Inside Pages (March-April 2014) - COSIDICI · the achievement of broader societal goals. In this sense, CSR is generally understood as being the way through which a company achieves

MARCH - APRIL, 2014 1

VOL. LII NO. 2

E D I T O R I A L BO A R D

Chairman of the Editorial Board

Shri P. Joy Oommen, IAS (Retd.)Chairman & Managing Director,Kerala Financial Corporation (KFC)Thiruvananthapuram

Vice-Chairman

Shri U.P. Singh, IRS (Retd.)Ex-Chief Commissioner, Income-Tax &TRAI Member

Members

Shri R.C. ModyEx-C.G.M., RBI

Shri P.B. MathurEx-E.D., RBI

Shri K.C. GanjwalFormer Member, Company Law Board,Government of India

Shri V. S. RathoreSecretary General, COSIDICI

Editor

Shri K. K. MudgilEx- C.G.M., RBI

Associate Editor

Smt. Renu SethSecretary, COSIDICI

MARCH - APRIL, 2014

COSIDICI COURIER

BI MONTHLY JOURNAL OF COUNCIL OF STATE INDUSTRIAL DEVELOPMENT andINVESTMENT CORPORATIONS OF INDIA

CONTENTS

Secretary General’s Desk ...................................... 2

Appointments ........................................................ 4

Strengthening MSMEs Must to Create New Jobs .. 5

Composite Development Index : ............................ 7An Explanatory Note

Profile of Member Corporations ........................... 10

[KERALA STATE INDUSTRIAL DEVELOPMENT

CORPORATION {KSIDC}]

Letter to the Editor ............................................... 12

Questions of Cyberquiz – 47 ............................... 12

Member Corporaptions Their Activities ................ 13

News from States ................................................ 15

Do You Know ! ..................................................... 16

Activities of COSIDICI ......................................... 17

Micro, Small & Medium Enterprises ..................... 20

Economic Scene ................................................. 22

All India Institutions ............................................. 24

Success Stories of KSFC Assisted Units ............ 27

Health Care .......................................................... 28

Policy Pointers ..................................................... 29

Answers of Cyberquiz – 47 .................................. 30

Miscellany ........................................................... 31

The views expressed in the journal are those of the contributors and not necessarily ofthe Council of State Industrial Development and Investment Corporations of India.

COSIDICI COURIER2

SECRETARY GENERAL’S DESK

IMPORIMPORIMPORIMPORIMPORTTTTTANCE OF CORPORAANCE OF CORPORAANCE OF CORPORAANCE OF CORPORAANCE OF CORPORATE SOCIAL RESPONSIBILITYTE SOCIAL RESPONSIBILITYTE SOCIAL RESPONSIBILITYTE SOCIAL RESPONSIBILITYTE SOCIAL RESPONSIBILITY

Corporate Social Responsibility (CSR) is thecontinuing commitment by business to behaveethically and also focus on improving the quality oflife of the workforce and their families as well as ofthe local community and society at large whilecontributing to economic development. The EuropeanCommission defines CSR as “ a concept wherebycompanies decide voluntarily to contribute to a bettersociety and a cleaner environment. A conceptwhereby companies integrate social andenvironmental concerns in their business operationsand in their interaction with their stakeholders on avoluntary basis.” The focus is not only how youmanage your core business, but also how farcompanies go beyond and make a contribution tothe achievement of broader societal goals. In thissense, CSR is generally understood as being the waythrough which a company achieves a balance ofeconomic, environmental and social imperatives whileat the same time addressing the expectations ofshareholders and stakeholders. Corporate socialresponsibility may also be referred to as “corporatecitizenship” and can involve incurring short-term coststhat do not provide an immediate financial benefit tothe company, but instead promote positive social andenvironmental change.

In the age of globalised world, the concept of CSR isgoing to occupy a centre stage position in thecorporate world. Keeping in mind the changing marketscenario, corporate have to change their work cultureand practice CSR in a way that truly benefits society.Initially, the key CSR issues were labour laws, factoriesacts and child labour legislations. But in presentcontext, the concept of CSR is much wider.Environmental management, eco-efficiency, goodcorporate governance, responsible sourcing, labourstandards and working conditions, employee andcommunity relations and social equity are key CSRissues nowadays. Society expects the corporates tobe socially responsible as the economic environmentof the society is dependant on the businessenvironment. In line with changing expectations, it isnecessary to draw up a mandatory CSR frameworkby Governments.

V.S. RATHORESecretary General, COSIDICI

The Corporate Sector inIndia has grown fast in thepost liberalization erabringing various productsand services to the middleclass, never thought of fewyears back. Increasingavailability of products andservices in the market hasprovided many choices tothe consumers. However,this growth has come at ahigh social and environmental cost with climatechange looming large over the future of economicactivity. Can companies design successful businessesthat add value to people’s lives without having to makemore and more products that have a highenvironmental cost? And now that it is high time thatwe address the need for huge cuts in carbonemissions, will companies be able to rise to thechallenge and reduce their environmental impact.Environmental good practice is also about businessefficiency and the best use of valuable resources. Itis crucial that civil society and business come togetherin finding ways in which sustainable growth takes placewithout adverse impact on environment.

In India, under the new Companies Act, 2013,corporates must spend 2% of their profit on CSRactivities from next fiscal year, provided they have aturnover of Rs 1,000 crore and more, or net worth ofRs 500 crore and more, or a net profit of Rs 5 croreand more. The corporate affairs ministry expects thataround Rs 15,000-20,000 crore would be spent in ayear on various social projects such as environment,skill development, water and sanitation through CSRactivities. Government of India is also looking at aproposal to float a company to manage CSR Fundsof all central public sector enterprises, to ensureefficient implementation of this social initiative. Thecompany could be set up under Section 25 on theground that an independent entity will have the scaleand resources to plan and execute CSR activities.

The Small & Medium Enterprises (SME) sector in Indiaalso participates in CSR activities but these efforts


have not been optimally delivered. One possiblereason can be the fact that CSR activities depend onthe profits of an SME and any fluctuations in profitscan adversely affect their capability to continue theircontribution for CSR activities. Another reason canbe the limited human resources available with SMEswhich may also result in lack of a professionalapproach. SMEs tend to focus on short-term activitiesthat involve lesser operational costs and as suchprefer charity donations rather than long-termprogrammes for local communities. With theintroduction of the new Companies Act, 2013, theSME’s approach to CSR has to be modified whilekeeping operational costs low. One viable alternativeis to pool resources with other SMEs in the clusterand create joint CSR programmes managed by asingle entity. This collaboration can be formed by unitsin a cluster as they interact with the same communitiesand have already established associations that caterto the business needs of the units.

Thus, CSR is about how companies manage thebusiness processes to produce an overall positiveimpact on society. Companies consider the interestsof society by taking responsibility for the impact oftheir activities on customers, suppliers, employeesshareholders, communities and other stakeholders,as well as the environment. This is seen to extendbeyond the statutory obligation to comply withlegislation as organizations are voluntarily takingfurther steps to improve the quality of life foremployees and their families as well as for the localcommunity and society at large. If a company choosesto follow the way of CSR, it will integrate ethicalconcerns in its activities and in its interaction with allthe stakeholders. This implies that the corporate unitsfunction in such a way that their CSR activities in all likelihood actually reach out to the society in general.The ethical considerations are aimed at preparingthe groundwork for expecting the correct reaction orresponse of their CSR generated activities.

Key Drivers of Corporate Social Responsibility

Enlightened self-interest – creating synergy of ethics,a cohesive society and a sustainable global economywhere markets, labor and communities are able tofunction well together.

Social investment – contributing to physicalinfrastructure and social capital is increasingly seenas a necessary part of doing business.

Transparency and trust - there is increasingexpectation that companies will be more open, moreaccountable and be prepared to report publicly ontheir performance in social and environmental arenas.

Increased public expectations of business - globalcompanies are expected to do more than merelyprovide jobs and contribute to the economy throughtaxes and employment.

A properly implemented CSR concept can bring alonga variety of competitive advantages, such as improvedbrand image and reputation, enhanced access tocapital and markets, improved productivity and quality,efficient human resource base, enhanced customerloyalty and better decision making and riskmanagement processes. The companies of futureare expected to undergo significant transformationsuch that CSR no longer needs to be managed as aseparate deliverable, but to draw a roadmap that canhelp them understand their role in sustainabledevelopment and how they can foster an environmentthat embeds a CSR ethic in the way business is done.

(V.S. RATHORE)

COSIDICI COURIER4

APPOINTMENTSAPPOINTMENTSAPPOINTMENTSAPPOINTMENTSAPPOINTMENTS

Shr i D.M. Spo l ia , IAS has beenappointed as Chairman & ManagingDirector, Delhi Financial Corporation{DFC}, New Delhi vice Shri Arvind Ray,IAS.

Shri Onkar Chand Sharma, IAS has beenappointed as Managing Director, HimachalPradesh Financial Corporation {HPFC},Shimla vice Shri Dr. Ajay Bhandari, IAS.

Shri V.P. Baligar, IAS has been appointed asChairman & Managing Director, KarnatakaState Industrial & Infrastructure DevelopmentCorporation Ltd. {KSIIDC}, Bangalore viceShri P.B. Ramamurthy, IAS

Shri Dheeraj Sahu, IAS has been appointedas Managing Director, The PradeshiyaIndustrial Investment Corporation of UttarPradesh Limited {PICUP}, Lucknow vice Dr.Surya Pratap Singh, IAS.

Shri Sandeep Kumar, IAS has beenappointed as Managing Director, OmnibusIndustrial Development Corporation ofDaman and Diu & Dadra and Nagar HaveliLtd. {OIDC}, Nani Daman vice Shri B.S.Bhalla, IAS

Shri Jasvinder Singh has been appointed asManaging Director, J&K State IndustrialDevelopment Corporation Ltd. {J&K SIDCO},Srinagar vice Shri Ilham Naseem.

Shri S.I. Sharma has been appointed asManaging Director, Manipur IndustralDevelopment Corporation Limited{MANIDCO}, Imphal vice Shri N. Joy KumarSingh.

Shri Takuyabang Jamir has been appointedas Managing Director, Nagaland IndustrialDevelopment Corporation Ltd. {NIDC},Dimapur vice Shri Nihoto Sohe.

Shri Rajiv Takru, IAS has been appointed asthe Revenue Secretary in the FinanceMinistry vice Shri Sumit Bose.In order to fillthe position vacated by Shri Takru, theAppointments Committee of Cabinet (ACC)has also appointed 1980-batch Rajasthancadre officer Shri Gurdial Singh Sandu, IAShas been appointed as Secretary FinancialServices vice Shri Rajiv Takru.

God has promised such of you as believe and do goodworks that He will surely make them to succeed the

present rulers on earth, even as He caused those who werebefore them to succeed.

Quran 24.55Quran 24.55Quran 24.55Quran 24.55Quran 24.55


The Reserve Bank of India governor recentlyacknowledged that micro, small and mediumenterprises (MSMEs) face difficulties in accessingcredit and has suggested the use of technologyto facilitate such flow of credit. Shri K.C.Chakrabarty, Deputy Governor, also observedrecently that inadequate flow of credit to MSMEshas been one of the factors constraining growthof the sector. Again, according to recent reports,the Standing Committee of RBI has been workingon this problem.

MSMEs are an important sector contributing 8%of country’s GDP, 45% of manufacturing outputand 40% of exports, according to the inter-ministerial committee on MSMEs (September2013). It is estimated that 3 crore MSMEsproviding employment to 7 crore persons aremanufacturing more than 6,000 products. And thegrowth in the sector has been slowing down inrecent years. Hence, there is a need to think outof the box to ensure flow of credit to MSMEs.

But first, some facts about the highlyheterogeneous MSME sector where 94% of unitsare unregistered. MSMEs are mainly classified asmanufacturing and service enterprises. There is aspecific stipulated limit on investment in plant andmachinery for each of the respective micro, smalland medium segments in manufacturing with amaximum limit of Rs.10 crore, and for equipmentin service enterprises with a maximum limit of Rs.5crore.

The government has been making consistentefforts since 1948 to encourage MSMEs in India.The Office of Development Commissioner forMSMEs, operational since 1954, has 70 officesand 21 autonomous bodies spread across thecountry. The government has initiated variousmeasures over the years such as clusterapproach, special economic zones and MSMEDAct, 2006, to encourage the sector. In fact, the

government ofIndia has ad e d i c a t e dministry forMSMEs since1999. The SmallI n d u s t r i e sDevelopmentBank of India( S I D B I ) ,established in1990, is the principal financial institution forpromotion, financing and development of theMSMEs. Commercial banks, especially throughthe priority sector lending, play an important role.At the state level, state financial corporations andstate industrial development corporations are themain sources of long-term finance for the sector.

Nearly 93% of units in the MSME sector aredependent on self-finance and do not get anyfinancial support from the financial institutions.Issues related to credit such as adequacy, timelyavailability, cost and mortgages continue to be aconcern. In India, a universally acknowledgedreason for the reluctance of the commercial banksto lend to MSMEs is the lack of reliable informationfor banks to assess the creditworthiness of theseunits and their promoters and proprietors. Thecredit information companies (CIC) are attempting,since 2005, to collect and build informationdatabase. The CICs are in a nascent stage andthe information base is still very limited. Theprogress is obviously slow for many reasons andRBI recently released a draft report on creditinformation for CICs seeking comments from thepublic. The dataset by CICs can only be preparedby official track of information which is not availablefor many units and certainly not for first timers. InIndia, with cash component of payments stillsubstantial in transactions, establishing credithistory would take a long time before business

Charan Singh#

STRENGTHENING MSMEs MUST TO CREATE NEW JOBS

COSIDICI COURIER6

practices change and credit history is created.Again, collecting soft information on MSMEs andtheir proprietors and promoters would involvesubstantial effort, which would be expensive tocollect and difficult to substantiate. Also, the easewith which these MSMEs can change theirlocation, address and name of the promoter andproprietor, especially when most of them are inrural areas, and with most of them unregistered,makes it rather difficult to recover loans. Further,lack of transparency and fair bankruptcy processand legal provisions for the recovery of loans arelengthy and therefore cumbersome. In the currentcontext of rising NPAs in case of all commercialbanks, lending to MSMEs is considered ratherrisky and therefore the persistence in reluctance.

The government could consider a self-help group(SHG) approach to extend credit to the MSMEs,as SHGs, based on experience in the sector ofmicrofinance, operate on collective wisdom and

peer pressure to ensure end-use and repayment.A similar exercise, in spirit, by Bangalore in filingproperty tax for the Bruhat Bangalore MahanagaraPalike in 2008 has yielded positive results wheretaxpayers can see what they have paid comparedwith their neighbours (Isher Ahluwalia, 2014).

Given the demographic patterns in India, more jobswould have to be created outside the governmentsector. In this context, the role of MSMEs assumesgreat significance and needs to be strengthened.In addition to technological solutions, which wouldgenerally take a long time to implement and fructify,the banking system could use a time-testedapproach exemplified in SHGs to extend credit toMSMEs. A strong and flourishing MSME sectorwould contribute to growth and higher exports.

Courtesy: The Financial Express.The author is RBI Chair Professor of Economics, IIM Bangalore.

Duke Ai: “May I ask what is the art of government?”Confucius: “The art of government simply consists inmaking things right, or putting things in their rightplaces. When the ruler himself is ‘right’, then thepeople naturally follow him in his right course. “

Book of Ritual 27Book of Ritual 27Book of Ritual 27Book of Ritual 27Book of Ritual 27


COMPOSITE DEVELOPMENT INDEX : AN EXPLANATORY NOTE

In May 2013, the Government of India constituteda committee to evolve a composite developmentindex of states. The Committee was directed tosuggest methods for identifying the backwardstates that could then be reflected in the devolutionof funds from the Central Government to the States.The terms of reference also included a qualifier:the devolution formula must also incentivizeperformance by including variables that measurethe ability of States to use funds productively.

The committee submitted its report on September1, 2013 (available at http://www.finmin.nic.in/reports/index.asp). The document popularly knownas the Rajan panel report (after the Chair,Raghuram Rajan) drew much attention.

The Principal Idea

The simplest scheme would be to look at per capitaincome. Economic growth is measured by thegrowth in per capita income and surely the idea ofbalanced regional development would include somenotion of parity in per capita income. The committeewas, however, of the view, that the object of adevelopment index is to capture the well being ofan average individual in a state. Hardly anyonewould contest the view that development is notsynonymous with income growth. Indeed, thewidespread acceptance of the human developmentindex that combines income with indicators ofhealth and education testifies to the strength of thisview. This suggests that a development index oughtto be a composite of income and other socialindicators. However, economists have longpreferred average consumption expenditures percapita as a better measure of economic welfare.Consumption is less sensitive than income toshocks coming from droughts, prices or policychanges. Secondly, as inequality in consumption isless than the inequality in income, the consumptionaverage is more representative of averagestandards of living.

To illustrate, consider an example. Suppose statedomestic product is relatively high because of afew industries such as mining or oil refining.However, as these industries employ relatively fewpeople, the direct impact on consumption

Bharat Ramaswami

expenditures will be limited. The state GDP percapita would then be a misleading measure of thewell being of an average individual. However, inthis example, even consumption expenditures maynot fully capture economic welfare. This is becausethere could be indirect impact of higher state GDP.A richer state would have more tax resources thatcould be invested in infrastructure, public servicesand subsidies to essential goods. All of these clearlymatter to economic welfare. While subsidies couldbe captured by consumption expenditures,infrastructure and public services would needadditional indicators. A comprehensivedevelopment index would therefore have to beaveraged across consumption per capita and theseother indicators of economic welfare. This is theprincipal idea that underlies the development indexproposed by the Committee.

Method

The development index has two components: aneeds index and a performance index. The needsindex is a simple average of consumption per capitaand other relevant variables. The performance indexis essentially the change in the needs index(towards development). The performance indexreceives a weight of 25% in the overall developmentindex. The performance index is included so thatstates that use funds productively to fur thereconomic welfare (as measured by the needsindex) are not penalized in future allocations offunds.

The needs index is a simple average of per capitaconsumption expenditures, the poverty ratio (which

COSIDICI COURIER8

accounts for the inequality in consumption) and 8other variables measuring access to public servicesand infrastructures. Six of these variables areeducation, health, household amenities (providedby public services), rate of urbanization, financialservices and a connectivity index (comprising railand road). The seventh variable is the femaleliteracy rate – the only variable in the index thatcaptures gender specific outcomes. The last variableis the percentage of population that is eitherScheduled Caste (SC) or Scheduled Tribe (ST).Unlike other variables, this is not an outcomevariable. However, it was included in the indexbecause it is widely recognized in Indian publicpolicy that additional resources are needed toovercome the disadvantages of these populationsbecause of the legacy of discrimination. Theperformance index is the change in the needs indexwith minor modifications. In particular, the SC/STvariable is excluded. So are the variables in theconnectivity index that relate to Central governmentinvestments. Before the indices are constructed,all the variables are suitably normalized to a 0-1scale where a smaller score indicates a higher levelof development relative to the other states.

The next step converts the indices to points to eachstate based on need and on performance. Thepoints also take into account the state’s populationand area. The final step is to compute a state’s sharein the overall funds to be disbursed. As the pointstally favours large states, each state gets a fixedbasic allocation of 0.3%. This totals to 8.4% of funds.To allocate the remainder 91.6%, the followingprocedure is adopted. A state’s share based onneed is the ratio of the points scored according toneed divided by the sum of all points across thestates. Similarly, a state’s share according toperformance is computed. The sum of these twoplus the fixed allocation of 0.3% is the state’s overallshare in funds.

Features

It is important to note that the index does notpropose a binary classification of states intodeveloped and under-developed. Rather itrecommends an allocation of funds based on thedevelopment index. As is well known, a binaryclassification tends to be arbitrary because it istypically not clear where the dividing line ought tobe drawn. States that are close to each other in thedevelopment index might well fall on either side of

the dividing line. The index based allocation avoidssuch issues.

Second, the intent was to construct a transparentindex that can be revised with time. To achieve thisintent, the Committee restricted itself to thoseindicators that are contained in official data andabout which information is routinely collected fromtime to time. The needs and performance indicesare therefore dynamic and so would the formulafor allocation of funds.

Turning to the findings, Goa has the lowest valueon the under-development index and its shareaccording to both need and performance is zero.So it receives only the fixed share of 0.3%. Despitethis, its per capita allocation (Rs.20.6) in Rs. 1000crores is high because of its small population. Fora similar reason, other small states also gain.Arunachal Pradesh, Manipur, Meghalaya, Mizoram,Nagaland, Sikkim and Tripura receive small shares;yet their per capita allocations are higher than thatof the other states.

An easy way of summarizing the implications ofthe Committee’s report is to look at the ratio of thestate’s share in funds to its share in population. Ifthis value is above one, then a state receives morethan its share of population. If this value is belowone, then a state receives less than its share ofpopulation.

The states with shares less than their shares inpopulation, in increasing order, are Kerala, TamilNadu, Maharashtra, Punjab, Haryana, West Bengal,Gujarat, Karnataka and Uttarakhand. AndhraPradesh and Uttar Pradesh have fund shares thatare about the same as their share in population.The states with fund shares more than their sharesin population include Goa, Himachal Pradesh,Sikkim and the North-Eastern States. The largerstates in this category, in increasing order of fundshare, are Assam, Bihar, Jharkhand, Rajasthan,Madhya Pradesh, Chhattisgarh, Jammu & Kashmirand Odisha. These are the states that would gainfrom the application of a development index.

Questions

There are several questions that need to beaddressed in constructing an index: what variablesshould comprise the index, how should they beweighted and whether and to what extentperformance should be weighted. Much of thecriticism of the index surrounds these questions.


The most persistent criticism of the index was thedecision to use consumption per capita rather thanincome per capita. This was the principal objectionof the dissenting note to the report. Why should astate like Kerala that has high consumptionexpenditures only because of remittances rank highin the index? Notice that by this reasoning, India’sexport of software services cannot be seen as‘development’ either.

Another criticism was why should the indicators beequally weighted. In the technical literature, themethod of principal components is often used tocompute weights in the construction of indices. TheCommittee used this method as well and found thatthe principal components method suggestedweights close to the equal weights allocation. A thirdkind of criticism relates to the ranking of statesaccording to the development index and theirshares in funds. The report has been criticized forgiving too little to the North-eastern states (eventhough their fund shares are well above their sharesin population) arguing that this would jeopardisetheir development. In the same breath,commentators (and often the same ones) havechastised the committee for reducing the sharesof the states that have done well on the developmentindex. A fourth criticism is that the Committee shouldhave recommended transfers to offset fiscaldisabilities. This was not the mandate of theCommittee and doing so would have encroachedon the domain of the Finance Commission.

Finally, a fundamental criticism has been about theplace of this report in the wider framework of Centre-State federal transfers. As is well known, much ofthe devolution of funds happens through theFinance Commission or through central assistanceto state plans through the Planning Commission.The Finance Commission is constitutionallymandated and clearly their recommendations donot have to be based on a development index. ThePlanning Commission allocations are fixed in

consultations with states and only a small part oftheir disbursement is guided by the Gadgil-Mukherjee formula. Therefore, it is not clear whatCentral funds will be guided by a development index.

Perhaps one reason for some of the discomfort withthe Committee’s findings is that the report hasinsufficient documentation about the raw data thatwas used to produce the indicators. Although theraw numbers are sourced from official dataavailable in the public domain, it is a formidabletask for individual researchers to assemble theentire data themselves.

Concluding Remarks :

In this short article, I have attempted to convey thethinking behind the report on the compositedevelopment index and also a flavor of its findings.The report itself contains greater detail about thedata sources, the correlation between the variousindicators, the formula for assigning points, and thefindings and how they relate to fund shares throughFinance and Planning Commission. The index istransparent and based on official verifiable data.The index is not based on a priori views aboutwhether a particular state is less developed or not.It is equally important to note that the index andtherefore the allocation of funds is relative.Everybody cannot do well on the index. For thisreason, some states that are higher ranked on thedevelopment scale would receive less funds lessthan a lower ranked state. This is the logic of adevelopment index.

Endnotes

The raw data was assembled by a team at theMinistry of Finance that also computed the index.The primary task of the Committee was to developthe methodology. The index computations with stateidentifiers and the raw data were not seen by theCommittee until after the methodology wasfinalized.

Courtesy: Yojana

The author is professor of Economics at the Indian Statistical Institute, Delhi withresearch interest that spans areas in agricultural economics and economic

development

COSIDICI COURIER10

PROFILE OF MEMBER CORPORAPROFILE OF MEMBER CORPORAPROFILE OF MEMBER CORPORAPROFILE OF MEMBER CORPORAPROFILE OF MEMBER CORPORATIONSTIONSTIONSTIONSTIONS

Smt. Aruna Sundararajan, IAS is presentlyManaging Director of Kerala State IndustrialDevelopment Corporation (KSIDC). Some ofher assignments since she joined Serviceshave been Under Secre tar y, Min is t r y o fDefence, Secretary, Information Tech. Deptt.,CEO, In f ras t ruc ture Leas ing & F inanc ia lServices, Joint Secretary, Ministry of Housing& Urban Poverty Alleviation, Secretary, SocialWelfare Deptt., Prl. Secretary, Power Deptt.,Kerala. KSIDC is scal ing new heights ofachievements under the able stewardship ofSmt. Aruna Sundararajan, IAS.

Kera la Sta te Indust r ia l Deve lopmentCorporation (KSIDC) - the Government agencyfor industrial and investment promotion inKerala was formed in 1961 with the objectiveof p romot ing , s t imu la t ing , f inanc ing andfaci l i ta t ing the development of large andmedium scale industries in Kerala, KSIDC actsas a promotional agency involved in catalyzingthe deve lopment o f phys ica l and soc ia linfrastructure required for constant growth ofindustry in the State.

KSIDC of fers pro fess iona l gu idance andsuppor t for potent ia l investors through acomprehensive set of services that includedeveloping business ideas, identifying viablepro jec ts , p rov id ing f inanc ia l ass is tance,guidance and assistance for implementation.KSIDC thus attracts a considerable volume ofinvestment to the State.

Functions :

Kera la Sta te Indust r ia l Deve lopmentCorporation Ltd. (KSIDC) is a wholly ownedcompany of Government of Kerala, for thepromotion and development of medium and

large scale units in the State. As the nodalagency for foreign and domestic investmentsin Kerala, KSIDC provides comprehensivesuppor t for investors, besides processingvarious incentive schemes and faci l i tat ingconstant interaction between the governmentand the industrial sector.

Established in 1961, KSIDC is led by a coregroup of seasoned professionals from variousfields including Engineering, Management,Finance and Law. The exper t ise of theseprofessionals in planning and management ofvarious kinds of projects helps the corporationto prov ide comprehensive ass is tance forinvestors.

KSIDC, as a fac i l i ta tor and f inanc ier forindustries, offers wide ranging assistance inindustrial promotion. The key areas of our focusinclude:

Identification of Investment Ideas

Translating ideas into concrete proposals

Feasibility Study, Project Evaluation

KERALA STATE INDUSTRIAL DEVELOPMENT CORPORATION (KSIDC)


Financial Structuring, Loan Syndication

Assisting in Central and State Govt.Clearances

Development and Administration of GrowthCenters

Industrial and Infrastructure development

So far, KSIDC has promoted more than 650projects in the State with an investment outlayof Rs.5155 crores providing employment toapproximately 72500 persons.

Project Lending :

KSIDC offers financial assistance and supportto medium and large scale industries in theState including service sectors like tourism,s tar ca tegor y hote ls, resor ts, hosp i ta ls,infrastructure projects, etc and where theconstitution of assisted unit is in the nature ofPrivate/ Public Ltd Company.

Usually assistance is extended to projects withan investment of Rs.200 Lakh and above and

the te rm loan ass is tance is l im i ted to amaximum of Rs.2000 Lakh in a project and itcan go up further in a single project with StateGovernment’s permission. The definition of themedium and la rge sca le manufac tur ingindust r ies as def ined by the Cent ra lGovernment is applicable to the Corporationalso.

He alone is a man who keeps his word: Not that he hasone thing in the heart, and another on the tongue.

Guru Gobind SinghGuru Gobind SinghGuru Gobind SinghGuru Gobind SinghGuru Gobind Singh

COSIDICI COURIER12

LETTER TO THE EDITOR

Dt.: 28th April, 2014

Dear Editor,

The periodicals and journals published by Industry Associations and organisationssuch as yours play a vital role in disseminating relevant information to the membersin particulars and the public at large. Since we are also publishing a monthlyNewsletter we can appreciate the efforts which go into preparing a good journal.We find the new format of COSIDICI COURIER quite eye catching. The constantimprovement also shows that the persons responsible for publishing are not takingit as a routine job but putting their heart & soul in its preparation.

Your publication is doing a yeoman service to the Industry fraternity and deservesall praises for the effort.

Please accept our best wishes for the publication as well as for the Council of State Industrial Development& Investment Corporation of India (COSIDICI).

With Best Regards,

Yours Sincerely, Sd/-{Ashok Khandelia}PresidentAssociation of Industries DewasIndustrial Area No. 1,A. B. Road, Dewas - 455001

1. What is the name of the BPO company ofIndian cinema celebrity Arvind Swami ?

[a] Phoenix Global Solutions; [b] ProLeaseIndia; [c] Mindshare; [d] Mindspace.

2. What did Jakarta Project of Sun Microsystemsinvolve ?

[a] Creating a web server for servelets andJSPs (Java Server Pages) in collaboration withApache; [b] Creation of Java Language; [c] Creation of a commercial versionof Java; [d] Creation of a commercial version of Linux.

3. This non-profit organisation of volunteers from around the world operates and contributesto a project to design, develop and maintain a free open-source HTTP Web server. Whatis it called ?

[a] Open-source Group; [b] Apache Group; [c] Java Group; [d] Apache-Sun Group.

4. Which Indian company is the world’s first TL 9000 certified software services company ?

[a] Infosys Technologies; [b] TCS; [c] CMC Limited; [d] Wipro Technologies.

5. Which company calls its e-service arm the Garage Program ?

[a] Hewlett-Packard; [b] General Motors; [c] Ford Motor Company; [d] Maruti UdyogLtd.

For Answers See Page No. 30

QUESTIONS OF CYBERQUIZ~47QUESTIONS OF CYBERQUIZ~47QUESTIONS OF CYBERQUIZ~47QUESTIONS OF CYBERQUIZ~47QUESTIONS OF CYBERQUIZ~47

Shri Ashok Khandelia


Multi-level parking in Udyog Vihar

HSIIDC released the initial blueprints for its multi-level car parking project, which will soon be up forcommissioning in Udyog Vihar. The new facility willbe the first designated parking space for vehiclesin Gurgaon’s industrial area, where cars are usuallyparked on the roadsides causing massive trafficclutter during the rush hours. With the release ofthis initial proposal, which spells out the basicrequirements as well as the budgetary parametersfor the car park project, the HSIIDC has set the ballrolling on one of the most urgent of infrastructuralrequirements in Udyog Vihar as of now. “Given thespace constraints in Udyog Vihar phase IV, surfaceparking slots cannot adequately serve therequirements of the area. Thus, the HSIIDC isproposing to develop a dedicated parking facility,which would include a multi-level parking as wellas an area designated for surface parking to caterto the growing demand for car parks in this area,”said an HSIIDC official. The expected financialoutlays for the overall project will be something tothe tune of Rs 90-100 crore, and the new parkingfacility, according to officials, would alsoaccommodate retail outlets, offices and eateriesso that the commercial returns are maximized. “Wehave chosen a 3 acre area in Udyog Vihar phaseIV for the multi-level car park project. The landadjacent to it, around 3.5 acres will be utilized forconstruction of a new access road and for a surfaceparking facility,” the official said. The site is locatedat a distance of around three kilometres from theexpressway and will be connected to the NH8

through a new 9-metre-wide access road, also tobe constructed as a part of the overall project. “Thenew strip of road will extend all the way from theparking facility to one of the service lanes of thehighway. There’s another 18-metre-wide road whichis proposed to pass through the main site to providebetter connectivity, which will also be constructedalong side the main project.

Andhra Pradesh government looks to sellstakes in Hyderabad infra projects

Andhra Pradesh is dividing the state government’sequity holdings in dozens of infrastructure projectstaken up under public-private partnerships and aimto complete the work by June 2. This has beennecessitated due to creation of Telengana as India’s29th State. The state government, through its nodalagency Andhra Pradesh Industrial InfrastructureCorporation is reducing its equity in these urbaninfrastructure projects to 26%.

MEMBER CORPORAPTIONS - THEIR ACTIVITIES

COSIDICI COURIER14

Valuers and auditors are being appointed to assessthe worth of the equity investments by the stategovernment. Andhra Pradesh has investments insome 300 industrial parks spread over 1.21 lakhacre. It has stakes in 29 joint venture companieswith private entities.

APIIC, whose initial focus was selling developedindustrial plots to businesses, reoriented itself tothe changing needs of the economy and joinedhands with private firms. The corporation holdsequity stakes in projects mostly in lieu of the landgiven to infrastructure projects. In some cases, ithas made cash investments.

Centre approves electronics projects worth Rs89 crore in Madhya Pradesh

The Central government has sanctioned electronicsmanufacturing projects worth Rs 88.65 crore in twodistricts of Madhya Pradesh. The projects, comingup at Badwai near Bhopal and Purva near Jabalpur,will provide employment to over 17,000 people,according to the state government’s Information

Technology department. The cost of the clusterproject at Badwai is pegged at Rs 48.34 crore,wherein the contribution of Centre will be 50 percent.

The state government through the Madhya PradeshState Industrial Development Corporation(MPSIDC) and the units to be set up under theproject will equally bear 25 per cent cost equally.

“For the project, 50-acre land has been allottedwhere world-level high quality facilities of power,water, road and other infrastructure will be provided.The project will be operational within 2.3 years,”the release added.

According to the state government, a collectiveinvestment to the tune of Rs 260 crore by the unitsis expected for the project wherein 3000 peoplewill get direct and 9000 indirect employment.Thecost of the cluster project at Purva is estimated atRs 40.31 crore. “The pattern of cost sharing forthis project will be same as in Badwai cluster.

Yesterday is but a dream, tomorrow is only a vision,but today well lived makes every yesterday a dreamof happiness, and every tomorrow a vision of hope.

KalidasaKalidasaKalidasaKalidasaKalidasa


NEWS FROM STNEWS FROM STNEWS FROM STNEWS FROM STNEWS FROM STAAAAATESTESTESTESTES

U’khand notifies new policy for small units

The Uttarakhand government has come out with anew purchase preference policy for micro and smallenterprises (MSEs) in the hill state. Under the newpolicy, the government will give purchasepreference to all the state-based local MSEs in casetheir tenders are within the range of 20 per cent ofthe L1 (lowest quotation). The measure wouldbenefit the state’s khadi and village industry,particularly in the handicraft and handloom sectors.

Even in the various government turnkey projects, itwill be mandatory for the company to purchase 30per cent of the material from local MSEs. Whilemaking procurement from the local enterprises, thegovernment will not seek information regarding thecompany’s annual turnover. For this purpose, allthe MSEs in the state will have to register with theNational Small Industrial Corporation (NSIC) andget a certificate of quality from it.

Gujarat tech SMEs eye 40% rise in exports

After a successful participation in the global tradeexhibition at CeBIT 2014 in Hannover, Germany,recently,Gujarat-based small and mediumenterprises (SMEs) in the information technologysector are upbeat about making their presence feltin global trade and exhibitions. Led by the industryassociation, Gujarat Electronics and SoftwareIndustries Association (GESIA), the SMEs areexploring more global opportunities to enhanceIT exports from the state.

Hence, after participating in trade expos in Dubaiand Germany, GESIA is exploring places such asWest Asia, Taiwan, Barcelona, Brazil and Canadato begin with. What is more, by enhancing theirglobal presence through trade expo participationand delegation visits, GESIA anticipates a rise of40 per cent in software exports by Gujarat-basedIT SMEs.

In the immediate future, GESIA is looking atparticipating in IT and electronics trade expos inWest Asia and Taiwan. It is also in talks with theCanadian government for delegation visits.

According to Shri Vishal Vasu, director and chieftechnology officer of Dev Information TechnologyPvt. Ltd., one of the IT SMEs from Gujarat thatparticipated in CeBIT, the participants receivedenquiries in areas like mobile applicationdevelopment, web application development, ITservice management, and enterprise solutions,among others.

India’s exports of electronics goods, software andrelated services to West Asia totalled $3.519 billionin 2012-13. It is estimated that electronics goodsexports to West Asian countries in 2012-13amounted to $1.667 billion, while exports ofsoftware and related services to that regionamounted to $1.852 billion. However, IT andsoftware exports from Gujarat are currently worthRs 1,400 crore, which the industry body anticipateswill rise by 40 per cent due to an enhanced globalpresence on the part of IT SMEs from the State.

COSIDICI COURIER16

DO YOU KNOW !DO YOU KNOW !DO YOU KNOW !DO YOU KNOW !DO YOU KNOW !

Timber : More than 1500 species of treesare commercially exploited for timber indifferent parts of India. It is used in timber-based industries such as plywood, sawmilling, paper and pulp, and particle boards.

Bamboo : These are common in the north-eastern and the south-western parts of India,growing along with deciduous or evergreenforest. The main commercial uses of bambooare as timber substitutes, fodder, and rawmaterial for basket, paper and pulp, and othersmall-scale industries.

Cane : Cane or rattan are the stems of aclimber plant and are used for a large numberof household items. It is used to make walkingsticks, polo sticks, baskets, picture frames,screens, and mats.

Grasses : There are hundreds of varietiesof grasses in the country that are used for anumber of purposes. Lemon grass, palmrosegrass, bhabbhar, and khus grass are someof them.

Fruit : Fruit trees are an important source ofincome and food for the rural household. Insome areas fruit trees are commonly plantedalong the field borders and around the wells.Mango, coconut, orange, pear, jackfruit andmany others grow wild in the forest.

Medicinal use : Since time immemorialhumans have been depending on the forestto cure them of various ailments. Even todayman is dependent on the forest for herbs andplants to fight against disease. Of all the

FOREST PRODUCTS AND THEIR USES

medicinal treesfound in India,the neem is themost important.Leaves, bark,and other partsof many othertrees also havemedicinal valueand are used tomake variousayurvedic medicines.

Fibre : Plant fibre has many different uses.Soft fibres such as jute are derived from thestems of the plant. Hard fibre from the leavesof hemp and sisal are used to make fabricsfor various applications. Coir, another form offibre from the fruit of the coconut, is used tomake ropes.

Floss : The fruits of many species of Indiantrees produce a silky floss. The most commonof these is simal. It is used to made cottonwool, mattresses, and pillows.

Essential Oils : Tropical grasses such aslemon grass, citronella, and khus are thesource of essential oils. Oil is distilled fromthe wood of various species such assandalwood, agar, and pine. Oil is alsoderived from the leaves of certain plants andtrees such as eucalyptus, camphor,wintergreen, and pine. These oils are usedfor making soaps, cosmetics, incense,pharmaceuticals, and confectionery.

One must never give up hope of becoming better. Aperson is old only when he refuses to make the effort

to change.

Paramhansa YoganandaParamhansa YoganandaParamhansa YoganandaParamhansa YoganandaParamhansa Yogananda


ACTIVITIES OF COSIDICIACTIVITIES OF COSIDICIACTIVITIES OF COSIDICIACTIVITIES OF COSIDICIACTIVITIES OF COSIDICI

The Executive Committee of COSIDICI was heldat “Uday Samudra Leisure Beach Hotel”,Samudra Beach, Kovalam, Kerala on March 08,2014 and discussed the following issues :

Strengthening of Training arrangements forOfficers of SLFIs :

The on-going Training Programme arranged byCOSIDICI in collaboration with RBI at Pune wasappreciated by the Executive Committee. TheMembers felt that the Training provided by SIDBIwould be very useful for SFCs. However, SIDBIbeing their apex body should subsidise thesetraining programmes. COSIDICI was requested totake up the matter with SIDBI. Shri P. Joy Oommen,IAS advised that COSIDICI may build a pool ofresource persons of officers from the MemberCorporations. These officers would be experts intheir field. KFC for example has a number of officerswho can be trainer for Project Appraisal, Recoverymatters and even on HRD issues. SICOM Ltd. hasofficers who are experts in Project financing in manysector. SICOM could also guide those memberswhich had registered as NBFC u/s 45-1A of theRBI Act, 1935 to file monthly and quarterly returnswhich had been made mandatory by the RBI.COSIDICI was requested to make a schedule forconducting its own training with the help of theexperts sourced from the Member Corporationsand the training would be held in different regionsof the country so as to benefit all the members.The Executive Committee appreciated thissuggestion and felt it would enable sharing ofexpertise through training which is relevant to thestaff of the member corporations.

Strategies for revival and restructuring of SFCs:

Shri Oommen informed that in recent years KFChas been achieving substantial growth in terms ofsanctions, disbursements of financial assistance aswell as in recoveries. The operational profit of theCorporation had crossed Rs.100crore mark for thefirst time in the history of the Corporation and ithad emerged as the best performing public sectorundertaking in Kerala. The Corporation earned aNet Profit of Rs.66.83 crores during F.Y. 2012-13,the Non- Performing Assets are 0.36% and Capital

Adequacy Ratio (CAR) is 24.94. KFC is the nodalagency for the Kerala State EntrepreneurDevelopment Mission (KSEDM) which wasannounced in the budget of Kerala StateGovernment in the financial year 2011-12. TheMission involves setting up of 10,000 enterprisesin the State over the next five years. It also aims atgenerating one lakh job opportunities and buildingentrepreneurship culture among the educatedyouth of the State.

The groups/entrepreneurs are selected afterinterview conducted by a Selection Committee andare given training for two weeks and they will begiven interest free financial assistance up to 90%of the project cost, subject to a maximum of Rs.20lakhs. The repayment period is maximum of 5 years,including one year moratorium. As on February28, 2014, 1,980 enterprises and 4,676 prospectiveentrepreneurs, were selected under the Missionscheme. 244 of these enterprises have alreadystarted commercial operation and 99 more, havingbeen sanctioned financial assistance, areimplementing their projects. Including thepromoters, 1,618 persons are engaged in theenterprises that have started commercial operation.One breakthrough that KFC has achieved throughthe KSEDM is the funding of start-up units inincubators in different parts of the State. Many unitsin Technopark TBI, Thiruvananthapuram, Start-upVillage, Ernakulam and NIT Incubator, Kozhikode

COSIDICI COURIER18

have availed loans for the first time for theircommercial operations. More persons with highereducation, especially professional education, arecoming forward to take up the self-employmentroute which has given a new direction to the youthof Kerala. There has also been a substantialincrease in the number of persons trained. Tosustain the growth momentum, the Corporation hasbeen looking at opportunities of participation inmeets where prospective entrepreneurs alsoparticipate. These include organizing workshops,awareness camps in colleges, sponsoring of collegeannual meets, actively participating in activities attechnology incubators, etc. The large number ofstart-ups thus incubated by KFC, are expected tohave a multiplier effect on the economy of Keralaleading to availability of local products and serviceswith improved quality and at a lower cost tocustomers on the one side; and additionalcontribution to State Exchequer in the form of salestax, service tax etc. on the other side. It would alsomake the youth self-reliant, confident and enablethem to attain dignity with good living standards.

The Corporation has also established itself as atechnologically advanced Customer CentricInstitution. It had made substantial progress inimplementing the Core Financial Solution (CFS)developed for it by TCS. A new application has alsobeen developed to handle the disbursement fundrequests from branches and allocation of the samefrom Head Office on real time basis which reducesthe time lag between request of funds anddisbursement of loans.

Mr. T. Wangchuk, M.D., SIDICO informed thatSIDICO has an authorized share capital of Rs. 20.00crores and paid up capital of Rs.17.14 crores. Itsnet profit during the past two years has been aboveRs.2.00 crores for each year. The Corporation hasdeclared dividend amounting to Rs.51.43 lakhs tothe share-holders during the Financial Year 2011-12 and 2012-13. SIDICO is the nodal agency ofthe State Government for implementation of ChiefMinister’s Self Employment Scheme under whichthe educated unemployed youth of the State aregiven loans at a concessional interest rate of 6%per annum to take up income generating schemesthrough self employment. The loan is interest freefor two years from the date of disbursement.SIDICO is also the nodal agency of the State

Government for implementation of theComprehensive Educational Loan. It is meant foreducated youth desiring to take up higher academicstudies and professional courses in India andabroad. The loan is interest free during the courseperiod plus one year or 6 months after gettingemployment whichever is earlier. Thereafter, itbears an interest of 6% per annum.

Dr. Madhu Khare, IAS, M.D., MPFC informed thatMPFC has a share capital of Rs.361.1 crore. TheCorporation is also meeting its targets of sanctionsand disbursement. However it was felt that theSFCs Act 1951 constrained the working of the StateFinancial Corporations. It did not allow the SFCs togive loans to educational Institutions. The ExecutiveCommittee advised under section 2(c) of the SFCAct, the SFCs could give loans to an industrialconcern providing engineering, technical, financial,management, marketing or other services orfacilities for industry. If any Corporation wants togive loan for any other activities, it could get thatactivity approved by SIDBI under clause xxii ofSection 2(c) of the SFCs Act. The approval wouldhowever need to be taken on a case to case basis.The MSMED Act 2006 had added a list of serviceswhich had expanded the activities where the SFCscould operate profitably.

Smt. Anita Rajendra, IAS, Vice CMD, APIDCinformed the Executive Committee that the APIDCwas established in 1960. It had financed units whichhave now become very large and successfulindustries e.g. Amara Raja, Pennar Industries butAPIDC was no longer extending term loans toindividual units. However the Corporation startedVenture Capital financing for which it had formedAPIDC-VCL. The fund had already given a returnof 20%. The Corporation had started Research andInnovation Council of Hyderabad with equity ofRs.100crore from the State Government and ISBas the knowledge partner. The research done herewould be in the field of IT, Life Science, Cleantech,Manufacturing sector etc. and would be linked toindustry. APIDC would facilitate linkages betweenResearch and Industry and would contribute Rs.60crore to the fund. Thus the role of the Corporationis more in the area of industrial promotion and lessin lending operations.


Shri Baldev Singh, IAS, M.D., SICOM Ltd. informedthe Executive Committee that SICOM wasdisinvested in 2005. It is a non-deposit taking NBFCand was registered under section 45-1A of RBI Act,1934. The Government of Maharashtra owns 49%of the equity, the rest of 51% is with Sansui Bank ofJapan, J C Flower & Company, Corporates andEmployees Welfare Fund of 2%. Two of its mainresources of funds are term deposits fromcorporates and line of credit from various banks.SICOM had decided to go in for public issues andfloat an IPO but keeping in view the currenteconomic scenario the Corporation has postponedthe same. SICOM gives long, medium and shortterm loans, Working Capital Loans as well as BillDiscounting facilities. It’s three main areas ofexpertise are as under :-

Special Situation Funding : Under this Scheme,SICOM takes up units which are not doing well butwhich can be turned around. SICOM participatesin management, equity and debt of thesecompanies. The Corporation has achieved 100%success rate in turning around these NPAs andearned handsomely by selling the equity of the unit(after turning it around) in the market.

SICOM-ARC : This is a 100% subsidy of theCorporation which takes over the NPAs of banksand affects recovery by selling the assets. SICOM-ARC has earned Return on Assets ranging between30-40%.

Real Estate Sector : SICOM enters into JointVenture Projects with builders and is presently intoa residential project (of 100 acres) in Nagpur.

SICOM actively participates in Venture Funding butonly after evaluating the projects and the risksinvolved. It had funded one in education sectornamely Educomp which is more of an IT companythan an Educational Institution. Shri Singh felt thatSFCs should be turned around to promote industryfor which they needed to be made autonomous.

Shri Madhusudan Sharma, IAS, M.D., RFC informedthe Executive Committee that RFC has not givenany fresh loans in the past two years. RFC hadbecome a nodal agency for Young EntrepreneursIncentive Scheme of the Government of Rajasthan.

Under the scheme 1000 persons were supposedto be helped to set up industries. However, only280 persons were chosen but are yet to be givenfinancial assistance. The main problem was thelack of suitable industrial plots with proper facilitiesin well developed industrial areas. Commentingupon RFCs loan portfolio, Shri Sharma informedthat many of the units financed earlier by RFC gonefor litigation and resolving these old cases wasdifficult. He felt that common “litigation policy” couldbe prepared for all the SFCs. Shri Sharma furtherinformed that RFC plans to focus on giving loansto upcoming real estate sector projects in the State.

Shri V.S. Rathore, Secretary General cautioned thatRFC already has a high exposure to the real estatesector and further exposure would lead to increasedrisks. Also, the RBI has fixed exposure norms tothis sector for Banks, which are also to be adheredto by RFC/all SFCs. Shri Baldev Singh informedthat when SICOM takes up real estate financing, ittakes a collateral of 2.5 – 3 times the cost of theproject apart from proper due diligence andthorough appraisal. Further, an Escrow account isopened for routing the revenues / sale proceedsunder the project. It should be made mandatoryfor the loanee to obtain ‘No Objection Certificate’from the Corporation for sale of any project relatedassets/collateral assets.

The Executive Committee was unanimous in itsopinion that working of all the Corporations shouldbe fully computerized. This would enable theapplications to be processed within a few days andfacilitate sanctions and disbursement of loans andrecovery. Kerala Financial Corporation had alreadyshown a marked improvement in its operationssince implementation of Core Financial Solution.

COSIDICI National Awards 2014 for“Outstanding Entrepreneurs” :

The Executive Committee was happy to note thegood response of the Members Corporationstowards the COSIDICI National Award Function2014 and suggested that the function may be heldafter the Lok Sabha Election 2014 to enable a betterparticipation from the Member Corporations.

COSIDICI COURIER20

MICRO, SMALL & MEDIUM ENTERPRISESMICRO, SMALL & MEDIUM ENTERPRISESMICRO, SMALL & MEDIUM ENTERPRISESMICRO, SMALL & MEDIUM ENTERPRISESMICRO, SMALL & MEDIUM ENTERPRISES

RBI extends loan tenure for exporters to 10years

The RBI has allowed banks to provide loans withtenures of up to 10 years to exporters to help themensure capital flows to fulfill long-term contracts.Existing norms allow banks to give loans for up toone-year only. It has been decided to permit banksto allow exporters having a minimum of three years’satisfactory track record to receive long-term exportadvance up to a maximum tenor of 10 years to beutilised for execution of long-term supply contractsfor export of goods.

SMEs raise Rs.317 crore through public issueslast year

As many as 37 small and medium enterprises gotlisted on the bourses in 2013-14, with public issuesworth Rs.317 crore. It was 32.63% more thanRs.239-crore garnered by 24 companies on theSME platforms of the stock exchanges in 2012-13.BSE has 57 and NSE has five firms listed on theirrespective SME platforms.

RBI Panel to review credit flow to MSME sector

A meeting of the Reserve Bank of India’s StandingAdvisory Committee was convened in March toreview the flow of institutional credit to themicro, small and medium enterprises (MSME)sector, according to the fortnightly e-newsletter ofthe Federation of Indian Micro, Small and MediumEnterprises (FISME). The RBI has constituted theStanding Advisory Committee (SAC) with DeputyGovernor Shri K C Chakrabarty as chairman. Theofficials of the ministry of micro, small and mediumenterprises, banks and associations of the MSMEsector are members of the SAC.

The committee has been mandated to examineissues related to credit availability to the MSMEsector. It will also examine the constraints and thesteps being taken to overcome them, so that theinstitutional credit flow to MSMEs improves. On theagenda for the meeting is a review of credit to theMSME sector. In this regard, it will review data onoutstanding credit to the sector as on December31, 2013 as received from the banks; suggestionsreceived from industry association and chambers;and recent initiatives to facilitate credit flow to the

sector. The committee will also review findings ofthe IBA (Indian Banks’ Association) on ‘Quick Studyon the MSE sector’ and release of long-pendingclaims of banks under the erstwhile PMRY (PrimeMinister’s Rozgar Yojana) subsidy.

Govt concerned at 221% rise in sick MSMEs

An inter-ministerial committee on acceleratingmanufacturing in the micro, small and mediumenterprise (MSME) sector has made over 60recommendations covering issues of regulation,finance, infrastructure, technology and markets thataffect the different stages of the life cycle of MSMEs.The recommendations come in the backdrop of a221 per cent increase in the number of sick microand small enterprises (MSEs) between 2010 and2013 — from 77,723 to 249,903 (provisional) —after declining between 2005 and 2008.Their outstanding loans have risen by nearly 145per cent over this period, from Rs.5,233 crore toRs.12,800 crore.

The committee was set up by the cabinet secretaryin the context of the long gestation period inthe National Manufacturing Policy introduced by theCentre in 2011, and owing to growing concern aboutthe performance of MSMEs in the short andmedium terms. The report recommends ways ofboosting manufacturing in the MSME sector. Thereport said it was clear that MSMEs individually andcollectively lack the advocacy ability enjoyed bylarger enterprises on economic and functionalissues, and, therefore, are frequently at thereceiving end of unexpected actions of otherstakeholders, including the state machinery. “Acomplex and unfriendly business ecosystem


pushes small entrepreneurs towards the informaland unregistered segment, which is growing fasterthan the organised segment by more than fivetimes, and already accounts for over 95 percent ofall MSMEs,”.

This trend must be reversed as it is not sustainable,it adds, noting that policy makers and administratorsin multiple departments of local, state and Centralgovernments must understand the need to createan ecosystem that assists entrepreneurs throughthe life cycle of creation, growth and closure ofenterprises and encourages them to operate in theorganised economy. Among the keyrecommendations of the report are two that saystate governments should streamline and simplifyinternal processes, and allot more than 30,000 plotsthat are lying vacant in established industrial estatesacross the country to start-ups that come up withgood business plans. The committee has alsorecommended the setting up of a Credit GuaranteeFund with a corpus of Rs.1,000 crore, purely forenterprises started by graduate engineers andgraduate management trainees, adding that thescope of the fund can subsequently be expandedto include other first-generation entrepreneurs. Thereport says the India Inclusive Innovation Fundmust be operationalised as early as possible andthe Reserve Bank of India should consider directingcommercial banks to reduce lending rates to MSEsfrom 17-18 per cent to 13 per cent (i.e., not morethan two percentage points above the base lendingrate), since the credit risk is almost eliminated whenthe guarantee cover under CGTMSE (CreditGuarantee Fund Trust for Micro and SmallEnterprises) is taken. It repeats a recommendationof the National Manufacturing CompetitivenessCouncil, that a liquidity fund be set up for marketmakers in SME platforms, to provide them with acushion to reduce their holding risks. The ministriesconcerned must consider setting up innovation hubsto use R&D for the manufacture of high-endtechnology products. These innovation hubs may

comprise the 2000 clusters that are in the organisedsector; the laboratories of the Council for Scientificand Industrial Research and the Indian Institute ofScience; and technical universities in the proximity.

Microsoft Offers Cloud Time to SMBs

Microsoft under its three-month scheme, which isexclusively launched for India market, is makingan exchange offer to small and mediumbusinesses (SMBs) to give away their hardware inreturn for a cloud setup. It is reaching out toorganisations with 250 personal computers or less,offering them Azure credit in exchange for theirhardware. The company has opened a toll-freenumber and web access for the businesses to reachout to. “This is an opportunity for SMBs to get valuefor their legacy hardware and at the same time leapto the cloud. This will help them reduce maintenancecosts and get on a modern platform,”.

Microsoft has partnered with Mumbai-based Just-Dispose, which would collect the hardware fromthe customer, and provide a purchaseacknowledgement and a figure for the cash valueof the hardware. Based on this, the business canbuy Azure credit and build a cloud platform andhost applications. The organization, however,needs to commit certain amount every year to availmonthly credit on Windows Azure. This credit willcover over 30%-50% of the investment that theyincur while moving into the cloud.

For instance, if the value of the existing computerservers is estimated by JustDispose to be in therange of $200-$1000, the customer needs to paya minimum of $3000 a year as a guarantee amount.The business would then get credit towardsWindows Azure services upto a maximum of $500per month for two months, in addition to the $3000already in its credit. Overall the small businesswould end up paying $3000 for its Azuresubscription worth $4000, according to Microsoft.

It is not the oath that makes us believe the man, but theman the oath.

AeschylusAeschylusAeschylusAeschylusAeschylus

COSIDICI COURIER22

ECONOMIC SCENEECONOMIC SCENEECONOMIC SCENEECONOMIC SCENEECONOMIC SCENE

Fiscal Deficit Exceeds Estimates

The central government’s fiscal deficit breachedboth the revised estimate (RE) and Budget estimate(BE) targets for 2013-14 with one month still to go.Revenues from tax and disinvestment were shortof the target; expenditure, plan and non-plan, rose. The deficit was Rs.5.99 lakh crore during April-February of 2013-14, about 14.3 per cent higherover the RE of Rs.5.24 lakh crore. The BE was setat Rs.5.42 lakh crore. However, the month ofMarch might see some fiscal surplus, as advancetax payments came and disinvestment gatheredpace. The exchequer has to draw a fiscal surplusof Rs.75,000 crore in March to meet the RE targetand Rs.57,000 crore to meet the BE target.Economists said meeting the RE target might bedifficult, though the deficit could be somewhere near to the BE. The RE had estimated the fiscaldeficit to be 4.6 per cent of gross domestic product(GDP) and the BE at 4.8 per cent.

The economy’s slowing impacted tax receipts. Taxrevenue, net of state devolutions, was Rs.6.27 lakhcrore till February, 75 per cent of the RE of Rs.8.36lakh crore. At this point last financial year, it was77.1 per cent of RE.

The economy is officially projected to grow 4.9 percent in 2013-14, the second year in a row whenthe economy would expand below five per cent.However, officials were hopeful of meeting at leastthe direct tax collection targets. The taxdepartment had collected Rs 6.23 lakh crore tillMarch 30, against the target of Rs 6.36 lakh crore,including states’ share. Officials were confident ofRs 13,000 crore coming on the last day of thefinancial year. The government was not able tomeet even the truncated target of disinvestmentproceeds, pegged at only Rs.16,027 crore in theRE against the Rs.40,000 crore projected in theBE. Actual divestment proceeds were Rs.5,939 crore. These proceeds were 95 per cent of the REin 2012-13. Total revenue was a little over Rs.8lakh crore, 75.1 per cent of the RE target. It waslower than the 78.3 per cent in the correspondingperiod of 2012-13. The Centre incurred plan

expenditure of Rs 4.09 lakh crore, about 86 percent of the RE at Rs 4.75 lakh crore. At this point in FY13, it was 82.3 per cent of RE. Non-Planexpenditure was Rs 9.9 lakh crore or 88.9 per centof the RE at Rs 11.14 lakh crore. It was higher thanthe 86.5 per cent in the corresponding period lastyear. The revenue deficit, gap between non-capitalexpenditure and revenue, was 117.3 per cent ofRE. It was Rs 4.34 lakh crore against the RE of Rs3.70 lakh crore. Many economists consider therevenue deficit a more serious problem than thefiscal deficit because it means the government isborrowing to meet even its consumptionexpenditure.

India’s FDI inflows up 1.5% to $2.18 billion inJanuary

Foreign direct investment (FDI) into India grew by1.5% to $2.18 billion in January, according to thedata by the Department of Industrial Policy andPromotion. In January 2013, the FDI was at $2.15billion. However, for the April-January period,foreign investment inflows dipped 2 per cent to$18.74 bill ion from $19.1 bill ion during thecorresponding period of the previous fiscal.

During the 10-months of this fiscal, the highest FDIcame in services ($1.80 billion), followed bypharmaceuticals ($1.26 billion), automobiles($1billion) and construction development ($966million). Mauritius led inflows into India with $4.11billion of FDI during April-January, followed bySingapore ($3.67 billion), UK ($3.18 billion) and theNetherlands ($1.7billion).


The country needs foreign investment to helpregain its growth momentum. India’s economicgrowth slowed to a decade’s low of 4.5% in 2012-13. India is estimated to require about $1 trillionbetween 2012-13 and 2016-17, the 12th Five-YearPlan period, to fund infra projects.

CAD Narrows on Exports Push-up

India’s external sector position improvedsignificantly by December 2013. The latest balanceof payments data, indicates India’s currentaccount deficit (CAD)— excess of overseasexpenses over earnings— narrowed to 0.9% of GDPfrom 6.5% of GDP in the same period a year agoon the back of a modest pickup in exports and asharp moderation in gold exports. For the calendaryear 2014, CAD as % of GDP is expected to touch3.7% according to IMF estimates. Though it is nocomparison with economies with current surpluses,it is expected to do much better than someemerging market peers such as South Africa andTurkey. India has also recorded among the fastestimprovement in its CAD as % of GDP. The finalnumber could be lower than IMF estimates. Forthe financial year ending March 2014, India’s CADcould touch 1.9% of GDP, according to estimatesby State Bank of India.

Global trade to grow at 4.7% in 2014, says WTO

The World Trade Organization (WTO) in Aprilforecast growth in global goods trade in 2014 at4.7%, more than double the 2.1% jump last year,but still below the last 20-year average of 5.3%.For the past two years, growth has averaged only2.2%.

Coir exports jump 32% to Rs.1,476 crore lastyear

Exports of coir and its products jumped by 32% toa record high of Rs.1,476 crore in 2013-14 andChina topped the list of importers, the Coir Boardsaid. Coir exports were worth Rs.1,116 crore inFY 13, Coir Board chairman Shri G. Balachandransaid. In volume terms, exports increased to5,37,040 tonne in FY14, from 4,29,501 tonne inFY13, a growth of 25%. China accounted for24.42%of exports. In the preceding years, the USwas top in the list, expressing concern at the largeexport of coir fibre from India to China. He said thegovernment should take immediate steps to sendvalue-added products to China instead of exportingraw-materials.

Hope is important because it can makethe present moment less difficult to bear. If we

believe that tomorrow will be better, we can bear ahardship today.

Thich Nhat Hanh Thich Nhat Hanh Thich Nhat Hanh Thich Nhat Hanh Thich Nhat Hanh

COSIDICI COURIER24

ALL INDIA INSTITUTIONSALL INDIA INSTITUTIONSALL INDIA INSTITUTIONSALL INDIA INSTITUTIONSALL INDIA INSTITUTIONS

Framework for Revitalising Distressed Assets

The Reserve Bank, on February 26, 2014, hasissued certain guidelines regarding the “Frameworkfor Revitalising Distressed Assets in the Economy”.They are:

Refinancing of Project Loans

If the banks/lenders refinance any existinginfrastructure and other project loans by way of take-out financing, the project loan refinancing wouldnot be considered as restructuring subject to certainconditions.

Sale of Financial Assets to SCs/RCs

With a view to incentivising banks to recoverappropriate value in respect of their non performingassets (NPAs) promptly, banks can now reverse theexcess provision on sale of NPA if the sale is for avalue higher than the net book value (NBV) (i.e.,book value less provisions held) to its profit andloss (P&L) account in the year the amounts arereceived.

Purchase/Sale of NPAs to Other Banks

Banks will be permitted to sell their NPAs to otherbanks/FIs/ NBFCs (excluding SCs/RCs) without anyinitial holding period.

Use of Counter-cyclical/Floating Provisions

Banks can now use counter-cyclical/floatingprovisions for meeting any shortfall on sale of NPA,i.e., when the sale is at a price below the NBV whichpresently requires debit to the profit and lossaccount.

Bank Loans for Financing Promoters’Contribution

Banks can now extend finance to ‘specialised’entities subject to select guidelines applicable toadvances against shares/debentures/bonds andother regulatory and statutory exposure limits.

The guidelines regarding “Framework forRevitalising Distressed Assets in the Economy” alsoinclude regulatory issues like, credit risk

management; reinforcement of regulatoryinstructions by the Reserve Bank issued from timeto time; registration of transactions relating tosecuritisation and reconstruction of financial assetsand those relating to mortgage by deposit of titledeeds to secure any loan or advances granted bybanks and financial institutions, as defined underthe SARFAESI Act, in the Central Registry ofSecuritisation Asset Reconstruction and SecurityInterest of India (CERSAI); and Board Oversight.

Concept Paper on Trade Receivables and CreditExchange for Financing MSMEs

The Reserve Bank, on March 19, 2014, has soughtfeedback on the Concept Paper on “TradeReceivables and Credit Exchange for FinancingMicro, Small and Medium Enterprises (MSMEs)”.Comments may be emailed or sent by post to theChief General Manager, Department of Paymentand Settlement Systems, Reserve Bank of India,Central Office, 14th Floor, Shahid Bhagat SinghMarg, Mumbai-400001 on or before April 20, 2014.The concept paper is available on RBI website(www.rbi.org.in).

Background:

Given the potential of MSMEs in unlocking growth,employment and inclusion in the economy andsociety, there is a pressing need to address concernsrelated to financing of this segment.


Despite efforts on multiple fronts as well asenabling legal and regulatory provisions, the MSMEsegment continues to be belaboured with theproblem of delayed payments and dependency ontheir corporate buyer/s.

The matter has been addressed in the reports ofthe Committee on Financial Sector Reforms (2008)as well as the Working Group on Securitisation ofTrade Receivables (2009). The repor ts hadrecommended having an institutional infrastructurefor creating necessary liquidity for trade receivablesthrough a mechanism of efficient and cost effectivefactoring/ reverse factoring process. The statementmade by the Governor on September 04, 2013regarding facilitation of Electronic Bill FactoringExchanges in the country, has drawn the attentionof many stakeholders in the country in offering theirexpertise and experience in this area to facilitatebuilding of suitable infrastructure for MSMEfinancing.

RBI grants “in-principle” approval for bankinglicences

The RBI has on April 2, 2014, granted “in-principle”approval to two applicants, namely, IDFC Limitedand Bandhan Financial Services Private Limited,to set up banks under the Guidelines on Licensingof New Banks in the Private Sector. The “in-principle” approval granted will be valid for a periodof 18 months during which the applicants have tocomply with the requirements under the Guidelinesand fulfil the other conditions as may be stipulatedby the Reserve Bank.

Implementation of Basel III Capital Regulationsin India

The Reserve Bank, on March 27, 2014, extendedthe transitional period for full implementation ofBasel III Capital Regulations in India upto March31, 2019. Earlier deadline was March 31, 2018. Thiswill also align full implementation of Basel III in Indiacloser to the internationally agreed date of January1, 2019. The decision was taken as there wereindustry-wide concerns about the potential stresseson the asset quality and consequential impact onthe performance/profitability of the banks, whichwould have necessitated some lead time for banksto raise capital within the internationally agreed

timeline for full implementation of the Basel IIICapital Regulations.

Differential Rate of Interest for MSEs

The Reserve Bank, on April 15, 2014, advised thebanks to take into account the incentives availableto Micro and Small Enterprises (MSE) borrowersin the form of the credit guarantee cover of theCredit Guarantee Fund Trust for Micro and SmallEnterprises (CGTMSE) and the zero risk weight forcapital adequacy purpose for the portion of the loanguaranteed by the CGTMSE and provide differentialinterest rate while pricing their loans for such MSEborrowers, than the other borrowers. However,banks should note that such differential rate ofinterest is not below the base rate of the bank.Further, banks have been advised to review theirloan policy governing extension of credit facilitiesto the MSE sector, with a view to using Boardapproved credit scoring models in their evaluationof the loan proposals of MSE borrowers.

Macroeconomic factors key for financialstability: RBI

Macroeconomic stability is important for preservingstability in the financial system, according to RBI.However refined the financial regulation might be,it cannot compensate for weaknesses in the realeconomy. Hence, macroeconomic stabilitycharacterised by fiscal prudence and sustainablegrowth with low inflation is important to preservethe overall stability of the financial system.

The global financial crisis has given a greatermacro-prudential orientation to financial regulationand emphasised on better quality capital so as tosafeguard financial stability. Banks are currentlyunder stress when it comes to their asset quality.The current weaknesses in corporate balancesheets, partly due to subdued economicenvironment, have been feeding into banks’balance sheets. This trend, if left unchecked, couldultimately impinge on financial stability. RBI hadrecently outlined a corrective action plan for tacklingdelinquent loans, including incentivising their earlyidentification, timely revamp and prompt steps fortheir recovery or sale.

RBI wants trade receivables & credit exchangefor financing MSMEs

COSIDICI COURIER26

The RBI has proposed setting up of a tradereceivables and credit exchange (TCE) forfinancing micro, small and medium enterprises(MSMEs). In a concept paper, the Central Bankdetailed the model through which TCE wouldfunction and alleviate some concerns overfinancing for MSMEs. The proposed model outlinestwo stages for trade receivables, the primarysegment where MSME bills are dematerialised anddiscounted through the electronic platform throughthe mechanism of reverse factoring and thesecondary market segment where the alreadyfactored or discounted invoices are further traded.

In the primary segment, once an MSME deliversgoods as per requirement to a corporate buyeralong with a bill, the buyer on acceptance of thegoods posts the bill on the TCE. These receivablesof the MSME from the buyer become available tothird parties for bidding. The MSME can accessfresh funds through the bidding process. While theMSME gets funds ahead of the actual payment bythe buyer, the buyer can directly pay to dues to thefinancier of the MSME. The RBI has soughtcomments from stakeholders on the functioning ofthe TCE and also the secondary market segment.Earlier in February, RBI governor Shri RaghuramRajan had said the bank is in talks with marketplayers to set up a trade receivables exchange tobetter facilitate credit to MSMEs. Shri Rajanexplained that MSMEs get squeezed all the timeby their large buyers, who pay after long delays.

NBFCs Approach RBI, Govt. over newcompanies Act

Non-banking finance companies (NBFCs) haveapproached the RBI and the Ministry of CorporateAffairs to amend regulations under the newCompanies Act. These companies fear the stiffreserve requirements and norms on investmentin government bonds will hit them hard. Rules underThe new Companies Act make it mandatory forNBFCs to create a corpus (debenture redemptionreserve account) to meet repayment obligationsfor debentures maturing within a year. Also, theyhave to invest 15 per cent of their resources ingovernment bonds.

While building buffers for repayment is good forfinancial discipline, the provisioning would eat intothe funds to be deployed into business. And, thiswill be a huge burden on the already stretchedbalance sheets of NBFCs. Under the oldcompanies Act (of 1956), financial companies wereexempted from such a corpus.

Shri Mahesh Thakkar, director-general of FinanceIndustry Development Council, said the new Actcould make the situation acute. The entity will takeup the matter with the ministry and RBI, theregulator for financial companies. Shri Thakkar saidthe new Act could make fund-raising throughdebentures unviable. The effect of the norms onfinancial companies will vary according to degreeof their dependence on debentures - while thoseusing bank lines to source funds won’t see muchimpact, companies using medium-term (two-three-year) debentures will be under pressure to keep asubstantial portion of their funds in the redemptionreserve. Shri Sanjay Agarwal, managing directorof Au Financiers, said an exemption was allowedin the old companies Act, adding perhaps, it wasleft out in the new Act due to oversight. NBFCs havealready urged the government to reintroduce theexemption. For AU Financers, the share of bonds/debentures in the total funds raised is about 20per cent, and this might deal a 10-basis-point impacton costs.

RBI allows LLPs undertake financialcommitment aboard

The RBI has allowed Limited Liability Partnership(LLP) firms to carry out financial commitment to/onbehalf of joint ventures or wholly-ownedsubsidiaries of the Indian companies abroad. ‘‘Ona review, it has been decided to notify a LimitedLiability Par tnership as an ‘Indian Party’.Accordingly, an LLP, may henceforth undertakefinancial commitment to/on behalf of a JV/WOSabroad,’’ the Reserve Bank said. An ‘Indian party’means a company incorporated in India makinginvestment in a joint venture or wholly-ownedsubsidiary (WOS) abroad and includes any otherentity in India as may be notified by the RBI.


SUCCESS STORIES OF KSFC ASSISTED UNITSSUCCESS STORIES OF KSFC ASSISTED UNITSSUCCESS STORIES OF KSFC ASSISTED UNITSSUCCESS STORIES OF KSFC ASSISTED UNITSSUCCESS STORIES OF KSFC ASSISTED UNITS

Span Plastic Pvt. Ltd. was established in the year1979 by Mr. G.L. Wadhwa. Starting with themanufacture of bobbins and tubes, the companyhas progressed to manufacturing seam prooftubes, cones and plastic tubes for textile industry.These products are supplied regularly as importsubstitutes, which can be compared to Europeanstandards for quality. The plastic hangers,manufactured by the company, are exported toBangladesh and Sri Lanka.

The company had availed term loan amounting toRs.34.80 lakhs from KSFC.

The turnover of Span Plastic Pvt. Ltd. in the years 2005-06, 2006-07 and 2007-08 was Rs.401.28 lakhs,Rs.568.30 lakhs and Rs.569.20 lakhs respectively.

The company was awarded the ISO certification in February 2008.

Span Plastic Pvt. Ltd. Bangalore

S. M. ENTERPRISES MANDY

Ms. R. Indira started S.M. Enterprises in the year2004. The unit is engaged in the servicing andrepair ing of transformers and pumps. Theproprietrix has been supplying reconditionedtransformers to KPTCL and other privatecompanies. Over the years, the unit has availedseveral loans amounting to Rs.43.22 lakhs fromKSFC between 2004 and 2008, under the termloan and national equity fund schemes, forexpansion of the existing unit.

The performance of the company shows constantgrowth. The turnover figures of the company arerecorded as Rs.315 lakhs, Rs.394 lakhs and Rs.568lakhs in the year 2007, 2008 and 2009 respectively.

Ms. R. Indira received the Bhartiya Vikas Ratan award for ‘excellence in chosen field of activity’ on theoccasion of the 29th National Seminar on ‘Individual Contribution Towards Economic Growth and SocialDevelopment’ on 24th August 2009, at New Delhi from All India Business Development Association.

COSIDICI COURIER28

HEALHEALHEALHEALHEALTH CARETH CARETH CARETH CARETH CARE

A large percentage of the population is fat, unfitand unhealthy. Too little physical exercise and toomuch food are the main culprits with sedentary jobsand too much time in front of the TV or PC beingnearly as culpable. It’s clear then that a caloriecontrolled diet plan and more physical exercise arevital for weight reduction but what kind of physicalexercise? Jump rope of course!

Jumping rope uses just about every muscle in yourbody which means it’s a very effective calorie burner.Your muscles have to work hard to support yourbody weight as you work out and with regards toburning calories, the much more muscle activitythe better.

In addition to being a very effective calorie burner,jumping rope also strengthens and conditions yourheart and lungs which mean you feel fitter and willalso be healthier. Almost every doctor worth hiswhite coat and stethoscope knows thatcardiovascular fitness is strongly linked tocardiovascular health. Fitter individuals tend topossess lower blood pressure, low resting heartrates, low stress levels, low cholesterol and aremuch less susceptible to strokes and heart attacks.Not only can jumping rope help you look better,you’ll feel better too!

Overweight individuals can be reticent about goingtowards the gym. It’s understandable really; fitnesscenters are where the fit and beautiful people hangout. Actually this isn’t even remotely true but it issufficient of a reason for an unfit and overweightperson to steer clear of gyms.

Not going to a gym is notan excuse for becoming fatand unfit though; especiallywhen you have a jump rope.You are able to work upquite a sweat in yourlounge, spare room,garden or garage withnothing more than yourtrusty speed rope. You donot require any costly exercise equipment or fancytraining clothes; just a pair of supportive shoes andthe willingness to work.

If you are new to physical exercise, very overweightor have any kind of medical condition pleaseconsult your doctor before you start a new exerciseregime. However, chances are, he’ll pat you on yourback and send you on your way when you tell himyou intend to lose weight and get fit.

Even with your doctor’s okay, make sure you startslow and build up gradually. Performing too muchtoo soon is a great way to get injured so initially,exercise smart rather than hard. Build up the lengthand frequency of your workouts over the comingweeks and months and, that way, you’ll avoid injuryand maintain making slow but steady progress; bepatient!

Jumping rope is an outstanding, cost effective,handy and accessible approach to get fit and stayfit and if it is good enough for world championboxers, you know it’s good enough for you too.

FANTASTIC BENEFITS OF SKIPPINGBy Keith Colladow

Hope is the dream of a waking man.

AristotleAristotleAristotleAristotleAristotle


POLICY POINTERSPOLICY POINTERSPOLICY POINTERSPOLICY POINTERSPOLICY POINTERS

New Companies Act Takes Effect

The new Companies Act, 2013, will come into forcefrom 1st April, 2014. However, many sections areyet to be notified. Among these are setting up of aNational Company Law Tribunal (NCLT), a NationalFinancial Reporting Authority (NFRA), winding-upof sick companies and special courts. Companieswill be required to follow the provisions in this regardof the old Companies Act, 1956. Some of the leftout sections also related to the Investor andEducation Protection Fund, compromise andarrangement, oppression and mismanagement,fraud and the damages required to be paid bycompanies involved. So far, the government hasnotified 283 of the 470 sections. The first notification,of 99 sections, was in 2013. The provisions oncorporate social responsibility (CSR) were notifiedon February 27. Last week, the ministry ofcorporate affairs (MCA) notified 183 new sections,to take effect from that day. The new law will bringmore transparency in corporate governance, whileallowing flexibility to companies in exceptionalsituations. Initially, the government faced a lot ofcriticism on the implementation and lack of clarityin the law. The draft rules and, eventually,notification of final rules by MCA in recent monthshave helped ease the scenario to a large extent.

Replacing the 58-year-old legislation, the new lawwould have stricter norms for independentdirectors, auditors, key appointments andstandards of conduct. While there is a mandatoryprovision on spending for CSR, companies canexplain if they want to digress from the norm.Companies with a net worth of more than Rs.500crore or revenue of more than Rs.1,000 crore ornet profit of more than Rs.5 crore will have tomandatorily spend two per cent of their averagenet profit over the three preceding years on CSRactivities. Also, companies must file returns on publicdeposits within three months and reconstitute theirboards, with at least one woman and twoindependent directors (IDs) within a year.

The sections notified by MCA include some keyprovisions related to public and private placement,allotment of securities, resolutions requiring specialnotice, powers to the Serious Fraud InvestigationOffice, one-person company, related-partytransaction, audit and auditors, qualification ofdirectors, board and its powers and revival andrehabilitation of sick companies, among others.

New Companies Act: MCA notifies rules forauditors

Except one person company, all class of firms,including unlisted ones and those above a certainfinancial threshold, will have to appoint auditors androtate their appointment as per the Companies(Audit and Auditors) Rules, 2014, notified by theministry of corporate affairs. Starting April 1, nearly60% of the new Companies Act, 2013 will beenforced. As per the rules on audit and auditors,the auditors (individuals or firms) will need to be upfor re-appointment every sixth annual generalmeeting (AGM) provided they have already heldone term of 5 years (in case of an individual) ortwo consecutive terms of 5 years (in case of a firm).

As per the rules, all unlisted public companies witha paid-up share capital of Rs.10 crore or more;private companies having a paid-up share capitalof Rs.20 crore or more and companies that haveborrowed more than Rs.50 crore, will need toappoint auditors. Even norms pertaining to the

COSIDICI COURIER30

rotation of auditors will also be applicable to suchclass of companies, the rules said.

PSBs Announce Sale of NPAs Worth Rs.5,763cr to ARCs to Clean Up Books

Public sector lenders, such as Indian OverseasBank, United Bank of India, Bank of Maharashtra,Bank of Baroda and Syndicate Bank, haveannounced sale of assets worth Rs.5,763 crore toasset reconstruction companies. The United Bankhas said it will reduce its NPAs by selling assetsworth Rs.700 crore to ARCs. According to RBI,gross NPAs of public sector banks stood at Rs.1.64lakh crore as on March 31, 2013, whereas thoseof private sector peers were Rs.20,762 crore. Thegross NPA ratio at the aggregate level was 3.6% atend-March 2013, up from 3.1% a year ago. Thisincreased activity is a result of the new RBIguidelines on early detection of stressed assets.Banks now believe selling NPAs to ARCs hastensthe recovery process.

Shri P Rudran, MD & CEO, Arcil, said, “Banks havebeen more active in disposing of bad assets andhave ramped up measures for recoveries. Thisfiscal (till February), the quantum of assets put onsale by banks is 67% more than that in last financialyear.” This year has seen Rs.20,000 crore worthof assets being put on sale, compared to Rs.12,000crore in the previous fiscal (FY13). In a documentreleased on January 30, 2014, RBI said that ARCsshould be construed as a supportive system forstressed asset management with greater emphasison asset reconstruction rather than asset stripping.“At present, banks cannot sell standard assets toARCs. In order to ensure better chances ofreconstruction of stressed assets, henceforthbanks will be permitted to sell assets reported asSMA-2 (loans overdue from 61-90 days) to ARCs,”RBI said in its guidelines. The RBI added that theability of the ARCs to raise limited debt funds torehabilitate units will be considered.

1.[b] ProLease India : The company, one of the biggest in the USAin its segment, has changed its name to Paystaff from January2006, Arvind’s movie career spanned less than three years andnine movies, the biggest grosser being Roja , a film on terrorismin Kashmir.

2.[a] Creating a web server for Servlets and JSPs (Java ServerPages) in collaboration with Apache : Most of the meetingsbetween Sun and Apache took place in the former’s conferenceroom called Jakarta, hence the project name. JSP is a technologycreated by Sun to enable development of platform-independentWeb-based applications.

3.[b] Apache Group : The group introduced a free open-source HTTP server called Apache in 1995.An Apache is a member of Athapaskan tribes that migrated to the southwestern desert. Theyfought a losing battle from 1861 to 1886 with the United States and were resettled in Oklahoma.

4.[d] Wipro Technologies : The TL 9000 Quality Management System (QMS), was created byQuEST (Quality Excellence for Suppliers of Telecommunications) Forum to meet the qualityrequirements of the worldwide telecommunications industry.

5.[a] Hewlett-Packard : The program assists Internet start-ups, dot-coms, Applied Services Products(ASPs), e-service providers and trading communities to accelerate market launch, preserve capitaland prepare for hypergrowth. The program sees itself as a logical extension of the originalgarage mentality that got the company started in 1939. It seeks to instill the same basic principlesinto today’s new Internet based companies that made it the first real “garage-to-success” story.

ANSWERS OF CYBERQUIZ~47ANSWERS OF CYBERQUIZ~47ANSWERS OF CYBERQUIZ~47ANSWERS OF CYBERQUIZ~47ANSWERS OF CYBERQUIZ~47


MISCELLANYMISCELLANYMISCELLANYMISCELLANYMISCELLANY

IMPACT OF THE NEW COMPANIES ACT ON THE SMEs

The Companies Act 2013 has raised the bar oncorporate governance, even for SMEs

Small businesses, banded together as Small andMedium Enterprises (SMEs) in officialese, form thebackbone of the Indian economy. According to a2011 study by Dun & Bradstreet, the SME sectoremploys about 73 million people in over 30 millionunits spread across the country. Yet, the issue ofcorporate governance was limited to large andlisted firms, not the SME sector.

The Companies Act 2013, passed by Parliamentlast year and enforced from April 1 this year,attempts to address this lacuna. For the first time,a small business was defined under the Act itself.Next, a str ingent repor ting framework wasproposed, which raised the bar on corporategovernance, even for SMEs.

Corporate governance, in the context of this article,is defined as the structures and systems that enablea business to run successfully. The question is, iscorporate governance needed for SMEs? Theseentities are inherently entrepreneurial, not listed ingeneral, and have directors and CEOs from thesame family. Doesn’t this eliminate the need formandatory internal checks and balances?

The argument against this position is that: bothSMEs and large firms are exposed to the samemarket forces and competitions; in fact, given theirlimited resources, SMEs have a larger risk profile.Good corporate governance gives them credibilityand this wins investors’ confidence.

The Act brought into force certain provisions whichimpact SMEs in some cases.

One-member company [section 2(62)]: A one-member company can be incorporated by an Indiancitizen, resident in India for at least 182 days duringthe preceding year. These need not hold AGMs andwill cease to be a one-member firm if its paid-upcapital exceeds Rs.50 lakh or its average annual

turnover (during the preceding three financial years)exceeds Rs.2 crore.

Comment: This is a useful provision for SMEs as itwill avoid the requirement of a second shareholderand obviate costs of holding AGMs.

CIN requirement [sec 12(3)(c)]: Every companymust indicate the Corporate Identification Numberon its business letters, billheads, notices, officialpublications, etc. This is in addition to specifyingthe name and address of the registered officetogether with telephone, fax, e-mail ID and website.In case of any name change, all former names(during the preceding two years) must be printed.

Comment: This is an additional administrative andfinancial burden for SMEs.

Gap between board meetings [sec 173]:Although the total number of board meetings in ayear remain the same (i.e. four), the gap betweenboard meetings cannot exceed 120 days.

Comment: No exemption for any company, SMEsmust comply.

Resident director [sec149(3)]: Unlike the previouslaw which did not insist on a resident director, the

COSIDICI COURIER32

Act requires all companies to have one director whohas stayed in India for 182 days in the previouscalendar year.

Comment: No exemption for any company, SMEsmust comply.

Independent directors [sec 149(4)]: Listedcompanies and public companies with a paid-upcapital of Rs.10 crore (or more) or turnover ofRs.100 crore (or more) must have at least one-third independent directors on the board. Provisionis made for separate meetings of independentdirectors and the board (without participation ofmanagement or other directors).

Comment: Applies to listed companies, will not applyto most SMEs.

Non-cash transactions involving director, etc[Section 192]: Prior shareholder approval isrequired for certain non-cash transactions involvinga company and its director or its holding, subsidiaryor an associate company or a person connectedwith the director.

Comment: Applies to SMEs.

Loans to directors [sec 185]: The Act prohibitsloans to directors except as part of the conditions

of service or under a scheme or as otherwisepermitted in other provisions of the Act.


Loans to and investments in subsidiary [sec185 & 186]: Initially, the Act required specialshareholders’ resolution if limits on loans andinvestments to and in a subsidiary exceeded certainlimits. The Rules however provide that thisrequirement will not apply to loans and investmentsbetween a company and its wholly-ownedsubsidiary or guarantee or security given to anybank or financial institution for its subsidiary, etc.


Related party transactions [sec 188]: The relatedparty provisions have been expanded and includeleasing of immovable property, which was earlierexempt. It applies to companies with a paid-upcapital of Rs.10 crore or where the transactionvalue exceeds prescribed limits. Specialshareholders’ resolution is required where theshareholder who is a related party cannot vote.Arm’s length transactions done in the ordinarycourse of business and one-person companies areexempt.

Comment: This will not apply to most SMEs.

Do not despair, nor lose hope, but move on in faith andlove. The clouds will disperse and the sun will shine

again!

J P VaswaniJ P VaswaniJ P VaswaniJ P VaswaniJ P Vaswani


BANNER HEADLINES

IMPORTANCE OF CORPORATE SOCIAL RESPONSIBILITY

STRENGTHENING MSMEs MUST TO CREATE NEW JOBS

CENTRE APPROVES ELECTRONICS PROJECT – RS.89 CR IN M.P.

GUJARAT TECH SMEs EYE 40% RISE IN EXPORTS

GOVT. CONCERNED AT 221% RISE IN SICK MSMEs

INDIA’s FDI INFLOWS UP 1.5% TO $ 2.18 BILLION IN JAN.

RBI GRANTS ‘IN PRINCIPLE’ APPROVAL FOR BANKING LICENCES

COIR EXPORTS JUMP 32% TO RS.1,476 CR LAST YEAR

March-April, 2014 March-April, 2014

Documents

Inside Pages (March-April 2014) - COSIDICI · the achievement of broader societal goals. In this sense, CSR is generally understood as being the way through which a company achieves