Bihar

The only problem I’ve got when I’m here is having to work out with Marines in the gym because I generally feel like your commander in chief is in pretty good shape, and then I get next to some guy, you know, curling 100 pounds and it makes me feel small

Barack Obama President, USA

Google is a really fun place to work. When you are walking in the office, you see everyone is doing something interesting. When I walked into the Google office for the first time, I was like a kid in a candy store

Sunder Pichai CEO, Google

There are three points to success - concept, capability, culture. Learn more from day one...chase after your concept or idea. Improve your capability to chase the idea...Curate the culture

Satya Nadella CEO, Microsoft

There’s plenty of talent around… It’s about how one harnesses the talent and it’s about timing… The end of one World Cup allows you to look ahead and plan for the next edition, which is four years away. The period in between has to be used to experiment, to groom talent

Ravi Shastri Former cricketer 8 I January 2016

www.governancetoday.co.in

GOVERNANCE WATCH

India did well in year of global economic turmoil: Finance Minister VOICING “GREAT satisfaction” over performance of the Indian economy in “a year of turmoil and volatility” globally, Union Finance Minister ArunJaitleyhas dismissed grumblings about the economy not having taken off as “cynicism -- a way of life in India”. Looking back at 2015, Jaitley said India has been the bright spot with growth prospects of 7-7.5 per cent despite global slowdown and adversities, and expressed optimism that the growth rate which is “quite good” would improve further in the months to come. India has responded well to the challenge posed by the slowdown in global economy, the minister said.He although acknowledged that “there are areas (in which) we have to respond faster”. “As the year ends, I look back with a sense of great satisfaction,” Jaitleysaid adding that India’s fiscal fundamentals are “extremely sound”.

Petroleum products to be out of GST for now, says CEA PETROL AND other petroleum products would not be brought under the GST regime for some time after its roll out, Chief Economic AdvisorArvind Subramanian has said. “Constitutionally petrol and other petroleum products will be within the GST system. But it would be out of the GST dispensation after its implementation for some time”, Subramanian told reporters on the sidelines of an event. He said that the GST council would decide for how long these products would be out of the new taxation regime. “Even after GST, petrol and other petroleum products would continue to be taxed the way now both by the Centre and states”, he said. Asked about the roll-out of GST, he said that Union Finance minister ArunJaitley had said that the government was hoping that the GST Bill would be passed soon. “All depends on when the Constitution Amendment Bill gets cleared”, Subramanian said.

Gujarat planning to launch e-voting in panchayat polls GUJARAT GOVERNMENT is now planning to extend the e-voting facility to panchayat polls, despite the lukewarm response it got in the recent municipal polls.

At present, the e-voting facility is available only for voters of all the eight municipal corporations in the state.

However, before taking a decision, the state government has started an exercise to collect information from across India as well as from the other countries to find out the feasibility of this project. According to Minister for Panchayat and Rural Development JayantiKavadia, information about Internet connectivity in rural parts of state is also being collected. “Our department is at present collecting information about whether such facility is in place in any other part of India or in the world, and how it is being handled there”, he said. www.governancetoday.co.in

January 2016 I 9

GOVERNANCE WATCH

IT sector worried; India to take up visa fee with U.S. INDIA WILL soon schedule discussions with the U.S. to raise its concerns over the Obama administration’s recent decision to hike visa fees. India will also consider retaliatory measures and even explore the possibility of dragging the U.S. to the World Trade Organisation’s dispute settlement body, but only if talks fail to amicably resolve the issue. Issues related to the tightening of the visa and immigration regime and the fear-mongering about a large number of American jobs allegedly going to foreigners have been part of the rhetoric before elections in the U.S. This time too, it is no different.

Industry bodies FICCI and Nasscom had termed America’s decision — to double the fees for certain categories of H1B and L1 visas to $4,000 and $4,500 respectively — as “discriminatory” because it will mainly impact Indian IT firms.

NPAs: Banks get breather from RBI

THE RESERVE Bank of India has given an informal assurance to commercial banks that it will not place restrictions against these lenders if their stressed loans increase sharply on account of cleaning up their books as it has directed. This comes as a relief to the banks that were worried that RBI’s mandate to downgrade a chunk of loans given to errant borrowers would impact their earnings and result in prompt corrective action, said two senior bankers, who did not want to be named.The directive implied that the banks would have to classify some standard loans as substandard loans and make higher provisions on them.

In order to discipline banks, RBI initiates prompt corrective action (PCA) on banks that either have bad loans above 10% of total loans or whose return on assets falls below 0.25% and capital adequacy ratio drops below 9%.

Bihar to seek Rs 56,000 crore from Centre for roads BIHAR WILL seek financial assistance of Rs 55,970 crore from the Centre for the construction, development and renovation of various national highways (NHs) and mega bridges. The Deputy CM TejPratapis expected to demand Rs 22,000 crore for the construction and widening of various NHs, including four new mega road bridges proposed by PM NarendraModi in his Rs 1.25 lakh crore Bihar package announced during the state assembly poll campaign. As per initial estimates, out of this Rs 22,000 crore, nearly Rs 13,000 crore would be spent on the construction of four mega bridges proposed on the Ganga, Sone and Kosi. Besides complete rehabilitation of the existing Mahatma Gandhi Setu at a cost of 2,800 crore, a new four-lane bridge would also be constructed parallel to the Setu.

10 I January 2016

www.governancetoday.co.in

GOVERNANCE WATCH

Uttar Pradesh govt decides to ban polythene SEEKING TO make Uttar Pradesh an environmentfriendly place, the government has decided to enforce the ban on the use of polythene across the state, nearly a month after the Allahabad High Court’s direction to prohibit its usage. “We have banned polythene and its carry bags across the state. There was a court directive for making UP environment friendly. We are also looking at alternative material that we can distribute to the people,” Chief Minister AkhileshYadav said. A decision to this effect was taken at a cabinet meeting chaired by Akhilesh in Lucknow. The administration, however has not specified the timeline as to when the ban will come into force. On November 18, the Allahabad High Court had directed the state government to issue a notification enforing complete ban on the sale of polythene across the state by December 31 this year.

RS passes Bill reducing juvenile age to 16 for heinous crimes THE RAJYA Sabha passed the Juvenile Justice (Care and Protection of Children) Bill, which will ensure that from now on 16-year olds involved in heinous crimes will be prosecuted as adults. Union Minister Minister Maneka Gandhi said, “juvenile crime is the fastest rising segment of crime” and justified the move to amend the Juvenile Justice Act and asserted that the present Bill was the “most compassionate” Bill. Attempting to dispel the concerns of members, the minister said no juvenile would be sent to the jail directly and the experts and psychologists of the Justice Board will first decide whether the crime committed has been “child-like” or was it committed in an “adult frame of mind”. She said the juveniles would still have the power to appeal even if a court decides that they will go to an adult jail.

Union government to create buffer stock of pulses THE UNION government has decided to create a buffer stock of 1 lakh tonnes of pulses in the country to stabilise its prices in the wholesale and retail market and effectively check hoarding by releasing it during an increase in its. Ashok Dalawai, Additional Secretary of the Union Agriculture Department, has said that the Union government has released Rs. 100 crore from the Price Stabilisation Fund (PSF) for procuring pulses directly from farmers at the market price. Mr. Dalawai, who also visited the market yard of APMC in Kalaburagi and few warehouses to inspect storage facilities, said that the purchase had already begun in Maharashtra, Telangana and Karnataka. In Kalaburagi district, 250 quintals of red gram have been purchased directly from farmers offering the market price.

www.governancetoday.co.in

January 2016 I 11

GOVERNANCE WATCH

Harmful bacteria can survive in cookies for months THE RECENT study was prompted by an increased number of outbreak of foodborne diseases linked to dry foods, said the researchers who wanted to see just how long bacteria that cause foodborne illness can survive in certain foods. “There have been an increased number of outbreaks of diseases associated with consumption of contaminated dry foods. We would not expect salmonella to grow in foods that have a very dry environment,” said lead researcher Larry Beuchat from University of Georgia in the US. The researchers found that not only can harmful bacteria survive in dry foods, like cookie and cracker sandwiches, but they can also live for long periods of time. For the study, researchers used five different serotypes of salmonella that had been isolated from foods involved in previous foodborne outbreaks. “Isolates were from foods with very low moisture content,” Beuchat said.

Malaria immune-booster vaccine comes closer to reality A MALARIA vaccine is a major step nearer after a team of scientists found that self-sabotage prevents immune protection against the disease. Australian scientists have for the first time revealed how malaria parasites cause an inflammatory reaction that sabotages our body’s ability to protect itself against the disease. The discovery opens up the possibility of improving new or existing malaria vaccines by boosting key immune cells needed for longlasting immunity. Researchers from Melbourne’s Walter and Eliza Hall Institute discovered that the same inflammatory molecules that drive the immune response in clinical and severe malaria also prevent the body from developing protective antibodies against the parasite. Researcher Diana Hansen said it was the first time scientists had pinpointed why the immune system fails to develop immunity during malaria infection.

ISRO’s RLV-TD Project likely to be delayed TECHNICAL SNAGS have forced the Indian Space Research Organisation (ISRO) to put off the first test on a scaled-down prototype of India’s futuristic space shuttle. Sources said that the Reusable Launch Vehicle-Technology Demonstrator (RLV-TD), under development at the Vikram Sarabhai Space Centre (VSSC) here at Thumba, developed a minor leak during a test, forcing the ISRO to postpone the mission. The ambitious RLV-TD, the first small step to building a ‘space shuttle’ which can return to earth after accomplishing space missions, is likely to be delayed up to April 2016.ISRO had originally planned a mid-2015 launch for the RLV-TD. It had later been postponed to January 2016.VSSC Director Dr K Sivan said that some of the components had to be re-assembled.

12 I January 2016

www.governancetoday.co.in

GLOBAL WATCH

WTO summit ends without an agreement THE 10TH Ministerial conference of the World Trade Organization (WTO) held in Nairobi ended in failure as the delegates could not reach an agreement to take the Doha round of negotiations forward. However, the member nations have agreed on the removal of subsidies on farming exports. The step is intended to help farmers in developing countries to compete on fairer terms. Providing export subsidies on agricultural goods by developed countries has curbed their import of goods from developing nations. Because of this, there has been a long standing demand to eliminate the subsidies. WTO D-G Roberto Azevedo termed the agreement ‘the most significant outcome on agriculture’ as it seeks to abolish market distortions. According to the agreement adopted on agricultural exports, developing countries must also eliminate their subsidies, but not until 2018, and with some exceptions until 2023.

Saudi Arabia elects women

IN A first ever step, women in Saudi Arabia were allowed to contest and vote in local elections. According to results announced by the government authorities, 20 women were successfully elected to municipal council seats. The total election turnout was recorded to be 47.4 per cent among which only 10 per cent of the voters were recorded to be female. Still, this is a historic step for a country where women are denied even the most basic rights. Women need the permission of a male member of the family to apply for passport and driving licenses are not issued to women. Women were not permitted to have identity cards till a few years ago. In 2011, King Abdullah promised to give women the right to vote and stand as candidates in the local council elections, the only democratically elected bodies in the kingdom His successor King Salman implemented the decision.

British Parliament votes for ISIS bombings THE BRITISH House of Commons voted 397 to 223 in favor of carrying air strikes against ISIS targets inside Syria. The motion was tabled by the British Prime Minister David Cameron and is seen as a step to support Britain’s neighbor France in their fight against terror following the attacks in Paris. The bill has clearly stated that Britain will not deploy any ground forces in Syria. Cameron in his speech argued that IS poses a terror threat to people and United Kingdom has a moral obligation to get involved in the global fight. He proposed a seven-point plan which involved military, diplomatic and humanitarian action in Syria. Hours after the vote, Tornado jets took off from the RAF Akrotiri in Cyprus and carried out the first air strikes in Syria. www.governancetoday.co.in

January 2016 I 13

COVER STORY

Pushing the MSME agenda The Micro, Small and Medium Enterprises are both socially and economically important. It needs government support to grow Anand Mishra GLOBALLY, MICRO, small and medium enterprises (MSMEs) perform the crucial function of being the prime employer, thus having an economic as well as social context of existence. Because large manufacturing and services sectors cannot absorb the entire workforce, MSMEs are important also from the perspective of bridging rural urban divide in terms of employment, and to achieve financial inclusion.

Because MSME segment provides stability during economic downturns, many developed and developing economies provide special care to this segment.

While Indian government also provides benefits to this segment, the impact is somewhere lost in multiple problems in operational environment. But this segment can become a catalyst for socioeconomic transformation of the country, and as such, deserves utmost importance in the overall economic planning of the country.

With emergence of new technologies in computing, communication and operational management, the MSME sector has an immense scope for transitioning from a highly inefficient, and technologically and managerially challenged entities to modern, efficient and nimble entities that can capture global markets with massive online presence, not just in traditional products like handloom, artistic handicrafts and such items, but in technical products that can be an important part of the global value chain. However that cannot happen in isolation. The government needs to empower the segment with right incentives, but more importantly, with adequate physical and regulatory infrastructure. As government embarks on making India a manufacturing hub with 14 I January 2016

initiatives such as “Make in India” and “Digital India,” MSMEs’ role cannot be overlooked.

Making valuable contribution to GDP By way of contribution to the economy and relevance to the same, Indian MSMEs are somewhat uniquely placed. According to the Indian SME Survey, FirstbizGreyhound, 2014-15, currently, there are approximately 48 million MSMEs operating in India, employing around 40 per cent of the country’s labour and contributing to about 17 per cent of the national GDP. This is slightly out of sync because it shows inordinately high labor intensity; only Brazil and Canada show such disparity in contribution to national economy and employment. It also shows how crucial this segment is in the overall context of social reach and maintaining socio economic normalcy.

The MSME segment also contributes around 45 per cent of the country’s overall exports underscoring the vitality of the segment in earning the valuable forex. As per a report of KPMG and CII, brought out last year, MSMEs in the manufacturing and services sectors are growing at a fast 18 per cent and 34 per cent rate. The number of new entrants in the SMEs sector is growing at an average of 23 per cent in manufacturing and 31 per cent in the services sector.

Going by the current trend, the MSMEs’ contribution India’s GDP would touch 22 per cent by 2020.

Struggling for basics A couple of years ago, Financial Times came out with a story stating that hardly half a million of India’s MSMEs had presence on web, and

only 81 per cent of had access to high speed internet – compared with 86 per cent in Malaysia and 96 per cent in China. Just 36 per cent of SMEs in India had what McKinsey called “online enterprise solutions.” This was despite the fact that on average, using the internet raised revenues by 9.1 per cent, reduced the cost of goods sold by 6.3 per cent, and cut the cost of operations and administration by 8.4 per cent. The big question is why even with such obvious and big advantages, Indian MSMEs are not moving online. The answer is that they are stuck at the struggle for more basic infrastructure. A few years ago, a survey had revealed that lack of financing, poor marketing ability, low absorption of technology, and poor infrastructure were the most pressing problems of MSMEs, besides improper government policies; the list would read more or less same even today, creditable governmental interventions notwithstanding.

In India, MSME are very large in numbers, diverse in type of business and are spread across remote geographies. A large majority are informal and not registered with the formal eco system of MSMEs, thus not deriving any benefits that are available from government. This also means that are left at mercy of unorganized sector services which are highly costly besides being unreliable.

Of all problems that MSMEs face, financing has been and continues to be the primary stifling factor. This is despite the fact that the bank financing to the segment has risen significantly over the years.

Even with all encouragements by the government and the RBI, very often banks shy away from lending to MSMEs because of reasons that are characteristic of MSMEs. To start with, most MSMEs don’t www.governancetoday.co.in

have enough of collateral to provide or enough history to prove creditworthiness.

Overwhelming majority are one man show with business model that suffer from competitive disadvantage or lack managerial and technical competence, severely adding to their risk profile. It is not without reason that only 5.18 per cent of the MSME units (both registered and unregistered) had availed of finance through institutional sources, as per the Fourth Census of MSME sector. While 2.05 per cent had finance from noninstitutional sources, 92.77 per cent had no finance or depended on self finance. A branch manager of one of the largest public sector banks in India said that most MSME applications suffer from the lack of credit history of business or promoters or both. Even though rating is a crucial part of financing and interest rate decision, for which SMERA (SME Rating Agency) was created, most MSMEs prefer not to be rated.

But financing is only one of the problems. Lack of business strength also impacts most of the MSMEs. Because most first or even second generation entrepreneurs are not professionals, they fail to implement quality operational management or put in place efficient team of professional managers to supervise operations. Poor managerial capability manifests in problems like inability to procure raw materials at competitive prices.

Lack of skilled manpower and weak financial condition also limits access to modern technology and constraints modernization and expansion.

Finally, poor managerial skill restricts them from reaching global markets. Small size prevents MSMEs from attaining economies of scale and capturing bigger market.

It also hinders the internalization of functions such as market research, technology innovation and market intelligence, which impedes their productivity. The lack of scale is the biggest differentiating factor between Indian and Chinese small scale players. www.governancetoday.co.in

About 48 mn MSMEs operate in India and employ around 40 % of the labour.

Pushing the MSME agenda To be fair, successive governments have taken numerous steps to make MSMEs strong and vibrant. Various schemes have been launched that cater to specific needs of MSME sector and address typical weakness areas. For example, National Manufacturing Competitiveness Program (NMCP) has been launched for improving competitiveness among Indian MSMEs by improving their processes, designs, technology, and market access. Ten components of NMCP have been operationalized to spur innovation and growth in the MSME sector, including Quality Management Systems and Quality Technology Tools, Building Awareness on IPRs, Support for Entrepreneurial and Managerial Development, Marketing Support/

Assistance and Lean Manufacturing Competitiveness Scheme. These are the areas in which MSMEs generally are not able to gain competence because of cost or availability factors. Further, the Rural Self Employment Training Institutes (RSETIs) are working to improve the human capital of MSMEs including enhancing the managerial qualities of the promoters and building skilled workforce.

In order to increase the credit flow to the sector, Credit Guarantee Scheme for Micro and Small Enterprises has been put in place that intends to make available credit to SSI units, particularly tiny units, for loans up to Rs 100 lakhs without collateral/ third party guarantees.

To facilitate technology upgradation of small scale industries, Credit Linked Capital Subsidy Scheme provides 15 per cent upfront capital January 2016 I 15

subsidy finance for inducting higher technology in specific sectors.

Recently, central government also launched ASPIRE (A Scheme for Promoting Innovation and Rural Entrepreneurship), through which, a number of technology centres and incubation centers are to be opened up, which would accelerate entrepreneurship and innovation in agro industry, a historically neglected segment of MSMEs. On the monetary side, RBI has initiated multiple steps to encourage banks to lend to small sector players, by formulating guidelines and mandating minimum lending norms for units falling in these categories. In April 2015, it mandated banks to lend seven per cent of their annual total lending to micro enterprises. To address the problem of lack of adequate collateral that most MSMEs face, banks have been encouraged to offer collateral free loans, wherein Credit Guarantee Fund Trust Scheme for Micro and Small Industries (CGTMSE) offers credit guarantee cover to Member Lending Institutions (MLIs), up to 75 per cent of amount of default.

This helps micro units and startups, who can raise initial funding for capex without having to worry about collateral. Banks have also been asked to achieve a 20 per cent year-on-year growth in credit to micro and small enterprises, a 10 per cent annual growth in the number of micro enterprise accounts and 60 per cent of total lending to MSE sector as on 16 I January 2016

preceding March 31st to Micro enterprises.

A new paradigm required What is certain is that in a changed global business paradigm, MSMEs cannot be beholden to the old ways of doing business. In future, businesses, whether large or small, would be more about ideas and the creativity with which the ideas are captured in business models. And it is this paradigm in which MSMEs have the upper hand because unlike large players, they are more nimble, fast and quick to respond. But for that, they need to be empowered and provided good playing field, in form of top quality infrastructure, which today means not only roads and power, but also reliable and affordable connectivity.

While government can and must provide good infrastructure and regulatory support, MSMEs also need to pad up to change themselves intrinsically.

Financing is the basic requirement and needs an innovative approach to sort out.

Traditionally, MSMEs have relied too heavily on personal funding by promoters and friends, and have been discouraged by formal financial institutions; even today it is hard to get bank or institutional loans for an MSME without heavy collateral and five year history. But not many MSMEs scrape through this period. As such, along with institutional support which is being tried right now, an ecosystem

needs to be developed in which MSMEs can avail funds from NBFCs, Venture Capital Funds and Angel Funds etc.

Innovative financing options such as supply-chain financing, whereby MSMEs can access shortterm credit against the supplies while they await payment should be encouraged. This would ease the working capital requirements of MSMEs to a considerable extent and can be used with receivables financing, bills discounting, reverse factoring etc. Similarly, equipment lease finance can to an extent address term finance requirement.

But for all this, banks would need to innovate too, and need active RBI support.

As far as marketing is concerned, experience of last few years show that internet and e-commerce has emerged as a great tool to tap national and global market. Even today, a little over 40 per cent of MSMEs are selling online. According to the latest SMEStreet Survey, web-enabled SMEs are making higher profits and have enhanced customer reach. New initiatives like Makein-India and Digital India need maximum MSME participation to be successful, which, in turn, require high Information, Communication and Telecommunication (ICT) push.

Most developed countries have a thriving MSME sector which contributes significantly to national GDP and overall employment. If India has to grow sustainably at eight per cent, it needs to transfer a large number of people from agricultural to industrial economy.

Creating and sustaining a thriving MSME ecosystem is necessary for this because neither large manufacturing and services can employ so many people, nor can big cities absorb such migration. As such, an efficient and distributed MSME sector which is well in sync with the global value chain is perhaps only way to grow fast and equitably. No effort is too much to achieve this goal. anand @governancetoday.co.in

www.governancetoday.co.in

INTERVIEW

OUR BASIC MOTTO IS TO MAKE INDIA MORE COMPETITIVE THE GOVERNMENT of India has come up with numerous schemes to benefit the MSME sector, which is suffering from lot of problems.

To find out more about the approach and intent of the major programs of the government for the sector, Ramesh Kumar Raja, Senior Copy Editor, ‘Governance Today’, spoke to Giriraj Singh, Union Minister of State for MSMEs. Edited excerpts:

How can MSMEs play an important role in the ‘Make in India’ program?

We work as a facilitator in this program. The basic motto of our ministry is to make Indian MSMEs more competitive on international platform with the usage of technology. Thus, providing a common facility centre to every concerned area is a part of our ministry. We give monetary assistance to MSME players by simplifying certain rules and regulations for better functioning of the sector. Most importantly, we have recently started the Udyog Aadhaar registration. Make in India is simply not the slogan of our Prime Minister but also a thought; i.e. minimum government and maximum self-governance.

Because of our endeavour, the industry is no more required to undergo the scrutiny of a babu (bureaucrat) for registration. Selfdeclaration and self-governance thus comes into play here.

In fiscal year 2014-15, we guaranteed loans worth Rs 12,000 cr for those opening an enterprise below one crore rupees. We assured the banks that if their money went non-performing (asset), we would pay up.

Besides, we are running a scheme under which it is compulsory for a PSU to procure at least 20 per cent of products from MSMEs. www.governancetoday.co.in

an important vision which we will realise besides taking measures in other areas of MSME sector for employment generation.

Poor infrastructure is taking a toll on MSMEs. How do you look at it?

Giriraj Singh, MoS, MSMEs Procuring raw materials from retail market is a costly affair for small enterprises. They are also not able to purchase in bulk owing to their small-sized budget and turnovers. Taking this issue into account across all industries in the MSME sector, we purchase raw materials in bulk and distribute among them.

Further, under the Make in India program we are going to incorporate ‘Make in Village’, a sub-program which will give employment to about five crore people via the KVIC (Khadi and Village Industries Commission) Solar Charkha Model. It’s a very innovative model which will not only help in Make in India, but also play a very significant role in women empowerment and give employment to youth in villages through backward and forward linkages.

How do you look at PM Modi’s another ambitious program, Skill India?

A target of skilling 1.5 crore people by 2022 has been given to our department by the Prime Minister which we will achieve. By the way, Skill India is simply not about skilling workforce. Trainingcum-employment program too has a lot to do with skilling the work force. Giving employment to five crore people through the KVIC’s Solar Charkha Model by 2022 is

Although infrastructure is a big problem in India, the work related to them is not confined to a single department. Different ministries are there for different works, from electricity supply to roads.

Nitin Gadkariji (Union Minister for Road Transport & Highways) has chalked out a very dynamic plan and I hope his endeavour will play a very substantial role in the Make in India program.

How can government help MSMEs in tapping export market?

Common facility centres are already there at different clusters in India to address such issues and enable domestic MSMEs to compete across the world. The MSMEs of Ludhiana, for instance, send their products to nearly 10 countries and compete with China. Even Germany is accepting the products of India, thanks to their maintenance and quality standards. We are progressing with ‘zero effect and zero defect’ model and hope to catch up the export markets soon.

What role does you see for NIMSME for the growth of the sector?

Simply one department is not going to bring about a sea change. Technology, quality, skill and marketing are all going to play big roles in the development of MSME segment.

January 2016 I 17

INTERVIEW

WAREHOUSING INDUSTRY UNDER TRANSFORMATION STAGE

INDIAN RAILWAYS is not only a mammoth transportation organization for people, but is also a big goods transporter.

Needless to say, it needs warehousing services to undertake its logistic services. Central Railside Warehouse Company Ltd. (CRWC), performs this crucial function of providing warehousing facilities and services to Indian Railways at crucial locations. To understand the various facilities and services of CRWC and the challenges it faces, Abhijeet Srivastava & Ritika Bisht, ‘Governance Today’ spoke to K. U. Thankachen, MD, CRWC. Edited excerpts:

Can you explain in brief about your work in providing warehousing facilities to Railways?

CRWC, a miniratna PSU, entered into an MOU with Railways in 2003 for development of 22 warehouses at various railway locations. Currently we are operating at 19 terminals across India where we handle bagged commodities like cement, fertilizers, foodgrains and white goods which are generally transported via trains across these terminals. The very idea of providing warehousing at Railway terminal has been conceived to give value added service to the customers at the Railway Terminal itself. The transit warehousing provided by us at good sheds across the country has been useful in reducing damages and pilferages and savings on heavy detention charges to the customers as well as in integrating the logistic 18 I January 2016

services. In line with the “Make in India “concept, CRWC is committed towards the “Move in India” concept, which is bound to be a revolution in integrating the logistics solutions of the country benefitting the railways & its traffic on a larger scale.

Technology has a crucial role in enabling seamless service. How is CRWC using technology to fulfill its objectives?

The warehousing Industry is under a tremendous transformation stage. Now, we have warehouses with ultramodern designs, racking systems, mechanized handling equipments, IT enabled warehouse management system so on and so forth. Technology is enabling greater efficiencies and maximizing space utilization with upcoming concepts like logistic parks, freight terminals, FTWZ’s etc, which offer integrated services and enhance supply chain efficiencies. The growth in Indian economy will spur corresponding growth in this sector too.

What kind of challenges CRWC faces while providing efficient solutions?

Despite its strategic importance in the Indian economy, the opportunities that the Indian landscape presents and its

K. U. Thankachen

MD, CRWC

immense potential for growth, the Indian warehousing sector confronts several challenges, following being the major ones: • Land availability : Procurement of land in a strategic location with clear title and proper approvals is still a key challenge for any new entrant to set up a warehouse.

The lack of existing clear land classifications in Indian cities is of major concern as far as the development of warehouse zones are concerned. With land values peaking in the last three to five years, the availability of affordable land is another concern for the industry. It is getting increasingly difficult to procure land at affordable prices for building warehouses in India. To add to the misery, different states have different rules regarding agricultural land acquisition, which create entry barriers and have serious cost and time implications.

• Fragmented market with unorganized players: Economies of scale cannot be explored as the warehousing sector in India is dominated by small players with small capacities spread across India. All over the world, coldchain service providers have large

www.governancetoday.co.in

fleet sizes and big warehouses with state-of-the-art technology.

Thus, the costs of cold chain supply are prohibitive at a large scale in India. Because of small and unorganized players, access to adequate and timely credit at a reasonable cost is also problematic. Also small or medium entrepreneurs are unable to provide collateral in order to avail of loans from banks and are hence denied credit.

• Complex tax regime: The delay in the implementation of GST and the existing complex sales and transport tax system tends to discourage the establishment of a national-level centralized distribution centre or hubs, the likes of which are often seen in developed countries.

• Lack of integrated supply chain: Though warehousing is an integral component of the supply chain, currently warehouses are structured on a standalone basis. Warehousing service providers often struggle with other supply chain stakeholders for integration of information and visibility. This disintegration in the upstream, downstream or both ends of warehousing leads to unpredictability of usage of space and facilities. In addition, this impacts the value-added service performance level expected from warehousing service providers.

• Lack of trained manpower: The lack of training institutes adds to the woes of the warehousing sector. Evolving warehouse management processes and operations with more demanding customers, lack of attraction for new recruits arising from poor working conditions, relatively less attractive incentives and benefits, and the emergence of attractive alternate career options are reasons that contribute to the skill shortage in the Indian warehousing sector.

• Lack of IT penetration The warehousing sector in India, with some exceptions, is characterized by low technology www.governancetoday.co.in

levels that act as a handicap in the emerging Indian and global market. Limited real-time visibility with manual inventory management, warehousing management, documentation, billing and reporting has raised doubts on the sustainability of a large number of warehousing players. The existence of these will be in jeopardy in the face of international competition from 3PL and 4PL service providers.

• Lack of expertise in warehousing technologies : A majority of the Indian warehousing players today have inefficient methods of storing, handling and monitoring of goods. They also suffer from stock visibility issues, stock traceability, higher pilferages and damages.

phased manner. Some agreements have already been inked and many are under process like Joint Venture Agreement and EOI with players like IWAI, IFFCO etc. We are also in discussion for business avenues to run in PPP mode for Parcel services, Silos, cold chain & other verticals.

What are the new Initiatives of CRWC?

clients are Ultratech Cement, India Cement, Lafarge, ACC, Ambuja, Vasavdatta, Jaypee, Maha, Prism, Mycem, Nagarjuna, Deccan Cement, Cement Corporation, Manikgarh cement, Penna Cement etc. Among others, our clients include RCF, KRIBHCO, IFFCO, FACT, IPL, JNVFC, ZAC etc. in fertilizers and FCI & traders in foodgrains.

CRWC has taken various initiatives in recent time. For example, in order to keep pace with the emerging technological trends and in order to provide a transparent and efficient system of working, it has started maintaining a warehouse management system that provides support for all IT infrastructure development where vendors can see and make an assessment of how much stock is lying at the warehouse where data is completely generated and managed via the computer.

Secondly, we have put in place third party audit mechanisms for ensuring customer satisfaction.

We are also planning for document of 14 new Railside warehouses which will are expected to be taken up in a

Which are the major clients of CRWC? CRWC has a good clientele base pan INDIA and has achieved significant business results using CRWC’s world-class warehousing services and business solutions.

The commodities which are mainly handled at our terminal are Cements, Fertilizers and Food Grains.

In cement segment, major

What are your future plans in increasing your operational units?

We are already in the process of enhancing our capacities at 14 strategic locations and the warehouse construction activities after executing joint feasibility with railways will be taken up for enhancing the operational capabilities and capacities.

January 2016 I 19

COVER STORY

Infusing flexibility MSMEs Development (Amendment) Bill seeks to increase the investment limits, in view of evolving market dynamics Praveen Raman A WELL regulated market is important for a business enterprise to grow. The regulations must be relevant to the existing business environment and any change in market forces must lead to change in rules too. The change in regulations becomes imperative especially when it concerns a large number of enterprises, like MSMEs, who contribute eight per cent to the national GDP. The MSMEs, until now, are regulated by MSME development Act 2006, some of the sections of which have become obsolete given the change in business environment in the last nine years.

With an intention to create better business ecosystem for these enterprises, the government has now proposed amendments in the Act. Introduced in the Lok Sabha in April 2015, the Micro, Small and Medium Enterprises Development (Amendment) Bill, 2015 seeks to change few Sections dealing with monetary cap for MSMEs. The Bill has two substantive clauses seeking to amend Sections 7 (1)and 7 (9) of the existing MSME Development Act, dealing with classification of enterprises, advisory committee and memorandum of MSMEs. The Bill also proposes to introduce a new clause asSection 7 (1 A) in the parent Act. By amending Section 7 of the Act, this Bill seeks to increase the investment limits for MSMEs in view of inflation and evolving market dynamics. Through the proposed new clause, Section 7(1A), the Bill seeks to empower the government to further enhance investment limits in future through notification.

The proposed Amendment in Section 7 (9) of the Act defines the criterion of higher investment for small and medium enterprises 20 I January 2016

and will enable the government to classify village enterprises as medium enterprises which were earlier classified as small enterprises.

Why these changes needed?

The MSME Development (MSMED) Act, 2006 was enacted to address policy issues affecting MSMEs as well as to classify the enterprises as micro, small or medium based on their investment in plant and machinery/ equipments. The existing limits under the MSMED Act were fixed in 2006. Since then, there has been a significant increase in the price index and cost of inputs, necessitating alterations.

There has also been a change in the business environment with many MSMEs becoming part of the domestic and global value chains. Hence, an amendment was required to the present MSMED Act to enhance the existing limit for investment in plant and machinery considering changes in price index and cost of inputs consistent with the emerging role of the MSMEs in various global value chains.

The present Act states that the central government may, while classifying any class or classes or enterprises, vary, from time to time, the criterion of investment and also consider criteria or standards in respect of employment or turnover of the enterprises. These provisions enable the central government to classify micro, tiny enterprises or the village enterprises as part of small enterprises. The current proposal is to enable central government to classify micro or tiny enterprises or village enterprises not only as small enterprises but also as medium enterprises. This may also be based on criteria of higher

investment and on consideration of criteria or standard in respect of employment or turnover of the enterprises. The move is expected to open the doors of growth to MSMEs and will enable them to move up in value chain.

Also, considering the inflation and dynamic market situation, there is a need to periodically revise the criterion of investment and therefore, the Bill empowers the central government to vary by way of a notification, the investment limits, which shall not exceed thrice the limits, specified in clauses (a) and (b) of sub-section (1) of section 7 for the purposes of development of micro, small and medium enterprises.

There is a reason as to why the dynamics of market conditions cannot be ignored while making provisions for the MSMEs. The MSMEs are characterised by very low levels of technology.

In the MSME Development Act itself, as well as from the industry perspective, there have been demands for enabling small enterprises to improve their technology. When we improve the technology, which is in the context of MSME, it is not necessarily done by internal innovation but by bringing in better machinery for purposes of production or service delivery. Then, that machinery has to be purchased at the current cost and in doing so, many of the MSMEs would cease to be MSMEs. The micro would become small, small would become medium and medium would cease to be in that domain.

Another consideration was the emergence of value chains in global economy. In a given value chain you have the Tier-1, 2 and 3 of Original Equipment Manufacturers (OEMs), who support that value chain. These value chains have to www.governancetoday.co.in

THE COST* OF INPUTS ALMOST DOUBLED IN 9 YEARS Commodity

2005 -06

2006 -07

2007 -08

2008 -09

2009 -10

2010 -11

2011 -12

2012 -13

2013 -14

Fuel & Power

113.58

120.92

120.96

134.95

132.10

148.32

169.03

186.49

205.43

Cement & Lime

102.34

118.88

137.66

138.64

149.02

150.84

156.97

168.63

166.98

Basic Metals, Alloys Products

102.23

111.72

123.22

137.96

129.51

140.73

156.29

166.07

164.53

97.90

99.15

117.08

136.87

118.99

127.92

152.68

161.60

154.08

Machine

103.58

110-12

114.14

117.44

117.98

121.31

125.08

128.36

131,64

Transport equipment & Parts

102.69

104,97

107.56

113.33

116.82

120.34

124.58

129.83

134.51

Iron &Semi Machinery & Tools

Source: MSMEs Development (Amendment) Bill 2015, *WPI (BASE YEAR 2004-05=100)

be globally competitive if we have to stand anywhere in the global market. The competitiveness of the value chain would depend on each of the elements, including the OEM and all other ancillary and service providers to that value chain being competitive.

Therefore, there is a need to improve the productivity of the valuechain in which the MSMEs constitute a big part and also with productivity, the competitiveness viz-a-viz other countries.

The bigger part of the value chain, the top-most layers like Tier1 and mostly the Tier-2 suppliers are already outside the domain of the MSMEs. In some cases, Tier3 is within the MSME segment but MSMEs are actually falling www.governancetoday.co.in

even below the Tier-3 level. As a result, many of the Tier-3 or Tier2 suppliers are actually engaging the so-called MSMEs as a kind of outsourced agencies to fulfil certain jobs which are required in the manufacturing process. There is another difficulty in the outsourcing part which is imposition of the Service Tax. If a job connected with the manufacture of a particular product is outsourced, then, that entity to which it is being outsourced will have to pay the Service Tax also, thus increasing final prices.

So the integration of the MSMEs in the value chain becomes a problem and it is important that in the given value chains, the MSMEs can occupy at least the level of Tier-3 and Tier-2 suppliers.

Now, if the whole nature of the manufacturing is turning from manufacture of individual components to sub-assemblies and system integration by the OEMs, in that context, it becomes important in our opinion to at least keep pace with the technology and to enable the MSMEs to access technologies through development programs of the Government, both at the state level or at the central level.

We hope the Bill becomes an act very soon. This will be breather for the MSMEs and will help them become globally competitive.

(With inputs from Standing Committee on industry report) praveen@governancetoday.co.in

January 2016 I 21

COVER STORY

Chained down Poor infra obstructing the wheels of ‘growth engines’ Ramesh Kumar Raja THE GOVERNMENT’S ‘Make in India’ program has a lot to do with the development of the country. But there is a jerk which it is facing today. MSMEs, the most vital constituent of the ambitious program which is also said to be the engines of growth, is in dire need of a sufficiently developed infrastructure to flourish and take the country forward at par with China, undoubtedly the biggest manufacturing hub of the world. Be it roads, ports, railways, airports, 22 I January 2016

power generation or distribution facilities, irrigation facilities, access to telecom infrastructure or even the very basic housing and sanitation infrastructure – India is a terribly infrastructure-starved country. It is because of this factor India has been lagging behind in manufacturing sector on several counts.

It would not be wrong if we call it an ‘implementation deficit.’ What can be pitiful than this that even after 68 years of Independence we have achieved very little on the infrastructure front. According to

Sankalp Sharma and Amit Kapoor of Institute for Competitiveness, Gurgaon, “The problem is that we tend to look at infrastructure in silos and not as a concrete whole that is critically important for growth and development of this critical enabler for almost all aspects of our lives. The need for sustainable infrastructure development can hardly be overstated at this critical juncture when more and more people enter the workforce every year in search of jobs that presents us with a demographic dividend.” The big question is can www.governancetoday.co.in

The need for infrastructure development has a lot to do with the MSME sector, an important component of government’s ‘Make in India’ program

we capitalize this dividend and if not, what is to be done to be able to do so.

The infrastructure is not only critical for ensuring cost effective manufacturing and service delivery of MSMEs but also for the movement of labour and capital across the length and breadth of the country.

It is also instrumental in basic development and in increasing the speed of doing business.

“The infrastructure improvements have to be carried out in two ways. First, improvements will have to be undertaken in existing infrastructure be it railway corridors, roads, electricity generation and distribution, ports, airports, dams, irrigation, sanitation, access to telecom and the like. Secondly, and also equally critically, there should be the creation of new infrastructure www.governancetoday.co.in

in places and areas where there is a plaguing infrastructure deficit,” as per Sharma and Kapoor.

Since we are trying to follow the footsteps of China in infrastructure development, we must look at our vibrant past that how better off we were and what went wrong with us even as the neighbor marched ahead on infrastructure road and capitalized on it to become the manufacturing hub of the world.

Consider the development of railroads in the neighbouring country. China had close to 23,000 route km of railways in 1951 compared with the commensurate figure of 53,500 km for India. This was because India had inherited a colonial past where a well developed infrastructure formed the basis of efficient administration for the British Raj. As per a World

Bank statistics, China has now surpassed India comfortably– it had close to 66,000 route km of railways compared to 64,000 for India in 2012. Also, China has approximately 10,000 km of highspeed railways (HSRs with speeds of greater than 250 km/hr) - more than the entire HSR network of the European Union. Whereas, India’s railroad system does not have a single route km of high-speed rails at present. The best way to look at this would be assessing the gross productivity losses the country faces because of the slow railway system.

The Golden Quadrilateral, a project launched by former Prime Minister Atal Bihari Vajpayee in 2001 was an endeavour that helped India bridge the rural-urban divide by connecting many of the major industrial, agricultural and cultural centres of India. However, till date, national and state highways constitute less than five per cent of the total roads in the country.

Besides roads and railroads, telecom access is another area where we have made reasonable progress, but much needs to be done for greater digital inclusion of the MSMEs in communication networks, especially in high speed data connectivity. Considering the critical importance of online business in present economic set up, especially in tapping overseas market, it is absolutely imperative that MSMEs have affordable and reliable fibre optic connectivity.

With respect to power generation and distribution, port and airport development as well as dams and irrigation systems, immense improvement is required because these inefficiencies hurt smaller players much more.

The government alone cannot meet the needs of this diverse sector. The critical element thus is engaging the private sector in the improvement of infrastructure to meet India’s diverse infrastructure challenges. Restructuring publicprivate partnerships (PPPs) is the viable method and the way ahead as it helps the public sector to regulate while allowing the private January 2016 I 23

KPMG-CII REPORT:‘THE NEW WAVE INDIAN MSME – AN ACTION AGENDA FOR GROWTH’ Allocate 25 per cent of the land available at all Industrial corridors for MSMEs at different rate slabs and for acquiring models. This will help MSMEs to start their business ventures at affordable rates in key industrial parks and clusters.

World class infrastructure at national, regional and industry sector specific clusters and business centres (on the lines of ‘polyclinics’) for MSME in PPP model comprising physical infrastructure, knowledge infrastructure (Creation of tool rooms), e-platforms, B2B access and technology and innovation support for MSME. Further, link all stakeholders in the MSME ecosystem i.e. bankers, large MNCs, global markets customers, equity investors, skill development, research and developments institutes, trade associations, etc with the clusters and MSME participants in the region.

Promote IT development and implementation in MSME Clusters similar to the Quality Development Cluster Movement. Implement cloud technology among the MSME Clusters which can help MSMEs in Knowledge Sharing and Competitiveness Development.

Clusters alongside infrastructure being developed in 100 modern cities/townships, urban and rural areas and the investments in road, rail, air and water to provide greater connectivity for MSME businesses.

Incubation cells and hubs within clusters can be developed in collaboration with academia / regional institutions to provide MSMEs with mentoring and technology support, and shared R&D facilities. sector to invest in the growth story of the country. There are various models of PPP such as BOOT (build-own-operate-transfer), BOT (build-operate-transfer) and BOOST (build-operateown-share-transfer) that can be leveraged. It will happen only when risk allocation is understood in detail both by public and private sectors. So far PPP model has not succeeded because of multiple reasons including unclear norms to failure of government to guarantee returns, but leveraging private money in developing public asset is critical in a capital deficient and infrastructure deficit country like ours. It goes without saying 24 I January 2016

that the competitiveness of India would greatly be enhanced if the infrastructure sector is improved.

If the ambitious plans like Make in India are to be realized, states will have to be made partners in the infrastructure development process.

Requirements like electricity supply, affordable housing with adequate sanitation facilities, as well as proper roads is major areas of concern, which need to be looked into holistically and appropriate policies formed and more importantly, implemented.

This should be followed up with monitoring the progress of initiatives in a time bound manner

for building a better and a more flourishing country.

Since MSME sector is one of the most neglected segments with respect to public policy despite having immense potential, the policy formulation and public consensus on the same are presently being built. The push of the present government in improving infrastructure is thus a step in the right direction. What remains to be seen is, do we have the competence to execute what we have envisioned?

Considering our past experience, we would seriously doubt this and also because the government has changed but the indifferent governance mechanisms exercised by and through the bureaucracy remain the same.

Besides these, inadequate market infrastructure such as retail shops, e-commerce, and technological infrastructure in the form of R&D centres, testing labs, tool rooms, etc. are other factors that act as a barrier for MSMEs to become globally competitive. This aspect of manufacturing business too calls for the attention of policymakers.

According to S. Mahesh Kumar, director of Small and Medium Business Development Chamber of India, “The key demand of Indian MSME sector is the availability of adequate infrastructure, power and finance at reasonable rates.

One of the major reasons why Indian SMEs, despite being so competitive, fail to compete effectively in the global market is the unavailability of adequate infrastructure and power, which are the keys for running business operations successfully.” The policy makers hence need to create an enabling environment by providing adequate infrastructure to attract investments in the SME sector.

Further, more emphasis needs to be given to the MSME sector, by providing them with special schemes and incentives for new start-ups, young entrepreneurs as well as women entrepreneurs. ramesh@governancetoday.co.in

www.governancetoday.co.in

Hard times

COVER STORY

MSMEs struggle for funds in spite of their big contributions to the economy and employment

The major hurdle for MSMEs in approaching banks is the demand of heavy collateral for availing loans.

Lekshmi Parameswaran WHEN INDEPENDENT India chose industries as an important growth driver, it was a decision that defied all logic. For a country that was predominantly dependant on agriculture and where industrialization was still at its nascent stage, it was a giant leap to take. Though this decision is criticized by many, in hindsight it is easy to see why the government took such a step. The policy makers rightly recognized the role played by industries in laying down a strong foundation for economic development. Even for the development of agriculture, it was necessary to have the required technologies to achieve the goal of becoming a self-reliant nation. www.governancetoday.co.in

India’s strength has always been its Micro Small and Medium Enterprises (MSMEs) as it percolated down to every level of the economy. So when in 1969, the then Indira Gandhi led Congress government nationalized the banks, it was seen as a step that would bring in full financial inclusion. But even after almost five decades of the reforms and drastic changes in both the national and international economic scenario, the MSME sector still remains the least funded. This is astounding when viewed in the context of the contributions of this sector to the Indian economy.

The MSME sector through 26 million units manufactures over 6,000 products. This accounts for 8 per cent of the country’s GDP,

45 per cent of manufactured output and over 40 per cent of exports. In addition to all these, it provides employment to 60 million people which make it the second largest employment provider after agriculture. In the year 2006, the Micro Small and Medium Enterprises Development (MSMED) Act came into force which recognized the inclusion of services in these sectors. In spite of all the positives, MSMEs are still viewed as unprofitable and risky investments by the bankers and credit crunch has become an inevitable feature of this sector.

Risk averse banks It is an unfortunate reality that the banks that were conceptualized January 2016 I 25

Investment limits of MSMEs Type

Manufacturing

Service

Micro

Rs. 25 lakh

Rs.10 lakh

Small

Above Rs 25 lakh to Rs 5 crore

Above Rs 10 lakh to Rs 2 crore

Medium

Above Rs 5 crore to Rs 10 crore

Above Rs 2 crore to Rs 5 crore Source: MSMEs Development Act, 2006

for bringing in financial inclusion are becoming the reason for the growing exclusion. Most of the banks today are reluctant to fund MSMEs as they fear the loan may turn into Non Performing Assets (NPA).

Remith Macheri, an officer with the UCO Bank which funds MSME projects throws light on this issue, “MSME sector is the backbone of our economy and we are fully aware of the need to encourage such ventures. Unfortunately many of the applicants do not meet the criteria that we have laid for sanctioning of the loan. Also the high transaction costs involved makes it difficult to invest in a venture that might not yield reasonable returns.”

The fact that most of the MSMEs are run by first generation entrepreneurs is another reason why banks hesitate in funding them.

Many of them lack the expertise to run a business and manage funds systematically. Often money is withdrawn from the funds and used for other purposes which drastically affect the stability of the enterprise.

Compounding the problem is the lack of a uniform credit rating system to assess the creditworthiness of MSMEs. Though there is the rating agency SME Rating Agency of India Ltd. (SMERA) solely for SMEs, some other agencies also rate MSMEs, sometimes based on different parameters that add on to the confusion. Such confusion reduces chance of securing bank finance.

The industries constituting the MSME sector are also seen as uncompetitive by many of the banks. This perception has evolved due to a clear lack of marketing and 26 I January 2016

product branding in certain sectors which are dominated by MSMEs.

The other side It is interesting to note that 94 per cent of MSMEs in India are in the unregistered segment which means none of these have access to any institutional credit. The opinion of not opting for financial assistance from the banks has remained unanimous within this segment. The reasons cited are aplenty and what comes to the fore is a mutual distrust that has hindered the growth of the small scale economy of the country.

The major issue that stops MSMEs from approaching banks is the heavy collateral that is demanded for granting the loans.

The small scale entrepreneurs find it difficult to arrange the required investment backing and turn to the unorganized money market for support. Many also find the paperwork cumbersome and lengthy.

“I waited for months to know the status of my loan application and when it was finally sanctioned it was for a much lesser amount than what I originally applied for”, says Nikita Jain who runs a small handicraft unit in Hyderabad.

Time to act There is an urgent need to make all MSMEs economically viable.

These are the drivers of economic growth and the high labor capital ratio can be steered to the nation’s advantage only if the MSMEs are properly funded.

The Nair Committee Report on

Priority Sector Lending has pressed for urgent financial reforms in the MSME sector if India has to grow by 8 to 10 per cent. Taking a cue from this, it is time for those in the decision making realm to formulate a policy that would bring even the unregistered industries under its ambit. It has to be understood that shortage of funds would mean lack of innovation which is detrimental to any country’s progress.

Moreover the dependency on private finances would create a parallel money market in the economy with no accountability or transparency. The high interest rates charged by the financiers will no doubt put an additional strain on the economy. One of the ways to prevent this from happening is to go for banking sector reforms where the credit worthiness of a business will be assessed by factoring in the cash flow.

The decision by the Reserve Bank of India (RBI) in April 2015 mandating all banks to lend seven per cent of their annual total lending to micro sector, will go a long way in improving this sector if implemented properly. The current finance gap of Rs 32.5 trillion can be closed only if the government takes initiatives to fund the sector.

The 2015-16 union budget has enabled Non-Banking Finance Companies (NBFCs) registered with the RBI and having asset size of Rs 500 crore and above to be considered a financial institution under SARFAESI Act, 2002, and allowed it to fund SME and midcorporate businesses.

The foreign banks which are seen as reluctant lenders should be encouraged to invest in the MSMEs. This can happen only if the government provides enough support for the enterprises to be profitable. The help should not just be in terms of monetary benefits but should also include providing the sector with market linkages and enabling them to compete well with big companies in the domestic market.

The RBI in its guidelines has instructed the banks to give collateral free loans up to Rs 10 www.governancetoday.co.in

Source of finance for MSMEs

Institutional Sources Non-Institutional Sources No finance/ Self Financing

lakhs to micro and small enterprises.

In cases where a particular micro or small unit is seen to make profits, the central bank has mandated the other banks to increase the limit to Rs 25 lakhs. It has also asked the banks to sanction a composite loan limit of Rs 1 crore (to small players) so that the operations can be streamlined and be offered through a single window system. It has also put forth the suggestion that public sector banks should have at least one specialized branch in every district to cater to the needs of the MSME sector. Some of the banks have already started implementing the suggestion of providing collateral free loans and there is a need for others to follow.

Another step that can be taken is to create a separate body of bank officials who can scrutinize each application by keeping the macro-economic goals in view.

MSMEs should be encouraged to document all their transactions in order to provide the ease of doing business.

The model of meso-finance that www.governancetoday.co.in

is increasingly becoming popular to fund MSMEs is something that can be emulated all across the country.

It works on the same principle of micro-finance but offers all the facilities that a commercial bank offers with a slightly higher credit limit. The applicants should also be given the facility to track their online loan applications so that new entrepreneurs can get an insight into the functioning of the system.

With Prime Minister Narendra Modi pitching for the ‘Make in India’ and ‘Digital India initiatives’, time is ripe to encourage more technocrats to be a part of the MSME sector. One way to do this would be to provide them a subsistence allowance as interest free loans for a minimum period and repayment holiday for the first few months. A gestation period of six months can be given for setting up the enterprise and making it break even.

All efforts should be taken to implement the Government’s policy of procuring at least 20 per cent of annual purchase from MSME sector. An institutional mechanism

should be put in place to facilitate discussion among all stakeholders.

The role played by organizations like National Small Industries Corporation Ltd. which acts as a bridge between the MSMEs and banks should be further widened in scope.

As it stands, the areas where banks lend to MSME are working capital finance, vehicle loans, equipment and raw materials purchase, project finance and long-term finance. This should also include insurance cover for cyclical fluctuations and the loss suffered due to volatility of the Indian currency. Since MSME sector is highly export intensive, even the smallest of reforms in this sector can make heavy gains to India’s foreign exchange reserves.

It is in this sector that the future of the Indian economy lies and it is up to the policy makers to make meaningful contributions to ensure its growth. lekshmi @governancetoday.co.in

January 2016 I 27

COVER STORY

Tryst with technology MSMEs need to move up the tech ladder Lekshmi Parmeswaran THE GROWTH story of the Indian Micro Small Medium Enterprises (MSMEs) has been a rather peculiar one. The sector which is hailed as the backbone of Indian economy and which is the country’s second largest employment provider has a contribution of only 8 per cent to the GDP. The lack of technological penetration is perhaps the most profound reason that this anomaly can be attributed to.

In spite of India making great strides in the field of technological advancement, technology is yet to touch the lives of those at the lower rung. Most of the industries in the MSME sector are run using archaic means which affect their efficiency.

A look at the factors that have led to a dismal scenario like this brings to the fore nothing other than government’s lack of planning and political will to reform the sector.

Reluctant enterprises The high cost involved in the initial stages is seen as the biggest barrier by MSMEs in adopting technologies. There is also a clear lack of awareness about the benefits that a continuing reliance on technology can bring to the firms.

The first generation entrepreneurs who are more concentrated in the micro and small enterprises often see an investment in technology as a drain on resources. The government has been unable to make concerted efforts to change this perspective and bring in more industries under the technological ambit.

28 I January 2016

The next obstacle is that of language. Many of the entrepreneurs in this sector are without any formal training in Information and Communication Technology (ICT). Added to this is the lack of software in local languages which has made the process of technological adoption so much slower. It also needs to be kept in mind that many of the rural areas do not have the infrastructure like power supply and broadband connectivity.

With those who are aware of the benefits of technology, the security concerns become an important issue. The ever looming fear of data theft is an issue that is yet to be addressed. The strict tax rules which take into account only the profits registered without factoring in the operating expenses make the entrepreneurs unwilling to give easy access to their records.

There is also a growing skill mismatch because of which small scale industries opt out of technological transition. The workforces employed in both skilled and unskilled do not have the

requisite knowledge to handle even the most basic of technologies.

This has remained the case even with the government opening up a number of District Level Knowledge Centers.

Ushering in reforms There is no limit to what technology can do to aid in the rise of an enterprise. Even the digitization of something as simple as invoicing can help streamline a business to a great extent. This will make all the transactions faster and enable the companies to keep record of the cash flow.

The companies can use this information to plan for their future in an organized manner. Technology also cuts costs. The use of ICT in transport and freight services will substantially bring down the costs incurred by the enterprises and will enable them to strengthen their supply chain.

Perhaps the greatest benefit of employing technology in the operation of a business is the edge that it will give against its www.governancetoday.co.in

competitors. Every company has the opportunity to provide services that are different from the rest.

From the customer’s perspective, it will be this value addition that will make them opt for a particular company’s product. All these will give the Indian MSME’s the much needed competitive advantage in the global market.

The one way to bring about this change is by spreading awareness amongst entrepreneurs on the benefits of using technology in their operations. Success stories from across the country can be shared to encourage them to adopt similar practices. The government should also incentivize companies to make optimum use of technology. The institutions at the local level should be involved in increasing the credit access to MSMEs. The Union Ministry’s Credit Linked Capital Subsidy Scheme for Technological Upgradation can be widened in scope to cover the unregistered units.

There is a need for training centers to train the staffs who imparts knowledge to the entrepreneurs.

Various governmental agencies like the National Small Industries Corporation (NSIC) and the Small Industries Development Corporation (SIDCO) already have their training centers. But the benefits of these centers have not yet permeated down to the lower levels due to their inability to convince the stakeholders on the urgency to go for reforms. The quality of the curricula prepared is also questionable as some of the concepts taught in the classrooms border on technological obsolesce.

In addition to this, the syllabus of the graduate courses should also be revised to equip students with the knowledge of latest technological developments.

The government can aid the small enterprises to tie up with big firms in the transfer of technology.

There is also an immediate need to set up research centres that cater exclusively to the needs of MSMEs. Creation of small industrial clusters that is based on the Public Private Partnership model is a good way to www.governancetoday.co.in

NMCP*: TEN COMPONENTS Building awareness on Intellectual Property Rights for MSMEs; Scheme for Providing Support for Entrepreneurial and Managerial Development of SMEs through incubators.

Enabling Manufacturing Sector to be Competitive through Quality Management Standards (QMS) and Quality Technology Tools (QTT); Mini Tool Rooms under PPP mode; Marketing Assistance/support to MSEs (Bar Code); Lean Manufacturing Competitiveness Programme for MSMEs; Promotion of Information & Communication Tools (ICT) in Indian MSME sector; Design Clinics Scheme for MSMEs; Marketing Assistance and Technology Up gradation Scheme for MSMEs; and Technology and Quality Up gradation Support to MSMEs. *National Manufacturing Competitiveness Program

bring about far reaching reforms in the sector.

The National Manufacturing Competitiveness Program announced by the government in 2005 is visionary in its approach.

The implementation of all ten components of the policy can make MSMEs the powerhouse of Indian economy. One of the most notable points of the policy is to encourage MSMEs to get barcode certification for higher export realization. For this, the government will reimburse 75 per cent of the annual certification fee in the initial three years. Other important provisions are that relating to technical assistance for the setting up of incubators and to strengthen capacity-building through energy efficient means.

There is also a need to bring in uniform standards in the working of MSMEs. The National Council of Skill Development has already started working in this regard. It has announced its goal of establishing a virtual university, Centre for Excellence at the national level to standardize the training curriculum.

This should be implemented as early as possible so that the nation can move ahead as a comprehensive

whole. A model similar to that of the World Bank’s ‘Living Labs’ which encourages open innovations can be introduced in India. Such a step will also help in the creation of a labor pool that is equipped to deal with any technological challenges.

The time has come to popularize cloud computing so that MSMEs get a larger platform to expand.

The government should set up call centers where the entrepreneurs can seek assistance in the use of technology. The decisions by the Government of India to lay fiber optic Cable Network across India for Rs 30,000 crores and that of the Telecom Authority to upgrade the broadband speed from 256kbps to 512kbps will definitely aid in speeding up the process.

India is a country that has seen the highest penetration of mobile phones. So technology can reach the grass root level if its benefits are known to the masses. The same strategy should be adopted in the MSME sector and make it one of the most productive sectors as far as economic growth goes. lekshmi @governancetoday.co.in

January 2016 I 29

COVER STORY

Performing against odds

MSMEs’ share in India’s export has been more than 40 per cent in the last three years, a few steps by the govt. can push it further Praveen Raman MICRO, SMALL and Medium Enterprises (MSME) sector has emerged as a highly vibrant and dynamic sector of the Indian economy over the last five decades. They not only play a crucial role in providing large employment opportunities at comparatively lower capital cost, but also contribute heavily to foreign exchange earnings. Based on the export data maintained by Director General of Commercial Intelligence & Statistics, Ministry of Commerce, the share of MSMEs in India’s total export has been more than 40 per cent in the last 3 years, from 43 per cent in 201213, to 44.7 per cent in 2014-15.

Thus MSMEs contribute nearly half of India’s exports.The main markets for the 20 most-exported MSME product groups, whichaccounted for more than 90 per cent of MSME exports from 2009 to 2012, include the USA, the European Union (EU) and the UAE.

Major hindrance in the MSME export sector Although the Indian MSMEs are a diverse and heterogeneous group, they face some common problems. The main is the shortage of adequate and timely credit.

Some enterprises (e.g. handicrafts) require larger working capital, which directly impacts their production cycle. The high cost of credit, with interest rates of 14-16 per cent and demand of collateral by commercial banks damage prospect of such enterprises.

Another challenge the MSMEs face is marketing. It include product differentiation, brand building, customized tailor-made services, clientele building, after sales servicing etc. Many entrepreneurs 30 I January 2016

are not entering in the field of exports due to lack of market knowledge, availability of a growing domestic market, and the complexities of international trade. Limited scale of operations leads to low production capacity (and consequent low exportable surplus), which is related to the maximum limits for capital investment for definition of MSME. Problems of designing, packaging and product display due to limited financial and human capacities are also big hindrances.

Other major issues is lack of adequate infrastructure, including power, water, roads, etc. which though not unique for MSMEs, impact small scale manufacturing sectors much more than large players. Other than this, low technology levels and lack of access to modern technology are other problem areas. The cost of technology can puts financial burden on the enterprise that works on thin profit margin.

Also, there is a huge lack of coordination among the various organizations involved in the promotion of MSMEs, including organizations of the stategovernments, and poor linkages with the institutional stakeholders in the private sector. Various ministries run programs for the same target group. Other than this, there is lack of a reliable and updated data base to help in monitoring the development initiatives and formulation of appropriate schemes to meet the differential needs of the heterogeneous beneficiaries.

Towards creating positive atmosphere Availability and Cost of Credit: There are lot ways to incentivize MSMEs exporters.

Like an additional interest subvention of

2 per cent should be given those exporters who repay on a timely basis.Another way is an automatic increase in foreign currency limitsdue to rupee depreciation.

Marketing Support: Enhancement of budget and scope is required under Market Development Assistance (MDA) Scheme and Market Access Initiative (MAI) Scheme. Greater focus is required on brand building and trade fairs, double income tax deduction for marketing expenses and support for E-Commerce and a focus on Asia will help Indian MSMEs to boost their export.

Productivity/Technology/Skill upgradation: With appropriate modification in labor laws, we can enable more overtime hours and employment of women in night shifts.The efficiency and productivity can be enhanced by technology upgradation schemes with both capital subsidy and interest subvention. The government also needs to set up research/resource/product development centers and linkages with the technical institutions and CSIR laboratories.

Infrastructure for MSMEs: There is an urgent requirement of 24*7 facilities for export consignments at major air cargo/ sea port complexes.The MSME clusters near Highways/Rail Corridors should be promoted.

Incentives/Taxes related issues: There is a need to have a supportive duty and incentive structure for the MSME sector to ensure competitive edge at the international level. Products of MSMEs need more incentives, hand-holding and better risk mitigation measures as they have a limited resource base. In view of this, it becomes important to have a differential corporate/income tax regime for MSME exporters. There www.governancetoday.co.in

is a need for a separate Export Credit Guarantee Corporation of India or the ECGC policy for MSMEs to reduce costs. The removal ofservice tax on conversion of export proceeds remittances and a host of issueswhich will reduce transaction costs in exports is required.

Institutional Framework: Constitution of a Standing Committee of Secretaries has been suggested by many experts; such a committee would go a long way to resolve policy and implementation related issues besides ensuring greater coordination at the ground level between Customs and DGFT offices.

For the ease of business, the MSME exporters continue to demand amendments in the present Act so that investment limitscan be revised. This will help put more capital into the sector.An incentive in through tax relief can also increase profit of margin for such business houses.

Keeping in view the definitions for MSMEs in other countries, and the inflation in India in last few years, the capital investment criteria should be increased by at least 50 per cent for MSMEs. This is essential to ensure price competitiveness through some economies of scale, as well as to ensure ‘export surplus.’

An inter-ministerial committee, in the year 2013, proposed sector specific measures to promote export competitiveness, including budgetary support, direct purchase of horticulture/vegetable items from farmers by exporters and greater infrastructure support for processed agriculture exports.

Another set of reforms will include increase in capital investment limits in the definition of MSMEs and leveraging of defense offsets to support MSME exports.

The Committee was conscious of the fact that a number of therecommendations would increase the budgetary expenditure/reduce tax revenue and consequently add to the strain on fiscal deficit.

However the Committee felt www.governancetoday.co.in

BLUEPRINT OF EXPORT GROWTH A cess of 0.1 per cent on the production of chemical and Plastics, for creating a fund for technology upgradation for such sectors Additional budgetary support for handicrafts sector, enhancing the support under Integrated Leather Development Scheme Calibration of exports of cotton yarn; avoid unintended exclusions of fabric items Amendment of APMC Acts for enabling direct purchase of horticulture/vegetable items from farmers by exporters and greater infrastructure support (testing labs, pack houses) for processed agriculture exports.

The state APMC Acts need to be modified, so as to enable direct purchase by exporters from the farmers, of at least horticulture/ vegetable items In food processing, quality certification is a major issue where costs are very high.

The committee recommends that the facilities for quality certification may be expeditiously expanded Increase in capital investment limits in the definition of MSMEs and leveraging of defence offsets to support MSME exports.

Source: Inter-ministerial Committee, 2013

that the most critical issue facing the Indian economy today is CAD, and that there is no sustainable medium/long term option for the country but to boost exports.

Accordingly, while recommending taxation/fiscal incentives, the Committee suggested that the benefit may be limited to a period of 5 years. Where increase in budget outlays has been suggested for some Plan schemes supporting MSME’s exports, it was felt that there may be a need to curtail consumption expenditure in other schemes, so as to ensure that

India remains on the path of fiscal consolidation.

Indian MSMEs have a vast export market to tap. They require conducive regulations and timely credit to grow. We can expect MSMEs export boom only when the international trade has more incentives than the domestic market. With a change in present business ecosystem, they can export more and help in balance of trade. praveen@governancetoday.co.in

January 2016 I 31

COVER STORY

Time for a single labour law The federal structure of India makes it an uphill task

Different labour laws prevalent in different states have made the MSME sector more scattered and tough to regulate

Ramesh Kumar Raja IN A country of over billion people, MSME sector has a large potential in providing employment opportunities to the increasing number of youth in the economy. It contributes nearly eight per cent of national GDP, employs over eight crore people in nearly four crore enterprises and accounts for 45 per cent of manufactured output and 40 per cent of exports of India.

But what worries this sector is that it is largely labour-intensive and highly disorganised and different labour laws prevalent in different states have made this sector more scattered and tough to regulate.

It’s not without reason that MSMEs have been complaining of high compliance cost because of filing of multiple returns, inspections and stringent penal provisions. They have been seeking exemption to this sector from some of the major 32 I January 2016

labour laws as also requesting for merger of some of the labour laws such as: exempting MSMEs from the definition of ‘factory’ under the Factories Act, 1948; permitting engagement of contract labour under the Contract Labour (R&A) Act 1970; exempting the MSME units from the coverage of Shops and Establishments Act; merger of Industrial Disputes Act and Trade Unions Act into a single industrial relations law, similarly, ESIC Act, EPFO Act and Maternity Benefit Act etc. If many of these laws could be merged into a single law on social security; and procedural simplification such as filing of single returns under different labour laws, uniform definitions etc. could be undertaken, MSME’s life could be made easier.

It may be noted that majority of these enterprises are self-owned, engaging very few labour. Hence, they face a genuine problem in

executing many of the labour laws such as Minimum Wages Act, Payment of Wages Act etc. They are also not in a position to bear heavy compliance cost by way of filing multiple returns etc. Similarly, many of the small units engaged in welding units, auto components, leather manufactures, handlooms and hosiery units etc. find it difficult to comply to the rigorous requirements of some of the labour laws such Factories Act 1948, Minimum Wages Act etc. There is a definite case to provide relaxed norms for these units.

It’s worth noting that in spite of having the obligatory funds, many entrepreneurs hold themselves back because of India’s labour policy. Policies to guard labour rights such as strengthening the Industrial Disputes Act is good, but when the level of compliances for a large industrial house and a small enterprises are not set apart, it only www.governancetoday.co.in

ends up harming labour interests.

Skill development of the labour within the industry and before their exit, can be an important encouragement for labour to enter and exit freely from these industries.

Any exemption from operation of labour laws in the MSMEs, however, has wider consequences and so requires a thorough check.

The trade unions have been fighting such a demand for a long time. Moreover, every labour law has a precise role and therefore any blanket exemption may not be desirable. However, the suggestion for merger of some of the labour laws into umbrella legislation merits consideration.

Likewise, the recommendation for procedural simplification such as uniform definition, self-certification, and filing of single returns etc. will be of significant help to the small units and should be given effect to at the earliest. These changes do not need any amendment of the law and are therefore easier to bring about. Countries like Brazil have already incorporated a single filing of returns by the MSMEs, which is reportedly working well.

Similar reforms can be adopted in India too which will help making the MSMEs more competitive.

Thanks to the current regime led by Prime Minister Narendra Modi, finally there is some action on the ground. There is a proposal for a single labour law for the entire sector to enhance its competitiveness and improve work culture. The Ministry of Labour is preparing a single law by merging all other existing labour laws regulating the sector in consultation with the MSME ministry.

Some of the subjects under active deliberations are registration of MSME, simplification of penal provisions in the labour laws for the small scale sector, clubbing of laws in groups and removing multiple of provisions in different laws.

Another proposal is to move from a regulatory system to an incentivebased system for implementation of labour laws.

If a scheme is launched for www.governancetoday.co.in

the sector, its implementation gets affected by the different laws prevalent in each state. While the sector is quite export-oriented, the products hit many non-tariff barriers in importing countries due to labour law issues, which pulls down the overall export competitiveness of the country. MSMEs make a wide range of goods that are sold at home as well as exported, but with the implementation of the WTO regime, they now have to deal with the prospect of removal of protectionist measures such as reservation for small scale.

Meanwhile, in its endeavour to fast-track the labour reforms process, the government introduced two bills in the Lok Sabha last year seeking to revamp outdated labour laws with proposals aimed at jobs and expanding manufacturing.

Although they are still pending on the floor of the house, the Factories (Amendment) Bill, 2014, and the Apprentices (Amendment) Bill, 2014, seek to amend laws that came into force in 1948 and 1961, respectively. Once passed, they are expected to make it easier to do business in India, with provisions to allow flexibility in both hiring and working hours.

The Factories (Amendment) Bill, 2014 is seen as one of the landmark labour law reforms mooted by the government, which is keen to promote its ‘Make in India’ campaign to boost domestic manufacturing. The bill, which seeks to ease regulations on hours of work and overtime to workers, has also proposed doubling the threshold of workers for definition of a factory, which in turn would exclude nearly 70 per cent of all such units from the purview of labour laws.

Way forward To deal with labour issues has always remained an uphill task for Indian firms. If you ask any factory owner from any part of the country, the majority will rank it as one of the biggest hurdles.

But things may change a bit now, with the government introducing a

host of labour reforms last years.

These welcome measures, clubbed under an umbrella programme, Pt. Deendayal Upadhyay Shramev Jayate Karyakram, comprise a web portal which will be operative in four central organizations: Chief Labour Commissioner, Directorate General of Mines Safety, Employment Provident Fund, and Employees’ State Insurance Corporation. For on-line registration, six lakh units in the country will be allotted a unique identification. Using this portal, the business units will be able to file self-certified and single on-line return for 16 out of 44 central laws.

In terms of labour inspection, under the new plan a computer will now determine where an inspection will be carried out the next day and a factory inspection report will have to be loaded online within 72 hours (it cannot be modified thereafter). Needless to say, these measures will take away the discretionary powers of the inspectors, making the inspection process transparent. Moreover, the government has also tried to reach out the employees by introducing easy portability for provident fund users and converging social security benefits on Rashtriya Swasthya Bima Yojana smart card.

A scheme for training apprentices has also been launched.

It goes without saying that these modifications are too little to be adequate. While some people, mainly critics, point out that the government has plucked only some low hanging fruits, leaving the tougher issues unaddressed, some of them also view that the reform measures will make little difference as long as the states do not respond to them. Although truth is there in these views, it cannot be denied that these are some very positive changes and among the firsts to be attempted in over 50 years. We can now expect that these first steps taken forward will be the commencement of bigger and even better things in the days to come. ramesh@governancetoday.co.in

January 2016 I 33

COVER STORY

Promising avenue

There is a growing opportunity for MSMEs in defense sector

Defense manufacturing is dominated by large players even as MSMEs play second fiddle

Ramesh Kumar Raja INDIA RANKS among the top 10 countries in the world in terms of military expenditure, thanks to its snowballing defense budget that makes the country rich enough to handle any war-crisis. But bizarrely, bulk of defense procurements is made by way of imports. Need not to worry now. The government’s ‘Make in India’ program coupled with a new Defense Procurement Procedure (DPP) which has almost been finalized as per Defense Minister Manohar Parrikar, the scenario is likely to change for the better. While it’s a good time for the country’s MSMEs to integrate themselves into the supply chains of national and international defense majors to reduce dependence on foreign supplies and gain a foothold in the international market, the procedures are going to be easy to procure defense-related equipment.

Although there was always a need for self-reliance, India, till the recent past, relied heavily on foreign manufacturers for procurement of defense equipment.

34 I January 2016

According to Union MSME Minister Kalraj Mishra, the aerospace and defense industries are of strategic importance to any nation and India needs to increase self-reliance in this sector. “As we all know, small and medium enterprises (SMEs) play an important role in creating a self-reliant base for any industrial sector and that stands true for the defense sector as well,” Mishra said during the fourth edition of ‘MSME DEFEXPO 2015’ in Bangalore.

Noting that in India, a large number of SMEs serve as suppliers to defense PSUs but their contribution has somewhat gone unnoticed, he stated “in order to achieve selfreliance in defense production and subsequently emerge as a significant defense player, India has to improve the competitiveness of its domestic SMEs.” A committee of experts set up by the Ministry of Defense mentioned in its report that almost 80 per cent of component, aggregates and assemblies of complex weapon system and aircraft are made by MSMEs, which are part of supply chains, Minister of State for Defense Rao Inderjit Singh recently said in

the Parliament. In a written reply in Rajya Sabha, the committee under the chairmanship of Dhirendra Singh, former IAS officer, in its report also mentioned that there are nearly 6,000 MSMEs across the country supplying components and sub-assemblies to the DPSUs, ordnance factories, DRDO and private industries. A 2012 report of the Confederation of Indian Industry (CII) and the Boston Consulting Group (BCG) mentions that the employee base of 1.8 lakh in ordnance factories and DPSUs is similar to the countries like United Kingdom and France which are amongst the largest producers of defense related items.

The lack of state of the art defense technology and poor production capabilities are some of the major reasons for India’s lagging behind in the field of defense production. Because of this reason, the government had promulgated Defense Production Policy in 2011, aimed at achieving substantive self-reliance in the design, development and production of equipment, weapon systems and platforms required for defense in as early a time frame as possible. It also aimed to create conditions conducive for the private industry to take an active role in this endeavour; enhance potential of SMEs in indigenisation and broaden the defense R&D base of the country. In pursuance of the policy, the government has taken several steps to build strong defense industrial base.

Challenges While both government and industry are keen to develop defense manufacturing in India as part of ‘Make in India’ concept, they would have to work on challenges the industry is facing at the moment. Moreover, defense sector leaders also believe that www.governancetoday.co.in

vendor development has to be focussed on. In order to decrease our dependence on others for defense equipment and to fulfil its ‘Make in India’ dream for defense sector, India needs to strengthen its vendor base, experts felt at the Defense Conclave organised by CII in Ahmedabad recently.

Defense industry is going through a change and has a huge potential for acquiring a global stature. But there are several challenges that industry and government together need to resolve to make strong the country’s defense industry. According to Prashant Amin, executive director of Elecon Engineering Company Limited, “Finance is the biggest issue with the small industries.

If you are going to do something new, you need money which is not easily available for MSMEs and we have to work on it.”

Moreover, as research and development (R&D) is necessary for the defense manufacturing sector, the industry needs to work on it. Also, the industry would have to strengthen supply chain management as most of the players outsource the components from MSMEs. In this regard vendor development programs will be necessary. As per Shikha Gupta, general manager - strategic planning, Bharat Electronics Limited, “While most of the component manufacturing is outsourced to the MSMEs, we have to focus on vendor development. And along with vendor development, R&D is the critical improvement area, to serve better the defense sector of the country.”

As per experts, capability can be developed in MSMEs and for that India needs to create proper ecosystem. Although it will take some time as it is new for Indian industry, gradually we will be able to reduce our dependency on overseas suppliers.

Suggestions According to NITI Aayog member VK Saraswat, defense www.governancetoday.co.in

‘MAKE IN INDIA’ GETS RUSSIAN BOOST Prime Minister Narendra Modi during his recent visit to Russia signed 16 deals with President Vladimir Putin, with spotlight on nuclear reactors, military helicopters.

HIGHLIGHTS Joint manufacture of Kamov 226 military helicopters, a first for ‘Make in India’ in defense sector Construction of 12 nulear power plants Anil Ambani controlled Reliance Defense to build air defense systems with Russia’s Almaz-Antey Reliance Defense to build 4 Talwar Class frigates with Russian USC MoU on technical co-operation in Railways MoU on co-operation in helicopter engineering SMEs and industries have to improve their skill sets and efficiencies as the Indian defense and aerospace industry would offer business opportunities worth about USD 200 billion in the next 15-20 years.

“The Indian industry, SMEs, MSMEs, and Tier-II and TierIII industries have to gear up in terms of quality, standardisation and level of integration besides increasing skills of their workforce.

Only then will they be able to make use of these opportunities which are immense. They should also know how to market these not only in domestic markets, but also overseas,” Saraswat advises.

As per Saraswat, “There is a need to improve skill sets and efficiencies. Those who are component manufacturers today have to become sub-system

suppliers and those who are subsystem suppliers have to become system integrators. Only then will India be able to take advantage of offsets which are in the range of USD 60 billion.”

It may be noted that offset is a big opportunity for which India has to be ready. Introducing significant policy measures that could help in promoting ease of doing business and in pushing the Make in India program, the defense ministry more recently made amendments in the ‘offset’ policy to allow flexibility to the vendors in offset contracts and reinstatement of services as an avenue for discharge of offset obligations and level playing field to Indian vendors in capital acquisitions. ramesh@governancetoday.co.in

January 2016 I 35

36 I January 2016

www.governancetoday.co.in

The unsafe lot

WOMEN SAFETY

There is an urgent need to fix the safety issue women face everyday while travelling in suburban railway Praveen Raman THE DECEMBER 16, 2012 gangrape incident shook the entire nation, especially the working women and girls who travel every day to their school, colleges and workplaces. When a girl comes out of her home every morning, she has much doubt about her safe comeback. In a country where the women related crimes figure in lakhs, such doubt and scare are very prevalent. The post-liberalization period has seen a surge in woman participation in employment and it is set to grow with time. A safe and secured atmosphere is therefore an absolute necessity for them or we will keep half of our population on the mercy of another half.

Suburban railways takes lead The suburban railways, apart from being one of the major services rendered by the Indian Railways, also plays a facilitating role in addressing the challenges of the public transport system in many of India’s important cities.

Various railway zones, viz., Central, Eastern, Southern, South Eastern, South Western and Western and Kolkata Metro, are providing dedicated suburban services in the country covering about 4,377 million passengers each year, which works out to 53.23 percent of the total passengers on the system. In view of this, it is imperative that the Railways provide the best of the services and amenities to travelling public who use these services on a daily basis. A substantial segment of the Railways’ clients comprises of women passengers. As such, besides providing adequate facilities to women passengers, ensuring their safety and security has been a matter of great concern www.governancetoday.co.in

to the Railway administration.

In our country, the suburban railway plays a dominant role in connecting workplaces and homes.

This can be easily experienced in a city like Mumbai and Delhi.

The safety of women in such public transport has bothered the governments for a long time. While the suburban railway serves a large number of people, there are instances that the organization has failed to do enough to ensure safety of women passengers. In Central Railway and Western Railway zones alone, the total number of commuters was 1468.46 million and 1278.70 million respectively for the year 2013-14 and as per one estimate, 12 per cent of them are women. This is a staggering number. There is need to either increase the number of rakes or improve the frequency of trains, especially in peak hours. Numerous requests from the passengers, particularly women, have come for increasing the frequency of suburban trains, to avoid difficulty in boarding and deboarding. But effective measures are yet to be taken. There is need to increase the frequency of suburban trains, particularly during peak hours. This will not only facilitate smoother travel for daily commuters but also help security personnel in managing the peak hour rush. In particular, the Railways should consider increasing the frequency of exclusive ladies special suburban trains, at least during the peak hours. This will make the public transport friendly to woman passengers. However, the railways has admitted that increasing the load of all the EMU rakes to 15 cars is not feasible due to operational/ infrastructural constraints. They should further consider changing timings of train services to suit passengers’ convenience, after

conducting periodic surveys and studies.

Secondly, the suburban railways have no public utilities.

This problem must be addressed soon. The toilet facility is one of the foremost basic amenities and its absence from a public space like a railway station/platform results in serious inconvenience to the commuters, especially women.

Toilets, especially ladies toilets, were badly maintained, located at the outskirts of the stations in poorly lit areas, and often remained locked. There is a growing need to take immediate and effective steps to improve the situation.

Women commuters also face threats from the unauthorized vendors, beggars and hawkers on suburban trains, stations, platforms, over bridges, pathways, etc. They not only obstruct the free movement of the passengers but also indulge in pick-pocketing and other such crimes. All unauthorized hawkers and beggars should be strictly prohibited from boarding trains or operating at platforms/ stations. Further, non-commuter licensed vendors/hawkers must carry their ID cards issued by the Railways and must wear their Railway Badges, carrying their names and license numbers.

The Railways must ensure that vendors, along with their luggage, travel in the luggage compartment or earmarked areas of coaches reserved exclusively for their use.

Women representation is poor in RPF According to the Railways, the representation of women in Railways Protection Force (RPF) presently is as low as 1.7 per cent.

This is a major hurdle in women safety. In the Railway Budget 201314, certain measures for improving January 2016 I 37

safety and security of passengers were announced, but fell short of implementation. Measures include increasing women RPF personnel and raising it with 10 per cent.

There is a dismal presence of security guards. There is an urgent need to ensure visible security presence at the stations/platforms and on trains, particularly during late hours, to prevent untoward incidents and to instill a sense of security in the women commuters.

All post and out-post in-charges have been instructed to deploy sufficient men to increase visible 38 I January 2016

security presence at the stations and also advised to make sure that staff attend all trains and ladies coaches to check the safety of passengers and to instill a sense of security among the women commuters. Further, all RPF staff have been suitably instructed to keep special watch on the coaches reserved for women passengers.

The security vigilance cameras act as a strong deterrent against anti-social elements. Hence, the installation of security cameras inside the coaches, at the platforms and at stations is important. These

CCTVs should be monitored round the clock by the security personnel.

At the same time, such surveillance should not compromise on the personal privacy of the commuters.

Besides, the ladies coaches must be properly guarded with one lady guard present in the coaches all the travelling time. The public address system at Railway stations should also be used to announce the helpline number, warn against unauthorized entry into women’s coaches and punishment that can result there from, and in general to sensitize the travelling public www.governancetoday.co.in

Gender-sensitive Railways Security personnel including lady security personnel are deployed in trains and on Railway platforms.

An Integrated Security System consisting of electronic surveillance of vulnerable stations through CCTV camera network, access control, anti sabotage checks has been approved to strengthen surveillance mechanism Gender sensitization through awareness campaigns amongst the front line Railway staff like ticket checking staff, RPF and on-board employees who have constant interface with the travelling public is done constantly Lady staff is being deployed as per available resources on platforms for the help of women commuters Security help-line numbers have been set up in the concerned Zonal control rooms to facilitate the passengers to inform about any untoward incidents.

The numbers of such security help-lines have been displayed at conspicuous places of important Railway stations and in the coaches of trains Regular coordination meetings are held with State Police at all levels to ensure proper registration and investigation of crime by Government Railway Police Regular drives are conducted against male persons travelling in ladies compartment and offenders are prosecuted under provisions of the Railways Act

MISSING TARGETS

Gender-wise break-up of RPF; govt failed to fill the gap Gender wise Zone

Male

Female

RB

13

1

CR

3710

149

ECoR

1736

55

ECR

2732

47

ER

6484

153

NCR

2363

73

NER

2674

64

NFR

3009

89

NR

6352

196

NWR

1619

58

SCR

2455

60

SECR

1273

48

SER

3234

88

SR

3627

115

SWR

1157

45

WCR

1236

45

WR

3725

129

Total*

47399

1415

*Excluding RPSF; Source : Indian Railways

on gender concerns. Further, the Railways must ensure that there is no trespassing either in the ladies coaches or ladies waiting rooms and that stringent action is taken against any violators. Currently, no policy/guidelines are available for provision of security vigilance cameras inside the coaches.

Important stations are being provided with security cameras under the integrated security system project covering 202 important stations on the railway network.

In our country, the complaint www.governancetoday.co.in

redressal is a big issue and the Railways is no exception. Despite having a well organized Public Grievances Redressal Machinery, the action taken on complaints is very slow. It is also learnt that there is a lack of proper information about such system too.

Besides, there is no mechanism of informing the complainant about the action taken with regard to his/ her complaint. In this, there is a need to make the complaint redressal mechanism more commuter friendly and more transparent by adopting state-of-the-art technology and by

putting in place an effective followup mechanism.

The Railway Ministry should take immediate steps to remove the various lacunae in its existing grievance redressal system too.

The issue of women safety will continue to trouble the government in future as the women participation is set to grow in our country. It will require a sincere effort by the all government agencies to make this world better for women. praveen@governancetoday.co.in

January 2016 I 39

CLIMATE CHANGE

Small yet significant gains The recent Paris agreement on climate change takes important steps in the right direction Anand Mishra AFTER TWO weeks of intense negotiations which often tottered and stalled, nearly two hundred countries culminated the 23 year long negotiations with a mostly legally binding agreement to tackle the menace of climate change. The deal required personal investment from many world leaders like US President Barack Obama, Chinese President Xi Jinping, German PM Angela Merkel and French President Francois Hollande, and many rounds of informal bilateral level negotiations to thrash out a globally acceptable draft, bringing rich and poor nation on board.

Since 1992, when UNFCC was set up, governments had been pledging to take measures that would avoid global warming. At many occasions, most recently, in Durban and Lima, agreements

40 I January 2016

looked very close yet could not be reached. For these reasons, Paris conference or COP 21 was widely seen as make-or-break round. But moving into the negotiation, hopes had reached a very high level, as most countries have come to realize the painful necessity of a formal and binding agreement.

The deal The final draft adopted at Paris, though not perfect, has something for everyone. What also sets this agreement apart from other ones is that unlike all previous agreements that bound developed economies like the US to lower greenhouse gas emissions, and exempted developing countries like China and India from such obligations, it requires some action in from every country, rich or poor.

The deal has managed a decent

compromise between developed and developing countries who have sparred over many issues till now.

In the broad sense, rich countries have not been forced to pay up a legally binding sum in assistance, and on the other, developing countries have not been forced to come up with a binding emission commitment. As for India, the draft has some positives in terms of differentiated treatment of developed and developing countries, but also has implications for the coal based power plants that the country intends to set up in coming years.

The “bottom up” structure of the negotiation has been the basic fundamental of the climate negotiations and that has been retained in the agreement, which calls for countries to try to keep global temperature rises “well below” 2 degree Celsius, the

www.governancetoday.co.in

threshold that is widely held to unleash the worst effects of climate change, including rise in sea level and freak weather patterns. The draft, in fact, commits signatories to “pursue efforts” to limit warming to 1.5 degree Celsius – a nearly impossible target which was incorporated in the draft to appease those nations like the Maldives and the Marshall Islands which are most vulnerable to climate change.

The deal requires developed nations to continue to provide funding to help poor countries cut their carbon emissions and adapt to the effects of climate change.

However, it stopped short of setting a legally binding level of money that the developed countries need to pay each year. The accompanying, non-binding financial commitment requires developed countries to mobilize $100 billion of public and private finance for developing countries each year after 2020. It further calls on them to pledge a higher sum by 2025.

The developing countries, on the other hand, can take heart from the fact that the all-important principle of ‘differentiation,’ according to which, developed nations, being primarily responsible for greenhouse gas emissions, must take greater action to fight climate change, has been retained, even though it does not have any reference to either historical responsibilities or to ‘Annex’ (developed) and ‘non-Annex’ (developing) countries.

The deal was not a smooth one as the negotiating countries ranged from rich and highly industrialized countries to extremely poor countries which unfortunately also happen to be the most at risk in the changing climate scenario.

That challenge of climate change manifests differently to different countries which in turn explains the reservations and priorities for these countries. So, when South Africa raised the issue of “loss and damage,” for developed countries, this meant the question of whether developing countries should be entitled to special aid in the event of climate-related disasters whereas www.governancetoday.co.in

for the developing countries, it became an issue of compensation and liability.

For other developing countries, including China, a key sticking point was differentiation – the concept that holds developed countries more responsible for climate change and thus liable to do more on the issue. The United States wanted stricter monitoring requirements, yet more of voluntary provisions, so it could win Senate approval. Island nations, threatened with inundation, wanted tougher temperature targets whereas poorer countries wanted definitive financial commitments from rich countries. In essence, therefore, all ceded ground for other and that clinched the deal.

Meaning for India India broadly had two broad agenda points it wanted to secure at the talks. First and foremost, it did not want to be bogged down by a definitive emission target which could restrict its energy choices.

As such, it wanted the Common but Differentiated Responsibilities (CBDR) regime to have formal mention. While that did not come through in as many words in the draft, the differentiation of developed and developing countries is embedded in the various elements of the agreement, from mitigation and adaptation to finance and capacity building. India, like other countries can take heart from the fact that the agreement does not force it to commit to a certain emission figure or peak emission date.

Second aspect which is important from Indian perspective is that of financing. Like other developing countries India also wanted financial assistance in more explicit terms, something that did not come through in the deal draft.

On the contrary, the draft says that one of the ways the purpose of the agreement could be achieved is by making global “finance flows consistent with a pathway towards low greenhouse gas emissions and climate resilient development.”

What this essentially means that

external funding for future power plants can get more restricted to renewable and may not come in polluting thermal power plants which are going to remain India’s power generation mainstay for at least coming few decades even as it ramps up renewable in overall energy calculus.

India aims to bring down its dependence on coal for power generation from the current 61 per cent to 57 per cent in the year 2031-32. On the other hand, the contribution of renewable like solar, wind and biogas in total electricity generation was projected to grow to 29 per cent from the current 12 per cent. But since total electricity generation capacity is expected to rise from the existing 260 GW to somewhere upwards of 800 GW. This means even as it will fire relatively lesser power plants on coal, in absolute terms, the coal consumption may be triple of what it currently is.

India wants external financing to fund part of this expansion in capacity, but that may become problematic now.

However, that trend is visible even now.

Organization for Economic Cooperation and Development (OECD) for example, has already decided to restrict export credit agencies from supporting certain kinds of coal power plants overseas.

World Bank is also reported to be in favor of financing coal based plants “only in rare circumstances,” such as “meeting basic energy needs in countries with no feasible alternatives.” The road to power through coal could get bumpier post Paris agreement.

Implementation is the key The deal, on its own, is not going to solve the menace of global warming and climate change. Even if all countries do what they have pledged, it will cut greenhouse gas emissions by about half that is needed to limit the atmospheric temperatures rise by 2 degrees Celsius. Moving forward, therefore, a lot will depend on implementation.

But precisely because the deal January 2016 I 41

Though highly polluting, coal will remain India’s primary power generation fuel for coming few decades.

HIGHLIGHTS OF THE AGREEMENT Limiting global warming: To keep global warming “well below” 2 degrees Celsius and to “pursue efforts” to keep the temperature rise below 1.5 degree Celsius, heattrapping greenhouse gas emissions to be stopped “as soon as possible.”

Financial assistance: The wealthy countries should continue to offer financial help to poor countries so they could reduce emissions. Other countries (big emerging economies like China) can also pitch in on a voluntary basis for this purpose. Poorer countries had pushed for a legally binding provision requiring that rich countries appropriate a minimum of at least $100 billion a year to help them mitigate and adapt to the ravages of climate change.

However, the actual amount of assistance not made binding for developed countries Progressive target setting: Because initial are not enough to limit global warming below 2 degrees Celsius, governments have been asked to review targets in the next four years, without requiring them to deepen their emission cuts. As renewable energy sources become more affordable and effective, countries may shift to them anyway.

Transparency and monitoring: While there is no penalty for countries that miss their emissions targets, transparency rules would encourage countries to actually do what they say they will do. But it allows some flexibility for developing countries.

Loss and damage: The inclusion of a Global Goal on Adaptation as well as separate and explicit recognition for loss and damage is an important achievement as it increases the importance of addressing the protection of those vulnerable to climate change.

42 I January 2016

is more loosely defined than say Kyoto Protocol to bring everyone on board, targets are left hanging: there is no set date for peaking of emissions or for achieving carbon neutrality. Also, while these targets are binding at global level they are not binding for individual countries.

And because agreement is not fully binding, signatory countries can still renege on their commitments with no penalty.

At the end of the day, while it may not be the perfect deal, it is a significant step forward in the right direction. It brings on board everyone and expects all to deliver for a shared cause. Countries have been legally required to reconvene every five years starting in 2023 to publicly report on their progress on emission front. The monitoring and reporting system would also ensure that global and individual actions are in line with the overall plan. For individual countries, it presents a challenge; to change their economic model to suit global needs without surrendering their genuine requirements. It may not be easy for poorer and developing countries like India to put in place ecologically sensitive policies in place because they are invariably costlier, but they would still be better off doing the same because costs of continuing on the current path are inordinately high, in monetary as well as human terms. anand@governancetoday.co.in

www.governancetoday.co.in

DISASTER MANAGEMENT

A mismanaged city

More than rain, the unplanned development and flawed government policies are responsible for the Chennai flood

The city will take long time to recover from the damage.

Lekshmi Parameswaran THE MIDNIGHT of December 2nd will be etched in the minds of Chennaites forever. For it was on that fateful night that the city witnessed its biggest disaster in the last hundred years. Unprepared and ill-equipped, the entire city succumbed to the fury of nature.

But can all the events of the weeks that followed simply be termed as a natural disaster or did man have any role to play in unleashing the chain of tragedies?

The answer is obvious. The role that man played in the scheme of events was a lot more than that played by nature’s fury. Years and years of unplanned development and inherently flawed political and economic policies were largely www.governancetoday.co.in

responsible for the catastrophe that the nation witnessed. The government’s complete lack of sensitivity in handling a disaster of such great magnitude showed all that is wrong with the vote bank politics.

The inability of government to act in the face of adversity will continue to nag the conscience of the city in times to come. The signs of the impending danger were clearly visible for the last many years. Every time a low pressure area forms in the Bay of Bengal, Chennai gets incessant rains because of which the educational institutions remain closed and people have to wade through the flooded streets. But none of these were viewed seriously by the authorities and the problems that

rain bring with it every year became a part of the city’s culture.

The official stand that the ruling AIADMK government took was that it was the unprecedented rainfall that led to the difficult circumstances and the situation was well under control. But the panic that ensued after the gates of the Chembarambakkam dam were thrown open pointed to an entirely different reality. The rain-fed reservoir located on the largest lake outside Chennai in the Kanchipuram district of Tamilnadu supplies water to the city of Chennai. A lake which was till then the lifeline of the city became the cause of its greatest sorrow. The heart wrenching stories of people who were caught unawares in the night battling death with no January 2016 I 43

The floodgates of the Chembarambakkam Dam were opened without evaluating the consequences.

support from any quarter show how little human lives are valued by those in power. The rains were heavy from 23rd November and the International Weather Forecast issued a warning of what was to come on 28th November. This means that the authorities had enough time to hold consultations and chart out a plan of action.

Unfortunately as fate would have it, the best action deemed fit was inaction which pushed the city into a veritable hellhole.

Unanswered questions The first question that arises in the mind of anyone is why was the water of Chembarambakkam released at midnight and how could the engineers take such a callous approach in evaluating its consequences? The rains were pouring continuously and it was only logical for them to consult the experts and institutions at the national and international level on how to release the water without endangering the lives and livelihoods of people. The argument that the water had reached the dam’s full capacity of 3,396 million cubic feet and hence the only way out was to release it into the Adyar River does not hold ground.

Even after the taking of the 44 I January 2016

regrettable step, there was still time to alert the people and move them to safety. The 25km distance that the water had to traverse to reach the city meant that a warning could have been issued to all if all departments of the state government were taken into confidence. But that also did not happen.

Another fact that appalls a layman with no idea of urban planning and architecture is the way in which building permits were issued. An application of a little bit of common sense would have made the authorities see the dangers of construction on a dried up lake bed or too close to a river bank. The areas of Manapakkam and Nadambakkam suffered the most as permits were issued to builders to construct high rise apartments on the riverbank. The blocking of natural channels meant that there was no place for water to drain out; resultantly it clogged the city. A report by the Chennai Metro Development Authority has stated that more than 300 water bodies in the city have disappeared due to unplanned constructions. The city’s wetlands which would have absorbed a good amount of water have also been encroached upon.

Instead of taking cognizance of this matter, the concerned authorities

chose short term goals over long term ones.

The existing storm water drains pose yet another problem. Most of them are either concretized or filled with silt. The ones that aid in the flow of water are allegedly linked to the drainage pipes which render it ineffective when the rains become heavy. None of the successive governments in the state found it necessary to address this issue and on top of it took pride in announcing new constructions like the Rapid Mass Transit System built on the Buckingham canal.

It is natural for any city to grow and develop as the rate of migration increases. Being a metropolitan city, the pressure of expanding was more on Chennai. Sadly, the unscientific planning of the outgrowths meant that the natural ecosystem was permanently damaged and even a minor natural phenomenon was bound to translate into a big disaster.

The case of Velachery, a low lying area in South Chennai where every year the rains make life miserable is a classic case of unscientific development.

The reason why the state government never made any strict rules in the permitting of building licenses is an issue worth pondering upon. www.governancetoday.co.in

Learning from the mistakes The road to complete rehabilitation stretches very long.

But there are a few lessons that can be imbibed from this disaster.

Just the way the youth of Chennai taught the whole nation that a little empathy is enough to cross the sometimes thin line between life and death.

The foremost lesson would be for all the political parties in the state. The time has come to move away from the strategy of pleasing the voters and start investing in projects that would address a citizen’s everyday concerns.

There must be coordination among all departments of the state government and it must be seen that decisions are not taken unilaterally.

There is an urgent need to bring in more rules and regulation for the issuing of building permits. It should be made mandatory for any construction to have environmental clearance. This should also be made applicable to the satellite towns surrounding the cities. The state should constitute a separate body of urban planning experts to give timely advice.

Another issue that has come to the fore is the lack of a state-level task force to deal with the disaster.

It has to be kept in mind that some amount of time will lapse before the armed forces work out the logistics and reach an area. In many cases, precious hours are wasted in this wait solely because the state police forces are not trained to deal with such challenging situations.

Lastly, the citizens should take it on themselves to urge the government to make transparent policies and should become proactive members in the process of governance. The ordinary citizens of Chennai were able to prove to the world the real power of social media in rescuing many lives. In his recent visit to India, Google’s CEO Mr. Sundar Pichai emphasized on Project Loon which will use helium-filled ballons to provide data connectivity in remote www.governancetoday.co.in

To avoid such disasters in future, a detailed city planning will be required

areas. Technology will definitely be the focus in facilitating participatory democracy and every stakeholder should see to it that the unity witnessed in the face of the disaster does not wither away with time.

The words of Mr. Arun Krishnamurthy, an environmental activist credited with the cleaning of 17 lakes in the country and founder of the NGO, Environmentalist Foundation of India based in Chennai best sums up the testing two weeks and what to expect in the future, “Aimless development and complete disrespect to natural environment was the primary reason to the recent floods in Chennai. An urban arrogance with which we took our waterways for granted and eventually paid a price for it.

There is lack of awareness and disinterest in conserving our lakes, marshlands. This has to change; we as a society have a larger responsibility now in conserving what is left and recovering whatever is possible. Environment conservation is common sense and we in Chennai have realized it is no longer a choice. Clearing and securing our water bodies is the first primary goal followed by large scale public outreach to sensitize people on Conservation, Calamity preparedness etc to prevent future

incidents.” It is not that we Indians are incapable of learning of how to prepare for and cope with natural disasters. Both the states of Odisha and Gujarat have put good cyclone and heat wave predicting and handling systems in place which has ensured that the death of people from such natural calamities has come down in recent years.

However, for achieving such successes, a concerted effort from political leadership is required which could then percolate to bureaucracy and operational levels.

Unfortunately, in most of cases, the unplanned human intervention stifling natural systems have ultimately turned unpredictable natural accidents into human catastrophes. Only a couple of years ago, the flash floods in Uttarakhand led to extreme loss of lives and property in Kedar Nath and now in Chennai, a situation which was perfectly avoidable was allowed to develop thanks to years of neglect and unimaginative crisis management.

We need immediate attention on both fronts. The sooner leaders wake up, the better, for people that is. lekshmi @governancetoday.co.in

January 2016 I 45

BILATERAL RELATIONS

Pragmatic and futuristic Shinzo Abe’s visit gives a boost to bilateral relations

Praying for better relations; India and Japan Prime Ministers attend an evening prayer at a ghat in Varanasi

Anand Mishra THE MOST defining spectacle of Japanese PM Shinzo Abe’s visit to India between Dec 11-13, was the picture perfect evening prayer at Varanasi where he and his Indian counterpart Narendra Modi went through the whole ritual in a grand setting. The visit went much the same way. Both sides made all the right noises, both mostly got what they set out for and together they sent the subtle signals to relevant receivers. In the process, the two leaders who have a shared vision of achieving greater status for their respective nations, took the relations to a higher level which, though falls short of an alliance, gives enough indication of converging interest in terms of bilateral relations, regional security and regional threats.

Obviously, inking of agreement to implement bullet train project and civil nuclear deal were high visibility elements, but there were others parts that despite being 46 I January 2016

important did not hog the limelight.

The three crucial agreements out of more than fifteen relate to “in principle” agreement on cooperation on civil nuclear energy, a $12 billion soft funding to build India’s first bullet train besides and defense cooperation. The Mumbai Ahmadabad high speed train is important as Japan and China were locked in stiff competition for the deal. For Japan, the Indian project was crucial because it had just lost a similar deal to Chins in Indonesia. Besides these, another $12 billion have been committed

by Japan as incentive package for Japanese companies investing in India. Japan would also participate in big ticket infrastructure projects in India, including the $5.5 billion Chennai-Bengaluru corridor project.

Under the defense deals, the two sides agreed to share technology, equipment and military information. Additionally, India and Japan agreed to start interaction between air force staffs of the

two countries. What did not come through was the agreement on the proposed sale of Japanese US-2 amphibious aircraft, which could have been one of Japan’s first arms sales since Abe lifted a 50year ban on weapon exports.

Nuclear deal a case of tough love After years of slow but gradual negotiations, the two countries agreed to cooperate in civil nuclear energy. The agreement, though “in principle,” marks an important step in furthering nuclear commerce between the two countries. The technical details including those related to the necessary internal procedures, would be finalized later, after which the formal agreement could be signed. The agreement is crucial because Japan is a key member of global nuclear commerce and Japanese companies are integral parts of major nuclear power equipment supplier groups. www.governancetoday.co.in

The agreement on the nuclear energy had eluded Indian and Japanese negotiators for many years, because of the extremely high, and understandably so, Japanese sensitivities on any aspect related to the development and testing of nuclear weapons.

As negotiations moved on over last couple of years, apart from reprocessing of spent fuel and tracking of nuclear material, Japan’s insistence on assurance from India, a NPT non signatory, that it was not going to conduct any more nuclear tests, emerged as the singularly important sticking point. India, was not willing to go beyond the statement made by then foreign minister Pranab Mukherjee in 2008 before the NSG that India remained “committed to a voluntary, unilateral moratorium on nuclear testing.” The Japanese finally relented on this crucial issue.

Yasuhisa Kawamura, spokesman in the Japanese Prime Minister’s office, told reporters in New Delhi that India’s self imposed moratorium on nuclear testing and its move separating its civil nuclear reactors from its military ones were seen as commitments by Japan to assuage its concerns on nuclear testing and non-proliferation.

“Japan does not see any move by India to go towards testing of atomic weapons,” Kawamura said during a press conference. However, Japan would relook at the pact with India if it (India) were to test, he said.

Even though it would be a hard task for Abe to sell the deal to his countrymen, mayors of Hiroshima and Nagasaki had jointly written him to reconsider the deal, the commercial benefits could have contributed to the softening of Japanese stance. India is widely seen today as a huge market for nuclear energy and most global players are trying to have a slice of this market. India is already in process to install multiple nuclear power plants such as Kudankulam, in Tamil Nadu, Mithi Virdi in Gujarat, Jaitapur in Maharashtra and Kovvada in Andhra Pradesh. Out of these, only Kudankulam, being built with Russian pressurized water www.governancetoday.co.in

reactor, has no Japanese parts.

All the other three have important Japanese element; Toshiba has a controlling stake in Westinghouse, whose AP1000 reactor is being used for Mithi Virdi project and the Economic Simplified Boiling Water Reactors (ESBWR), used for Kovvada project, was developed by GE in collaboration with Hitachi. As domestic Japanese nuclear power market has gone in limbo after the Fukushima disaster in 2011, Indian market looks promising and Japanese would not want to lose out to Chinese nuclear parts suppliers which have emerged as strong players, thanks to their mastery in reverse engineering and copying capabilities.

The strategic angle In the emergent geopolitical environment of East Asia, India and Japan have found their strategic interests aligning with greater intensity over last half decade or so. As China has grown increasingly assertive in its dealings with the East Asian region, which it feels its rightful backyard, many analysts feel both India and Japan feel it suits them to work together.

India has an unsettled border issue with China while Japan has territorial disputes with China in the East China Sea. Japan and India have also seen China escalating conflicts in last couple of years.

As the US puts its policy of ‘pivot-to-Asia’ in practice, it is encouraging countries like Japan and Australia to take greater responsibility of collective defense in the region. While India is not an ally of the US in the classical sense, it feels its current geopolitical interests are better served by being close to the American camp in the Asian region. That explains to a large extent New Delhi’s decision to make Japan a regular participant in the annual Malabar exercise, which, though had started as a trilateral exercise with the US and Japan, emerged later as a bilateral exercise.

In this environment, the explicit mention of South China Sea

in the India and Japan Vision 2025 assumes significance. The statement says “The two Prime Ministers noting the developments in the South China Sea called upon all States to avoid unilateral actions that could lead to tensions in the region.” It is the second time that India has openly taken a stand on the disputed region and questioned Chinese claim of sovereignty on multiple islands there in an oblique manner. This shows convergence of opinion between India, Japan and importantly, the US as regards tensions in the South China Sea. Another crucial part of the visit which was missed by media here is that India welcomed and supported Japan’s recent legislation to expand the scope of its use of force overseas. This is very important in that it shows India’s encouragement of Japan’s evolution into a “normal” military power, not bogged down by post WWII constitutional limitations.

This support will also bolster Abe’s efforts back in Japan where there is still lot or resistance to such change of military stance.

The broad takeaway of Abe’s visit is that the two countries today need each other more than ever and they are willing to take previously unthinkable steps to benefit from each other’s strengths. Japanese money and knowledge has been instrumental in transforming much of East Asia, including China, and Japan is willing to invest to transform India as well. Both countries are facing unprecedented security and geopolitical challenges from a common adversary.

Faced with such an unpredictable environment, both have been pragmatic in approaching pursuing the bilateral relationship; Japan has walked much to meet Indian position in the nuclear arena and India has come out more openly than ever in supporting Japan in East China Sea. Hopefully, this pragmatism will cement the relation between these two messy yet thriving democracies further. anand@governancetoday.co.in

January 2016 I 47

ASSOCHAM ROUNDTABLE

Duty reduction required to incentivize domestic IT hardware production

Dr. Ajay Kumar (left), Additional Secretary, Ministry of IT and Manasvi Srivastava of Assocham, at the event in New Delhi.

A ROUNDTABLE organized

by ASSOCHAM was held on 16th December, 2015, at Hotel Lalit, New Delhi. The topic was ‘Make in India: Trade and Fiscal Incentives for the IT Hardware and Electronics Industry.’

Dr. Ajay Kumar, Additional Secretary, Ministry of IT, was the speaker from the government whereas the industry was represented by Dell, Microsoft, Lenovo and Texas Instruments. Dr Pralok Gupta from IIFT shared his views on Global Trade and India’s current position and potential with regard to the same.

The Roundtable brought key asks from the industry to the 48 I January 2016

fore which included incentivizing the domestic manufacture of electronic goods especially Personal Computers and Laptops (which currently is rather low) and to discuss ways of massively increasing India’s share in manufacture of IT products globally.

The industry specifically asked for a duty reduction for Personal Computers and Laptops in line with what has already been done for mobile phones and Tablets by the Government to incentivize domestic manufacture.

While MSIPS is scheme that already exists for manufacturers that grants production subsidy, there

is a need to look at fundamental aspects which would make global players look at India as a preferred destination for manufacturing. This is very important given that a few countries like China and Taiwan account for a significant share of the global trade in Electronic goods specifically computers.

Separately Mr. Satya Poddar, Partner, Ernst & Young specified how the domestic manufacture has been adversely impacted due to the taxation regime in India.

He cited how the valuation basis for taxation being different for customs and for local manufacture resulted in higher excise duty www.governancetoday.co.in

Dr. Pralok Gupta, Assistant Professor of IIFT, addresses the summit

being paid for all domestically manufactured products. Added to this differential is the differential VAT rate that is different in various States ranging from 4 per cent to 12 per cent, compared to the single VAT equivalent rate of 4 per cent for imports and other miscellaneous duties and taxes

like the electricity duty that is imposed on domestic manufacture.

He said that all this leads one to believe that it is cheaper to import than to manufacture in India. While GST would address some of these issues, there is a need to look at the taxation regime more closely to remove any advantage for imports

over the domestic manufacture.

Dr Ajay Kumar mentioned that India has suffered on the domestic manufacture front in view of the ITA agreement which made imports cheaper, hence it is crucial to look at go forward policy on ITA goods; India in any case is not participating in the current round of discussion to expand the list of ITA goods. He emphasised upon the need to manufacture low-priced laptops in India to spur computer manufacturing. He outlined at length the opportunities that would soon arise to spur demand for computers in India given the digitisation efforts that are being planned by the Government in various segments including rural areas and specific sectors such as health care, research and innovation. This he hoped would increase the digital footprint across sectors and hitherto untapped areas resulting in an inclusive digital growth of the country as a whole.

Dignitaries at the summit www.governancetoday.co.in

January 2016 I 49

INTERVIEW

OUR GOAL IS TO PROVIDE EFFICIENT, SAFE AND AFFORDABLE TRANSPORT AT THE PUSH OF A BUTTON

Ashwin Dias

General Manager, East India, UBER WITH SPEEDY cab services at any time anywhere model along with enhanced safety and security features, UBER has swiftly gained market in India. With smart city project in the country, UBER looks forward to bring smart mobility services to facilitate ease of travelling for customers.

Ritika Bisht, Correspondent, Governance Today, discussed with Ashwin Dias, General Manager, East India, UBER, about 50 I January 2016

company’s inclusion in future plans for smart city project. Edited excerpts:

How important is the Public-Private Partnership model when it comes to introducing smart transportation for the masses?

I believe that for any sector,

especially infrastructure-related, it is beneficial for the city/state to look at a PPP model, primarily because problems related to funds and investments and resources will not cause a hindrance and it has proved to be beneficial on various fronts for the society at large.

Uber has signed MoUs with Governments of various states including Andhra Pradesh, Telangana, Rajasthan, Punjab and Tamil Nadu, to work together to create hundreds of thousands of jobs, foster greater innovation and contribute to technology-related skills training and help cities transform and achieve their smart city goals.

Uber and the Government of West Bengal share a common interest to further the concept of smart mobility and we are very excited to do our part.

Uber gets cities moving more efficiently, bringing safe, reliable and affordable alternatives to urban transportation to citizens and we hope to continue to have productive conversations and collaboration with the Government to help achieve their goals.

Smart Mobility and Smart Transportation are among the most important aspects of developing a Smart City. How can UBER deliver when it comes to achieving smart mobility? www.governancetoday.co.in

Moving people–the world’s most precious cargo–from point A to point B is a huge responsibility and one that is at the heart of every city plan. While most cities have got a working system in place, it’s now time, in this day and age it is time to introduce Smart Mobility/ Transportation solutions in the system. At Uber, our goal is to provide efficient, safe and affordable transport at the push of a button. We are here to make transport as reliable as running water.

Has UBER planned any new services in future that can help in redefining smart mobility in India?

We have introduced various solutions such as ridesharing and uberPOOL in multiple cities across the world, to help manage urban growth and relieve traffic congestion through more efficient utilization of assets, reduction of personal vehicle use and provide cities with opportunities for carpooling and ridesharing.

About uberPOOL: We’ve launched uberPOOL in Bangalore as an experiment, and have already got great feedback from riders and drivers.

With uberPOOL, commuters can share a ride—and split the cost—with another person who happens to be requesting a ride along a similar route. Riders can save up to 50 per cent while adding only a few minutes of time per trip. With the lower prices, people can move past car ownership, as taking Uber becomes less expensive than using and maintaining a personal vehicle. And that impact on congestion can be powerful.

Smart technology and smart mobility would certainly ease the way public commute at present. Do you think www.governancetoday.co.in

it would cost more to general public?

The transportation industry has been plagued by stagnation for decades. Within two years of starting operations in India, Uber has disrupted the norm and we’ve already seen how, with the help of technology, the platform is able to provide thousands of commuters a reliable, safe and affordable ride, just at the push of a button.

Smart Mobility, with a strong technology platform to rely on, allows cities and companies like Uber to manage existing assets better with increased utilization.

We have seen through more efficient utilization of vehicles, Uber gets cities moving better, allowing drivers to complete more trips per hour and earn more, all while riders pay less.

What kind of challenges would you face while embarking on a journey to ensure smart mobility?

The idea of smart mobility is in a nascent stage in India, which can be challenging as Governments and the private sector both try to define this space. It is here where publicprivate partnerships can be helpful to resolve any ambiguities and move together with common goals.

According to you, what can state governments introduce which

would make it easy for transport sector to facilitate smart mobility?

As a first step, recognizing the service, technology and benefits on-demand technology platforms bring to a city’s transportation system is of crucial importance.

What will also be beneficial to the community at large, is when local authorities and technology firms can work together. A great example of this - Uber has partnered with the local police in Pune and set up a SOS Control Room, which is integrated with the ‘Help’ button in the app, which when pressed, sends a real time alert to the local police, with the info of the driver, the route and the exact location of the vehicle. We’re looking forward to more such tie-ups with the local authorities, so we give the people the most efficient and reliable solution.

Continuing conversations with the government that lead to innovative ideas and collaboration between on demand transportation technology platforms is essential for the future of smart mobility.

State Governments can start this process by adopting regulations for on demand technology transportation platforms in line with the Central Government Advisory Guidelines and promote the concepts of ridesharing/ carpooling in their respective states.

January 2016 I 51

STATE IN FOCUS: BIHAR

At critical juncture The Nitish-led new government needs to double down on developmental efforts

Bihar has seen a remarkable development work in the last few years. The question is to how to keep that wheel moving.

Praveen Raman AMERICAN PRESIDENT Abraham Lincoln once said: “Democracy is the government of the people, by the people and for the people”. The Social and economic wellbeing of the citizens is the prime job of the governments, especially in a democracy. As each demand and expectation cannot be met by any government, the overall welfare of the society must be visible. However, that is not always the case and the first socioeconomic census of India gives a detailed picture of where our governments have failed us. The statistics look terrible for states like Bihar.

Bihar is politically a very important state but the debate on economy of the state has started only in last decade, especially after the defeat of the RJD in 2005. But a more logical reference point to start the discussion is the socio-economic census (SECC) of the state. According to SECC 2011, only 5.9 per cent of rural households of the state have salaried job and around 93 per cent in the same section earn less than Rs 10,000 per month. In the land holding category, 65 per cent of rural population has no land and 52 I January 2016

the KCC penetration is as low as 2.3 per cent. These figures show that there has been no wealth creation in the state where over 80 per cent of the population is dependent on agriculture.

For the last two-and-a-half decades, Lalu Prasad and Nitish Kumar, have influenced the state in different ways. Lalu’s regime was a period of total neglect to economic development and governance.

While the socio-political balance shifted from upper/forward castes to the backward castes, crime rate increased, administrative system got denigrated and economic development took a back seat. Nitish Kumar’s focused on development and brought the agenda of governance and economic development to the centre stage. What a combined entity of the two diametrically opposite approaches to development will deliver, is a question that will be answered only in time.

Politically powerful, economically weak: the uniqueness of Bihar Bihar is politically important because the state has 40 Members of Parliament and the regional

parties based in Bihar have played important role since the beginning of the coalition era. But the state ranks fourteenth in terms of contribution to the national GDP. Despite the fact that Bihar has maintained an impressive growth rate in the last five years, it has a very low per capita income, almost half of the national average.

Industries contribute only 4.6 per cent of the state’s GDP and this is because the state has remained aloof from the post-liberalisation period where the growth has been primarily industry driven.

What are the major socio economic challenges facing state?

To comprehend the challenges facing Bihar’s economy, it is first necessary to remember that, with a population of 104.0 million in 2011, Bihar is an extremely denselypopulated region, with no less than 1,106 persons living per sq. km. of its area. As per the erstwhile Planning Commission figures, in 2011-12, 33.7 percent of its population lived below the poverty line in Bihar. Almost nine-tenths of its population lives in the villages, where the poverty ratio is relatively www.governancetoday.co.in

higher at 34.1 percent. Bihar had to overcome all these challenges to move ahead on a new growth path.

With the bifurcation of the state in 2000, the vast mineral sector and other big industries went to the carved out state of Jharkhand, leaving Bihar with only agriculture to manage with. But with a prudent development strategy, the state could overcome these challenges.

The GSDP of Bihar at 200405 prices in 2013-14 was Rs. 1.75 lakh crore, yielding a per capita income of Rs. 17,294. The estimated GSDP at current prices in 2013-14 is Rs. 3.43 lakh crore, implying a per capita income of Rs. 33,954. As for the rate of growth, Bihar’s economy has not grown uniformly over the period 200001 to 2013-14. During 2000-01 to 2004-05, the state income at constant prices grew at an annual rate of 3.4 percent. After that, the economy witnessed a turnaround and grew at an annual rate of 10.2 percent between 2005-06 to 2009-10, and by 10.4 percent between 2010-11 to 2013-14.

This later rates of growth were not only much higher than what was achieved in previous period, but one of the highest among all the Indian states.

Among contributors of the growth, during 2005-10, Registered Manufacturing (45.4 percent), Construction (19.8 percent) and Communication (24.7 percent) were the major growth drivers. During the succeeding period of 2010-14, the Banking and Insurance (19.2 percent), Trade, Hotels and Restaurants (17.3 percent), Communication (16.4 percent) and Other Transport (14.3 percent) picked up the baton. This indicates a more diversified growth profile in later years as services started to pick on back of heavy physical construction.

Enabling growth through basic amenities and basic infra Over last entire decade, the policy focus in the state has been www.governancetoday.co.in

Sectoral Composition of GSDP At Constant (2004-05) Prices

S.

Sector

No. 1 2

3 4

5 6 7

Agriculture/Animal Husbandry

19992000 to 2004-05

200506 to 2009-10

2010-11 to 2013-14

23.0

19.4

2.2

2.7

1.5

0.1

0.1

Forestry / Logging

Fishing

Mining/Quarrying

Sub-Total (Primary)

Manufacturing 5.1

5.2

Registered

Un-registered

Construction

Electricity / Water Supply / Gas

Sub-Total (Secondary)

Transport / Storage / Communication

9 10

11

1.6

1.3

1.0

34.3

27.0

22.0

1.4

1.4

1.8

5.7

4.3

5.6

4.2

4.8

3.0

10.0

13.1

11.6

17.0

19.2

1.5

1.4

6.4

1.4

6.9

Railways

2.5

2.0

8.3

Storage

0.1

0.1

8.4

2.7

1.3

2.2

4.1

18.3

21.3

23.4

Sub-Total (8 and 9)

24.6

28.1

31.8

Real Estate/ Ownership of Dwelling/ Business Services

4.7

5.5

5.2

8.7

9.7

10.7

Communication

Trade / Hotel / Restaurant

Banking / Insurance

Sub-Total (10 and 11)

2.6

1.3

2.6

8.4

Other Transport

0.1

4.5

8.1

8.2 8

30.3

4.0

Public Administration

13

Other Services

13.6

12.1

10.8

Sub-Total (Tertiary)

54.0

55.9

58.8

on investment in infrastructure development in which investment has increased manifold in recent years, with increased private sector participation. However, problems like delays in according approvals,

100.0

6.0

5.4

12

Total GSDP

7.0

4.1

0.1

100.0

5.4

100.0

Source: Economic Surver of Bihar, 2014-15

land acquisition, and environmental clearance are still holding back the segment and need immediate attention of the new government.

Besides, the time overruns in the implementation of the projects must January 2016 I 53

be avoided. The state government has resolved to connect the capital city Patna to the remotest areas in the state, so that people can reach the capital within a maximum of six hours from any place. This is crucial not only in terms of connectivity of people, but also from industrial perspective as speedy product delivery is an important aspect of development, especially in agro based industry that has so much potential in the state. Even after a decade of work, the state continues to remain far behind the all-India average in terms of road length per lakh of population. In 201213, Bihar reported only 175 km of road length per lakh of population, as against all-India average of 388 km. However, in terms of road length per 100 sq. km, Bihar with 193 km of road length remained ahead of all-India average of 143 km showing good progress.

Governance at the center stage of economic growth In the last one decade, the state has seen a major shift in administrative behavior. Nitish Kumar led-NDA government had worked hard to improve governance, a major achievement being marked improvement in law and order situation by enforcing arms act stringently.

The consequent stability brought investment and growth.

Another area where the development is clearly visible is electricity. Last seven years has seen a tremendous improvement in power situation across the state.

Effective implementation of Rajiv Gandhi Vidyutikaran Yojana has seen many areas coming to the map.

The attendance in schools and hospitals has also increased.

Schools and hospitals which used to bear a deserted look now have a semblance of normalcy. Increased presence of children, teachers and doctors have been a game changer.

A host of interesting measures like providing cycles to girls, uniform to 54 I January 2016

Nitish Kumar, Bihar Chief Minister

girls, and recruitment of Shiksha Mitra and teachers have given a philip to educational agenda.

A fixed time period for service delivery mechanism has seen a major improvement in the efficiency in governmental work. Fifty percent reservations to women, support to widows, and loans for marriage has been some of the popular welfare measures. However, the absolute level of performance is still sketchy. Hospitals and schools are hopelessly short of infrastructure and are overburdened.

Implementation of social programs is not up to the mark and the administration does not have capacity of manpower, processes and procedures to precisely point the inadequacy in the system.

At a crucial juncture The rate of growth of Bihar economy has been very high during the recent years. During the period 2009-10 to 2013-14, the state economy grew annually at 11.3 percent. Simultaneously, the state government enhanced its development expenditure as a consequence to which, human development in the state showed substantial progress, particularly in the critical areas of education and health. Because of limited resources of the state government, the Per Capita Development Expenditure (PCDE) in Bihar has been low compared to the national average. However, during the last five years, the PCDE of Bihar has

grown at 15.2 per cent, not too worse than the all-India level of 16.8 per cent.

According to Census 2011, Bihar is the third most populous state of India, with a total population of 104.1 million. Three demographic features of Bihar which are substantially different from that of other states are — decadal growth rate of population, density of population, and rate of urbanization. The decadal growth rate of population for Bihar (25.1 per cent) is much higher than that for India (17.6 per cent), indicating the absence of the demographic transition that many parts of India have already experienced. With a density of population of 1,106 persons per sq. km., the highest among the major states, the population pressure is a major challenge in Bihar. This high degree of population pressure demands higher resources for the state’s development. Finally, the urbanization ratio is only 11.3 per cent in Bihar, making it the most rural state in the country.

Bihar has always been a laboratory for politics because of its complex social structure. The country could neither ignore the leaders the state has thrown up, nor its political messages. The state has given a clear mandate to the Nitish Kumar indicating that its people have liked the local version of governance. The state could not afford to miss the economic opportunity it can avail in the present scenario. To utilize it full, the state will have to invest heavily in the human resource and promote private enterprise. In short, the development endeavor is still at an initial stage of work-inprogress. But this is a crucial stage which can set the foundation for transforming the state into a mid income state. To achieve that the leadership needs to stay pragmatic and improve steadily; wavering is not an option.

(With inputs from Economic Survey of Bihar, 2013-14) praveen @governancetoday.co.in

www.governancetoday.co.in

www.governancetoday.co.in

January 2016 I 55

MEDICINE

Shutting doors for hope Banning surrogacy for foreign nationals will affect Indian medical fraternity

India has made tremendous progress in Artificial Reproductive Technology, making it a leading global player

Dr Ragini Agrawal FAMILY IS the primary unit of the society. Surrogacy helps build families. Today, infertility is recognized as a disease even by World Health Organization (WHO).

Artificial Reproductive Technology (ART) has been recognized as field of medicine and thus under the aegis of such techniques, surrogacy is a procedure undertaken to help the childless couples become parents.

From almost over a decade India has been catering the childless couples and individuals from all over the world with respect to the infertility issues and childlessness 56 I January 2016

on account of social or biological infertility.

The Law Commission in it’s 228th report on the Need for Legislation to regulate Assisted Reproductive Technology Clinics as well as Rights and Obligations of Parties to a surrogacy stated in the year 2008 that ART industry is now a 25,000 crore rupee pot of gold.

The major reason stated as per the report for foreigners flocking to India for such procedures is the “Cost factor.� The report categorically states that the usual fee is around $25,000 to $30,000 in India which is around 1/3rd of that in developed countries like the USA.

This has made India a favorable destination for foreign couples who look for a cost-effective treatment for infertility and a whole branch of medical tourism has flourished on the surrogate practice.

However, off late, with gradual succession from banning single foreign nationals in 2012, Indian government has now come up with a recent notification which essentially puts a complete ban on foreign nationals from undertaking surrogacy in India. This will be a major hit on medical tourism in the field of infertility. Though there is no official data available as to how many foreign nationals visit every www.governancetoday.co.in

year to undertake surrogacy but the fact that India has occupied a significant position in recent years for surrogacy and infertility treatment in itself speaks , how detrimental this ban would be to the entire industry.

With India offering surrogacy to foreign nationals, it was not only beneficial for medical tourism but was also beneficial for overall economy and tourism sector of India. Surrogacy has helped India build stronger medical ties with other countries. Foreigners have even named their daughters “India.”

It made foreigners aware about that fact that India has advanced a lot and have best of medical facilities, good doctors and world class treatments.

India has been targeted that surrogacy in India is poverty driven, leads to exploitation of women and women should not be renting their wombs to foreign nationals.

Commercial Surrogacy leads to demeaning the dignity of women.

Strange it is that India has always been on the target for the simple reason that it is a developing nation and when west does it, it is technology and when India does it, it is poverty.

The fact of the matter is that not only do we have cost effective treatment but also parent friendly laws. National Guidelines for Accreditation, Supervision and Regulation of ART Clinics, evolved in 2005 by the Indian Council of Medical Research (ICMR) and the National Academy of Medical Sciences (NAMS), the surrogate mother is not considered to be the legal mother. The birth certificate is made in the name of the genetic parents.

If we ban foreign surrogacy,

Surrogacy laws in India are very parent friendly

then we are leaving the surrogacy as option for the developed nations like USA, and taking away from Indian medical fraternity which is equally capable to cater world’s need and bring benefits of medical tourism in the fields of infertility to India. In a progressive society bans are not looked as a regulatory measure.

The ART Bill is on the anvil, but by passing interim notifications to ban surrogacy, the spirit of democracy is defeated as there was no alarming situation to disturb the status quo of surrogacy in India. Motherhood / Parenthood is a universal phenomena, a doctor would not discriminate on any basis including nationality to provide surrogacy / infertility treatment.

Thus, for medical fraternity it has come to a shock. As far as the legality of the concept of surrogacy is concerned it would be worthwhile to mention that Article 16.1 of the Universal Declaration of Human Rights 1948 says, inter alia, that “men and women of full age without any limitation due to race,

The ART Bill is on the anvil, but by passing interim notifications to ban surrogacy, the spirit of democracy is defeated as there was no alarming situation to disturb the status quo of surrogacy in India www.governancetoday.co.in

nationality or religion have the right to marry and found a family”.

India is a party to such declarations. It will lead to breach of international conventions/ declarations. In 2012 the Ministry of Home affairs made surrogacy visa guidelines and created enough safeguards to deal with the issues of nationality of children born in India to overseas citizens as only those countries nationals can undertake surrogacy in India which allowed surrogacy.

United States of America is in a win –win situation from the ban in India as a major medical tourism will flock there and now at the international forums where India was making its presence felt will vanish from the scene altogether.

Regulation is always in the form of balancing interest and not in the forms of extreme view. It is high time to develop a positive and forward political and social vision and make laws which depict the voice of people and spirit of democracy.

(The writer is Director – Medical & Clinical Services at W Hospital. Hers has been a long journey of many firsts. The first GyneEndoscopist of Haryana in the private sector and first Gynecologist to do operative laparoscopy like lap hysterectomy in Gurgaon, she is credited for introducing Aesthetic Gynecology & Laser in north India)

January 2016 I 57

INTERVIEW

SMART ICT SOLUTIONS WOULD ALLOW HIGHER REVENUES FROM NEW BUSINESS MODELS AN AMBITIOUS project as smart city not only requires hefty investment but also good governance along with proper planning. Bidhannagar is one of the shortlisted cities for the smart city project in the country. To know its future development plans and challenges of the city, Ritika Bisht and Anupam Gupta, Governance Today, talked to Pawan Kadyan, IAS, Commissioner, Bidhannagar Municipal Corporation. Edited excerpts:

Bidhannagar has been named as one of cities from West Bengal that would be developed as a smart city. How are you planning to go forward with this aim as it is certainly a difficult task to develop smart cities in India?

Pawan Kadyan, IAS

Commissioner, Bidhannagar Municipal Corporation 58 I January 2016

A city needs basic infrastructure and basic municipal services as prerequisites for building on to them the technology layer to become smart city.

Therefore, Bidhannagar is in an advantageous position compared to most other cities when it comes to becoming a smart city.

We plan to build on our existing infrastructure and services based on the priorities of our residents to co-create with them a smarter Bidhannagar. Creation of investment opportunities in our progressive city, our robust implementation framework and pooling of city resources under the unanimous leadership of our www.governancetoday.co.in

elected representatives shall be important in this progress to create the 21st century Bidhannagar.

Can you brief us about the current work that is being undertaken in Bidhannagar as a part of smart city project?

We have recently submitted our duly approved Smart City Proposal (SCP) to Government of India and at this stage we are in the process of developing detailed business models to showcase the attractive investment opportunities in our city during the upcoming Bengal Global Business Summit in January 2016, apart from framing the Articles of Association (AoA) for the proposed Special Purpose Vehicle (SPV) to be set up for implementation of the Mission.

How can IT inclusion ease the journey of realizing the smart city dream?

The role of IT is integral to becoming smarter and better governed in the current stage of urban development not just in India but across the globe. Internet of Things (IoT) based technology applications would be key in pancity and smart area development.

IT based solutions help reduce costs while also ensuring sustainability and inclusiveness.

According to you what will it take to help cities in deploying solutions for modern urban infrastructure?

The realization of the need for innovation in modern urban spaces to develop sustainable solutions has dawned upon most cities and their citizens. Development of smart cities is not just the responsibility or prerogative of city administration. Private sector participation and citizens’ ownership of smart solutions is www.governancetoday.co.in

crucial for tangible success of the Mission objectives, and especially for creation of modern urban infrastructure.

depending on the quantum of assistance being provided alone.

Therefore, it is possible to achieve the dream with this assistance.

Smart governance, smart housing, smart mobility, smart security, smart water & waste management are just some of the elements of a smart city. Do you think that public living in a smart city would be able to have access to smart features without paying hefty amount for the same?

Can you tell us about any future projects (smart city projects) which would be taking place in Bidhannagar?

Yes, indeed. Smart ICT based solutions would allow higher revenues to be generated from new business models and streams of revenue generation such as higher realization of existing taxes and user charges, economies of scale, plugged leakages, increased efficiency of resource utilization, decreased costs of service delivery to the Municipal Corporation, and frugal innovation. The additional burden on citizens, if any, would not be high.

Do you think it is possible to achieve the smart city dream with the current financial assistance?

Though such financial assistance is important to achieve the target but it is not sufficient as it takes much more resource to become a smart city. Its actual significance lies is its nature rather than its quantum as the financial assistance of the Government is dependent on the performance of the city in the ‘City Challenge.’ It is a mark of the city’s competence and a certification of its potential and creditworthiness. In this way it is critical for the city’s capability to raise required funds for development as a smart city from other sources rather than

The projects mentioned as part of Bidhannagar’s Smart City Proposal to Government of India cover all dimensions and parameters of the Mission components. For instance, Comprehensive Municipal e-Governance, both in the internal administration of the organization and in its interface with citizens, is one of projects proposed under the Mission.

Public Private Partnership definitely plays a key role to a massive project as smart city. Do you think that there are any challenges when it comes to working with private players?

The proposed SPV would be an entity comprising competent professionals recruited from the market to implement the Mission.

This would give it a perspective to understand potential private players on one hand and on the other would also allow the private players interacting with the SPV and the Municipal Corporation to understand the intricacies of government and the history, culture and local developmental concerns of the city. Such mutual understanding is crucial and could be a challenge. Also, given the nascent stage of the concept of Indian smart cities, negotiations on the various models of implementation of different PPP projects could be another challenge.

January 2016 I 59

ECONOMY

Fed hikes rates

The first hike in about a decade signals a divergence between the US and other leading economies

Anand Mishra AFTER A span of nine years, the US Fed has increased the interest rates in a move which has been coming a long time. The move marks the official end of the globally coordinated fiscal and monetary stimuli that was provided to the world economy that had come dangerously close to a halt in wake of financial crisis in 2008.

The Fed announced a 25 basis point (0.25 per cent) hike in the Federal Funds Rate, the rate which forms the base of the overnight inter-bank lending market in the US. The Fed has also made clear market its intention to increase the rates in four tranches of a quarter percentage points each over next one year.

While the quantum of increase has not been high, it has received tremendous attention globally, 60 I January 2016

in financial markets as well as in policy making circles. The reasons have been multiple, ranging from increasing divergence between the US Fed and other leading central banks to the possible impact on global trade and emerging markets’ economic health. Though the global equity markets have received the decision with cautious joy, actual impact would be seen over the course of coming weeks and months as money managers take a call on placing their bets in the coming year. In India too, opinions have varied on the possible impact of the move on economy and on financial markets.

Why now The possible increase in interest rates had become a big betting game over last couple of years across the world financial markets.

But gradually, markets had slowly accepted the inevitability of the rate hike over last year or so and in fact was hoping for a marginal hike in the second half of this year. This was because broadly, the consensus was developing in the US that the economy had strengthened to a level where it can withstand a hike even as other major economic blocks have not been doing that well. As such, the possibility of a shock from markets was perhaps the least running into the Fed Open Market Committee (FOMC) meet on December 16th.

This was much in contrast to the situation in 2013, when the rate hike was mooted for the first time by officials, and had sent the global markets in a tizzy. So for a start, the fear of a negative reception was quite low.

Among other more substantive economic reasons, the www.governancetoday.co.in

unemployment situation could be named a major comforting factor for the Fed while deciding a hike.

With joblessness at just 5 percent, Fed probably felt that the economy was strong enough to withstand modestly higher borrowing rates and an increasing rate regime.

Another aspect of raising rates is the inflation connection. Fed has been targeting a 2 per cent inflation level which could be conducive to a growing economy.

However, inflation is still lingering at half a per cent which makes it counter intuitive to raise rates. But the inflation has been low because of very low oil prices and if that starts to move up, inflation can shoot up fast which could have forced Fed to tighten rates too steeply, an imprudent move in a fragile recovery environment. As an equity analyst in Mumbai suggests, a gradual, multi step increase in small tranches is better option which is what Fed has settled for.

Impact on global economy The global equity markets took the move in positive spirit as they felt the rise was not steep and had come with a clear indication on the future course of action, thus removing uncertainty on rate front for much of next year as well. But there are a few strands that need attention while understanding what

“There could be some outflow because expectations are that the rate of return in the American economy will be better...some capital will move out (of India)�

C. Rangarajan, former RBI Governor global economy could face over coming months because of the Fed’s move.

There is a widespread belief that emerging-market countries and companies would feel the heat of increased cost of debt.

Even though the impact of this rate

hike is not very high, the cost of borrowing have been tightening for many months now. The expectation of increased rates has been driving down the currencies of most emerging markets which has been further abetted by the poor real economic health of these economies. Finally, and because of the above mentioned reasons, money have been flying out of emerging markets consistently; over a trillion dollars were pulled out of emerging markets in a year till July 2015. The flight to quality is likely to be accentuated post this rate hike as attractiveness of US assets would increase with further rates hikes over the course of next year.

Second flank of the problem is the increasing divergence between the stances of the US Fed which has signaled a tightening rate regime, and the stances of European Central Bank, Bank of Japan and Peoples Bank of China, each of which has been easing the cost and availability of money to prop up respective economies.

This divergence, indicative of the relative difference in the economic health of the US on the one hand and other economic blocks on the other, could be a source of volatility of global financial markets more than the actual Dollar value of impact of increase in interest rates.

These changes and impacts would take a few months to be reflected

After leaving rates near zero level for 6 years, federal funds rate has been jacked up

www.governancetoday.co.in

January 2016 I 61

in countries trade and balance of payment statistics.

But there is a counter narrative to this argument according to which, moving forward, the real source of cheap capital would not be the US; it will be China which has been saving and investing a staggering rate but which is slowing down now and needs investments to be parked externally, for the very simple reason that its domestic market could not be absorb more investment right now, without pushing inflationary tendency. This could be a reason why it has been pumping so much money in building infrastructure abroad in recent years. The setting up of institutions like Asian Infrastructure Banks and BRICS Bank with massive Chinese contributions is another strand of this broad trend. The huge surplus of capital from China can hold down the impact on the increasing cost of long-term global capital that Fed tightening can unleash.

Is India isolated?

Amidst all the hullabaloo over the possible impact of the Fed’s decision on the world economy, the crucial question that is facing and would increasingly face Indian policymakers is how would the rate hike impact Indian economy and its corporates and financial markets?

As things stand, India is feeling doubly punched. First, it will feel the usual pain of emerging markets in form of rising cost of overseas debt and exit of money from financial markets. However, according to some analysts, ECB’s easy money policy could help India, like other emerging markets, cushion off the Fed’s tightening till the time government adjusts on a policy level. But broadly, the emerging markets have ceased to be the flavor of the season for global investors and India is not an exception.

At a broader economic level, India finds itself at a sticky ground.

Its growth may be looking about all right, but individual segments are not looking bright. Industry is not reviving strongly and so is 62 I January 2016

“As far as India is concerned, we are really well cushioned.

Inflation is coming down, fiscal deficit situation is very good, external situation is also robust. So, I think for all these reasons impact on India would be very minimal” Arvind Subramanian, Chief Economic Advisor agriculture. Exports have also been hit badly over last few quarters. Many analysts are of opinion that the country could be seeing a stagnant period of corporate growth even as economy undergoes structural changes that the new government has been affecting. All of this means a period of uncertainty for corporate India.

Both of these factors mean that the country could feel the heat over a longish period as Fed affects more rate hikes and the relative attractions of American assets forces more investors to pull out of the country. Former RBI Governor C Rangarajan too feels that there could be an exit from India. In an interview to a news agency he said that “There could be some outflow because expectations are that the rate of return in the American

economy will be better...some capital will move out (of India).”

Another way it would hit India is that it would make external money dearer for massive infrastructure projects that India intends to put in place over the course of coming years.

But there are people who think that India is better suited to weather the rate hike season compared to other emerging economies.

According to Chief Economic Advisor Arvind Subramanian, “As far as India is concerned, we are really well cushioned. Inflation is coming down, fiscal deficit situation is very good, external situation is also robust. So, I think for all these reasons impact on India would be very minimal.” He further added that “It is very difficult to be sure that this is going to be the beginning of a rate cycle, because it is clear from the Fed statement that they are going to be very cautious going forward.” The positive assessment has also been echoed by global rating major Fitch which said that while India is not immune to potential market jitters on account of interest rate hike by the US Fed, favorable economic growth outlook makes it attractive for foreign investors. It also said that the country’s lower dependence on exports and improved external balances make it better placed than many of its peers.

In totality, the rate hike decision of the Fed is a crucial development, if not in monetary terms, then definitely in psychological terms.

On the one hand, it constitutes an important step in normalizing monetary policy that was pursued after the global financial crisis.

But on the other, its impact on the global economy will be varied, unpredictable to an extent and most importantly, transformative in how global economic system functions. The emerging situation could be challenging yet one that could prove opportunities for India, should policy makers make right choices. anand @governancetoday.co.in

www.governancetoday.co.in

INTERVIEW

IN SPORTS, APART FROM CRICKET, THE ADMINISTRATORS LOOK LEAST CONCERNED

SPORTS, OTHER than cricket, tennis, badminton and those which were able to bring Olympic triumphs home, are like aliens to India. So is the pathetic approach of authorities governing these sports. The story of netball is a perfect case in this regard that how its players are living the life of unsung heroes despite bringing laurels to India at major sporting events. Ramesh Kumar Raja had a wide-ranging conversation with Prachi Tehlan, one of the most talented players on the court who gave a new dimension to the Indian netball under her captaincy. Like many of her contemporaries, Prachi was forced to take a sabbatical as there were neither job opportunities nor good facilities to practice.

She recently wrote an open letter to Prime Minister Narendra Modi seeking his attention over the sorry state of fringe sports in India, but unfortunately there is no response from the other side till date. Edited excerpts:

Tell us about your sporting journey from basketball to net ball. And of course, about your captaincy that brought laurels to the country in net ball?

Prachi Tehlan Former India netball captain www.governancetoday.co.in

I started playing basketball in class 7th in 2001. I played my first nationals representing Delhi in 2002 when I got an offer to join Montfort as it had a better basketball team and an experienced coach. The journey never stopped after that and I represented Delhi in all the age categories and continued to play it till college where I got an opportunity to play Netball for the first time ever during inter college tournament because of my height.

January 2016 I 63

achievements that my team had under my captaincy.

How did you land a corporate job and not the government one? What are the other women of your team doing?

Despite bringing laurels to India, the netball players are living the life of unsung heroes

The selection committee got highly impressed with my shooting skills and selected me to be a part of the first national camp that was to be held in Gandhinagar in February 2008, Gujarat in preparation for CWG 2010.

It was a tough decision to make as my first year exams were very close and I had to take a call to join the camp of entirely new sport for me. But I took the decision and with my family’s support I worked hard and very hard to learn the game and eventually played all the major national and international netball championships from 2008- 2011.

I was given the opportunity to lead my team in 2010 during the 7th Youth Asian Championship held in Delhi. It indeed wasn’t easy to prove myself from the squad of 70 girls who started the camp and eventually being in the top 12 to represent my country at that platform, in top 7 to start the play for my team and being the youngest captain consecutively for two years in all the major championships India participated.

Adding to the silver medal which India won under my captaincy during South Asian Beach Games help in Sri Lanka in 2011.

What is the difference between Basketball and Netball?

People in India generally confuse all the ball games. For 64 I January 2016

most, Basketball, Handball, Throwball and Netball are the same.

There is a huge difference in both the games. To share a few major ones- Baketball court has board behind the ring and netball doesn’t. In basketball, five players can play from one team at a time, in netball there are seven on the ground. In basketball, every player can shoot and dribble the ball. In netball, a player can’t dribble the ball, only two players can shoot and one can’t keep the possession of the ball for more than three seconds. Basketball court is divided into two halves whereas the netball court is divided into three halves.

Other than these, the rules, regulations, game duration and sports attire are entirely different in these sports.

Share with us your achievements that make the country proud.

My every drop of sweat on the playing ground for 11 years was in the zeal to play for my country and breaking the previous performance records.

Some of the achievements are winning its first silver medal in 2011 under my captaincy. Winning the Indo-Singapore series, rolling up the international rank in Asia from 9th to 7th in senior category and from 7th to 4th in youth category are some other

Unfortunate but true. Before the big games in 2010, we were promised government jobs and scholarships. As the time passed, politicians got changed and eventually the government with no focus on the careers of the players and the future of the game in the country. Experiencing this reality, I had to complete my education in management and look for a corporate job taking a retirement from the sport. There was nothing more I could have done for my country and I could see a bleak future for myself in terms of growing as a professional Netball player to earn my living.

Some of the women from my team are placed as physical education teachers, many got married and have kids and some got the support from their state governments to find a suitable job for themselves considering their education. I am ambitious, well spoken, confident and hardworking with strong educational background. My aspirations in life doesn’t allow me to take up a job which doesn’t satisfy and do justice with my qualifications.

Why are these sports still lying in neglect in India despite brilliant performance internationally?

People running the federations are the sole reason. Conflicts between the federation members are spoiling the career and golden years of sports persons. The authorities should understand the needs and desires of a player who is playing on the ground all out of his passion. I am happy to see sports like badminton, kabaddi, www.governancetoday.co.in

football and hockey coming up with their leagues and celebrities getting involved to promote them.

I hope these leagues affect the actual system of federations through which a player actually qualifies to represent the country at an international platform.

What drawbacks have you noticed in the operation and administration of these two sports?

Lack of flow of funds to these games on operational level to provide all basic necessities a player should be getting is a major factor. Also, the people running these federations do not understand a player’s need and do something for them.

What compelled you to write a letter to the Prime Minister recently?

Did you receive any feedback from the other end?

Just as millions of Indians I was also hoping for betterment and was looking forward to PM Narendra Modi’s delivery on that hope with changed government.

I was sitting with my friends and discussing about the issues we faced during our sports life and if at all there is somebody to listen to it and bring up a productive change. I started to pen down the difficult times faced by the team which we never deserved specially when representing our nation abroad.

I have not yet received any feedback from anyone but a lot of appreciation from people for bringing it up and opening the reality for them to read.

What are your suggestions to the government and policy makers for the upliftment of basketball and netball www.governancetoday.co.in

Lack of job opportunities and good facilities forced Prachi to take a sabbatical from the sport

at par with other popular sports in India?

Sports education in our country is almost zero. No one knows even a single university which offers a good course for sports management in comparison with universities abroad. Sports coaches/ athletes/ officials/ administration/ management in our country is still outdated which needs to be improved. There are very few job opportunities available. Sportsmen here have to think a lot before taking any sport professionally. When the time comes for them to perform at the best, they leave the sport. There is no system of players being paid (match fees) for the matches we play at international level other than cricket. The government must look at this issue. In the metropolitans, we have best facilities in terms of infrastructure.

Unfortunately students hardly get to use it. These sports hubs should be promoted with easy access for school/college students and professional athletes and should be open for their access all the time. Whenever I come across Indira Gandhi stadium, I see no athletes but only the dust all over. States as well as national federation play a major role in churning out talent from the hoards available. In India though, in sports apart from cricket, the administrators look least concerned. Year after year their

own generations keep acquiring various posts in the committee. No player who has seen the ground realities gets the opportunity to do something good for the development of the sport.

In my letter to the PM, I had requested him to have a structure in place where athletes who have seen the modern way and techniques can give back to the upcoming generation for the development of sports. The senior people from federations stay in 5-star hotels with their families and do not even bother if the team representing them and the nation on the ground gets to have enough food so that they can play properly. These are the issues the government must pay heed to for the betterment of sports like netball.

What needs to be done to promote the netball as it’s new to India?

Netball is a much older game than basketball and a matter of fact it’s not new in India. It’s just that because of lack of care and attention to the game, it’s unnoticed by us Indians with our focus mostly on cricket or till the time we win an Olympic medal to prove that we really are athletes and play a sport and its high time you recognize that.

January 2016 I 65

INTERVIEW

IT-ENABLED SMARTNESS CANNOT BE ACHIEVED WITHOUT BASIC PHYSICAL INFRASTRUCTURE

Nitin Jain

Vice President & Head Strategy, Shapoorji Pallonji SHAPOORJI PALLONJI, a 150 year old construction group initiated its journey as Littlewood Pallonji & Co, which built a giant water reservoir on Malabar hills to serve the needs of the residents of Mumbai. Today a conglomerate, the group has garnered laurels for its infrastructure and real estate projects not only in India but also globally. Ritika Bisht, Correspondent, Governance Today talks to Nitin Jain, Vice President & Head Strategy, Shapoorji Pallonji Engineering & Construction division, about their success story. Edited Excerpts: 66 I January 2016

Shapoorji Pallonji (SPCPL) is renowned across the country for its massive infrastructure projects. Can you provide a brief about your area of work?

Shapoorji Pallonji is credited for structuring numerous architectural marvels in India and globally in various verticals like - Residential, Commercial, Industrial, Hospitality, Retail, Sports complexes,

Redevelopment, IT Parks, water & waste management and related infrastructure etc.

Smart city mission guidelines call in for four models of development namely Greenfield (City extension), Retrofitting (City Improvement), Redevelopment (City Renewal) and pan city model with common mandatory elements.These area based development models need fresh physical infrastructure development ideally on a PPP model. It is known that the green city initiative cannot be started without the new area development and this is where our group comes with our world-class services.

Shapoorji Pallonji is present in all these models and is currently developing India’s largest affordable housing project in West Bengal, Shukhobrishti. The project is being developed on 150 acres of land and 20,000 units aims to provide affordable homes with facilities usually associated with high-end residential complexes.

We are also doing a big social infrastructure project with the Government of West Bengal under which we are delivering multiple hospitals for them.

If we consider retrofitting and redevelopment models, real estate space is crucial because any redevelopment that has to happen would be either through some existing area or through slum redevelopment projects.

Shapoorji Pallonji is one of the pioneers in developing slums and the best example to justify this would be Mumbai’s Imperial Twin Towers, the tallest luxury towers in the country, which is a result of slum redevelopment project. We www.governancetoday.co.in

are doing other similar projects in Mumbai and elsewhere.

Being an international player, what, according to you, are the problems your group encounters while undertaking projects in India?

We are working across panIndia and our presence now stretches across four continents.

A big arm of our group is present in Dubai from where we cater to South-East Asia, Africa, and Middle-East.

Increasing population is one of the challenges while working in India. In addition, mix of urban/ rural divide within the city makes it even more difficult. Currently, the thought process about smart city is more inclined towards ITenabled smartness which cannot be achieved until you have some basic physical infrastructure in place.

If you don’t get 24x7 power or clean drinking water or open spaces in a society then it is not possible to directly move to enablement through IT. Most of the smart city initiatives are being led by ICT companies instead of infrastructure & real estate corporates which is not the ideal model. We need to first create infrastructure and then make it smart. Smart mobility, smart transportation, smart parking will not exist unless you get proper roads, parking infrastructure and so on.

Your group has worked with different state governments in infrastructure and real estate segment. Did you face any difficulty while collaborating with the government?

Getting proper connect with government is usually a difficult task, but certain states are more www.governancetoday.co.in

approachable than others. Talking in context of smart city project, private partnership is minimal and currently there is a lack of clarity on how the work will be executed, which we feel would be clear as time progresses.

Currently 98 cities have submitted their Smart city proposals, but the first 20 cities are yet to be announced. The current funds of Rs. 200 crore each year for a period of 5 years can only do some very basic infrastructure improvement. For such initiative to really have an impact huge funding is required with a PPP model. This has not been clarified. Smart cities projects undertaken in other countries were built with hefty investments to the tune of USD 35-40 billionfor a period of 6-10 years. We need similar kind of investmentsin our country. GIFT city is one such example in India, which needs to be replicated in the vicinity of metros and Tier-1 cities.

What’s the involvement of your group companies in smart cities initiative?

Infrastructure and real estate are our corner stones but now we have increased our participation in water and waste management segment as well. We have been doing multiple projects in these areas like potable water distribution, industrial infrastructure development, STPs and ETPs. We have now expanded our work and taken up projects like waste management, waste to energy projects treatment, municipal waste collection, transmission & treatment etc.

We have a big presence in renewable energy, typically the solar energy both as EPC player and developer. Our group company Sterling and Wilson is the leading Solar EPC solution providers in India with installed capacity of more than 300 MW.They are also present into solar lighting, smart lighting, and waste-to-energy solutions.

In order to address city’s key challenges on urban mobility our group company Afcons provides solutions in the Integrated multimodal transport (MRTS, BRTS, 6 lane roads, LRTS, PRTS), intelligent traffic management (through bridges, flyovers, skywalks, utility tunnels etc.) & smart parking Another smart city dimension focuses on technology that involves e-governance and citizen partnership &involvement. Our group company Forbes Technosys Limited (FTL) is in transaction management & transaction automation solutions and provides services, solutions and networks that enable customers to manage their transactions more efficiently.

FTL’s lines of business include Self-Service Automation (Kiosks and Multi-function ATMs), Imaging Solutions, Financial Inclusion Solutions, Enterprise Mobility Solutions, Banking Automation Solutions, Retail Automation Products, e-Payment Solutions, e-stamping Solutions, Recharge &Ticketing Solutions and Managed Services, Turnkey data center projects and operations & maintenance of these.

Can you mention any of your projects that are in pipeline?

From E&C perspective we always have 100-150 ongoing projects. We have worked with nearly every state government, very big private players and private groups. The company is poised for major expansion with significant new investments in the development of large projects in power, transportation, and ports.

In general our success during any kind of project rests on three principles; Equitable well-being of the society with inclusiveness, Efficient and judicious use of resources and foresight with a commitment on long term sustainability.

January 2016 I 67

PRISON REFORMS

Ostracized forever?

Rehabilitation of prisoners should be viewed seriously

From a place to reform, prisons have become a retributive place

Lekshmi Parameswaran ‘A SOCIETY is judged by how well it treats its prisoners’, these words of Dostoevsky seem apt even to this date. But as realities stand, ours is a society where an order for imprisonment relegates the person to the deepest dungeons with no hopes of a better life.

If one has to look at the history of India’s criminal justice system, it can be traced back to the Vedic times where an offender was compulsorily handed down a prison term with the aim of giving him/ her sufficient time to contemplate on the wrong doing and give a chance to repent the mistake.

68 I January 2016

Unfortunately, the situation at present has lost sight of the goals with which imprisonment was first introduced. Now it has become highly retributive in nature with the society seeing it as a way to isolate certain individuals forever and they are seldom given a chance to live a life of respect and dignity.

A lot has already been discussed about the pathetic conditions in many of the Indian prisons. Over-crowding, long years of wait for the case to go to trial and poor conditions of hygiene are some of the problems that have caught everybody’s attention. But there is another important issue that has often failed to find its place

in the popular discourse. It is that of post release rehabilitation of the prisoners.

The debates surrounding the release of the juvenile convict in the 2012 Delhi gang rape case has brought to the fore a very dangerous reality of our society. A section of media kept on stressing how radicalized he has become in the last three years and how big a threat he will be to the society at large. This is but a reflection of the general psyche of the people because of the notions that have been entrenched in their minds over a period of time. The argument that has always found consensus among the public is that prisons harden criminals and they pose a permanent threat to the society.

If this belief is indeed true, then it points to the collective failure of all elements of society to be compassionate to fellow human beings. With the enactment of the Prisons Reforms Act in 1894 and the ushering in of a new perspective on reforms in 1993 by the then Inspector General, Dr.Kiran Bedi, IPS (Retd) in the Tihar jail, conditions have no doubt improved within some prison premises.

The concept of rigorous imprisonment is now approached in a much more humane way and even the convicts awaiting death penalty are now allowed to mix with the other prisoners till all the legal remedies available to them are exhausted and the death sentence is confirmed. Counseling sessions and meditation classes are organized on a regular basis to channel the energies of the inmates to productive activities.

The prisoners lodged in the Central Prisons are now given the opportunity to study further through correspondence courses offered by the Indira Gandhi National Open University (IGNOU). The bread making or the chapatti making www.governancetoday.co.in

factories of the Central Prisons are counted among the most successful ventures and plays a major role in making them self-reliant. It is estimated that by working in these factories, a prisoner earns up to Rs 3000 per month which when accumulated becomes a substantial sum to help in his/her rehabilitation. In addition to this, vocational training like carpentry, bag making, weaving and tailoring are taught to them so that they will find ways to sustain themselves after their release. Since prison reforms fall under the state list, State Governments keep aside an amount for granting loans to people who are interested in starting their own ventures after release.

In spite of the positive steps taken by the authorities, most of the released prisoners find the confines of the huge walls a much more comforting place than the world outside. A recently released prisoner who didn’t want to be named shares his ordeal, ‘Though I went in for a petty crime, I have realized that I will always be looked upon as a social outcast. The conditions in jail were definitely tough but we could buy some luxuries with the money that we earned in a week. After release, I have been unable to find even menial jobs and along with me even my family is getting punished.”

The same story is echoed by millions who struggle to find a footing in the society after their release.

Freedom instead of bringing relief has become a cause of unending trauma. The legal system of the country has no provision in place to do a follow up on those released.

Added to this is the problem of poverty. For those who come from economically deprived classes, a life in prison where their basic needs are met becomes easier than fighting to gain acceptance outside.

Because of this many go back to the life of crime and it becomes a vicious cycle with no end in sight.

Keeping all these factors in sight, NGOs across the country have been demanding for a National Policy on Rehabilitation of Freed Prisoners. Prassanna Kumar www.governancetoday.co.in

Tihar jail has been a pioneer in imparting vocational training to inmates.

who is a social worker advocating prisoners’ rights elaborates on this point, “What we want is a policy that would enable those who have been previously found in conflict with the law, to start a fresh life.

This can happen only if people are kept busy while serving their sentences in constructive activities.

A separate body should be created to assist those who are looking for employment after release. They should also be given sound advice on what to do with the money that they make while in prison.

Reformation does not end on the day of release. In fact, that is the most testing time. Only continuous support from the authorities will prevent a relapse of the criminal tendencies in a person.”

The Art of Living Foundation through its ‘Prison Smart Program’ and the ‘SRIJAN’ (Social Rehabilitation of Inmates in Jail and Aiding the Needy) is setting an example for the nation to follow.

The basic idea behind these two programs is that an individual takes to crime only under the influence of external factors and because he/ she has been unable to deal with the situation. The foundation strongly espouses the concept that nobody is born evil and right guidance can bring one back on the path of goodness. While the Prison Smart Program aims at bringing stability in the minds of inmates, the SRIJAN program teaches them various skills and employs the freed prisoners.

This has been implemented on a pilot basis in Tihar jail, Delhi and

Tinsukia jail, Assam and has given the beneficiaries a new ray of hope.

A lesser known fact but one which holds the key for future reforms is the model that Bilaspur jail in Himachal Pradesh has implemented. This prison is slowly revolutionalizing the very concept of imprisonment. The prisoners lodged in this jail are allowed to go out to earn their livelihood and they are expected to be back only by 6 PM. Such a step has ensured that the prisoners remain part of the society and the discipline of prison life prevents them from resorting to unlawful activities.

The 54 open jails in the country where the inmates have a semblance of freedom is no doubt a positive step. But the final goal of prison reforms should be to emulate the Bilaspur model so that people are given a chance to reflect on their actions and they are allowed to make the right choice without any coercion. The concerned authorities should also take the responsibility of giving counseling to the prisoner’s family as true rehabilitation cannot happen without acceptance. The society should also be made more aware of an individual’s rights so that the social ostracizing that a freed prisoner is subjected to can be stopped. In the end, the ethos of democracy should be upheld so that each and every citizen of this nation is given the respect that they deserve. lekshmi @governancetoday.co.in

January 2016 I 69

MICROFINANCE

Spreading wings In the last few years, microfinance institutions are moving to new business ecosystems Praveen Raman THERE IS good news for the microfinance sector in our country.

The gross loan portfolio (GLP) has seen an impressive growth in the quarter ending in September 2015 (Q2 FY 2015-16). According to MFIN Micrometer, GLP stood at a Rs. 36,660 cr as compared to 20,879 cr during the same quarter last year. Experts believe that this surge in business is primarily attributed to the positive business environment and favorable regulations.

The report further says that the productivity ratios for MFIs continued to move upwards.

Average GLP per branch as on Sep 30, 2015, stood at Rs 4.25 cr, up by 51 per cent over Q2 financial year 14-15 and average GLP per loan officer is now Rs 81 Lakhs, 36 per cent more from the last year. This indicates that a segment of our society that is overlooked by the banking sectors, is being addressed very successfully by MFIs. It is also interesting to see that MFIs are now foraying into new business ecosystems, like into secured loans (housing) and green funding (e-rickshaws & solar lamps). While it is too early to say whether the model will succeed, but it will be rather interesting to see MFIs operating in that segment. Many argue that economic well being brings about new needs in a society, and that need should be addressed too by the existing economic models. Like a small and poor household needs not only job, but a place to live in too. Therefore financial institutions need address that need too. This could be good for both parties.

Furthermore, needs of a society is localized and the set of services it wishes to avail could be unique.

70 I January 2016

The productivity ratios for MFIs continue to move upwards

For instance, an unemployed youth living somewhere in suburban Delhi will have some unique employment opportunities and living requirements. An MFI working in this particular area would be familiar with such opportunities and could such customer better.

Greater product diversity— in particular the extension of microfinance services beyond a single microcredit product and, more broadly, beyond microcredit in general—will indicate that these financial institutions are meeting a greater range of client needs.

Availability of a wide variety of financial products and services tailored to client needs is beneficial to clients.

Eighty-eight per cent of Indian MFIs offer more than one credit product. However, the cause for concern is that the reported credit products still have features identical to the core products with weekly installments and a short duration, making new product ill designed to begin with. Reporting on the product variety should take into account the purpose, size, loan term, and repayment schedule.

According to Access ASSIST Survey, 2013, 89 per cent loans are for livelihoods, followed by 4

per cent each for health & housing, and other consumption; investment needs account for only 3 per cent of the portfolio. This seems to be more a reflection of inadequate product diversity from the supply side than weak demand for credit of different types.

ASSIST survey shows that the number of MFIs offering needspecific loans such as water and sanitation and education are increasing compared to last year. The Enterprise/IGA loans that constitute 80 per cent of portfolio are not differentiated to accommodate the differing nature of the diverse range of enterprises carried out by poor. Compounding the lack of savings options for Indian microfinance clients is the relative paucity of MFIs offering savings facilitation services. It is heartening to see that Indian MFIs provide voluntary insurance to their clients more frequently than South Asian MFIs generally. In terms of options, over 70 per cent of these voluntary insurance offerings go beyond credit life insurance, 27 per cent include health insurance, and 20 per cent include agricultural insurance. praveen@governancetoday.co.in

www.governancetoday.co.in

MFIs HAVE STARTED OPERATING AT A SPEED IN THE PRESENT REGIME RAKESH DUBEY has more than eighteen year of work experience in MFIs sector. He heads SVCL, a Gurgaon-based Microfinance Institution. While speaking to ‘Governance Today’ Dubey gives insight into emerging segments in microfinance.

rural areas, we are planning to launch the e-rickshaw services in Delhi looking at the product category. E-rickshaws would work better in urban areas.

The insurance used to be a major project. What do you suggest to make this business commercially viable again?

What are the emerging areas that your focussed on? How competitive these sectors are?

We are planning to foray into Secured loans (Housing) and Green funding (e-rickshaws & solar lamps) from January 2016.

Every MFI follows the traditional way of providing micro loans to the low income households, so anything different from that can surely create a market for other types of needs. It also helps us broaden our services and hence stay competitive. Like, Housing loans and solar lamps are basic needs of people while e-rickshaws can help them in income generation.

At present, not many MFIs have forayed into housing loans or green funds so we definitely see a bigger growth opportunity in the sector.

How do you look at the commercial viability of these forays? Have any targets been set so far?

These are sectors where it is difficult to take loans from banks in rural areas so it opens up opportunities for us.

A house for example is a basic necessity for an individual. People borrow money from different sources including MFIs for various reasons which they actually use for building their house. So it is better they directly take housing www.governancetoday.co.in

Rakesh Dubey

CEO, SV Creditline Pvt Ltd. loan. This section of industry is quite big.

For e-rickshaws, the rickshaw pullers pay around Rs 300400 as rental per day. While, by taking loans from SVCL they would have to pay Rs.180-200 as installment per day and they will be able to own it from day one.

The remaining earning they save everyday can actually go for the benefit of the family.

For the new products as mentioned above, we are planning to target at least 2 lakh members by 2017.

More MFIs are shifting their business to urban areas, how do you look at this issue?

It depends on the product and services which are being offered.

Some of the MFIs which shifted to urban areas have actually converted to banks now. Rural definitely has more population and people there are more in need of financial help.

For example, although our major focus has always been on

All the borrowers are covered up to their loan amount. Basically about 3.5 Cr families, i.e. 10 Cr people are connected with MFIs and they are insured appropriately and adequately. MFIs have helped these families to generate income so they can take the term insurance policies as well as medical claim policies.

What changes you have seen in MFI operations in the last few years, especially after the Andhra incident?

In the last few years, MFIs have started operating at a speed.

Now it is a regulated industry.

Business Correspondent (BC model) model is coming back.

Due to the increased progress, we can see how eight MFIs have got the license from RBI. In the last 3 years, fund flow in the MFI industry has been continuous.

Furthermore, the industry has got two Self-Regulatory Organizations (SRO’s)- MFIN and Sa-dhan and it has continuously been submitting the data and credit bureau on a weekly basis.

So if a client wants to graduate to formal banking system they would have credit repayment records on which the bank can assess their credit worthiness.

January 2016 I 71

ART & CULTURE

Bastar Band

Spreading message of non-violence with ‘dhol’

Bastar band, a musical group, uses folk performing art

Ramesh Kumar Raja WHENEVER THERE is talk of Bastar region of Chhattisgarh, the first impression that comes to our mind is the fire of Maoist insurgency that often comes in news. Then comes the picture that this part of the country is also a land of natural resources. Unfortunately, it also happens to be one of the poorest districts of the country, thanks to the massive neglect of the tribal populace by successive governments for whom the region was never an attraction. However, caught between the ethnic way of life and the trappings of what the world deems “development”, the tribal population is making every effort to protect their cultural roots.

One such attempt is the formation of the “Bastar Band,” a musical ensemble engaged for the salvage and spread of Chhattisgarh performing art forms and music 72 I January 2016

for over a decade. The group is working under extremely adverse contemporary scenario of this region, an area which is receiving bullets all over, and is wounded with the violence which has made the general life conditions extremely miserable.

The band, which is spreading the message of love, peace, and brotherhood among the people, was formed by Anup Ranjan Pandey, a theatre artist, with the support of local tribal youth and others to protect traditional tribal music and instruments from extinction.

All instruments, clothes and other stuffs used in the band are made by the local tribals themselves, without any machines. Many team members of this musical troupe are illiterate and belong to the remote villages of the region. Majority of them kept their legs outside their villages first time in the life when they travelled for performance, and

also saw trains for the first time in their lives.

Says Pandey, “I have myself seen Bastar turning into an extremely disturbed area from a

Anup Ranjan Pandey has been instrumental in creating the group www.governancetoday.co.in

Most tribes of Bastar region have elaborate art tradition that reflects in their attires and ornaments

heaven, which became a turning point in my life. The deterioration of peace and erosion in the performing art traditions incited me to work for their salvage and this catalyzed the foundation of Bastar Band.� The band has artists from Muria, Dandami Maria, Dhurwa, Bhatra, Dorla, Munda and Halba tribes of the region. According to Pandey, each tribe has its own history, social and religious

customs and a distinct musical tradition and dance form, which he is trying to showcase for the benefit of urban folks in India. Dance is an important part of tribal culture in Bastar district. There are various forms of tribal dances in Bastar, which include Saila, Suva and Karma dance. All the folk dances involve complex footwork and are characterised by the robustness and earthiness. The band also has

The region has a long and rich tradition of dhol music

www.governancetoday.co.in

artists from Mahra, Ganda, Mirgan and Ahir communities.

To organize this band, Pandey travelled to different corners of the area in adverse situation and convinced the artists about the aim of the band. He says that the credit goes to members of the band who believed in him and joined the group in extremely difficult and violence ridden conditions. The objective of the band is Banduk chhodo-Dhol pakdo (throw guns and hold drums) because gun destroys whereas drum expands the life. According to band members, risk is there in any work, so if the risk is related to a good cause like, using music for social therapy, the risk must be accepted, and the group has done precisely that. While some members of the band belong to families of professional musicians, others are bell metal carvers, herbal healers and farmers. Music keeps them busy during the nonharvesting seasons.

The participants usually wear scintillatingly colourful costumes, January 2016 I 73

Maria tribal dance is one of the most popular folk dance forms of Bastar

ornaments and headgear, which form the most important characteristic of the tribal dances.

To add more charm to already colourful dance performances, ghungroos and tiny tinkling bells are tied to body, which create a heart-warming musical sounds making the environment livelier.

It, in fact, took over two decades for Pandey to form this group. He spent all those years in collecting the musical instruments which the tribal people have used for ages and protect and preserve them for the posterity. The journey took him through the heart of the tribal bastions – from Raipur to Dantewada and from Narayanpur to Kondagaon and Rajnandgaon – remote ethnic outposts where he discovered the music of the land.

Pursuing his humblest research, the revivalist has been trying even now to retrieve some of the lost cultural signatures of the Bastar tribals.

Sharing one of his experiences, Pandey recalls, “It was in course of my journey 26 years ago that I heard the lingagatha, the songs of the tribal god of music. The legacy 74 I January 2016

of Linga Deva was in peril because the generation next of the ethnic communities had no memory of the music, except for few elders from the performing communities. So, I decided to revive the music and the cultures that grew around the genre.”

A major part of Pandey’s collection of 110 rare ethnic Chhattisgarhi instruments is made of percussion tools — the long dhol slung around the shoulders horizontally, the semi-circular stationary “dhol”, small “dhol” and “rattan paddy winnower” placed on earthenware jars that woman beat to a rhythm to produce a sound akin to the western drum sets. The 125-member ensemble plays at least 50 ancient instruments and sings from its repertoire of 150 songs across the state – and all over the country.

Pandey, who has performed as a lead actor at world famous “Hey Market” Theatre Leicester (England), and Tramway Theatre Glasgow (Scotland) with famous play director Habib Tanveer, himself is an exponent of the “Naacha” tradition of dance-drama. He is

one of the performers and plays the Charhe, a bamboo instrument which he learnt to play from the members of his troupe. The theatre artist, who has performed internationally, has been bestowed with a number of awards such as, Chhattisgarh Bhushan Samman and Chhattisgarh Diwas Samman for giving a new life to the dying art of the state.

The presentation of Bastar Band has been widely acclaimed throughout the country. It has given performance in all corners of the country as well as in front of dignitaries such as, President of India, Governor and Chief Minister of Chhattisgarh, to name a few. Its performance at 2010 Commonwealth Games in New Delhi was awe-inspiring.

The band has coined a slogan for peace. “There are more guns than dhol (percussion) in Chhattisgarh.

We want to preach non-violence with the dhol, as peace is at the heart of the band’s music,” says the folk theatre activist. ramesh@governancetoday.co.in

www.governancetoday.co.in

www.governancetoday.co.in

January 2016 I 75

76 I January 2016

www.governancetoday.co.in