In touch March 2013 by Madraschamber

Vol. 26 No.12 - March 2013

Inaugural function of the National Conference on Entrepreneurship in India - Road Ahead and Release of Madras University Journal of Business and Finance. l to r: E. Sarath Babu, Garry Jacobs, Dr R. Thandavan, T Shivaraman and Dr. S. Gurusamy.

Post-Budget workshop

Ms Chitra Venkataraman, Hon'ble Justice of the Madras High Court addressing.

IN THI S  President’s Message  Chamber’s Activities -

Post Budget Workshop 2013-14

I SSUE

Video Discussion on “Effective Presentation”

Presentation on Port of Antwerp

- Visit of TIKZN Trade Mission to Chennai MSME Development Institute – National  General Committee Vendor Development Programme in association with AIEMA Technology Centre  SPOT LIGHT Draft National Water Policy 2012 Meeting with Mr M Prasad, IAS., Addl. Secretary, Ministry of Commerce

 Policy Watch  Pre-Budget consultations with Government of TN - suggestions  Press Release  Additions to Library  Economic Review

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THE INDIA CEMENTS LIMITED "Coromandel Towers", 93, Santhome High Road, Karpagam Avenue, R.A. Puram, Chennai 600 028.

President’s Message The Vision 2023 document promised a focus on infrastructure, particularly power and transportation and the budget has attempted to follow through with concrete financial steps.

A Tax Free – Revenue Surplus TN Budget! Dear Members, Budgets are considered Events in India. While the major focus is on the Union budget, State budgets are, arguably, as important. They are also capable of throwing up surprises. The Tamil Nadu State Budget, presented on 21st March by the State Finance Minister, was more or less on the expected lines and in tune with the VISION 2023 document. While the Government kept tax rates unchanged, the projected revenue surplus of Rs. 664.06 crores was quite a surprise. The slowdown in economy, and definitely the severely restricted power situation, has resulted in a Gross State Domestic Product (GSDP) growth rate of only 4.6 per cent for 2012-13. Supported by a 17 per cent growth in State’s tax revenues estimated at over Rs 86,065 crore, the Government has presented a revenue surplus budget of Rs 664 crore. As per the latest statistics , TN tops in the % of tax revenue to the GSDP among other States with 11.4 %. This financial comfort has given Tamil Nadu headroom to focus on capital expenditure and sustain its development schemes. This should also provide for long term stability in tax rates as the State can expect buoyancy in tax collections without rate increases as the economy revives.

It is stated that Rs 2,000 crore is allotted for infrastructure development fund and another Rs 750 crore for Metro Rail Project. The proposal to set up a ship building yard in Thoothukudi will encourage the logistics sector. The biggest World Bank aided project is assured in the road sector at a cost of Rs 8,580 crore covering over 1,678 km. A new body, the Tamil Nadu State Highways Authority, is expected to be created along the lines of the National Highways Authority of India to maintain and manage State Highways. On the power front, the budget has indicated that power projects worth Rs 21,000 crore would be taken up. The new projects which were envisaged include 1980 MW power projects at Ennore and 2X660 MW project at Udangudi. However, there does not appear to be any specific allocation of funds towards equity for these projects as it is unlikely that TANGEDCO will have suﬃcient internal accruals for this. One hopes that this will be financed in the next budget. A significant increase in allocation for TANGEDCO in the budget is a good omen for the necessary financial restructuring of the utility. The commissioning of the long delayed NLC-TNEB Tuticorin project, the Vallur project and other power plants should give some immediate relief to the power situation. However, for a longer term solution, a clear timeline for implementation of the newly proposed units would help. The Chamber has also urged the State Government to support and help

expedite the commissioning of the Koodangulam power plant at the earliest which would greatly help the industries. Power being very critical, these proposals have to be taken up on priority. The thrust and allocation of funds on education and skill development and the proposed land bank with 25,000 acres of land for industrialization purpose, would help the industrial development in the State both in the short and long run. Proper infrastructure and connectivity and less of bureaucracy will boost investments and employment generation in the State and we hope that the State budget and the State Government will ensure that. The higher tax collections in the State indicate higher compliance by the people in the State and their readiness to pay tax. But care also should be taken that, in our enthusiasm to increase the tax revenue, undue harassment and unreasonable pressures should not be melted out to the tax payers, which would have adverse eﬀects in the long run and will impact the industrial growth in the region. Let us hope that the timely implementation of the budgetary proposals and a business friendly approach will help the State move further ahead. I wish all the members a Happy Tamil New (Vijaya) Year! With best wishes.

T. Shivaraman President

CHAMBER’S ACTIVITIES 2nd March 2013

Post-Budget Workshop 2013-14 The Finance Minister presented the Union Budget to the Parliament on 28th February. It has been the practice of the Chamber to organize a Workshop on the Budget immediately thereafter to know the eﬀects it has on the trade and industry. This year the workshop was organised on 2nd March at Hotel GRT Grand Convention Centre. The workshop was well attended by nearly 100 participants. Mrs Chitra Venkataraman, Hon’ble Justice of the Madras High Court was the Chief Guest. The other speakers were: Mr R Raghuttama Rao, Managing Director, iMaCS Mr Sriram Seshadri, Chairman, Expert Committee on Direct Taxes Mr K Vaitheeswaran, Chairman, Expert Committee on Indirect Taxes Mr V Ranganathan, Partner, Ernst & Young Delivering his welcome address, Mr T Shivaraman, President, MCCI said in the western countries, budgets are not events but mere tax planning programmes. Budgets are not supposed to change policies but do only minor course corrections. The primary reason why Indian budgets are so momentous is because of the control of the Government in doing business in India. Talking about reducing the cost of business and doing business in India made easy, he said the Chamber has been agitated about this for long and it is interesting to note that the Finance Minister has talked about attracting investment both from foreign and Indian investors. The Indian investors are very neglected in India. There is a realisation in the government that Indian

investor has to be wooed. He said it is certainly for India to have a growth rate from 5% to 10% if only the regulations were made simple, compliance easier and the unreasonable power given to the bureaucracy is reduced. Indian business is being suﬀocated in India, he said, while Indian business is growing outside India. Indian people outside India are most dynamic. This is mainly because of the undue bureaucracy, he felt. Giving an overview of the Budget, Mr R Raghuttama Rao, said the budget is a political statement. It is a mix of political and economic intentions. It reflects the order of priorities in a democracy. 35% of our income is savings which goes into investment. This has fallen. Inflation has been stubborn. Parliament is not allowed to function. International rating agencies are threatening to downgrade our rating. He said 20% of the Government income is going to pay interest on the money it borrows. This is a wasteful expenditure. Growth rate for manufacturing is almost zero he said. The budget has not got anything to stimulate growth and how do we grow at 6.5% he asked. If foreign investment is so critical for us, we will have to remove uncertainty in the minds of foreign investors. He said one good thing in the budget is that no indiscriminate spending on populist measures. Addressing next, Mrs Chitra Venkataraman, Hon’ble Justice of the Madras High Court said the normal expectation from the budget by industry is that there should be certainty in tax administration, convenience of compliance not only from the tax point of view but also from administration point of view. We are the Tenth Economic Power in the world now and by 2035, we will be the

5th. Subsidy is a suicide she said while incentives will have great growth potential which need to be encouraged. Introduction of investment allowance for companies with an income of over Rs.100 crores is welcome but what about the SMEs? DTC and GST – when are they going to come? Disputes are multiplying and industry is not able to have a long term policy, she said. Settled questions are again and again being brought before the courts. Are we looking in a positive way? India has to think of marching forward and there should not be any retrospective amendments. She called for Government policies which will be stable, far sighted and investor friendly. Mr S G Prabhakharan, Vice-President, MCCI proposed the vote of thanks. Thereafter, Mr Sriram Seshadri, Chairman of the Expert Committee on Direct Taxes made a presentation on budget proposals relating to Direct Taxes. He addressed on the challenges faced in tax litigation, lack of certainty, slackness in administration, pendency of cases at ITAT, and disputes in transfer pricing. He said there is no change in corporate tax. However, the surcharge on domestic companies has been increased from 5% to 10% if their income exceeds Rs. 100 crores. Commodity transaction tax has been introduced on sale of commodities. There is a 15% investment allowance for new plant and machinery. However, the investment of Rs.100 crores has to be done within the next 2 years. Tax incentives under Section 80A for power sector have been extended to March 31, 2014. He also touched on tax on royalty and fees for technical services, transactions in immovable property, withholding tax of

CHAMBER’S ACTIVITIES immovable property transactions, tax on distribution of buy back of shares, taxation on dividends, Procedural and assessment related amendments, penalties etc. Mr K Vaitheeswaran, Chairman, Expert Committee on Indirect Taxes dealt with Indirect Tax proposals. He referred to the poor growth, significant current account deficit, issues of fiscal deficit, etc. He said significant allocations have been made to various departments for multiple schemes. But where is the money coming from for all these? he asked. He said surprisingly there have been very few notifications; no significant amendments to rules and regulations, Valuation procedure, etc. Cenvat credit has been left untouched and there are no new levies or new kinds of cess, etc. Coming to rates, he said there has been no increase in the general cenvat rates, no blanket withdrawal of exemptions, etc. He said the scope of advance rulings has been widened. This will have flooding of applications before the authorities. Coming to service tax he said the rate has been untouched and there are no major amendments. No changes in Service Tax Valuation Rules, Service Tax Rules, etc. He referred to the levy of service tax on all air conditioned restaurants from 1.4.2013. He also referred to the new scheme to cover service tax due or playable on amount due under Section 73A for the period from 1.1.2007 ending 31.12.2012 and not paid as on 1.3.2013. The scheme facilitates payment of not less than 50% of the taxes declared before 31.12.2013 and the balance by 30.6.2014 and grants immunity from penalty, interest and other proceedings.

He said the FM could have done the following but did not do: -

Gold Bond amnesty scheme

One year blanket service tax exemption or exports linked with receipt in convertible foreign exchange

Mr N. Venkataraman, Senior Advocate, Supreme Court said many of the amendments seem to be totally futile and may become infructuous in 2/3 years. There is a tendency to abuse. He called upon Associations to catalogue such abuses. More and more discretion in tax administration leads to more and more abuse he said. He also agreed that it is a very challenging task to do business in India. He cautioned to take great care, assert one’s point of view, and build all bricks very methodically. A preventive check is needed for assessments five years from now. Mr Arvind P Datar, Senior Counsel, Madras High Court, also addressed. He drew the attention of the audience to his article “Short term gloom, Long term doom” in the Hindu that day. The Railway and Union Budgets for 2013-14 have shown that our Government is unwilling to take decisions he said. Referring to the delay in implementing GST he said, it requires a highly disciplined approach. He called for overlapping of taxes and requested the Chamber to make a representation. In his summing up, Mr V Ranganathan said Mr Chidambaram had presented a low-voltage budget. The discussions in the workshop were extremely invigorating and intellectual. The three components he brought forth were : -

How one can do business in India and how does Government facilitate business

The challenges the Government is facing on the expenditure side and thereby managing the fiscal deficit

Every country has its own problems to contain inflation

The fiscal deficit is 5.2% - another 3 % is expected from the States

He concluded saying it is a very complex situation and there is more to the dismal picture.

6th & 7th March 2013

MSME Development Institute – National Vendor Development Programme in association with AIEMA Technology Centre: The MSME Development Institute in Chennai organized a National Vendor Development Programme in association with AIEMA Technology Centre. The Madras Chamber was one of the supporters of the programme held at ATC Ground, AIEMA Technology Centre, Ambattur, Chennai. The other supporters were State Bank of Inda, Small Industries Development Bank of India and National Small Industries Corporation. The objective of the Vendor Development Programme was to provide a common platform for MSMEs as well as large enterprises and Public Sector Undertakings to interact with each other and understand each other’s strengths and requirements. It also provided an opportunity to display their products and machineries in the stalls allotted to them. The Chamber had put up a stall to showcase the initiatives taken by the Chamber in respect of its Skill Development Centre. The Secretary General addressed in the inaugural session. Members of the Chamber also participated in the programme.

CHAMBER’S ACTIVITIES 8th March 2013

Meeting with Mr M Prasad, IAS., Addl. Secretary, Ministry of Commerce Since the Annual Supplement to Foreign Trade Policy is expected to be announced by the Government during the last week of March 2013, FIEO jointly with the O/o. Zonal DGFT and with the support of all the Export Promotion Councils/Commodity Boards/Trade Associations including our Chamber organized an Interactive Session with Mr. M. Prasad, I.A.S., Additional Secretary, Ministry of Commerce on 8th March at Hotel Le Royal Meridien. The main focus of the discussion was to invite suggestions from the exporters to increase India’s exports and suggest changes needed in the present FTP. The Chamber sent its suggestions to FIEO for discussion at the meeting as follows: 1. Customs must implement at least continuous working from 8 AM to 10 PM. The current 24x7 pilot project was rendered ineffective due to resistance and severe manpower shortage by the customs field staff. 2. FEMA permits a small percentage of non- realization of export proceeds as write off. Customs law must be aligned to FEMA and demand for refund of drawback must not be insisted by Customs authorities if the write off conforms to FEMA guidelines. 3. RMS (Risk Management Systems) in Exports must be introduced. This proposal is at the discussion stage for the past 3 years. 4. All Custodians must be encouraged to obtain AEO certification from CBEC and responsibilities divested with them to address the severe staff shortage in Customs.

5. Commerce Ministry must take up the MoCA Working Group recommendations for operationalising the AFS (Air Freight Stations) to encourage export consolidation and enable trade to benefit from lower airfreight rates. 6. The export trade is severely impacted by sudden imposition of many surcharges and additional charges by shipping /airline companies. Ministry of Commerce must establish a regulatory body akin to the Federal Maritime Council of USA which examines and approves every charge that is imposed on the exporters/importers. 7. The MTD ( Multimodal Transport Document ) which is equivalent to a Marine Bill of Lading is not being accepted by the Banks. The MTD is a document certified by Director General of Shipping – Government of India . It is important that the Banks are told to look into this and promote our government’s initiative . 8. Incentive Scheme to be broad based such as : a) Status Holder Incentive Scheme to be given to all Status Holders irrespective of Industry sectors. All industry sectors including Petroleum Sectors must be given this Incentive scheme as all are contributing for earning Foreign Exchange and all sectors to be treated equally. The volume of Exports is very high in Petroleum Sectors who are the backbone of Foreign Exchange Earners for the country. Hence they should be rightly rewarded. b) Focus Product Incentives Scheme is to be extended to all Products without any Chapter HS Code restriction. For instance, Focus Product Scheme under

Pharma Products under AP 37D Other market linked Focus Products – SL No.37 Focus Product Code 37 restricts Chapter No.30 only whereas there are many Pharma Products in other chapter nos. such as Chapter No.27 which are not given the Incentive. Hence Chapter No. Restriction should be removed. c) Focus Market Scheme is also to cover all Products irrespective of Industry Sectors. All Industry Sectors must be given due weightage and to be treated equally. d) Bill of Export as a document to be complied with for supplies to SEZ is to be kept as an optional document as some of SEZs are not aware of the Procedure associated with it. Either Certified ARE or Bill of Export - any one of them should be accepted as in the case of 100% EOU. e) In the present E BRC system for physical Exports, supplying to SEZ Units also to be covered. Otherwise All E BRCs will have Foreign Currency as Payment received for physical exports and for all SEZ it will be in Indian Rupees and for the purpose of arriving at value addition, it will be diﬃcult to calculate. All to be converted to Indian Rupees to arrive at VA. f) EO Period to be amended to 2 Years for Export and Import instead of 18 Months period which is too short to complete. By extending the above Incentive Scheme, Exports will register higher growth so as to make Indian Exports more competitive in the International Market.

Happiness is not something you find. It’s something you create.

CHAMBER’S ACTIVITIES 11th March 2013

Video Discussion on “Eﬀective Presentation” The monthly video discussion programme being jointly organized by MMA & MCCI was held in the Conference room of the Chamber. The topic was “Effective Presentation”. Mr R A Nadesan of Lead Training Solutions was the facilitator. Business is not merely about products and profits. It is more about people and relationship building. Good relationships at work place are as important as building relationships at home. When we relate well to people, we feel really valued and understood; it makes our jobs easier and it enhances our reputation. Skills of relating, communicating and influencing are pervasive. 70% of our life is spent on communication. The video discussed about 3 kinds of skills which are technical, human and business skill. Technical skill is the minimum requirement for any role. It gets the entry into an organization. The human skills include soft skills, which are necessary for managing people. Business skills are needed for career advancement. Of all these skills, communication and presentations are of the most important human skills required for eﬀectiveness in life. The success of an organization, to a large extent, depends upon the attitude and ability of each and every employee’s communication skill and presentation skills. A majority of the people have the fear of public speaking. How do you get started? One needs to manage anxiety before and during the presentation. One needs to visualize it and practice it. Take a deep breath, focus on relaxing and release the tension.

Handouts and visual aids will help you to reach your message well. To make the presentation interesting, use bar chart, column chart, line chart, pie chart, etc.

during which they extended an invitation to the members of MCCI to visit the Port. Accepting their invitation, the Madras Chamber has planned to take a delegation to Port of Antwerp during May 2013.

65% of the information is absorbed visually rather than orally.

One of the focussed areas of the Chamber in the past as well as present has been the development of port and the infrastructure as they are the key for the all round development of our State.

Have eye contact with the audience. Never memorise your presentation. Be spontaneous.

Hence the proposal to take a delegation to the Port of Antwerp with the following twin objective :

How do you deliver your presentation?

(a) to understand how world class ports work and to know about the best facilities and systems

Give bullet points and briefly explain each of them.

Give an introduction/preview. Follow this up with main and sub-ideas. Give the benefits and conclude with impact.

The mistakes generally done by presenters are: -

Poor posture, no movement, awkward gesture, no eye contact and bad voice.

Have a Q&A session at the end of the presentation. Visualise possible questions before hand and be prepared with answers. Mr Nadesan concluded saying that the ABCs of an effective presentation is – Accuracy, Brief and Clarity.

15th March 2013

Presentation on Port of Antwerp Antwerp Port in Europe is one of the world class Ports. In February 2013, a delegation from Port of Antwerp led by Mrs Cathy Berx, Governor of Antwerp Province and accompanied by the Chairman and other oﬃcials of the Port visited Chennai and a meeting was organised by the Chamber

(b) how our member companies could use the Antwerp Port to explore the possibilities of enhancing their trade with European Region. In this connection, to have a better understanding about the visit, the Chamber had invited Mr.Raj Khalid, India Representative of Port of Antwerp based in Mumbai to give a brief about the advantages of Port of Antwerp, about the forthcoming World Break Bulk Event to be held there in May and about the logistics support. Making the presentation Mr Raj Khalid said the Port of Antwerp is strategically located in the heart of Europe with the fastest, most eﬃcient connections to its major industrial and consumer centres. It is a multi-functional port with well connected, extensive logistics and storage solutions. It has highly skilled workforce. The Port of Antwerp currently handles an annual volume of almost 7.3 million TEUs. With ample space for the eﬃcient handling, storage and transhipment of container cargo and accessibility for ships with a capacity of up to 14,000 TEUs, the Port of Antwerp is one of Europe’s principal hubs for container cargo.

CHAMBER’S ACTIVITIES The Port of Antwerp continues to invest in the future with a range of projects aimed at boosting the capacity and productivity of the port.

21st March 2013

The participants sought many clarifications from Mr Raj Khalid.

Trade and Investment KwaZulu-Natal (TIKZN) is a trade facilitation and inward investment promotion agency for the province of KwaZulu-Natal in the Republic of South Africa, mandated by the Department of Economic Development and Tourism to promote the province of KwaZulu-Natal as the leader in export trade and premier investment destination.

Mr J Krishnan informed the participants about the Chamber ’s proposal as follows: The proposed dates of visit: 12th May to 19th May 2013 Places of visit: Three Ports in Belgium namely Port of Antwerp, Ghent Port and Zeebrugge Port and the Rotterdam Port in The Netherlands. O ff i c i a l m e e t i n g s w i t h t h e Po r t representatives; Meeting with EU Commission in Brussels; Participation in World Break Bulk event. The participants were requested to inform the Chamber about their joining the Delegation within a week’s time.

Visit of TIKZN Trade Mission to Chennai

India is one of South Africa’s key trading partners in the world as well as partners in multilateral organisations such as IBSA, G-20, NAMA-11 and most recently BRICS among others. India was ranked South Africa’s 6th largest trading partner globally and the 3rd largest on the Asian Continent after China and Japan. South African trade with India has increased significantly in the recent past. To leverage and facilitate more business opportunities between the two countries,

20th March 2013

National Conference on Entrepreneurship in India –Road Ahead The Entrepreneurship-cum-Skill Development Center, Department of Commerce, University of Madras, organised the above Conference on the 20th March at the University premises. The event was sponsored by the Department of Higher Education, Government of Tamilnadu. Mr T Shivaraman, President, MCCI delivered the inaugural address. A book titled “Entrepreneurship in India –Road Ahead” was released by the Vice-Chancellor of the University, Dr R Thandavan. TIKZN brought a Trade Mission to India and the delegation visited Chennai on 21st March. The Chamber arranged B2B meetings for interested members with the delegation.

GENERAL COMMITTEE 9th March 2013 The Committee, at its monthly meeting dwelt on the following subjects: Creation of a Mega Port – Study: The Consultants who had submitted the draft report were requested to modify the same with further inputs from the core committee which had gone through the same. The committee would finalise the report shortly. Skill Development: A project proposal has been submitted to Mr Prakash, IAS., Skill Development Mission Head and Secretary. Finishing School Programme: The Chamber is trying to have this programme outside Chennai. It is hoped that at least one programme would be rolled out before the end of March 2013. Members suggested that the Exim course can be conducted in more number of places as it had great potential for employment.

Forthcoming Programmes: 2nd May 2013 : Round Table on CSR 12th May to 19th May 2013: Chamber’s delegation to visit the Ports in Belgium and The Netherlands (Rotterdam) TIT BITS ISUZU has chosen Sri City to set up its first car manufacturing Plant in India. The Greatest value of having good people around us is not for what we get from them but how better person one becomes by being associated with

Union Budget Analysis and points for Post-Budget Memorandum: There was a discussion on the recent Budget presented by the Union Finance Minister, Mr. P. Chidambaram, on 28th February. While members felt that there was nothing substantive in the budget, they expressed that it was impossible to comply with Section 194AA dealing in immovable property (other than agricultural land). Disallowance under Section 40 of the IT Act relating to royalty, technical fees, etc. also came in for criticism. Members also felt that there was no thrust given for the manufacturing sector. The 15% investment allowance given to manufacturing companies that invests more than Rs 100 crore in plant and machinery during the period 1.4.2013 to 31.3.2015 may not be adequate to strengthen our trailing manufacturing sector. Also it was felt that 100 lacs in today’s tight money situation may not be easily feasible and the Chamber should request that this figure be modified to Rs. 50 crores.

The Committee felt that the Chamber’s Post-Budget memorandum containing the above points and any other additional points should be sent to the Government at the earliest. MCCI Delegation to Port of Antwerp – May 2013: Members were informed of the Chamber’s proposal to take a delegation of interested member companies numbering around 12-15 to Port of Antwerp and a few other leading ports including Rotterdam during mid-May. Since one of the focus areas of the Chamber is port and infrastructure development in Tamilnadu and currently the Chamber is also in the process of doing a study on the need for TN to have a world class port, this visit will help us to have the needed exposure. New Membership: Five companies were admitted during March. Their names appear elsewhere in the Bulletin.

7th March 2013

11th March 2013

Women’s Day Celebrations @ PRIST UNIVERSITY – Pondicherry Campus

Women’s Day celebrations @ JBAS (SIET) College for Women

Ms K Saraswathi, Secretary General of the Chamber was the Guest of Honour at the Women’s Day celebrations, jointly organized by Rotary Club of Pondicherry, Rotary Club of Pondicherry Cosmos and the Prist University, Pondicherry Campus. She, along with Prof.(Mrs) Chandra Krishnamurthy, Vice-Chancellor of Pondicherry University , flagged oﬀ a women human chain to impress upon the need for empowering women.

The Centre for Women’s Studies, JBAS College for Women, felicitated Ms K Saraswathi Secretary General of the Chamber as one of the Women Achievers in her capacity as the first Secretary General of The Madras Chamber of Commerce & Industry. She was presented an award on the occasion.

them.

POLICY WATCH RBI cuts policy rate by 25 basis points: The RBI on 19th March reduced the indicative policy rate (repo rate) by 25 basis points from 7.75 to 7.50 per cent. Repo rate is the rate at which banks borrow short term funds from the Central Bank. “The foremost challenge for returning the economy to a high growth trajectory is to revive investment. A competitive interest rate is necessary for this but not suﬃcient” the RBI said in its mid –quarter review of monetary policy. Sufficient conditions, according to the central bank include bridging supply constraints, staying the course on fiscal consolidation, both in terms of quantity and quality and improving governance. Egypt for doubling trade with India: Seeking Indian investments in energy, biotechnology and nanotechnology and cooperation in agriculture and space, Egyptian President Mohamed Morsy pushed for an ambitious goal of doubling trade with India in the next few years from the current level of $ 5.4 billion. “The trade surge between India and Egypt pushes us to set up more ambitious goal of doubling this volume within the coming few years. Egypt needs more grains and these could be exported by India” said Mr Morsy at a joint function organized by Assocham, FICCI and CII. “I would like to invite Indian companies, businessmen and investors to take advantage of the promising opportunities Egypt oﬀers and to assure that we will provide all required facilities and create the most conducive atmosphere for investment and business practice. One of our main focus area is to attract foreign direct investment. Both countries can cooperate in areas such as ICT, space science, energy, agriculture and nanotechnology”, he said. Investment Norms for Insurance Firms revised:IRDA sets limit for investment in infra bonds. The Insurance Regulatory and Development Authority of India has

re-worked the investment norms for insurance companies. The regulator has now mandated that a life insurance company should invest not less than 25 per cent of its total corpus in Central government securities. The total investment of such a company in Central and State government securities and other approved securities – all put togethershould not be less than 50 per cent. IRDA has also prescribed the investment limit for life insurance firms in housing and infrastructure bonds. While permitting them to invest in these bonds, the regulator has made it clear that the life insurance companies total exposure to these bonds should not be less than 15% of its corpus. The regulator also prescribed floor limits for general insurers including health insurers, to invest in Government securities and other approved housing bonds. Norms eased for ECBS: The Reserve Bank of India has relaxed rules for corporates to access ECB (external commercial borrowings) route to raise funds. The apex bank has now permitted companies which are under investigation by assorted law-enforcing authorities to raise funds through the ECB window under the automatic route. Till now, such companies were not allowed to access ECB under the automatic route. Any request by such corporate for ECB was usually examined by the RBI under the approval route. The relaxation to the ECB guidelines comes into force with immediate eﬀect. All other aspects of the ECB policy, under the automatic route such as amount of ECB, eligible borrower, recognized lender, end-use, average maturity period, prepayment, refinancing of existing ECB, and reporting arrangements, however, will remain unchanged. SEBI forms Panel to review insider trading norms: Market Regulator SEBI to curb the menace

of insider trading, has set up a new committee headed by former chief justice of Karnataka High Court Justice N K Sodhi to review insider trading norms. SEBI said two decades have passed since the SEBI (Prohibition of Insider Trading) Regulations 1992, were notified which was framed to deter the practice of insider trading in the securities of listed companies. Since then there had been several amendments to the Regulations and judicial paradigm through case laws had also evolved in India. Mauritius to address tax treaty issues Mauritius promised to add India’s concerns over possible misuse of tax avoidance treaty between the two countries, while ensuring its commercial viability on mutually acceptable terms. "We wish to reiterate that Mauritius is committed and willing to collaborate fully to address the concerns of the Indian side on the DTAC (Double Taxation Avoidance Convention) while ensuring tht the treaty remains commercially viable” – Mauritius’ Ministry of Finance and Economic Development said. “We are optimistic that both sides can conclude a mutually acceptable package that would yield a win-win situation, the Ministry said in a statement while welcoming Finance Minister P Chidambaram’s statement clarifying the recent concerns over Tax Residency Certificate (TRC) issue. New Incentives to Exporters: The Union Minister of Commerce and Industry announced a series of new incentives on 13.3.2013 for exporters. New Products under Focus Product Scheme (FPS): 112 new products added under FPS at 8 digit level, eligible for benefits @ 2% of FOB value of exports to all markets. Major sectors include Engineering, Electronics, Rubber, Chemicals, Plastics, Carton boxes and Egg powder. 113 new products at 8 digit level given higher benefits @ 5% of FOB value of

exports under Special FPS on exports to all markets. Major sectors include Hand Tools, parts of agriculture & horticulture machinery, sewing machines and parts, liquid pumps, nuts, bolts, washers, screws, staplers, and parts of machinery for soldering, brazing and welding. New Products and New Markets under Market Linked Focus Product Scheme (MLFPS) 1837 new products added under MLFPS at 8 digit level, eligible for benefits @ 2% of FOB value of exports to specified

markets.

Gram Udyog Yojana (VKGUY):

Major sectors include Machine Tools, Earth moving equipments, Transmission towers, Electrical and Power Equipments, Steel Tubes, pipes and galvanized sheets, Compressors, Iron and Steel Structures, Auto components, Three wheelers and cotton woven fabrics. (Chemicals have been included for providing benefit for a limited period of 6 months).

Sesame seeds and minor coconut products added under VKGUY scheme, eligible for benefits @ 5% of FOB value of exports to all markets.

Two new major markets viz. China and Japan added under MLFPS. New products under Vishesh Krishi and

New market added under Focus market Scheme (FMS): Timor Leste added as new FMS country, eligible for benefits @ 3% of FOB value of exports of all products. Support under Market Access Initiative (MAI) scheme, for setting up of Warehouse in Latin America by Export Promotion Council for Handicrafts.

Highlights of Tamilnadu Budget 2013 - 2014: The Tamil Nadu Government will focus on rural and urban infrastructure, expedite implementation of projects which will benefit the agriculture and manufacturing sectors. The thrust would be on agriculture with investments going into storage and marketing infrastructure, industrial development backed by speedy implementation of infrastructure projects including in power and roads. NO NEW TAXES: The Government has decided not to impose new taxes or hike existing rates in the backdrop of the slow economic growth. Supported by a 17 per cent growth in State’s tax revenues estimated at over Rs 86,065 crore, the Government has presented a revenue surplus budget of Rs 664 crore, contained fiscal deficit and debt which has given it room to invest more in capital expenditure for growth and on social sectors. All the welfare schemes will continue. Fiscal deficit is at Rs 22,938 crore which is 2.84 per cent of the Gross State Domestic Product and well within the three per cent limit under the Tamil Nadu Fiscal Responsibility Act, 2003. Net borrowings in 2013-14 will be higher compared with the current year at Rs 21,142 crore (Rs 15,675 crore) but well within the limits allowed Rs 24,263 crore (Rs 20,716 crore). This financial comfort has given Tamil Nadu headroom to focus on capital expenditure and sustain its development schemes.

INFRASTRUCTURE: The Government has allocated Rs 2,000 crore for an infrastructure development fund and Rs 200 crore for project preparation fund for the year. Key infrastructure projects have been cleared at the first meeting of the Tamil Nadu Infrastructure Development Board. A new body, the Tamil Nadu State Highways Authority will be created along the lines of the National Highways Authority of India to maintain and manage State Highways. The biggest externally aided project will be implemented in the road sector at a cost of Rs 8,580 crore covering over 1,678 km. AGRICULTURE: The allocation to agriculture is Rs 5,189 crore (Rs 4,829 crore) of the total Rs 17,220 crore to the primary sector. Following the Rs 1,517-crore relief package to the Cauvery Delta farmers, the Government is readying a relief package for the other districts. Horticulture will be expanded with 8.2 lakh acres brought under vegetable cultivation against the present 7.25 lakh acres. Infrastructure in agricultural markets will be upgraded and markets integrated with commodity exchanges. The objective is to increase processing, farmers’ revenue and stabilise incomes. Crop loan target from the cooperative sector is pegged at Rs 4,500 crore for 2013-14 against Rs 4,000 crore in the current year.

To improve water use eﬃciency, the State Government has decided to do away with the one-acre limit on small and marginal farmers to make use of subsidy for micro irrigation. Farmers can choose their suppliers and the subsidy will be released to the farmers’ account. Over Rs 520 crore will be available as subsidy to cover over 1.30 lakh acres. FOOD SUBSIDY: Food subsidy is set at Rs 4,900 crore with the Government deciding to continue with universal coverage under the Public Distribution System. Whatever the implication of the Centre’s Food Security Bill, the State Government will continue with free rice supply and subsidised sales of essential commodities like pulses and edible oil. EDUCATION: The Government has earmarked maximum funds to school education at Rs 16,965 crore. Tamil Nadu was among the earliest to notify the Right of Children to Free and Compulsory Education Rules, 2011. Over 24.76 lakh students will receive cash benefit of Rs 381 crore including cash incentives. Enrolment in higher education has gone up to 6.51 lakh students in 2012-13 (6.09 lakh). Avoid junk foods and junk thoughts. Treat your body, mind, and emotions with the gentle care they deserve.

Pre-Budget consultations by GoTN: 18th March 2013 The Government of Tamilnadu convened a meeting to hold pre-budget consultations at the Secretariat on 18th March. The meeting was attended by the Finance Minister as well as the Commercial Taxes Minister of the Government of Tamilnadu. Other Government officials too were present. From the Chamber ’s side, Mr P R Subrahmanyan, Co-Chairman of the Expert Committee on VAT accompanied by Mr S. Sankaranarayanan, Senior Manager, MCCI, attended this meeting. The following issues were raised and handed over to the officials for consideration and appropriate remedies in the forthcoming budget. ISSUES RELATING TO TAMIL NADU VALUE ADDED TAX I. Input Tax Credit 1. Presently Section 19 (16) of the Act states that the ITC credit availed is on provisional basis. It is suggested that a time limit be fixed beyond which the ITC credit availed should be allowed as final. O In our view one year from the date of availment is a reasonable period beyond which the ITC credit availed should be made as final. 2. The present ITC scheme under Section 19 (4) provides the benefits in excess of 4% defying parity and presently reduced to 3%. O Many States have brought suitable changes on par with Sec. 8 (4) of CST Act 1956. Similar amendment is requested in TNVAT Act to avail ITC benefit in excess of 2%. 3. Section 19(2)(v) of the TNVAT Act allows input tax credit on purchases used for CST sales, which fall under

Section 8(1) of the CST Act, 1956 and Section 19(5)(c) specifically provides that credit would not be available when the sales fall under Section 8(2) of the CST Act. This is against the concept of VAT and no other State provides for this. When a transaction is not covered by C-Form, Tamil Nadu in any event gets revenue which is more than 3% and hence, there is no justification for not allowing input tax credit against sales not covered by C-Forms. O Relief sought: Amend Section 19(2) (v) to cover both sales covered under Section 8(1) and 8(2) of CST Act 1956 and hence suggest for deletion of Section 19(5)(c). O Conditions for filing of Form C and Form F under Rule 10 of TNVAT Act for availing ITC to be removed. 4. Opening stock credit and transitional provisions when crossing threshold limit (or) in respect of composition dealers crossing the 50 lakhs limit. 5. Provisions similar to Section 19(12) for finished goods exempt but subsequently taxable – credit on goods in opening stock should be made eligible. O Hope GoTN has already considered this issue and suitable amendment to the above point 4 & 5. 6. In a worldwide VAT scenario, there is no artificial restriction that the inputs must be used in manufacture or the goods must be traded for VAT credit eligibility. Goods purchased and used in the business should qualify for VAT credit. A retailer pays VAT on his sales whereas he does not get any credit for purchases of air conditioners, computers, lighting, cameras, security equipment etc. All these are costs and are factored in the pricing.

O Relief sought: Necessary amendments can be made to widen the concept of input tax credit. The Maharashtra model allows set-oﬀ for the full amount of tax paid on purchases for business. This includes capital assets, goods the purchases of which are debited to profit & loss account, trading goods, raw materials, parts, components, spares, packing materials and fuel. 7. Proviso to Section 19(1) being interpreted by the department to mean that the purchasing dealer should establish that the selling dealer has paid VAT to the Government. Provisions under the Act to be incorporated to allow input tax credit if the person taking the credit has ascertained that the transaction is genuine. Similar provision as existing under CENVAT Credit Rules 2004 can be incorporated. II. TDS PROVISION 1) Section 13 of the Act provides for Tax Deduction at Source and its methodology is found to be financially very harsh. Presently sub-section (1) (c) to Sec. 13 provides for certificate issued by assessing authority for waiver of TDS on contract to contract basis. This has caused administrative burden both to Industry and Revenue without any achievement of described objective. Instead the waiver certificate may be insisted on yearly basis for all the operative jobs in the State. Suggestion: 1. Request for considering adoption of the TDS Scheme of Karnataka VAT Act where Sec. 9 provides for the dealer estimating VAT liability for TDS deduction and holds the dealer responsible for any wrong estimation,

to protect the interests of Revenue. Alternatively suggest modification to the circular for removing the condition No. 3 to circular 8/2011. 2. It is mandatory on the part of developers/ co-developers and units in SEZ to deduct TDS u/s 13 (1) while releasing the payment to works contractors for the works executed for them, though the transaction attracts zero rating as per Section 18 of TNVAT Act 2006. It is suggested that a notification may be issued exempting the contractees from deducting tax u/s 13 (1).

2. Works contractor in respect of contract with SEZ unit / developer should be treated as making a zero rated deemed sale and should be entitled to ITC. 3. Benefit of Zero Rated Sale to be extended to 100% EOUs and STPI units. VI. Works Contract – Composition scheme 1. Sec. 6 of the Act provides the dealer to opt for Composition scheme for all the projects under execution. The scheme is found unpopular and operates negatively. Relief sought:-

III. Stock Transfer Revision of rate of tax reversal in case of stock transfer to 2% (or) linking it to the CST Act. [Sec. 19(4)] (refer Point No. 2 to main para I) IV Capital Goods and Input Tax Credit 1. Capital goods used for processing, packing (or) storing of goods should be made eligible for credit u/s 19(2) - Sec. 19(2)(iv) and Sec. 19(3)(a) conflict with Sec. 2(11) 2. Manner to be prescribed under section 19(6) provisos relating to capital goods used in the manufacture of exempted goods and taxable goods. 3. Air-conditioning units relating to manufacture / production should be entitled to credit. [Sec. 19(7)(c)] Relief sought: • In the above context, the ITC benefit shall be extended to all dealers and in the context of “purchases from a VAT dealer in the course of business”. Accordingly a dealer in construction works i.e., deemed sales shall also have the ITC benefit on capital goods as well. V. Zero Rating 1. Whether sale to SEZ developer is a Zero Rated Sale under section 18?

• To give more encouragement for small contractors and to make the provision a success both for the Revenue as well as the assesses, suggest to adopt erstwhile section 7C of TNGST Act. For reason of leakage of revenue, many dealers prefer a simple and self explanatory provision for statutory provision rather than adopt a complicated statutory method. Sec. 6 of the Act needs to be toned down to make it popular on par with 7C or option under Section 6 shall be “contract wise” and not “year wise”. • Production of NIL deduction certificates in respect of a dealer opting for composition u/s 6 to be permitted. Tax cannot be collected from the Contractee u/s 6(5).

VI. Quarterly submission of ‘C’ Forms: The Madras Chamber is referring the Government Circular No. Acts Cell –IV23187/2009 dated 18th June 2009 by which it has now been made mandatory for all assessees to provide a ‘C’ Form within 3 months of the sale within the same period. • The Chamber has been voicing its concern over the production of ‘C’ Form to support the inter-State sale. The Chamber would like to submit that as the production of ‘C’ Forms has been a vexed and unresolved issue, we would like to advocate that the CT Department accepts the documents in support of the interState sale. This would be within the control of the buyer to produce the consignment way bill indicating the sale to the aﬀected party outside the State of Tamilnadu. We should even involve the invoice numbers to link the same with the actual transaction. These supporting documents viz. invoice copy / Consignment way bill/ declaration / bond of indemnity etc. should be considered legitimate enough proof to justify the claim of the seller for an inter-State Sale. • The Chamber would be extremely grateful if these changes are suitably acknowledged by passing adequate legislative measures.

Obituary A Sankarakrishnan Former President of the Chamber, Mr A Sankarakrishnan passed away on the 9th April at Chennai. He was the President during the period 2006-2007 and was former Managing Director of Kone Elevator India Pvt. Ltd. The Chamber extends its heartfelt condolences to his family members. May his soul rest in peace.

SPOT LIGHT

Draft National Water Policy 2012 Background On June 7, 2012 the Ministry of Water Resources published its Draft National Water Policy 2012 (NWP). The Draft Policy seeks to address issues such as the scarcity of water, inequities in its distribution and the lack of a unified perspective in planning, management and use of water resources. Under the Constitution, States have the authority to frame suitable policies, laws and regulations on water (Item 17 in List II of the Seventh Schedule or the State List). The NWP proposes an overarching national legal framework of general principles on water that can be used by States to draft their own legislation on water governance. The draft NWP was placed before the National Water Board and National Water Resources Council in February 2012. It was finalized and adopted by the National Water Resources Council on August 9, 2012 and is under deliberation by the National Water Board. The current scenario of water resources and their management have given rise to several concerns, some of which are : • Increasing variation in availability of water caused by incidences of water related disasters such as floods and increased erosion. • Poor access to safe drinking water and water for sanitation and hygiene continues to be problem. • Groundwater, through a community resource, continues to be perceived as individual property. It is exploited i n e q u i t a b l y a n d w i t h o u t a ny consideration for its sustainability.

• Grossly inadequate maintenance of existing irrigation infrastructure results in wastage and under-utilization of available resources. There is a widening gap between irrigation potential created and utilized. Basic principles of draft NWP Some of the basic principles that govern the draft NWP are as follows : • The principle of equity and social justice must inform the use and allocation of water. t

A common integrated perspective should govern the planning and management of water resources. Such a perspective would consider local, regional and national contexts and have an environmentally sound basis.

• Water needs to be managed as a common pool community resource that is held by the State under the public trust doctrine to ensure equitable and sustainable development for all. • Water may be treated as an economic good to promote its conservation and eﬃcient use after basic needs such as those of drinking water and sanitation are met. • The river basin should be considered as the basic hydrological unit for the purpose of this policy. Water Framework Law Under the framework proposed by the Draft NWP, water needs to be managed as a community resource by States under the public trust doctrine to achieve food security, livelihood, and equitable and

sustainable development for all. Existing Acts of various States such as the Indian Easements Act, 1882, the Irrigation Acts, etc. may have to be amended accordingly if they give proprietary rights to a land owner on groundwater under his land rather than treated as a community resource. The draft NWP makes recommendations on several issues such as adapting the availability of water to climate change, water pricing and conservation of river corridors, water bodies and infrastructure. This note summarises the key recommendations under each of these sections. Adaptation to climate change The draft NWP specifies initiatives that need to be adopted to regulate the availability of water when it varies due to climate change. The policy highlights the need to enhance capabilities of local communities so they can adopt climate resilient technological options to increase the availability of water. Adaptation strategies include, among others : • Increasing water storage in the forms of soil moisture, ponds, ground water, small and large reservoirs. • Enhancing the eﬃciency of water use through the adoption of agricultural strategies, cropping patterns, and improved water application methods, such as land leveling and drip / sprinkler irrigation. • Stakeholder participation in landsoil-water management with scientific inputs from local research

SPOT LIGHT and academic institutions to evolve diﬀerent agricultural strategies, reduce soil erosion and improve soil fertility.

rain water using farm ponds and other soil and water conservation measures.

• Incorporating coping strategies for possible climate changes in the planning and management of water resource structures, such as dams, flood embankments and tidal embankments.

Demand management and water use eﬃciency

Enhancing water available for use India’s average annual precipitation is about 4,000 Billion Cubic Meter (BCM). Of this, only about 1,123 BCM is utilizable. This limited availability of water will not meet the rising demand caused by population growth, rapid urbanization, industrialization and economic development. The report suggests the following ways to augment the water available for utilization : • Rainfall needs to be used directly and inadvertent evaporation of water needs to be avoided. • Aquifers need to be mapped to know the quantum and quality of ground water resources. Local communities should be involved in this process. • Declining ground water levels in over exploited areas need to be arrested by introducing improved technologies of water use and encouraging community based management of aquifers. Additionally, artificial recharging projects should be undertaken so that more water is recharged rather than extracted from aquifers. • Inter-basin transfers of water from surplus basins to deficit basins / areas need to be encouraged to increase the production of water. • Integrated watershed development activities with groundwater perspectives need to be undertaken to increase soil moisture, reduce sediment yield, and increase overall land and water productivity. Existing programmes such as Mahatma Gandhi National Rural Employment Guarantee Act may be used by farmers to harvest

The draft NWP recommends the following methods to promote and incentivize the efficient use of water : • Systems to benchmark water use, such as water footprints (total volume of water used in an area to produce goods and services) and water auditing (assessment of water use), need to be developed. Continuous water balance and water accounting studies need to be conducted to improve the efficiency of water use from irrigation projects and river basins. • Project appraisals and environment impact assessment for water uses, particularly for industrial projects, should include analyses of water footprints. • Water needs to be saved during irrigation. Methods to encourage water saving include, aligning cropping pattern with natural resource endowments, micro irrigation (drip, sprinkler, etc.) automated irrigation operation, and evaporation – transpiration reduction. Canal seepage water can also be recycled through conjunctive ground water use. • Small local level irrigation through small bunds, field ponds, agricultural a n d e n g i n e e r i n g m et h o d s fo r watershed development, need to be encouraged. • Users of water should be involved in monitoring the pattern of water use if it is causing problems like unacceptable depletion or building up of ground water, salinity, alkalinity etc., Water Pricing For the pre-emptive and high priority uses of water, the principle of differential pricing may have to be retained. Other than these uses, water should be allocated and priced according to economic principles.

• A Water Regulatory Authority should be established in each State. The authority will be responsible for fixing and regulating the water tariff system and charges to be levied. • Water charges should be determined on a volumetric basis. • Recycle and reuse of water should be incentivized through a properly planned tariff system. • Water Users Association (WUA) should be given statutory powers to collect and retain a portion of water charges, manage the volumetric quantum of water allotted to them and maintain the distribution system in their jurisdiction. Conservation of river corridors, water bodies and infrastructure • Conservation of river corridors, water bodies and infrastructure needs to be undertaken in a regulated and scientifically planned manner through community participation. • Encroachments and diversion of water bodies and drainage channels must not be allowed. Wherever such diversions have taken place, they should be restored and maintained to the extent feasible. • Pollution of sources of water and water bodies should not be allowed. Water bodies should be periodically inspected by a third party and stringent punitive action should be taken against persons responsible for pollution. • Legally empowered dam safety services need to be ensured in the Centre as well as States. Appropriate safety measures such as downstream flood management for each dam should be given top priority. Project Planning and Implementation Considering the existing water stress conditions, water resource projects should be planned as per the following efficiency benchmarks : • All clearances, including environmental and investment clearances, required

SPOT LIGHT for implementation of projects should be made time bound to avoid the economic losses incurred due to delays in implementation. • To avoid time and cost over-runs, concurrent monitoring at project, State and Central levels should be undertaken for timely interventions. • Water resource projects should be executed closely after they are planned so that intended benefits start accruing immediately and there is no gap between potential created and utilized. • Local governing bodies such as panchayats, municipalities, corporations, and WUAs should be involved in the planning of projects. Management of flood and drought While eﬀorts should be made to avert water related disasters like floods and droughts, a greater emphasis should be on preparedness for floods and droughts. Emphasis should also be placed on rehabilitation of the natural drainage system. • L a n d , s o i l , e n e rg y a n d wate r management with scientific inputs from local, research and scientific institutions should be used to evolve diﬀerent agricultural strategies and improve soil and water productivity. • Revetments (walls), spurs, embankments, etc., should be constructed on the basis of morphological studies to prevent soil erosion. • Flood forecasting needs to be expanded to the rest of the country and modernized using real time data acquisition system. • Operating procedures for reservoirs should be evolved and implemented so as to have a flood cushion and reduce trapping of sediment during flood season. • Frequency based flood inundation maps should be prepared to evolve coping strategies. Communities should be involved in preparing an

action plan for dealing with floods / droughts. Water Supply and Sanitation • Efforts should be made to provide improved water supply in rural areas with proper sewerage facilities. Least water intensive sanitation and sewerage systems with decentralized sewage treatment plants should be incentivized. • In urban and industrial areas, rainwater harvesting and de-salinization should be encouraged to increase availability of utilizable water. • Urban water supply and sewage treatment schemes should be integrated and executed simultaneously. Water supply bills should include sewerage charges. • Subsidies and incentives should be implemented to encourage the recovery of industrial pollutants and recycling, which are otherwise capital intensive. Institutional arrangements Forums need to be established at the Central and State levels to deliberate upon issues relating to water and resolving diﬀerences in demands for water between users. • A permanent Water Disputes Tribunal should be established at the Centre to resolve disputes expeditiously. • Communities should participate i n t h e m a n a ge m e nt o f wate r resource projects and services. State Governments or local authorities can encourage the private sector to become a service provider through public private partnerships. • I nte g rate d Wate r Re s o u rc e Management should be the main principle for planning, development and management of water resources. Trans-boundary rivers • Efforts should be made to enter into international agreements with neighbouring countries on a bilateral basis for exchange of hydrological data

of international rivers on real time basis. • Riparian (along the banks of rivers) States should be consulted during negotiations about sharing and management of water of international rivers keeping national interests in mind. Database and information system • A National Water Informatics Centre should be established to process hydrological data regularly from all over the country. All hydrological data should be put into the public domain. • More data about snow and glaciers, evaporation, tidal hydrology and hydraulics, river geometry changes, erosion etc. needs to be collected. Such a database should be maintained online to facilitate informed decision making in the management of water. Researching and training needs • Grants should be given to States to update technology, design practices, and planning and management practices. • An autonomous centre for research on water policy should be established to evaluate impacts of policy decisions and evolve policy directives. • To meet the demand of skilled manpower in the water sector, regular training and academic courses in water management should be promoted. A national campaign for water literacy needs to be started for capacity building of stakeholders in the water sector. Implementation of National Water Policy • The National Water Board should prepare a plan of action based on the National Water Policy, as approved by the National Water Resources Council, and monitor its implementation. • State Water Policies need to be drafted / revised in accordance with this policy.

(Source : Sakshi Balani, PRS Legislative Research)

SPOT LIGHT

Draft National Water Policy 2012 The draft National Water Policy 2012 recommended that water other than that required for drinking and sanitation, be treated as an economic good. Subsequent revisions have ensured that the water requirements for food security and agriculture are also considered primary.

rivers and aquifers. Of this, only about 1,123 bcm is utilisable through present strategies, if we don’t consider large interbasin transfers. Though availability of water is limited, demand continues to grow rapidly on account of rising population, rapid urbanisation, industrialisation and economic development. All across the country, rivers are running dry and suﬀer pollution by solid waste and eﬄuents.

An incident that occurred in 1995 remains fresh in my mind after all these years. A friend and I were shopping in a busy area in Coimbatore when a posh car stopped near us. A pair of hands emerged from the window of the vehicle; the hands were washed using a 1-litre bottle of mineral water freshly bought from a shop. The rich can aﬀord mineral water to wash their hands! But what if the poor were made to pay for the water they use? The draft National Water Policy has gone into two revisions, first in May 2012 and then again in July, after being tabled in January when protests were made about the policy treating water as an economic good, and favouring privatisation. Still, the soul of the draft remains intact except for a few points. There is every likelihood that water will become a highly rationed commodity in the future. We will have to pay for any excess water we use after our basic

domestic, sanitation and agriculture requirements have been met. This makes a national-level legal framework to control water use and prevent inter-State, intra-State and regional water conflicts absolutely imperative. With a population of over 1.3 billion (17% of the world’s population), India has only around 4% of the world’s renewable water resources. Its geographical area is 329 Mha, of which 180.6 Mha is arable; a total area of 142 Mha is the net sown area, of which 57 Mha is irrigated. India has the largest irrigated area in the world. The country’s total drainage area is divided into 24 basins, of which 13 major basins have a drainage area of more than 20,000 sq km. According to present estimates, India receives an average annual precipitation of about 4,000 billion cubic metres (bcm), which is its basic water resource. Of this, after considering natural evaporation/ transpiration, only about 1,869 bcm is the average annual natural flow through

Groundwater reserves are being overexploited, sanitation needs are not being met, and water conflicts are on the rise. Add to this, lack of a holistic and inter-disciplinary approach to water management, improper decision-making by public agencies, altering characteristics of catchment areas due to land use and land cover changes, salinisation, and changing rainfall patterns due to climate change. All these factors warrant strict water regulation. Indeed, spreading awareness about water issues and the need to use water judiciously is vital. Water demand for various sectors in 1998 and 2025 in India (billion cubic metres) Sector 1988 Irrigation 524 Domestic use 30 Industrial use 30 Inland navigation 0 Power 9 Environment 0 Evaporation losses 36 Total 629

2025 2050 618 807 62 111 67 81 10 15 33 70 10 20 50 76 850 1,180

Source: Report of the NCIWRDP (1999) What the draft National Water Policy 2012 says • Planning, development and management of water resources

need to be governed from a common integrated perspective taking into consideration the local, regional, State and national context and keeping in mind human, environmental, social and economic needs. • Water needs to be managed as a common pool community resource through a national-level legal framework, under the public trust doctrine, to achieve food security, l i ve l i h o o d a n d e q u i ta b l e a n d sustainable development for all. Existing water Acts may have to be modified accordingly. • Water is essential for sustenance of the ecosystem, therefore minimum ecological needs should be given due consideration. • River basins are to be considered the basic unit for all hydrological planning. Inter-basin transfers of water to be considered on the basis of the merits of each case after evaluating the environmental, economic and social impacts of such transfers. • Promotion of climate change adaptation strategies like increasing water storage, better water use efficiency, proper demand management, incorporation of coping strategies for possible climate change effects during the formulation of mega water projects, and enhancing the capabilities of communities to adopt climate-resilient technological options. • Enhancing the water available for use through status assessment of water resources every five years, direct use of rainfall, and avoidance of inadvertent evapo-transpiration, mapping of aquifers to know the quantum and quality of groundwater, arresting exploitation of groundwater, and considering the river basin as

the basic hydrological unit of all planning. • Integrated watershed development activities with the MGNREGA (Mahatma Gandhi National Rural Employment Guarantee Act) to the extent possible to reduce sedimentation yield and increase water productivity. • Water footprints and water auditing should be developed to promote and incentivise efficient use of water. • Recycle and reuse of water, including return flows, should be the general norm, and incentives for the same to encourage the practice. • Water saving in irrigation use is of paramount importance. Heavy underpricing of electricity which results in wastage of water and electricity to be regulated. • The draft says: ‘For the pre-emptive and high priority uses of water for sustaining life and ecosystem for ensuring food security and supporting livelihood for the poor, the principle of differential pricing may have to be retained. Over and above these uses, water should increasingly be subjected to allocation and pricing on economic principles.’ • A Water Regulatory Authority (WRA) should be established in each State to fix and regulate the water tariff system and charges (on a volumetric basis). Water Users Associations (WUAs) should be given statutory powers to collect and retain a portion of water charges, manage the volumetric quantum of water allotted to them, and maintain the distribution system in their jurisdiction. • Conservation of river corridors, water bodies and infrastructure by preventing encroachment and diversification of

water bodies and restoring them to the extent feasible, avoiding urban settlements in upstream areas and controlling pollution of water bodies through stringent punitive action. • Eﬃciency benchmarks to be prescribed in planning and implementation, done from an ecological, social and climate change perspective. They should be time-bound to avoid economic losses. Local governing bodies like panchayats, municipalities, corporations, etc, and water users associations, wherever applicable, should be involved in planning projects. • Proactive measures like flood forecasting, coping mechanisms and relevant measures to prevent floods and drought are to be planned. • Removal of disparities in water supply to urban and rural areas, tapping surface water for urban domestic water use and integrating water supply and sewage treatment schemes will be given priority. • A permanent Water Disputes Tribunal at the Centre should be established to resolve disputes expeditiously and in an equitable manner. Apart from using the ‘good oﬃces’ of Union or State governments, as the case may be, the paths of arbitration and mediation may also be tried in dispute resolution. • Water resources projects and services should be managed with community participation. Wherever State governments or local governing bodies decide, the private sector can be encouraged to become a service-provider in a public-private partnership model to meet agreed terms of service delivery, including penalties for failure. • The draft facilitates international agreements with neighbouring

countries on a bilateral basis for the exchange of hydrological data on international rivers on a near-real-time basis. • All hydrological data, other than those classified on national security considerations, should be put in the public domain. A National Water Informatics Centre should be established to collect, collate and process hydrological data regularly from all over the country, conduct preliminary processing, and maintain data in an open and transparent manner on a GIS platform.

• The statement that “inter-basin transfers of water should be considered on the basis of the merits of each case after evaluating the environmental, economic and social impacts of such transfers,” appears to understand the diﬃculty in interlinking rivers and its possible negative impacts. • Growing water conflicts warrant a permanent Water Disputes Tribunal, which is taken care of in the draft.

Merits and demerits of the policy:

• Under-pricing of electricity is undoubtedly a reason for wastage of both water and electricity. The importance given in the draft to regulating this is appreciated.

Merits

Demerits :

• The policy deserves praise for its ecological, climate change and conservation perspective.

• The policy sees water as a community resource but also treats it as an economic good, which is contradictory. Approaching water as an incomegenerating resource by government must be executed very carefully. The policy allows for the public-private partnership model and also asks States to exit their “service-provider role” and play a role as regulator. This could lead to distortions in access to water and prices in the long run. As with other policies, the poor will be at the receiving end.

• Adaptation to climate change and the statement that special attention will be paid to mitigation at the micro level by enhancing the capabilities of communities to adopt climate-resilient technological options is welcome. • Revision of the statement “water, over and above the pre-emptive need for safe drinking water and sanitation, should be treated as an economic good so as to promote its conservation and eﬃcient use,” in the initial draft, to “water, after meeting the preemptive needs for safe drinking water, sanitation and high priority allocation for other domestic needs (including the needs of animals), achieving food security, supporting sustenance agriculture and minimum ecosystem needs, may be treated as an economic good so as to promote its conservation and eﬃcient use,” can be welcomed from the perspective that agriculture has been given importance.

• Doing away with priorities mentioned in the earlier drafts (the 1987 and 1992 drafts list the priorities as drinking water, irrigation, hydropower, etc) will bring about confusion in the decisionmaking process and facilitate the role of parties with vested interests (for example, providing flexibility towards allocating water for industrial use at the cost of agriculture).

encroachment of water bodies, and growing exploitation of groundwater resources. For example, according to Clause 3.3 of the 2002 policy, water resources development and management have to be planned for a hydrological unit such as a drainage basin as a whole or for a sub-basin, multi-sectorally, taking into account surface and groundwater. “This has not translated to even one example of planning for a basin or even one instance of planning for surface and groundwater together,” says Chetan Pandit, former Member (Policy and Planning) of the Central Water Commission. • Providing incentives for recycle and reuse of water favours industry. Instead of incentives, strict enforcement of punitive laws to punish those industries that waste water and pollute it should be undertaken. • The draft policy also wants to take away proprietary rights over water, which means no one can claim ownership of groundwater on private land. Though this seems like a good move, it may affect use of water for agriculture unless the point is further clarified. • Intra-State and inter-State water conflicts continue to occur. Existing tribunals, such as the Cauvery Water Tribunal, have not been able to find solutions to them. Water issues are very sensitive issues; unless there is proper understanding among people within States and between States, these conflicts will persist. (Source : S. Ramesh, Team Leader, DHAN Foundation)

• Water policies have existed on paper since 1987, but nothing much has been done on the ground to ensure judicious use of water, to prevent

TN State Budget - Press Release The Madras Chamber of Commerce & Industry (MCCI) broadly welcomes the Budget proposals presented by the State Finance Minister today. This budget has been presented in the backdrop of a diﬃcult economic situation. A number of welfare schemes have been proposed to support the various sectors as well as the general public. Great emphasis has been given to skill development and training and the Chamber welcomes this proposal. This is forward looking and is bound to have a long term impact. The Chamber welcomes the proposal to improve and restore the water bodies as it will help us to mitigate the scarcity of water. Hopefully this would revive the farm sector in the State. The proposal to set up a ship building yard in Thoothukudi will encourage the logistics sector. Adequate steps have been taken to improve the Power shortage by setting up many power projects. However, there is no indication about the deadline for the completion of the projects. The Chamber urges the State Government to support the commissioning of the Koodungulam power plant at the earliest which would greatly help the Industries to run their plants. There are no fresh proposals in respect of Commercial Tax levies. This is a welcome step. Though the Government had organised a pre-budget meeting recently and a number of tax issues were discussed, it is hoped that the Government will take note of them and address them shortly. The general slowdown in the global economy has also aﬀected the State’s growth. Keeping this in mind, the Government has taken certain positive steps to revive the economy through this Budget. Chennai 21st March 2013

New Members:

T. Shivaraman President

Additions to Library

The Chamber extends a warm welcome to the following new members:

Directories:

Info-Drive Analytics Pvt. Ltd Business : IT & ITES

Assocham Strategy Paper – Doubling India’s Exports by 2013-14

Mash Shipping & Logistics Pvt. Ltd Business : Freight Forwarding & Clearing Agents

Combating Economic Instability Following Global Slowdown – Assocham

Lee & Muirhead Pvt. Ltd. Business : Logistics Management Oren Hydro Carbon Pvt. Ltd. Business : Manufacturers and exporters of specialty mud Chemicals BIM Alumni Association (Aﬃliated Member) Business : Management education & alumni network

The Luxury Directory - Assocham

Inclusive Growth through PPP Policy Imperatives Assocham India Micro, Small & Medium Enterprises Report 2012 – Institute of Small Enterprises and Development Sustainability Report 2011-12 : Five Elements –towards a Cleaner world – Chemplast Sanmar Ltd. Annual Reports: National Consumer Helpline - 2011-12 India Energy Forum – 2011-12 India Energy Year Book 2013 – India Energy Forum

ECONOMIC REVIEW CONTENTS 1.

Macroeconomy

1.1 Amendments to the Combination Regulations by CCI 1.2 Foreign Investment in Government Securities and Corporate Bonds Rationalised 1.3 The Asian Development Bank (ADB) and the Government of India Sign $ 252 Million Loan

Corporate Sector

2.1 Performance of Eight Core Industries 2.2 Sectoral Deployment of Bank Credit

1. Macroeconomy 1.1 Amendments to the Combination Regulations by CCI The Competition Commission of India (CCI) has amended the Combination Regulations with a view to further simplify the filing requirements and bring about greater certainty in the application of the Act and the Regulations. The provisions of the Competition Act, 2002 (“Act”) relating to regulation of combinations have been in force with eﬀect from 1st June, 2011. These were subsequently amended with a view to relax certain requirements in regard to filings by corporate entities for combinations that are unlikely to raise adverse competition concerns. The highlights of the major changes in the Combination Regulations are as under: The Regulations now do not require a notice to be filed for acquisition of shares or voting rights of companies if the acquisition is less than five percent of the shares or voting rights of the company in a financial year, where the acquirer already holds more than twenty five percent but less than fifty percent of the shares or voting rights of the company. In a step which would significantly reduce compliance requirements, the provision for giving notice is now dispensed for mergers/amalgamations involving two enterprises where one of the enterprises has more than fifty per cent (50%) shares or voting rights of the other enterprise. To provide clarification on the nature of intra-group acquisitions for which notice has to be given, Item 8 of Schedule I is amended to state that the relaxation would not apply where the acquired enterprise is jointly controlled. To avoid repetition and to have one category of exemption for acquisition of certain current assets like stock-in-trade, raw materials etc., Item 5 and Item 9 of Schedule I are clubbed and provided as one category under Item 5.

1.2 Foreign Investment in Government S e c u r i t i e s a n d C o r p o rate B o n d s Rationalised The Central Government in consultation with Reserve Bank of India (RBI) and SEBI has been progressively liberalizing/ rationalizing the scheme for foreign investment in Government Securities and Corporate bonds keeping in view the evolving macroeconomic scenario and financing needs of the economy. Till now FIIs were permitted to invest USD 25 billion in Government Securities (Comprising of two sub-limits of USD 10 billion and USD 15 billion), USD 26 billion in General Corporate bonds (comprising of USD 25 billion limit for FIIs and USD 1 billion limit for QFIs) and USD 25 billion in Long-term infra bonds (comprising of USD 10 billion limit for IDFs, USD 12 billion limit for FII investment in long-term infra bonds and USD 3 billion limit for QFI investment in Mutual Fund Debt schemes which invest in Infrastructure sector). The various sub-limits stated above were subject to diﬀerent sets of conditions in terms of original maturity, lock-in period and residual maturity restrictions. On review, it was observed that the existing framework of various debt sub-limits and associated conditions with respect to each sub-limit led to complexity and inflexibility for investors and hampered investment in debt securities. Therefore, in order to encourage greater foreign investments in INR denominated debt instrument, it was decided in consultation with RBI and SEBI to simplify the framework of FII debt limits, the allocation mechanism of these debt limits and also lay down a perspective plan for enhancement of these debt limits in the future. Features of the new policy approach are as follows: a. The existing debt limits will be merged into following two broad categories:

I. Government securities of US$ 25 billion (by merging Government Securities old and Government Securities long term) and, II. Corporate bonds of US $ 51 billion dollars (by merging US $ one billion for QFIs, US $ 25 billion dollars for FIIs in corporate bonds and US $ 25 billion for FIIs in long term infra bonds). b. The entire limit in both the Government securities and Corporate bonds categories will be made available to all eligible classes of foreign investors, including FIIs, QFIs, and long term investors such as Sovereign Wealth Funds (SWFs), Pension Funds, Foreign Central Banks etc. c. Out of USD 25 billion limit for Government Securities, a sub limit of US $ 5.5 billion has been provided for investment in short term papers such as treasury bills. d. Similarly in case of USD 51 billion limit for corporate bonds, a sub limit of US $ 3.5 billion has been provided for investment in short term papers such as commercial papers. e. These sub-limits have been carved out based on the current holdings of such short term instruments by FIIs and have been provided so that existing investments are not adversely aﬀected. f. Because of the room created by unifying categories, the current SEBI auction mechanism allocating debt limits for corporate bonds will be replaced by the ‘on tap system’ currently in place for infrastructure bonds. g. In order to allow large investors to plan their investments, the Government will review the foreign investor limit in corporate bonds when 80% of the current limit is taken up. Further, it will also enhance the limit on government bonds as and when needed, based on utlilisation levels, demand from foreign investors, macro-economic requirements and a prudent oﬀ shore: on shore balance. h. To provide a guide to investors, it has been decided that the annual enhancement of the Government

ECONOMIC REVIEW bond limit will remain within 5% of the gross annual borrowing of the Central Government excluding buy backs. 1.3 The Asian Development Bank (ADB) and the Government of India Sign $ 252 Million Loan The Asian Development Bank (ADB) and the Government of India signed here a $252 million loan to continue improving rural roads in the States of Assam, Chhattisgarh, Madhya Pradesh, Odisha, and West Bengal. The loan represents the first tranche of a US$ 800 million financing facility under the Rural Connectivity Investment Program. The loan will construct 3,461 km of all-weather rural roads in the five States, benefiting nearly 1,600 rural habitations. The second goal is to improve the capacity of implementing agencies through rural connectivity training and research centers and rural roads network management units. The Ministry of Rural Development (MoRD) is the executing agency of the project at the central level while the implementing agencies at the state level will be the respective State Rural Roads Development Agencies. The first tranche is expected to be completed in December, 2015. The first tranche from the ordinary capital resources of ADB has a 25-year term including a grace period of 5 years, commitment charge of 0.15% per year and interest rate to be determined in accordance with ADBâ&#x20AC;&#x2122;s LIBOR-based lending facility. The Government of India (MoRD and concerned States) will provide counterpart funds of $89 million for a total first tranche project investment cost of $341million. A Capacity Development Technical Assistance (TA) for US$ 2,300,000 (US$ 1,300,000 JFPR and US$ 1,000,000 Technical Assistance Special Fund-ADB) is also under process, as grant from ADB, for institutional development for Rural Roads Asset Management and will support the piloting of Rural Roads Network Management Units (RRNMUs) and establishment of the Rural Connectivity Training and Research Centres (RCTRCs) for the Rural Connectivity Investment Program. The said TA will be conducted for a period till June, 2015.

2. Corporate Sector

10.7% growth during the same period of 2011-12.

2 . 1 Pe r f o r m a n c e o f E i g h t C o r e Industries

Cement production registered a growth of 3.9% in February 2013 against its 9.8% growth in February 2012. The cumulative growth of Cement Production was 5.5% during April-February 2012-13 compared to its 6.7% growth during the same period of 2011-12.

The Eight core industries have a combined Index of 144.4 in February 2013 with a growth rate of (-) 2.5% compared to their 7.7% growth in February 2012. The decline in growth in February, 2013 was on account of negative growth witnessed in Electricity generation and in the production of Crude Oil, Coal, Natural Gas and Fertilizers. During AprilFebruary 2012-13, the cumulative growth rate of the Core industries was 2.6 % compared to their growth at 5.2% during the corresponding period in 2011-12. Coal production registered a growth of (-) 8.0% in February 2013 compared to its growth at 18.0% in February 2012. In cumulative terms, Coal production recorded a growth of 3.7% during AprilFebruary 2012-13 compared to its growth at 0.5% during the same period of 201112. Crude Oil production registered a growth of (-) 4.0% in February 2013 compared to its 0.3% growth in February 2012. Cumulatively, Crude Oil production recorded a growth of (-) 0.7% during April-February 2012-13 compared to its growth at 1.4% during the same period of 2011-12. The growth rate of Natural Gas production was negative both in February, 2013 at (-) 20.1% and in February 2012 at (-) 7.6%. Cumulatively also, Natural Gas production registered a negative growth of (-) 14.2% during April-February 2012-13 and (-) 8.8% during the same period of 2011-12. Petroleum refinery production had a growth of 4.3% in February 2013 compared to its growth at 6.0% in February 2012. In cumulative terms, Petroleum refinery production registered a growth of 7.0% during April-February 2012-13 compared to its 3.3% growth during the same period of 2011-12. Fertilizer production registered a growth of (-) 4.0% in February 2013 against its growth at 4.1% in February 2012. Cumulatively, Fertilizer production registered a growth of (-) 4.0% during April-February 2012-13 compared to its 0.3% growth during the same period of 2011-12. Steel production had a growth rate of 0.5% in February 2013 against its 8.7% growth in February 2012. Cumulatively, Steel production registered 2.1% growth during April-February 2012-13 compared to its

Electricity generation had a (-) 4.1% growth in February 2013 compared to its 8.6% growth in February 2012. The cumulative growth of Electricity generation was 4.0% during April-February 2012-13 compared to its 8.7% growth during the same period of 2011-12. 2.2 Sectoral Deployment of Bank Credit Sectoral deployment of credit collected from select 47 scheduled commercial banks accounting for about 95 per cent of the total non-food credit deployed by all scheduled commercial banks for the month of February 2013 reveals: On a year-on-year (y-o-y) basis, non-food bank credit increased by 14.4 per cent in February 2013 as compared with the increase of 15.4 per cent in February 2012. Credit to agriculture increased by 18.4 per cent in February 2013, up from 8.0 per cent in February 2012. Credit to industry increased by 14.7 per cent (y-o-y) in February 2013 as compared with the increase of 19.1 per cent in February 2012. Deceleration in credit growth to industry was observed in the entire major sub-sectors, barring beverage and tobacco; leather and leather products; wood and wood products; petroleum, coal products and nuclear fuels; cement and cement products; chemicals and chemical products and infrastructure. Credit to the services sector increased by 12.7 per cent in February 2013 as compared with the increase of 14.7 per cent in February 2012. Credit to NBFCs increased by 16.6 per cent in February 2013 as compared with the increase of 30.9 per cent in February 2012. Personal loans increased by 13.5 per cent in February 2013 as compared with the increase of 12.2 per cent in February 2012. (Source: Assocham)

POST BUDGET WORKSHOP 2013-14

T.Shivaraman, President, MCCI, welcoming the gathering.

T.Shivaraman presenting a memento to Chitra Venkataraman.

Sriram Seshadri addressing on Direct Tax Proposals.

R.Raghuttama Rao making a presentation on the Economic Implications of the Union Budget 2013. Seated l to r : K.Saraswathi, T.Shivaraman, Hon’ble Justice Chitra Venkataraman and S.G.Prabhakharan

Arvind P Datar at the mike. Seated l to r : V.Ranganathan, Sriram Seshadri and K.Vaitheeswaran.

A view of the audience.

K.Vaitheeswaran addressing on Indirect Tax Proposals.

MCCI & MMA Video discussion on “ Effective Presentation”

R.A.Nadesan. Corporate Trainer interacting with the participants.