of doing business is welcomed by the industry. Mudra Bank to promote SMEs is a good step as Small and Medium Enterprises require a push for an all-round development of the economy. A major positive of the Budget is the higher allocation for infrastructure and the statement by the Finance Minister that the Government should take the higher share of risk in PPP projects, especially with respect to regulatory risks. The recognition of the need to “revisit and revitalize” the PPP model is refreshing. The corporatization of ports, the introduction of tax free infrastructure bonds for the projects in the rail, road and irrigation sector, increase in threshold limit for domestic transfer pricing, deferring GAAR, monetization of gold and the new emphasis on technology as a means of plugging the gaps are all welcome moves. The Finance Minister mentioned that the government is on-track with respect to two “game-changers” – the GST and the JAM (Jan-Dhan, Aadhar and Mobile) trinity. The GST is expected to be in place by April 2016. This does seem as a possibility now owing to the Budget’s focus on “co-operative and competitive federalism”. This approach to federalism will hopefully quicken the consensus process necessary for GST. The JAM trinity is expected to change the dynamics of direct benefits transfer by making it corruption and leakage free. It is hoped that their implementation is done in a missionmode. The GDP growth rate projection between 8-8.5% for 2015-16 exudes a sense of optimism. Inflation to be contained around 5% is a healthy sign. Enhanced allocation of funds to MGNREGA shows that this government is intent on issues, and will continue to support the schemes of earlier government. Abolition of Wealth Tax which has been compensated by the proposal of 2% surcharge for the super-rich with annual incomes in excess of Rs.1 crore is a smart move. On the flip side, the budget did not have any significant step towards rationalization of the tax structure, reforming the labour market or reducing red tapeism. In other words, the unease of doing business because of endless paperwork and outdated policies and procedures and the undue harassment from regulatory authorities has not been very effectively dealt with, in the budget. Though, there is a lot of talk on Make in India, there are no clear cut measures to incentivize the manufacturing sector
which is a setback for the Industries. Also, the increase in service tax to 14 %, though on expected lines, could be inflationary in the short run and could have an adverse impact on the inflation control, hitting the poor and middle classes. Further, the fact that the revenue for the Government is increased in indirect taxes, which will be borne mostly by the poor and the middle classes make it highly regressive. Stringent law to curb black money and money laundering is a welcome step. Though the Government’s resolve to take on the issue of black money head-on is to be appreciated, it remains to be seen whether the legal provisions will be sufficient enough to tackle the menace. It should preferably be supplemented with the strengthening of the Financial Intelligence Unit (FIU) and Task Force. Studies have revealed that a major chunk of black money is in India owning to round-tripping. The Government should also look at this along with the money in foreign accounts. Only such a multi-pronged approach will ensure enforcement and compliance. Overall, the Budget does contain a lot of positives for the industrial eco-system of the nation and a lot of it hinges on the successful implementation of the schemes. It is also fair to remember that budgets are not magic wands to bring all the changes which the economy desires at one stroke. Lot of other forces do play a role and many things can happen only gradually with persistent efforts. It is the need of the hour to remain optimistic and upbeat about the economic future of the country. Let us believe in India’s “power to fly” and let us work together for realising that! Wishing all the members a very Happy Tamil New Year!
From the President’s desk
Dear Members, Union Budget 2015-2016 After a lot of expectation and speculation preceding the budget, the Union Budget for FY 2015-16 was tabled on the 28th Feb. Our Hon’ble Prime Minister Mr. Modi tweeted that the budget would “further reignite our growth engine”. The Finance Minister Mr. Arun Jaitley reiterated by stating “My proposals, lay down the roadmap for accelerating growth”. All the pre budget hype was mainly because of the fact that this is the first full term budget of the present Government. In our country, budgets are looked upon not just as a financial plan for the country, but expected to be a game changer with lot of policy reforms getting announced in the same year on year. The policy paralysis we have been experiencing in the past and the new Government’s assurance that the reforms would be fast tracked once they assumed office – all these heightened the expectations of different stakeholders from the budget . That is why the first reaction from many quarters to the budget are that there are no “big bang” announcements in the same. Most of the times our budgets come out with certain sensational announcements and invariably their implementation remain as a question mark. This budget digressed from the norm and avoided populism in favour of economic growth, social security and ground reforms. It is obvious that the focus was long term, as evidenced by examples such as the timeline given for the corporate tax rates. It is also evident that the Government is keen on setting a precedent for the Budget. For instance, the Union Budget refrained from taking the usual line of making changes to income tax rates, similar to how the Railway Budget avoided on announcing new trains. Two positive signs are obvious in the budget. One: the thrust on Fiscal discipline to contain the fiscal deficit to 3.9% , 3.5% and 3% respectively in the next coming years is a welcome move. Second, the intention to consolidate different institutions and structures to avoid duplication of procedures and control! Institutional reforms such as setting up a Public Debt Management Agency, merging of FMC with SEBI, setting up a sector agnostic Grievance Agency for financial redressal, and setting up a unified National market for Agriculture, can all be viewed as moves towards “Good Governance”. If successful, they will be instrumental in improving the investor and business climate. On the reforms front, the proposal to set up a panel to improve Ease of Doing Business and the slew of measures to encourage Start Ups, MSMEs, to boost investor sentiment and enhance the ease
SG.Prabhakharan President
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Chamber’s Activities SPECIAL PROGRAM 20th - 21st February 2015
Advanced Training Program for Aspiring Women Directors
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he Madras Chamber of Commerce & Industry, in its 179th year of service to Trade and Industry launched a unique initiative to commemorate the International Women’s Day celebrated on March 8th. The aim is to empower Women in the Corporate World. The unique, first of its kind program is a testament to the Chamber’s visionary perspective, as it catered to the demands of the recently amended Companies Act.
Ms. K.Saraswathi briefing the participants about the Training Program
The current Companies Act 2013 mandates that every listed company and every public company with a minimum paid up share capital of Rs.100 crore or an annual turnover of at least Rs.300 crore should appoint at least one Woman Director with the deadline being March 31, 2015. As a direct consequence of this law, there will be a great demand for women who are capable of taking on such responsibilities and executing them appropriately.
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Great Lakes Institute of Management (GLIM), a well re puted business school, providing top quality continued management learning to Corporate Leaders was the knowledge partner for this exclusive training program held on February 20th and 21st 2015 at Hotel Raintree, St. Mary’s Road, Alwarpet, Chennai – 18
Under the leadership of Mr. S.G.Prabhakharan, President, MCCI, Ms.Gayathri Sriram, MD, Ucal Auto Pvt. Ltd, Member, General Committee of the Chamber initiated this high level training program with the Sub Committee having Mr. V. Ranaganthan and Mr. P.Viswanathan as its members.
The aim, is to create a pool of competent, board ready women directors, who would be equipped with necessary knowledge and skills to be inducted into corporate boards.
The Chief Guest for the Inauguration was H.E. Mr. Achim Fabig, Consul General, Germany, Chennai. In his inaugural address he expressed appreciation for the Chamber’s initiative with regard to this program and added that India is not alone in this direction since in Germany too there is legislation that has
Dr.Suresh Srinivasan taking a session on Strategic Outlook
come up insisting Corporate Boards to have 30% Women representation by end of 2016. He concluded by encouraging Corporates to go all out and appoint women.
Chamber’s Activities
The Technical Sessions were conducted by experts from GLIM and MCCI as follows:z Dr.Suresh Srinivasan on Strategic Outlook z Mr.Sam Murali Prasad on Company Law and Responsibilities of Board Members z Prof. Shanti Srikant on Corporate Finance z Dr. G. Radhakrishnan on Assertiveness and Effective Communication
Mr.Sam Murali Prasad addressing the participants on Company Law and Responsibilities of Board Members
In the Valedictory function, Mr. Ram Venkataramani, Vice President of the Chamber stated that it is a timely program organised by the Chamber. He pointed out that women board members can bring in the much needed diversity to the Board and new perspectives to the Board room discussions. The Chief Guest Ms. Ranjana Kumar, former CMD, Indian Bank and currently Chairperson Advisory Board on Bank, Commercial and Financial Frauds (ABBCFF) launched the Women Director’s Forum. In her address, she emphasized the need for Women Directors to understand thoroughly the roles they have to play in bringing values to Companies as well as to Shareholders and also about the Companies and the Industries in which they would be actively involved. As part of the valedictory function, the logo for the Women Directors Forum was launched. There were 26 women participating from diverse fields. Joint Certificates by MCCI and GLIM were issued to the Participants. The feedback from the participants was also positive and this was the first successful step in developing a database of 100 “Board ready” women by the end of 2015. This
Prof. Shanti Srikant making a presentation on Corporate Finance
Dr. G. Radhakrishnan addressing on Assertiveness and Effective Communication
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Chamber’s Activities
Mr. Ram Venkataramani, Vice President, MCCI welcoming Ms. Ranjana Kumar, Former CMD, Indian Bank with a bouquet of flowers.
Ms Ranjana Kumar launched the Women Director Forum Logo and addressed the Participants.
26 high profile participants with the organizers – MCCI and GLIM
exclusive program is not a one-time exercise and the Chamber would be having regular follow up sessions, the first of which being scheduled on Finance in the month of April 2015.
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The program received wide coverage in leading newspapers.
Chamber’s Activities SPECIAL MEETING 16th-19th March 2015
British Business Group (BBG) Meeting at London
M
r. S. G. Prabhakharan, President, MCCI represented the Chamber at the meeting of the British Business Group at London. The BBG meeting was arranged between March 16, 2015 and March 19, 2015 in London, to enhance trade and business between UK and Tamil Nadu. He had the privilege of addressing the UK Delegates in a major conference organised by BBG at the House of Parliament on March 17, 2015. The visit ended with the networking dinner by BBG on 19th March.
Mr. S.G. Prabhakharan addressing in the House of Parliament- UK, as part of BBG UK India Summit.
A view of the huge turnout of participants in the BBG UK India Summit at the House of Parliament, UK.
DOING THE HONORS 10th February 2015
Presentation by Officials from Peel Ports, UK
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he Chamber hosted a meeting for the officials from Peel Ports, UK on February 10, 2015 at the Chamber’s Conference room. This meeting was organized under the auspices of the Logistics Committee. The Peel Ports team from UK was represented by Mr. Gary Hodgson, Group COO and Mr. Peter Faker – Group Sales Director.
Interactive meeting with the Officials from Peel Ports at the Conference room, MCCI
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Chamber’s Activities Mr. S.G.Prabhakharan, President, MCCI welcomed the team and gave a brief introduction about the Chamber. Mr. J.Krishnan gave an overview of the EXIM trade in Chennai. The UK team made a presentation about their facilities and explained how better connectivity could be provided by the UK Ports to our Chennai EXIM Industry. Mr S G Prabhakharan presenting MCCI Coffee Table Book to Peel Ports officials
FOOD FOR THOUGHT 21ST March 2015
FFT on “Is entrepreneurship Gender Neutral
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o commemorate International Women’s D ay o n M a r c h 8 t h , t h e Chamber organised a FFT on “Is Entrepreneurship Gender Neutral?” on March 21, 2015 The program aimed to discuss questions like: Why women entrepreneurship is taking off at a lesser speed? Do women have specific added challenges to become entrepreneurs? Whether the entrepreneurial eco system in India is equally conducive to both men and women ? Dr. Geetha Premkumar, Director, Vector Indo Janix Pvt. Ltd., began by stating that women entrepreneurs are definitely low in number and then proceeded to list the possible reasons for the same. Among the reasons and the
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Dr Geetha Premkumar, Director, Vector Indo Janix Pvt.Ltd., making a presentation
Ms Sarada Ramani, CEO, CI Global Technologies addressing the audience
Chamber’s Activities obstacles, a dominant one was the conservative social outlook. She concluded with an overview of the pitfalls and the corresponding solutions of the current Entrepreneurship eco-system.
Mr Navneet Raman, CFO, Nucleus Satellite Communications (Madras) Pvt.Ltd., addressing the audience
Speakers interacting with audience during the Q & A Session
A view of the audience
Ms. Sarada Ramani, Chief Executive Officer, CI, Global Technologies, presented a wide range of issues that plague women entrepreneurship in these times. She opined that change is happening but many problems still remain and unless these are resolved, women entrepreneurship cannot take off in large numbers. She concluded b y s t r o n g ly s u g ge s t i n g that the Madras Chamber should create a Women Entrepreneurs Angel Network to fund and mentor women and she offered her support in helping the Chamber to create such a network. Mr. Navneet Raman, Chief Financial Officer, Nucleus Satellite Communications (Madras) Pvt. Ltd., agreeing with the previous speakers, added that times are definitely changing and that men should be proactive in removing the stigma. He opined that the technology revolution will help improve the statutory process and concluded that the avenues for growth are increasing, especially with the advent of factors like e-commerce. There was a vibrant interaction by the participants.
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Chamber’s Activities SOWING THE SEEDS 28th February 2015
Union Budget Presentation
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he Union Budget Presentation by Finance Minister, Mr. Arun Jaitley, was viewed in the office of Mr. T.Shivaraman, immediate Past President, along with a few of the GC and Expert Committee Members. The consolidated views were given as a press release thereafter. The Chamber’s views were published in The Hindu and Economic Times.
3rd March 2015
Post Budget Workshop on Central Budget & Finance Bill 2015-2016
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Workshop on Central Budget & Finance Bill 2015-16 was organised on March 3, 2015 at Hotel GRT Grand, following the release of the Union Budget on 28th February by the Finance Minister, Government of India. Dr. S. Narayan, Special Guest for this program, set the tone for the event by his incisive analysis of the macroeconomic picture. He provided fresh insight on the issue of liquidity with specific thrust on few sectors like the real estate sector and interacted with the participants. M r. S r i r a m S e s h a d r i , Partner, BMR Legal and Chairman, MCCI Expert Committee on Direct Taxes, made a succinct analysis of the entire range of issues concerning Direct Taxes which helped the participants g a i n a c o m p r e h e n s ive understanding of the recent changes and their consequences.
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Mr. T.Shivaraman, Immediate Past President, MCCI greeting the Special Guest Dr. S. Narayan, Advisor, Athena Infonomics, Former Finance Secretary, GoI & Economic Advisor to the Prime Minister
Dr. S. Narayan, Special Guest addressing the participants.
Mr. Sriram Seshadri, Partner, BMR Legal and Chairman, MCCI Expert Committee on Direct Taxes making a presentation on a range of issues concerning Direct Taxes
Chamber’s Activities M r. K . Va i t h e e s w a r a n , Advocate & Tax Consultant and Chairman, MCCI Expert Committee on Indirect Taxes, made the analysis of the gamut of complex issues in the Indirect Taxes proposals armed with cricketing analogy which provided an interesting and easy understanding to the participants. Mr.K.Vaitheeswaran, Advocate & Tax Consultant and Chairman, MCCI Expert Committee on Indirect Taxes making an analysis of Indirect Taxes.
Mr. M.R. Venkatesh, Partner, GSV Associates & Chairman, MCCI Expert Committee on Economic Affairs summing up.
Mr. M.R. Venkatesh, Partner, GSV Associates & Chairman, MCCI Expert Committee on Economic Affairs, summed up the program and then provided fodder for thought by touching upon specific issues like black money and ease of doing business. The program was very well attended by 70 participants.
A view of the audience
17th - 18th March 2015
Awareness program on TSP (TNVAT) at Coimbatore & Trichy
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he Chamber received positive responses during the Awareness program on TNVAT at Madurai and recognised the need for such awareness programs in other cities as well. Hence, an Awareness program on TSP was arranged under
Ms. K. Saraswathi welcoming the Chief Guest Mr.Ajay Yadav IAS Joint Commissioner, Commercial Taxes, Coimbatore and Mr. Venkat Prakash representing TCS – TNVAT and the participants
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Chamber’s Activities the auspices of the VAT Committee at Coimbatore on March 17, 2015 and at Trichy on March 18, 2015. Mr. S.Sankaranarayanan, Deputy Secretary represented and coordinated the activities in Coimbatore & Trichy. Ms. K. Saraswathi attended the program at Coimbatore. The TSP is a new software d eve l o p e d b y TC S f o r availing the e-services of t h e C o m m e r c i a l Ta xe s Department, Government of Tamil Nadu. The aim is to reduce the hardships and minimise the conflicts between the Government and the assessees. TSP cover all the procedural aspects of Tax remittances and tax management. This program was mainly intended for Senior Executives in Departments of Taxation, Finance and Information Technology in Member Companies. Mr.Ajay Yadav IAS Joint Commissioner, Commercial Taxes, Coimbatore was the Chief Guest for the Awareness session at Coimbatore. He appreciated the Chamber for organising such awareness programs. He further informed that the TSP would be released in two phases. The 1st phase would cover, e-registration, e-renewals, e-payments, , e-returns and statutory forms. The 2nd Phase would cover check post, enforcement,
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A view of the audience
Mr.S.Sankaranarayanan, Deputy Secretary, MCCI welcoming the Chief Guest and Delegates
Mr.Shanmuganathan, Joint Commissioner, Commercial Taxes, Trichy addressing the participants
appellate, CST sales and more connected transactions. Provisions for GST transactions have been set up in the TSP portal. The objective of the TSP would be providing anytime anywhere access to services and reduction in service turn around time and minimal physical interaction with the department. He further stated the 1st phase may roll out in the first week of April and the 2nd phase would be in May 2015.
Mr.Venkat Prakash and Mr.Siva Subramanian both representing TCS-TNVAT made demo presentations and interacted with the delegates. There was a good interaction from 50 participants in Coimbatore With regard to Trichy, Mr.Shanmuganathan, Joint Commissioner, Commercial Taxes, Trichy was Chief Guest and he addressed the participants in
Chamber’s Activities the Inaugural session at Trichy. He too expressed appreciation to the Chamber for organising this awareness program. 30 Participants took part in the training in Trichy. The suggestions by the participants in Trichy and Coimbatore have been noted by TCS officials to take it forward to the Government, before implementation.
SUSTAINABLE CHENNAI FORUM ACTIVITIES 26th - 28th February 2015
Water Expo Chennai Trade Centre, Nandambakkam, Chennai
W
ater Today Pvt Ltd organized t h e 9 t h E d i t i o n o f Wa t e r Expo from 26th February 2015 to 28th February 2015 at Chennai Trade Centre, Nandambakkam, Chennai. The Chamber, which has been one of the supporting organizations in the earlier editions of the Water Expo in Chennai, as part of its Sustainable Chennai Forum (SCF) activities, extended its support for this edition as well. A stall was allotted for MCCI to showcase its activities of Sustainable Chennai Forum (SCF) and
Water Expo 2015 – MCCI Stall at the Water Expo
this provided a platform for the Chamber to create awareness about the activities of SCF to the participants of this water expo. The Chamber also had the opportunity to interact with other exhibitors who are active in water management, so as to enhance the network of SCF.
FACILITIES
The Chamber has a conference room which can accommodate 25 persons which can be used as a training hall for a nominal rent. LCD Projector with screen is available for use. For more details, contact the Chamber vide email : madraschamber@madraschamber.in or call 044 24349452/24349871.
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General Committee
The Committee held its monthly meetings in February and March and discussed the following issues among other issues
Representation made to the Principal Secretary, Commercial Taxes & Registration Department
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he Committee was informed that a representation was made to Mr.S.K.Prabakar, Principal Secretary, Commercial Taxes & Registration Department highlighting the concerns of the members regarding the following issues by the Expert Committees on Indirect Taxes and VAT:• Section 19 (2)5 of the Tamil Nadu Value Added Tax {Fifth Amendment) Act 2013 • Declaration of Usage of Industrial inputs covered under SL.No 67 of Part B- First Schedule to TNVAT Act • CST Assessment for the year 2013-2014 and20142015 Subsequently, the Government of Tamil Nadu considered the representation made under Section 19(2)5 and have introduced TN Act 5 of 2015.The Chamber had expressed its sincere thanks to the Government.
Global Investor’s Meet - May 23rd and May 24th, 2015
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he Committee was informed that the Chamber is one of the Partner Chambers with the Government of Tamil Nadu in organizing GIM which is to be held on May 23rd and 24th in Chennai. The Committee was informed about the report prepared by the Tamil Nadu Guidance Bureau on the Policy Reforms and the Best Practices Matrix for improving the investment climate based on the recommendations by Union Planning Commission and on the suggestions by various bodies. The fact that, MCCI Study on Manufacturing in Tamil Nadu-A Regulatory Roadmap has found a special mention in their report was appreciated. Further the Committee was informed that MCCI is also a member of the Seminar Committee constituted under the Chairmanship of the Principal Secretary, Planning and Development Department, among various committees formed to provide an institutional framework for the conduct of GIM.
OTHER MEETINGS
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he Chamber is one of the Partner Organizations for Global Investors Meet 2015 to be organized by the Government of Tamil Nadu on 23rd and 24th May 2015 at Chennai Trade Centre.
the Planning & Development Department, Govt. of TN to discuss the activities for the Global Investors Meet to be held in Chennai on 23rd & 24th May 2015.
• Mr. S.Sankaranarayanan and Mr. Raghuttama Rao attended the first meeting with the Guidance Bureau regarding the Global Investors Meet 2015 at the Secretariat on 9th February 2015.
• Ms. K.Saraswathi had a discussion with the Member Secretary, State Planning Commission at the SPC office on 25th February 2015 regarding programs and studies for the year 2015-2016.
• Mr. S.Sankaranarayanan attended the first Seminar Committee meeting of the Global Investors Meet 2015 at the Secretariat on 12th February 2015.
The Madras Chamber and Turkish Indian Chamber of Commerce & Industry had signed a MOU to strengthen the trade relations. The Turkish Indian Chamber of Commerce & Industry opened its office in Chennai and during the inauguration Mr. S.G.Prabhakharan, one of the speakers
• Ms. K. Saraswathi and Mr. S.Sankaranarayanan attended the Seminar Committee meeting held at
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congratulated the Turkish Indian Chamber. The meeting at Hotel GRT Grand on 9th March 2015 was also attended by Ms. K. Saraswathi • Mr. S.G. Prabhakharan, Ms. K. Saraswathi and Mr. S.Sankaranarayanan attended the Interactive session with Mr.Shaktikanta Das, IAS Revenue Secretary by CII at Hotel Taj Coromandel on March 11, 2015. • Ms. K.Saraswathi attended the Queen’s Birthday Celebration at the British Deputy High Commission on 12th March 2015. • Ms. K.Saraswathi attended the USIEF Fulbright Nehru Reception on 13th March 2015 • Ms. K.Saraswathi attended the MMA’s Women Manager’s convention on 14th March 2015.
General Committee • Ms. K.Saraswathi visited the GEEDEE Training Institute at Coimbatore and had a discussion regarding collaborative activities for the Skill Development Centre on 17th March 2015. • Ms. K.Saraswathi was the Panelist for the Indo French Chamber Commerce & Industry event on “Women in India- Success Stories” at the Indo French Culture Centre on 17th March 2015. • Ms. K. Saraswathi attended the CII Southern Region Annual Regional Meeting 2015 – Public Session on “Entrepreneurship – Enabling Make in India” on 18th March 2015. • Ms. K.Saraswathi attended the JCCIC 10th Anniversary Foundation on 19th March 2015.
Expert Committees The following committees had its meetings and are following up on various issues, the important discussions being highlighted below
Expert's Corner
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Direct Taxes Committee – Post Budget Representation
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Environment, Pollution Prevention & Control - to prepare a handbook of case studies for all Renewable Energy.
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Company Law/Corporate matters – Evaluation of Directors Program.
REPORT OF THE FOURTEENTH FINANCE COMMISSION this space for articles from these Experts in this feature Experts’ Corner.
Mr. V. Sriram, CEO, ICRA Management Consulting Services Ltd., Co-Chairman, Expert Committee on Financial Sector
The 14th Finance Commission (14th FC) was constituted on 2nd January, 2013 and submitted its report on 15th December, 2014. The recommendations for the period from 1st April, 2015 to 31st March, 2020 were presented for discussion on February 24th 2015. The key purpose of the Finance Commission is to recommend: •
Vertical Devolution: The distribution of the net proceeds of taxes of the Union between the Union and the States;
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Horizontal Devolution: The allocation between the States of the respective shares of such proceeds.
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Expert's Corner While the finance commission recommends on a number of other aspects in the areas of Fiscal Consolidation, Public Expenditure management, Pricing of public utilities and other areas where State Governments have concerns, the two purposes mentioned above is the primary outcome of the deliberations of the Finance Commission.
The Principle for Devolution While determining the share of the States, the basic aim of Finance Commissions has been to correct the differentials in revenue raising capacity and expenditure needs, taking into account the cost disability factors to the extent possible. To arrive at an equitable share, five broad parameters which impact the revenue earning capacity are taken into account and their weightages are as follows: Weights of different parameters
Share (%)
Population
17.5
Demographic change
10.0
Income distance
50.0
Area
15.0
Forest cover
7.5
The Finance Commission has strongly propounded that the formula based devolution is the most conducive method to strong co-operative federalism. The earlier method of formula based Grants have been done away with. A large number of Discretionary Transfers in the earlier years were towards the Centrally Sponsored Schemes. In terms of Grants, the Finance Commission divided them into three broad groups: 1. Post devolution revenue deficit grants
the case of Gram Panchayats, 90 % of the grant will be the basic grant and 10% will be performance grant. In the case of Municipalities, 80 % of the grant will be the basic grant and 20% will be performance grant. A number of reform measures, aimed at improving the performance of local bodies have been suggested.
The Quantum of Devolution With regard to vertical distribution, the Finance Commission has recommended that the States’ share in the net proceeds of the Union tax revenues be 42%. This is a huge jump from the 32% recommended by the 13th Finance Commission. This is the largest ever change in the percentage of devolution. Compared with the devolutions in 2014-15 the devolution of the States in 2015-16 will increase by over 45%.
Amount of funds to be transferred to states (in Rs. Lakh crore) 2015 -16
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2019 -20
Total
Tax devolution
5.79
6.68
7.72
8.93
10.35
39.48
Grants
0.88
1.00
1.03
1.11
1.33
5.37
Total
6.67
7.68
8.75
10.04
11.68
44.85
Some of the other initiatives that the Finance Commission has proposed are as follows: •
Doing away with the distinction of plan and non-plan funds
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Given the large number of capital works that are commenced and not carried forward, the Finance Commission has recommended that the Union and the State Governments provide a statutory ceiling on the sanction of new capital works to an appropriate multiple of the annual budget provision.
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Flexibility on fiscal deficit to the extent of 0.50 % for States whose Debt to GDP is less ta 25% of the preceding year and the interest payments are less than 10% of their revenue receipts in the preceding year
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Improvements to local bodies in the area of maintenance of accounting records, improvement
3. Grants to local bodies
Grants to local bodies have been recommended in two parts, a basic grant and a performance grant for duly constituted gram panchayats and municipalities. In
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Key initiatives proposed
2. Disaster relief grants Another important change brought about by the Finance Commission is the doing away of the ‘Plan’ and ‘Non-plan’ distinction. Consequently, the Post devolution non-plan revenue deficit grant has also been changed to post devolution revenue deficit grant. Basically, the focus has been to assess the real gap in the revenue earning capability and then providing grants to support growth initiatives.
2016 2017 -17 -18
in own revenue, publish service level benchmarks etc. These would be factored in the performance based grant
Expert's Corner
Points to ponder
governments might fritter away the resources by injudicious application of funds is not misplaced. While the better managed states may be able to use the funds wisely, the poorly managed states may end up spending the money populist schemes. Further, the ability of the states to deploy the additional funds is also suspect in some cases. Building capacity to handle nearly 35% more funds will be a challenge to the State government.
The entire recommendation hinges on the concept of co-operative federalism and the states have been given a larger say in how the funds are to be utilised as moist of the funds are not tied to any schemes or plans. However, the fear that some of the state
While the direction of the Finance Commission recommendations of increasing the share of devolution is a welcome and required step, we need to wait and see how the state government gear up to spend the additional resources in a productive manner.
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Central and State governments should move towards adopting accrual accounting
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Categorising public sector enterprises based on their importance.
Ms. Madhri Guruswamy, Advocate, T.S.Gopalan & Co Member – Expert Committee on Legal Affairs
NOTABLE DECISION OF THE MADRAS HIGH COURT On September 02, 2014, a Learned Judge of the Madras High Court pronounced a decision which could be termed as path breaking in more than one sense. On one hand, the decision has thrown light on the scope of intervention by the Court in an arbitration award and on the other hand, has granted a substantial compensation to be paid by an employer for failure to constitute complaints committee for dealing with sexual harassment at workplace.
Facts The Employee (called as “X’ in the judgment to maintain anonimity) entered into an Employment Agreement with the First respondent-company (termed as “Y””) on 10.3.2006, wherein she was to be appointed as Vice President (M&A Integration Strategy) with effect from 27.4.2006. The agreement contemplated the imparting of training to X, that X would be stationed at Chennai during the first year of employment and would be transferred to U.S.A., thereafter. The agreement contained an Arbitration Clause, with the seat of arbitration at Chennai.
However, within a few months of the commencement of the contract of employment, some untoward incidents happened, as a consequence of which, the petitioner claimed to have tendered a resignation. Thereafter, the Petitioner lodged a criminal complaint on 26.12.2007 against two Officers of the Company for alleged offences under the Indian Penal Code and the Tamil Nadu Prohibition of Harassment of Women Act, 1998. The company also filed criminal complaints of defamation and extortion against the Petitioner. Eventually, the Supreme Court referred the parties to arbitration. Before the Arbitrator, the Petitioner filed a Statement of Claim for recovery of a total amount of Rs.28,88,55,500/- under 12 different headings viz., Bonus for the completion of the first year & second year, arrears in salary, severance payouts, failure to transfer to the USA, not following procedures at the time of termination, loss of employment opportunity etc. For each heading, specified amounts were claimed. More particularly X claimed INR 9,06,00,000 as damages for non-constitution of committee to enquire into the allegations of sexual harassment. The Arbitrator accepted only one head of claim, namely severance benefit and awarded a sum of Rs.1,68,00,000/-. However, the Arbitrator also stated
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Expert's Corner that since the first respondent retained this benefit with them, he was awarding a sum Rs.2.00 Crores. The First Respondent was also directed to give a no objection certificate indicating that it was a contractual termination as recognised in the industry, so as not to come in the way of the Petitioners future employment prospects. Aggrieved by the order of the arbitrator, the Petitioner was before the Learned Judge. The employer who was the First Respondent, raised the legal issue as to whether the High Court can interfere with an award under Section 34 of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”) and modify the award?
Power to modify an award The Learned Judge first dwelled on the obstacle created by the language in Section 34 of the Arbitration Act. Section 34(1) of the Act provides that “recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with Sub-Section (2) and Sub-Section (3)”. None of the Sub-Sections of Section 34 use any other expression, such as “modify”, “revise”, “reverse” or “vary”. Therefore, there has been an element of doubt on the power of the Court under Section 34 to modify or revise or vary an award under Section 34. Under the erstwhile Arbitration Act, 1940, power was given under Section 15 to modify or vary or revise the award subject to the restrictions given therein. However, such a provision was lacking in the Arbitration Act. The Learned Judge referred to the decisions of the Supreme Court in the cases of Tata Hydro Electric Power Supply Co. Ltd. v. Union of India [2003 (4) SCC 172], Hindustan Zinc Limited v. Friends Coal Carbonisation [2006 (4) SCC 445], Krishna Bhagya Jala Nigam Ltd. v. G.Harischandra Reddy [AIR 2007 SC 817], wherein the judicial trend appears to favour an interpretation that there is a power to modify or revise or vary the award under Section 34 of the Arbitration Act. The judgment after analysing the Arbitration Acts of England, the United States (Federal Law), Canada, Australia and Singapore, has concluded that “the expression recourse to a Court against an arbitral award is a comprehensive and inclusive expression. Merely because such recourse is to be made in the form of an application to set aside the award, it cannot be construed that the power of the Court is limited by Section 34(1), only to set
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aside the award and to leave the parties in a position much worse than what they contemplated or deserved before the commencement of the arbitral proceeding. A statute cannot be interpreted in such a manner as to make the remedy worse than the disease. A narrow interpretation of Section 34(1) would actually spell doom for the arbitration regime and actually create a mischief. Therefore, in my considered view, the expression recourse to a Court against an arbitral award appearing in Section 34(1) cannot be construed to mean only a right to seek the setting aside of an award. Recourse against an arbitral award could be either for setting aside or for modifying or for enhancing or for varying or for revising an award. The expression application for setting aside such an award appearing in Section 34(2) and (3) merely prescribes the form, in which, a person can seek recourse against an arbitral award. The form, in which an application has to be made, cannot curtail the substantial right conferred by the statute. In other words, the right to have recourse to a Court, is a substantial right and that right is not liable to be curtailed, by the form in which the right has to be enforced or exercised. Hence, in my considered view, the power under Section 34(1) includes, within its ambit, the power to modify, vary or revise.” The Learned Judge further held that identical result can also be arrived on the basis of the well-settled principle that the Court does not exercise appellate powers under Section 34 of the Arbitration Act but has a revisional jurisdiction and a revisional jurisdiction will include in its purview the power to correct patent illegalities. Hence, the Learned Judge held that the High Court has power to modify or alter or revise an award under Section 34 of the Arbitration Act. After choosing to interfere with the award, the Learned Judge had to decide on whether the Claims in Headings No. 5, 6, 7, 9, 10 and 11 of the Petitioner can be sustained. On examining every claim, the Learned Judge held that he will not interfere with Claims 5, 6, 7, 9, 10 and 11 because they were either considered by the arbitrator or do not fall within the purview of Section 34 of the Arbitration Act. The Learned Judge observed that for failure to terminate suitably, the Petitioner could only seek relief under the provisions of labour laws viz., Tamil Nadu Shops and Establishments Act and not claim compensation.
Expert's Corner Failure to constitute committee to deal with Sexual Harassment of Women at Workplace However, when it came to claim (Rs. 9.07 crores) under Heading 12 viz., failure to constitute committee to deal with sexual harassment at workplace in terms of Vishaka Guidelines, the Learned Judge held that had the Committee been formed and taken up the cause of the Petitioner, the Petitioner would not have undergone the long drawn trauma, which she had. The reasoning given by the arbitrator for not granting her claim was against public policy and granted compensation of INR 1.68 crore (equivalent to the severance contribution). It is pertinent to note that the compensation was neither claimed nor awarded because the petitioner suffered sexual harassment at workplace but because the Respondent employer did not constitute a committee as laid down by the Vishaka
Intro: New Members
guidelines. Needless to say that this is an enormous amount that has been awarded as compensation under the Indian Legal System. The Central Government has enacted the Sexual Harassment a Workplace (Prevention, Prohibition and Redressal) Act, 2013 (with effect from December 2013) and in terms of Section 4, every employer is required to constitute Internal Complaints Committee. Failure to do so will result in penalty of Rs. 50,000 and may also result in cancellation of license of the employer. As the Act came into force subsequently, the above case is not covered under the provisions of the new enactment. One can only hope that with these kind of stringent provisions and rigorous implementation of legislations will dwindle the crimes committed against women.
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IT/ITES
La Freightlift Pvt Ltd
Logistics
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G Natesan &Co
Chartered Accountants
Voice Snap Services Private Limited
IT/ITES
Chevron Petroleum India Pvt. Ltd
Oil & Gas Exploration
Energy
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NBFC
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Johnson & Johnson Johnson & Johnson Private Ltd Limited
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CHAMBER IN THE NEWS
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FIRE UP REPRESENTATIONS & PRESS RELEASE
MCCI Press Release RAILWAY BUDGET 2015 16 The Madras Chamber observes that there were not much of figures in the main presentation of the budget ,but the devil or divine could be in the details. “While the non increase in passenger fares is on expected lines, no big ‘ticket’ items like no new trains or other major plans have come as a surprise.”
Welcome Moves: •
The focus on cleanliness ,safety, passenger amenities and transparency and governance.
•
Proposed Improvement in operating efficiency and ratios, though a major portion of that could be the result of falling fuel prices.
•
Simplifying the wagon leasing scheme.
•
Setting up the Logistics Corporation of India
•
For the first time expansion of freight handling through integration with port and air cargo from ICD is spoken about and also a 2000 cr coastal connectivity program.
•
Plan to Set up of Infras fund with JV
•
Setting up of an independent regulatory board on performance benchmarks and tariffs is a welcome move.
Points to Ponder •
Under investment should end no doubt , but the ambitious plan of raising around 48 % of the total outlay through other sources : how this would be done is a point to ponder.
•
How the debt will be serviced is also to be watched and understood.
•
Cross subsidizing the passenger fares by freight cost continues to be a matter of concern for the Chamber.
•
While the budget is a passenger friendly budget, the cost push effect of freight increase in basic commodities like iron & steel, cement and coal could have an inflationary effect.
•
Increase in Urea freight will swell the subsidy kitty and affect the cash flow of the fertilizer companies.
•
The Minister speaks about States’ investment in Railways. The question remains whether the States will come forward, given their limited resources and other priorities. “No doubt ,the Railways have to go through a transformation, and this budget could be one step in that direction. But a lot needs to be done and more concerted efforts and clear action plans on fund raising and timelines are required” says Mr J Krishnan, Chairman, Logistics Committee & Member, General Committee of the Chamber.
26th February, 2015
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K.Saraswathi Secretary General The Madras Chamber of Commerce & Industry
FIRE UP REPRESENTATIONS & PRESS RELEASE
MCCI Press Release UNION BUDGET – 2015-2016 The Madras Chamber lauded the Union budget for FY 2015-16 for its focus on enabling inclusive growth even while consolidating the fiscal position of the government, its accent on the social sectors (particularly healthcare and financial inclusion), and on the efforts to curtail black money and improve governance. Although the budget was devoid of any big bang announcements, the budget catered to all constituents, including corporate and MSMEs, domestic and international investors. “Corporatization of Ports is a good attempt to bring professionalism and increased efficiency to compete with the privately owned ports”, says Mr.T. Shivaraman, immediate past president Madras Chamber. “The higher allocation for infrastructure and introduction of tax free infra bonds, increase in threshold limit for domestic transfer pricing , deferring GAAR, monetization of gold are all welcome moves,” he says. “ there are some clear signals of moving towards the much talked about ease of doing business, like setting up a panel to consolidate and simplify laws, digitalization of returns , regulatory reforms in infrastructure and mention about preclearance for major projects like power, roadways etc provide some signs of hope , but implementation is critical “ he points out.“The easing of ESI and EPF rules and the extension of timelines for CENVAT credits, reduction of customs duty on select products though small measures ,will help at the ground level” he says. The indication that GST would be in place by April 2016 is a trigger of hope. Mr. Raghuttama Rao, General Committee Member, MCCI and MD, IMaCS, stated “what should be appreciated in this budget is a clear move towards strengthening the institutional structure that would help in improved governance and improved business and investment climate. The move towards establishing a comprehensive Bankruptcy code, Setting up a Public Debt Management Agency, merging of FMC with SEBI, undertaking regulatory reforms to improve, setting up a sector agnostic Grievance Agency for financial redressal, and setting up an Unified National market for Agriculture are some examples “. He also sees a decisive resolve on part of the government in terms of strengthening the financial sector through several useful measures such as bringing in harmony between large NBFCs and banks in terms of the SARFAESI Act, setting up a specialized bank for MSMEs by way of MUDRA, nudging the Post Office to become a nationwide Payments Bank, providing a stimulus to the infrastructure finance by setting up a National Infrastructure Fund, monetizing gold through the proposed Gold bonds scheme etc. On the flip side the Chamber feels that though there is a lot of talk on Make in India, there is no clear cut measures to incentivize the manufacturing sector. Also the increase in service tax to 14 % , though on expected lines, could be inflationary in the short run. 28th February, 2015
K.Saraswathi Secretary General The Madras Chamber of Commerce & Industry
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FIRE UP REPRESENTATIONS & PRESS RELEASE MCCI Press Release TAMIL NADU STATE BUDGET 2015 16 The Madras Chamber thankfully welcomes the announcements made on TN VAT, particularly the withdrawal of ITC reversal under section 19 (2) V and withdrawal of clause C of section 19 (5) of the Act on ITC claim without C form. These provisions introduced earlier had been a great hassle for manufacturing industries in TN and the Madras Chamber was continuously representing for doing away with them. The industry is greatly relieved that the Government has taken note of our concern and has positively acted. This would give a great boost to the local manufacturing and augurs well in the backdrop of GIM. Chamber also appreciates the efforts to improve the ease of doing business and the proposal to introduce a single window mechanism not only for the large industries, but also for the SMEs. Also, the Madurai Tuticorin Industrial Corridor, if expedited, can bring greater industrial growth to the Southern districts. Higher allocations to Roadways, urban infrastructure and municipal administrations and to social sectors like education, health etc are welcoming moves. However the creation and improvement of port infrastructure which is critical for State exports had not been mentioned in the budget. “This, which is an important component of Vision 2023 needs to be addressed,” the Chamber feels. 25th March, 2015
K.Saraswathi Secretary General The Madras Chamber of Commerce & Industry
PRESS RELEASE The Madras Chamber of Commerce & Industry (MCCI) is launching a special initiative to empower Women in the Corporate World. MCCI, the 179 year old Chamber, in association with Great Lakes Institute of Management (GLIM), a well reputed business school as knowledge partner, is organizing a very unique training program for Aspiring Women Directors on February 20th and 21st 2015 at Chennai . “A first of its kind, this program would be the stepping stone for women with experience and high aspirations to be groomed as future Directors”, assures, Ms. Gayathri Sriram, MD, Ucal Auto Pvt. Ltd, Member, General Committee of the Chamber, who is initiating this high level training program. She adds that “the objective of this program is to create a pool of competent, board ready women directors, who would be equipped with necessary knowledge and skills to be elevated or inducted into corporate boards”. “ With the Companies Act 2013 mandating certain class of companies to appoint at least one Woman Director before March 31, 2015, and more such provisions to follow , there is going to be a great demand for women directors in the near future, while adequate talents are not available currently. There is an urgent need to empower eligible women and make them board ready and hence this unique program by the Chamber” says Mr. S.G.Prabhakharan, President, MCCI . He further added “With a sea change having taken place recently in the field of Corporate Law, this program is a must not only for aspiring women directors, but also for Women who are already Directors on the Boards of both Public and Private Ltd. companies, irrespective of their size” On completion of the program, the participants would also become a part of the Elite Women Director Club of the Chamber and periodical study group meets and updates would follow. For more details, please log on to www.madraschamber.in. Email to madraschamber@madraschamber.in or call 044 – 24349452/24349871 22th February, 2015
22
K.Saraswathi Secretary General The Madras Chamber of Commerce & Industry
Economic Review What’s happening? UPDATES ON ECONOMY
Re Roadmap 2030 – NITI Aayog’s First Initiative: The “Report India’s Renewable Electricity Roadmap 2030—Toward Accelerated Renewable Electricity Deployment” was released at the Renewable Energy Global Investors Meet & Expo (RE-INVEST 2015). The report brought out by NITI Aayog talks about the current scenario of renewable energy in India and what needs to be done for its accelerated deployment to address energy security concerns. Shri Piyush Goyal, Union Minister of State (IC) for Coal, Power and New & Renewable Energy suggested that the land owners, who provide their land for setting up renewable energy projects, could be given a stake in the projects as an incentive. He urged NITI Aayog to help in creating some innovative model for the RE sector. He addressed the panelists while sitting in the audience. The panelists were of the opinion that India needs to keep renewable energy as a matter of national importance. They suggested that the need of the hour is to move away from the current practice and make RE as an integral part of the power sector. For this a comprehensive national policy framework would be required for smoother renewable projects development in the country.
Centre urges states to promote ‘citizen participation’ in urban planning and development: Seeking a paradigm shift in urban development planning, the central government has urged the states and urban local bodies to identify urban development needs and priorities through ‘citizen participation’ in decision making. This was the thrust of the new ‘Urban and Regional Development Plans Formulation and Implementation Guidelines’. These Guidelines were finalized and released after six months of consultations with states and other stakeholders by
the Ministry of Urban Development and its Town and Country Planning Organisation. The new urban planning guidelines seek to promote local and area level planning, investment planning, special purpose planning like in the case of city sanitation and mobility plans.
New Scheme to Promote Coastal Shipping Government of India has approved a new Central Sector Scheme for providing support to Major Ports for creation of infrastructure to promote coastal shipping. Financial assistance is given under the Scheme in the form of grant-in-aid for construction/up gradation of coastal berths and capital dredging for deepening of coastal berths and navigational channels. In addition, priority in berthing as well as discount on port charges is provided for coastal vessels in Major Ports. As per the constitutional framework, Major Ports are under the control of the Central Government and there is no unused Major Port in the country. All non-major ports are under the jurisdiction of State Governments. In both Major and non-major ports, private investment through Public Private Partnership (PPP) mode is the preferred mode for developing port infrastructure and most of the infrastructure has been developed through Public Private Partnership. In major ports in the last 2 years (2012-13 and 2013-14), 26 projects were awarded under PPP mode entailing an investment of Rs.15483.60 crores. International Financial Services Centres to be Set up to Enable India to Become a Producer and Exporter of International Financial Services The Government proposes to set up International Financial Services Centres (IFSC) in the country. The IFSCs are envisaged to be set up/operationalized in India to provide avenues to finest financial minds in India to fully exhibit and exploit their strength to the country’s advantage and enable India to become a producer and exporter of international financial services. The IFSCs will be set-up in the Special Economic Zones (SEZ). The first IFSC is proposed to be set up in Gujarat International Finance Tec-City, which is located in the notified Special Economic Zone.
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Economic Review Appropriate regulations in this regard will be issued in March, 2015.
Smart Cities, New Urban Development Mission to be launched in April: Minister of Urban Development Shri M.Venkaiah Naidu said that the two new major initiatives in the urban sector viz., development of Smart Cities and the New Urban Development Mission for 500 cities will take off in April. The necessary approvals for these two new schemes would be obtained at the earliest so that they can take off the ground in April. He said that Smart Cities being a transformative new initiatives required extensive consultations with all the stakeholders including the states, urban local bodies, related central ministries, real estate developers and experts including architects, designers, urban planners etc. the Minister informed that four rounds of consultations were held with the states to sensitize them to the challenges of making the cities smart and urban governance reforms to be implemented. Basic urban services and amenities will be provided under the New Urban Development Mission for 500 cities while projects of wider impact based on area development would be taken up under Smart Cities scheme.
Constitution of Internal Complaints Committee at workplace The Union Minister of Women and Child Development, Smt. Maneka Sanjay Gandhi has written to the various Chambers of Commerce and Industry regarding the constitution of an Internal Complaints Committee at workplace to deal with complaints of sexual harassment. In her letter, the Minister said that the Ministry has been receiving complaints from women working in the private sector about the absence of such a committee in their organizations. Many Members of Parliament have also personally raised their concern on this issue, the Minister said. The Minister has also asked them to furnish the compliance on this issue every month so that the Ministry is able to formulate a strategy towards those
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entities which do not comply with the provisions of Sexual Harassment of Women at Workplace Act, 2013. The Sexual Harassment of Women at Workplace Act, 2013 provides for the constitution of an Internal Complaint Committee by any establishment which has 10 or more employees. This Committee is required to examine the complaints/cases of harassment of women at workplace.
Foreign Equity Investment Cap of 49 Per Cent Applicable to All Indian Insurance Companies: The Indian Insurance Companies (Foreign Investment) Rules, 2015 have been notified by the Government of India under the powers conferred by Section 114 of the Insurance Act, 1938 read with clause (b) of sub-section (7A) of Section 2 of the Insurance Act, 1938 and Section 24 of the Insurance Regulatory and Development Authority Act, 1999. These Rules have been prepared based on extensive consultations with all the relevant Departments/Organisations. These Rules incorporate the recent amendments in the law into the standing/prevalent practices being followed hitherto with respect to the treatment of foreign investment in Indian Insurance Companies under extant applicable regulations and the FDI policy of Government of India. According to these rules, foreign equity investment cap of 49 per cent is applicable to all Indian insurance companies and they shall not allow the aggregate holdings by way of total foreign investment in their equity shares by Foreign Investors, including portfolio investors, to exceed forty-nine per cent of their paidup equity capital and also shall ensure that ownership and control shall remain at all times in the hands of resident Indian entities as referred to in these rules. The foreign equity investment cap of 49 per cent shall also apply to Insurance Brokers, Third Party Administrators, Surveyors and Loss Assessors and other insurance intermediaries appointed under the provisions of the IRDA Act, 1999. A copy of these rules are also placed on the website of Department of Financial Services at www. financialservices.gov.in
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