Labour Intensive Manufacturing, Planned Urbanisation and Quality Infrastructure would shape the future of Northern India – Amitabh Kant

“Northern India has youngest population in the world with great enterprising spirit that could lead to transformation of the region with emphasis on Labour Intensive Manufacturing, Planned Urbanisation and Quality Infrastructure”, said Mr Amitabh Kant, Secretary, DIPP, Ministry of Commerce & Industry, Government of India at CII Invest North 2014 here today.

Mr Kant enumerated the road map of how North can drive the growth of India:

• . Albeit the challenges of being a landlocked region, people from north has demonstrated exemplary entrepreneurship traits and have successfully overcome these inherent challenges.
• . Delhi Mumbai Industrial Corridor would be a game changer for the region.
• .. Interlinking of DMIC with the Amritsar Kolkata Corridor at Dadri would lead to a revolutionary shift in the world of logistics and Northern India has all the potential to leverage this opportunity.
• . Emerging opportunities in the defence sector after allowing 49% FDI through automatic route and de-licensing manufacturing of about 60% of defence items.
• . North India has the potential to emerge as a hub for value added manufacturing in defence sector.
• . Government is taking lot of initiatives towards ease of doing business
• . DIPP would work in close association with the state governments to spur investments and growth.

Mr Prem Narain, Chairman, OIFC & Secretary, Ministry of Overseas Indian Affairs, Government of India emphasised on the role of states in creating enabling policies and models to attract investments and growth.

Mr Narain suggested for structured engagement with the Indian Diaspora for engaging them with Indian growth story:
• . Ministry of Overseas Indian Affairs aims at promoting both social and economic engagement with Indian Diaspora.
• . State governments in the Northern Region should associate with OIFC to showcase investment projects/opportunities to overseas Indians through state specific investor meets. These would provide a platform for overseas Indians to learn more about the specifc economic opportunities available in India
• Ministry to soon open Pravasi Bharatiya Kendra at Chanakya Puri New Delhi.

. Speaking at the 3rd edition of CII Invest North, Mr Malvinder Mohan Singh, Chairman – Invest North 2014 and Executive Chairman – Fortis Healthcare Ltd said that the conclave today has emerged as a great platform wherein there is participation from Northern State Governments and 20 countries. He also informed that around 120 one to one B2G meetings have been tied up for next two days which itself speaks volumes about the scale of this initiative. “Discussions held with State Governments during previous editions of the event has led to framing of new investor friendly industrial policies as well as to certain investment facilitative amendments in the existing policies” said Mr Malvinder Mohan Singh.

Northern Region vests with everything that is required to overcome the challenges of being land locked, lack of mineral resources, perception of governance issues, etc. said Mr Richard Rekhy, Co-Chairman, Invest North 2014 and CEO, KPMG India. He emphasized on strengths such as strong agrarian economy base, abundant water resources, young population, industrial & freight corridors, opportunities of bilateral trade with neighbouring countries, etc. which makes North an ideal investment destination.

CII-KPMG reports on Northern India: Heralding the next chapter of growth and development; Ease of doing business in Northern Region – a survey; and Social Infrastructure – A look at enabling elements for growth and development were released during the Inaugural Session of the event.

Welcoming the participants, Mr Shreekant Somany, Deputy Chairman, CII Northern Region & Chairman & Managing Director, Somany Ceramics Ltd shared that India has emerged as the 3rd biggest economy as well as 3rd most preferred investment destination in the world. However subdued growth & high inflation with prolonged economic slowdown has been a cause of concern for some time and taking cognizance of this CII has been actively working towards building a conducive ecosystem for accelerating economic growth which facilitates investments in the region critical for generation of employment opportunities.

Mr Jayant Davar, Co-Chairman, Invest North 2014 & Co-Chariman & Managing Director, Sandhar Technologies Ltd in his concluding remarks opined that the two day conclave would provide an ideal platform for both investors and State Governments to understand and showcase the investment potential available in the region. The programme featured participation by Governments of Haryana, Delhi, Punjab, Rajasthan, Uttarakhand and Uttar Pradesh and over 300 investors. Mr Davar thanked the Department of Industrial Policy & Promotions and Overseas Indian Facilitation Centre to associate and support as Partner Ministry and Institutional Partner respectively.

Anand Singh Bhal, Economic Advisor, Mo UD calls for Renegotiation clause in PPP Projects at CII Realty 2014

“To give the much needed fillip to Real estate and infrastructure sector in India, ‘Renegotiation’ clause should be inculcated while awarding the Public Private Partnership (PPP) Projects to industry. This would help remove the major impediment to PPP projects, i.e the huge gap in the government’s mind set on one hand and the aggressive and ambitious strategies of the private sector on the other”, shared Mr Anand Singh Bhal, Economic Adviser, Ministry of Urban Development (MoUD), GoI while addressing Realty 2014 organised by Confederation of Indian Industry (CII), here today.

“Further, to encourage the industry to take up various infra projects under PPP mode, we are planning to bring in a system wherein initially just the management of various projects would be handed over to private sector and later, once industry is fully aware of the project details, full contract with Terms of Reference can be prepared and taken forward by the industry in afull fledged manner. This would save industry from the losses that they might have to suffer due to asymmetric information supplied by different Govt. Departments”, informed Mr Bhal, who is also the Chairman of PPP Committee of his Ministry.

“With the new regime at centre, which is pro-actively focusing on the implementation and capacity building part, we are hopeful that huge funds allocated earlier for infrastructure, lying unutilized due to incapacities at the state, district and MC level would soon be utilised. I am very optimistic that the new Govt would implement the infra projects under PPP mode, because Modi Govt feels that it is the only way to boost economy”, further added Mr Bhal.

On Smart Cities, Mr Bhal emphasised that “It can take approximately 25-30 years to build a single smart city. Hence the government should rather work to provide the smart features in various Indian ‘brownfield’ cities and make them ‘easy and smart’ to live in by use of ICT to provide public amenities and services under PPP mode. The key features could be Hi Tech Urban Transport with intelligent signalling, ticketing & tracking system; easy living with less of travel and more of mixed land use; proper water and sanitation and due importance to environment. This can however be achieved if and only if, all stakeholders like the industry, NGOs, institutes, state and central Governments, Municipal Corporations etc work together in one direction” emphasised Mr Bhal.

Mr Shreekant Somany, Deputy Chairman, CII NR and Chairman & Managing Director, Somany Ceramics Ltd congratulated the Honourable Finance Minister, Mr Arun Jaitly for presenting a budget of intent with significant focus on real estate and infrastructure sectors. Mr Somany said that in spite of the fact that some of the industry concern including infrastructure status to Real Estate sector has not yet been addressed; the current budget announcements will definitely help to start a long term positive trend for the real estate sector. Highlighting the need for a differentiated product that sustains quality over a period of time in retail segment Mr Somany said, “The retail sector of India is at an inflexion point where the growth of organized retailing and growth in consumption by the Indian population is going to take it to a higher growth trajectory in the coming decade”. Mr Somany further expressed his confidence that 10th edition of CII Conference on Real Estate – “Realty 2014” will help the industry to derive a realistic and viable roadmap for the Real Estate Sector.

Mr Anshuman Magazine, Chairman – REALTY 2014 and Chairman & Managing Director, CBRE South Asia Pvt Ltd, “The primary area requiring attention in the construction real estate sector is funding. Although the new government has announced the introduction of Real Estate Investment Trusts and Infrastructure Investment Trusts in the recent Union Budget, we are yet to see how that actually pans out on the ground. More than allocation of funds, timely implementation and capacity building are the need of the hour for the ease of transacting business in India’s Realty sector.”

Mr Mukund Vasudevan, Vice Chairman, CII Western UP Zonal Council and MD & Country Head, Pentair, “Growing real estate needs, supported by strong macroeconomic fundamentals will necessitate additional amount of liquidity into the system. Granting infrastructure status to some of the critical priority projects in the real estate sector is vital for the sector’s growth as building integrated townships, mass housing colonies, special residential zone etc are more or less the same as building large-scale infrastructure facilities. Building sector accounts for 30-40 percent of global Green House Gas emissions. The construction sector therefore needs to play a responsible role towards preservation of the fragile environment. In this regard, green buildings can play a catalytic role in addressing environmental issues and concerns.”

Mr Vineet Relia, COO, SARE Homes shared that the future Real Estate space belongs to those who use ‘Green’ technologies while building and give due importance to the environment.

Undertaking reforms in key aspects of doing business in India critical to restoring growth trajectory: CII-KPMG Report on Ease of Doing Business in India.

CII released a report titled “Ease of Doing Business in India” in partnership with KPMG, India in Chennai today. Despite being one of the fastest growing economies in the world and potential investment hub, India lags behind in terms of ease of doing business. Taking cognizance of this anomalous situation, CII and KPMG have jointly prepared a report aimed at improving India’s position in the World Bank’s Ease of Doing Business rankings, where India has repetitively been ranked India low compared to 184 other economies. 

The report identifies key areas for reform which will enable doing business in India, including setting up of business, land acquisition, taxation and contract enforcement.

According to the report, despite two decades of economic reforms, India continues to falter on various sub-indices such as starting a business, dealing with construction permits, getting electricity, registering property, paying taxes, trading across border, enforcing contracts or resolving insolvency. In fact, the latest rankings place India 134^th among 185 countries; lower than all its BRIC counterparts. Therefore, there is an urgency to focus on improving the business environment and arrest the decline in relative performance against various determinants of investment attractiveness. 

On release of the report, Mr Chandrajit Banerjee, Director General, CII said, “CII hopes that the findings of this report would help bring the issues to the fore and also serve as a reference point for the imminent need to pursue reforms in business practices and processes. Indian industry hopes that the new Government would accord due importance to this extremely important and urgent agenda that would help churn the wheels of investment and growth.” 

The report is based on a survey conducted amongst Indian industry followed with extensive primary and secondary research to assess the prevailing business regulatory environment in the country. Key issues highlighted include lack of an effective land acquisition process, unfavorable taxation regime, high cost of starting a business, complicated and time consuming contract enforcement process. 

Commenting on the findings of the report Richard Rekhy, Chief Executive Officer, KPMG in India said, “Having an environment that facilitates entrepreneurship, promotes investments productivity and growth is critical for improving business climate in India. The ease with which this is achieved can be a source of strategic advantage. The vulnerability of our country’s current standing in the Doing Business index means that reforms in these areas have become critical.”  

Key issues and recommendations 

Survey identifies key issues against the four parameters studied, and suggests recommendations to arrest the rapid decline in ease of doing business. 

Parameter Studied	Issues	Recommendations
Land Acquisition Process	Average time taken to acquire the land is 14 months and often        could take longer 58% of the respondents feel the number of visits made to each department to obtain the permission pose major obstacles in the approval process 69% of the respondents feel that there is a lack of effective land acquisition process 83% of the respondents feel that unsecured land titles generate uncertainty Land mutation process is considered complex and time-consuming Setup large designated industrial zones with pre-clearances and ready to move in Single window registration and mutation process Move from a deed based registration to Title based registration(Torrens System) Streamlined process for land use conversion A market-based pricing system, where price is determined by an independent body
Starting a business	Approvals related to environment clearances, land procurement, construction permits, industrial safety permits and power connectionare top five obstacles in starting a business 85% of the respondents feel that the time required to obtain such clearances is not reasonable 78% of the respondents who feel the number of windows/ministries one has to visit is not reasonable Reduce approval turnaround – make eBiz portal more effective Wider and effective adoption of Deemed approval principle Automatic approval for power, water and sewerage Moving away from Department centric approach to Business centric approach Labor reforms Continuous skill development Access to funds for Micro Small and Medium Enterprises (MSME)
Taxation	90% of the respondents are in favor of reduction in tax rates. 92% of the respondents feel that there are challenges in transfer pricing assessments relating to distribution / agency 90% of the respondents believe that the tax authorities are not proactive in promoting investments 60% of the respondents feel that the neutralization of tax decision by Supreme Court through retrospective amendment has had damaging effect on investment sentiments More than half the respondents have faced delays in obtaining service       tax refund	Implement Goods & Service Tax (GST) Reduce the number of taxes and the ambiguity / discretionary nature of taxes, especially in Transfer pricing cases Efficient, effective and time-bound taxation related dispute resolution Ensure taxation does not hinder free flow of goods Implement independent Grievance Redressal Cell Operational reforms required to get the tax base right Administration reforms required for consistency and increased efficiency in approach to taxation
Contract enforcement	Time taken from filing to final judgment seems unreasonable to most of the respondents and poses major obstacles Costs involved (costs for engaging and retaining lawyers, miscellaneous costs, during the interim stage, enforcement costs) also pose significant obstacles 84% of the respondents have indicated that a review of laws & regulations needs to be taken up urgently Create a centralized contract repository with Non-repudiation Effective implementation of e-courts Increase number of courts and tribunals More international treaties for increasing “reciprocative territories” Update antiquated laws Recognize and update laws keeping in mind the trends of higher technology updation, greater trade based on IPR and greater global trade

 

Emerging Business Opportunities for Indian MSMEs in Electronic System Design and Manufacturing Sector

Aggregate demand for electronic hardware in India is expected to increase to a total value of $400 billion by year 2020, up from $40 billion in 2009, whereas domestic production of electronic hardware will only reach an estimated value of $100 billion in the next six years. The ensuing demand-supply mismatch of about $300 billion will encourage global electronic system and design manufacturing (ESDM) companies to consider India as their next investment destination.

The National Policy on Electronics provides for the establishment of some 200 electronic manufacturing clusters (EMCs) which in turn will create new business opportunities for MSMEs. The EMCs will help the ESDM enterprises to raise their productivity levels, cut costs and promote innovations by leveraging shared infrastructure and resources, making the ICTE manufacturing sector more competitive.

Government is offering various schemes and incentives to encourage MSMEs to foray into electronic manufacturing. These include schemes for promotion of lean manufacturing, use of information and communication tools, setting up of mini tools rooms in the PPP mode, and entrepreneurial management development through incubators.

Reflecting on the emerging trends in the ESDM sector, in a session organized by CII on Emerging Opportunities for SMEs in Electronics Manufacturing, Dr Ajay Kumar, Joint Secretary, Department of Information Technology, Ministry of Information Technology & Communications, Government of India, said that today electronics are key components of various devices. Most medical devices are electronically operated. Likewise, traditional lighting is giving way to LED lighting. Electronics is pervasive in areas like IT, telecom, automotive, solar PV, smart cards, etc.

Demand for electronics hardware in India is growing at 20-21% per annum, but most of it is being met through imports. Taking cognizance of the imperative for promoting electronics manufacturing, Government has introduced a variety of schemes to encourage Indian electronics manufacturing companies. Dr Kumar said that India will be able to increase its share of global electronics manufacturing output by leveraging its low-cost manpower resources (vis-a-vis China). China accounts for nearly 40% of global electronics manufacturing output.

Dr Kumar said the National Policy on Electronics has underlined the need to develop new chips to meet local needs at affordable costs (‘Billion Needs, Million Chips’). On a larger plane, Government aims to increase domestic electronics manufacturing growth at the same rate as the demand growth.

To accelerate electronics manufacturing, Government has decided to meet 50% of the cost of creating common facilities in Greenfield EMCs. This amount will be subject to a ceiling of Rs 50 crore for every 100 acres, but with no upper limit. Likewise, Government will meet 75% of the cost of creating common facilities in brownfield EMCs, subject to a ceiling of Rs 50 crore.

Dr Kumar said that since the introduction of this scheme, Government has granted in-principle approval for 7 greenfield EMCs — GMR is setting up an EMC in Hosur, Tamil Nadu; Andhra Pradesh Industrial Development Corporation is setting up 2 EMCs near Hyderabad; ELCINA is setting an EMC in Bhiwadi; Madhya Pradesh Electronics Development Corporation, plans to set up 2 EMCs in Bhopal and Jabalpur; Kerala Industrial Infrastructure Development Corporation is setting up an EMC in Kochi. To encourage MSMEs to set up EMCs, Government offers to meet the costs incurred in the preparation of DPRs.

Dr Kumar informed that the brownfield EMC in Electronic City, Bangalore has decided to create common infrastructure for which Government will meet 75% of the total cost (Rs 70-80 crore). He added that Government is developing two incubators – one, in the area of chip design and the other to enable small companies to test their new design chips. The first incubator is coming up in Bangalore. It will be a centralised facility that can be accessed online.  The second incubator is being set up in collaboration with Delhi University and STPI.

Government is also offering 25% investment subsidy to electronic manufacturing units being set up in non-SEZ areas, and 20% investment subsidy to units coming up in SEZs. This scheme is being extended to units across the entire electronic manufacturing value chain, with a low minimum threshold limit of Rs 1 crore. The threshold limit varies for each manufacturing segment. “MSMEs can take advantage of this,” he said. Earlier, the minimum threshold limit was as high as Rs 1,000 crore.

In addition, Government provides for reimbursement of counter-veiling duty and excise duty for capital invested in this sector. This is available for setting up new units as well as for expansion or relocation of existing units. Hence, a unit that is not viable in Europe can be relocated to India and the duty concessions can be availed thereof.

Referring to the Modified Special Incentive Package Scheme (M-SIPS), Dr Kumar said that Government has received proposals worth $12 billion under the scheme until end-March.

Stating that Union Cabinet has given its approval for setting up two wafer fabs in the country, Dr Kumar said an ecosystem will come up around the fabs which will create a host of business opportunities for MSME vendors and suppliers. The project involves Rs 65,000 crore worth of investments.

He also said that Government is giving preference to domestic manufactured electronic goods in public procurements. As a case in point, 12-13 Indian companies (working on both ARM-based and Intel-based platforms) have bid for the procurement of Akash tablets. Domestic manufacturers are also invited to participate in the tenders for the Gigabit Passive Optical Network (GPON) project.

Besides, DGS&D has finalised separate manual for procurements from domestic and non-domestic manufacturing companies. Dr Kumar said, “We also want to increase the items that Government buys.”

He informed that Government is planning to create venture funds to support start-up electronics manufacturing activities. Besides, 2-5% export incentives are being given to a large number of electronic items manufactured in the country.

Highlighting the importance of creating a strong manpower base, Dr Kumar said the training programmes related to this industry have to be aligned with current industry needs. Hence, Government is proactively promoting skill development for this industry through different schemes. Industry is required to identify the training needs and recommend the training centres for skilling people. Government will meet 75% of the training costs. Dr Kumar said that one lakh people will be trained under this scheme.

He added that Government is also aiming to increase the number of PhD submissions per annum in the electronics discipline to about 1,500 by 2017-18. Toward this, Rs 400 crore has been earmarked for all PhD granting institutes to increase their intake of scholars. The PhD topics will be identified by industry. “We will create a platform where industry can highlight the areas in which research is to be carried out,” he said. The Union Cabinet took this decision in February 2014 and the scheme will be implemented from the new academic year beginning in June-July 2014.

Underlining the importance of R&D, Dr Kumar cited the example of an SME in Taiwan where 50% of its 115 people have a PhD. The company is looking to export medical electronics items to India. He asserted that Indian companies should be keen to pursue research, innovation and IPs.

Government has also introduced a scheme to support MSMEs to comply with the electronics safety standards. These standards came into effect on January 3, 2014. Companies have to adhere to the standards, for both manufacturing and imports. Government has agreed to reimburse the testing and certification costs incurred by these companies.

In addition, Government has recently approved a scheme to help MSMEs meet the quality standards in export destination markets. Under the scheme, Government will reimburse the associated costs.

Dr Kumar said that his ministry is planning to fund technology development also through its partnership with Global Innovation & Technology Alliance (GITA). Besides, the MSME Ministry plans to set up a Technology Centre exclusively for electronics.

Later, while responding to the various queries raised by the participants, Dr Kumar said that to promote collaborations his ministry has created an online B2B platform and publishes an electronics newsletter that goes to over 1 lakh readers.

Referring to the plan for setting up EMCs, he said the primary objective is to support globally competitive clusters. However, the clusters will be market driven. He also said that the EMCs should come up in areas that have high success factors.

Stating that investments are mainly flowing into areas like automotive components, LED, consumer electronics, Dr Kumar said that due efforts are being made to draw investments in many other promising segments of electronics manufacturing. Toward this, the department is creating a joint working group for smart cards.

Further, Government is facilitating common sourcing from global suppliers to reduce MSMEs transaction costs and other sourcing costs.

Referring to solar product manufacturing, he said that the MSIPS will be revised to include solar products. Currently, the focus is on PV cells, sub-strata etc.

Noting that many defence offset opportunities are underutilised by MSMEs, Dr Kumar said an Inter-Ministerial Committee looks into the concerns of domestic manufacturers with regard to public procurements. He added that R&D costs will also be covered under MSIPS.

Mr Deepak Sharma, Joint Director, Department of Information Technology, Ministry of Information Technology & Communications, Government of India, also participated in the session.