MSME’s: Engine for Growth

MSME’s: Engine for Growth

Contributes

• 8% of GDP
• 40% of the total exports
• 45% of manufacturing input

Keeping in view the contribution of MSME’s in the growth of Indian Economy, its development hasbeen assigned an important role in India’s national plans. Therefore, there is a need for the Government to take concrete steps in order to resolve those concerns which continue to thwart the growth of small and medium enterprises (SMEs) over the years

Action Plan for Make in India Initiative of MSME 

E-Governance:

Different procedures and lack of mutual trust leads to hidden costs and slow paralysis

• Strengthen the communication between stakeholders
• Establish a proper procedure pan-India
• Improve efficiencies in service delivery
• Public Participation to be enhanced via the integration of Social Media
• Building up of a database to measure the levels of productivity of the products
• Identification of products in need of research and development

Financial Inclusion:

High cost of credit, requirements of collateral, limited access to equity capital, lack of access to global markets, and the absence of a mechanism for the revival of sick enterprises

• Frame guidelines for micro and small enterprise financing; business, registration, regulation and accreditation of MFI entities; promoting right technology solutions; and formulating a credit guarantee scheme for loans given out to micro enterprises
• Financial Education of the borrowers for empowerment
• Statutory guidelines to stipulate penalties or interest for big corporations which delay payments to SMEs
• Skill development for bankers :
  • Standardising simple format for accounting purposes for MSMEs,
  • Competent development of human resources,
  • Cultivating business ethics and standards, and
  • Imparting training to MSMEs

Steps taken:

• All loans to come under Priority Sector Lending
• Micro Units Development and Refinance Agency (MUDRA) Bank expected to partner with coordinators at the State level to provide finance to SMEs. A corpus of Rs.20,000 crore has been allocated to the bank.
• The Union Budget has proposed to set up ‘Trade Receivables Discounting System’ (TreDs), an electronic platform that will facilitate financing of trade receivables from corporates and other buyers through multiple financiers.

Employment Generation & Skill Development:

MSMEs are labour-intensive and have the capability to create more jobs to cater to a young demographic country like India, where the climatic vagaries render many unemployed in the agricultural sector.

• Training of educated unemployed youth both in conventional and most advanced production and management technology/processes
• Developing Modular Courses and training of trainers
• Developing districts wise skill development needs and training providers.
• Up-scaling in collaboration with NSDC, Ministry of Skill Development, Entrepreneurship, Youth Affairs and Sports and Ministry of Labour and Employment

Steps Taken:

• Virtual Cluster web portal, to provide facilities like common application forms, credit scoring models etc. and a platform for Industry-Academia linkages has been set-up.
• Employment Facilitation Portal enables matching of job providers and job seekers

Technology and Energy Efficiency

• Compulsory procurement of materials by public sector units from SMEs
• Setting up of common research and development facilitation centres
• Up scaling cluster approach for infrastructure development and technology support
• Augmenting the past initiatives for further absorptions
• Steps to reduce wastages and innovative designs for waste-management

Zero Effect Zero Defect Manufacturing

• Promoting Lean Manufacturing Competitiveness Scheme (LMCS) in mini-clusters for Zero Defect manufacturing
• Promoting Energy Efficient Technologies using Clean Technology
• ZED Certification scheme in consultation with QCI, Industry Association and Rating Agencies

Steps taken:

• Quality Management Standards (QMS) and Quality Technology tools (QTT): to enhance their competitiveness
• ICT Scheme: for adopting ICT tools and applications through Cloud Computing

Consumer Protection Bill, 2015 introduced in Lok Sabha

Consumer Protection Bill, 2015 introduced in Lok Sabha
 The Consumer Protection Bill, 2015, was introduced in Lok Sabha on August 10, 2015. The Bill replaces the Consumer Protection Act, 1986.16 The Bill covers all types of consumer transactions, including online and electronic, and creates various quasi - judicial mechanisms for oversight and enforcement of the law. The Bill was referred to the Standing Committee on Consumer Affairs, Food and Public Distribution on August 26, 2015 and the report is expected within three months. Key features of the Bill include:
 Definition of consumer: The Bill defines a consumer as any person who buys a good or hires a service for a consideration. This includes the user of such good or service, but not one who obtains the good for resale or commercial purposes. It covers transactions through all modes including offline, online through electronic means, teleshopping, or multi level marketing.
 Product liability: If defects in the manufacture, construction, design, testing, service, marketing etc. of a product results in any personal injury or property damage to a consumer, the manufacturer would be made liable in a product liability action.
 Consumer protection agencies: The central government will set up the Central Consumer Protection Authority to promote, protect as well as enforce the rights of consumers. Consumer Dispute Redressal Commissions (CDRCs) are also to be set up at the district, state and national levels for the adjudication of consumer complaints.
 Consumer Mediation Cells (CMCs): The Bill introduces mediation as a mode of dispute resolution. National, State and District CMCs will be established and attached to the CDRCs.
 Penalties: Any person who fails to comply with an order of either of the Commissions would be liable for imprisonment from one month to three years, or with a fine from Rs 10,000 to Rs 50,000

Draft Human DNA Profiling Bill, 2015 released

Draft Human DNA Profiling Bill, 2015 released
The Department of Biotechnology under the Ministry of Science and Technology released the Draft Human DNA Profiling Bill, 2015 on August 5, 2015.15 The Draft Bill regulates the use of DNA analysis. It establishes national, state and regional level DNA data banks and the DNA Profiling Board. Key highlights of the draft Bill include:
 DNA Profiling Board: The responsibilities of the DNA Profiling Board will include: (i) issuing certificates of approval to DNA laboratories, (ii) framing guidelines for storage as well as destruction of biological substances, and (iii) supervising, monitoring and inspecting DNA laboratories and DNA data banks.
 DNA Laboratories: DNA profiling would be undertaken by the DNA laboratories. Every DNA laboratory for conducting DNA profiling would be required to take prior permission from the DNA Profiling Board.
 DNA data bank: DNA Banks will be established at the national, regional and state level. The DNA data banks shall store the DNA profiles received from the approved DNA labs. The data banks will maintain the following indices: (i) a crime scene index, (ii) a suspect index, (iii) an offenders‟ index, (iv) a missing persons‟ index, (v) unknown deceased persons‟ index, (vi) volunteers‟ index and (vii) such other DNA indices as may be prescribed by regulation by the DNA Profiling Board.
 Penalties: The penalties include: (i) obtaining individual identifiable DNA information through unauthorised means would be punishable with imprisonment of up to one year and a fine of up to one lakh rupees (ii) intentionally destroying, altering, contaminating biological evidence would be punishable with imprisonment of up to five years and a fine of up to two lakh rupees.

Census Religion data: What do the trends indicate?

The much delayed and also much awaited religion – wise census data has finally been released. The data shows that the population of Hindus has grown from 82.7 crores in 2001 to 96.63 crores in 2011, indicating 16.67% growth. Meanwhile, the Muslim population has grown from 13.8 crores to 17.2 crores, indicating a growth of 24.6%. Minority Sikh population also witnessed a substantial dip in their population growth rate from over 18% (1991-2001 decade) to 8.4% during 2001-2011. As a result, Sikh population as a proportion of total population has witnessed a decline of 0.2% from 1.9% in 2001 to 1.7%. The good news is that the growth rates of both Hindus and Muslims, in comparison to the previous decade, have come down.

The growth rate of Hindu population has witnessed a decline from 20.3% during 1991-2001 to 17.7% during 2001-2011, resulting in Hindu population in the country dipping below 80% to 79.8%. The religion-wise data released indicated that the proportion of Christian and Jain communities remained static at 2.3% and 0.4%, respectively. The proportion of Buddhists, in contrast, has witnessed a marginal dip from 0.8% (2001) to 0.7% (2011 census). The data also reveal that there is certain level of acceptance of family planning programmes by all the religions. The sex ratio among Muslims now stands at 951 females for every 1,000 males, substantially better than 936 in 2001, while among Hindus, it is 939 females for every 1,000 males, a slight improvement over the 2001 value of 931.

The share of Hindus over the previous five decades — between 1951 i.e. post-partition and 2001 — dropped 3.65 percentage points from 84.1% to 80.45% of the total population. Again in absolute terms, the Hindu population more than doubled (172% increase) from 30.36 crore to 82.75 crore during the 50 years till 2001. The drop in share of Hindus, due to a steady dip in the rate of growth of the Hindu population, comes on the back of rising education and income levels of the majority community.

The Census 2011 data shows that since independence, the share of Hindus has dropped by 5.75 percentage points while the share of Muslims has risen by slightly more than 4 percentage points. According to the 1951 census, Hindus comprised 84.1 per cent of the population post partition, after the inflow of Hindus from Pakistan and the outflow of Muslims at partition changed in the country’s demography. Hindus comprised just about 66% of the population of India before partition.

Experts believe that census data is neutral data, whereas its impacts are not neutral in nature. It has great sociological impact, which needs to be judged and evaluated. These data indicate that for the first time Hindus have come down below the psychological mark of 80%. Sociologically, society is constituted not only by religion, there are other variables too like class, caste etc. While looking at demographics data it is easy to look from a communal point view, as the data is presented from a communal perspective. Experts are of the view that the data has to be segregated based on socio – economic and regional variables.

RBI grants approval to 11 applicants for Payments Bank

RBI grants approval to 11 applicants for Payments Bank The Reserve Bank of India (RBI) granted in principle approvals to 11 applicants to set up Payments Banks, on August 19, 2015.6 Payments banks aim to provide small savings accounts, and payments and remittance services to low income individuals and small businesses, among other users. The in principle approval granted to the applicants, for setting up these banks, will be valid for a period of 18 months. Once the applicants fulfil the conditions laid down as part of the approval, the RBI will consider granting them a license for commencement of business. Key features of Payments Banks are:  The minimum paid-up capital requirement for these banks would be Rs 100 crore.  There will be a condition to hold a maximum balance of one lakh rupees per individual customer.  The banks would not be able to undertake lending activities, and their revenues will be collected through transaction charges. They will be able to issue debit cards, but not credit cards.  Apart from the Cash Reserve Ratio maintained with the RBI, the banks will be required to invest at least 75% of their deposits in government securities, and at most 25% of the deposits with other scheduled commercial banks.  The banks would be able to act as business correspondents of other universal banks, as per RBI guidelines.  The banks may undertake payments and remittance services through various channels.  The banks will also be able to offer products like mutual funds and insurance.

Framework for the National Investment and Infrastructure Fund released

Framework for the National Investment and Infrastructure Fund released
 The Ministry of Finance released the framework for the National Investment and Infrastructure Fund (NIIF) on August 20, 2015.5 Key features of the framework include:
 Objective: Maximize economic impact through infrastructure development in commercially viable projects, including stalled projects.
 Structure:
The NIIF will be established as one or more Alternative Investment Funds (AIFs) under SEBI regulations.
The initial corpus of NIIF will be Rs 20,000 crore, which may be raised from time to time, as decided by the Ministry of Finance. Government‟s share in the corpus will be 49% in each entity set up as an AIF.
 Functions: Functions of the NIIF will include: (i) fund-raising, which will include attracting investors to participate as partners in NIIF, (ii) investing and periodic monitoring of investments, and (iii) preparing a shelf of infrastructure projects and providing advisory services.
 Governance: The NIIF will be established as a Trust. It will have a governing council which will oversee the activities of the Trust. The council will consist of government representatives and experts in international finance, economists, and infrastructure professionals. The term and period of appointment of the council will be determined by the government.
 Funding sources:
Government‟s fund share of 49% would be provided as required. Central public sector enterprises could also contribute to the Fund which would be over and above the government‟s share. Domestic pension and provident funds and National Small Savings Fund may also provide funds to the NIIF.
NIIF would solicit equity participation from strategic partners.

Spectrum Trading: Another game-changing reform in Telecom Sector

Spectrum Trading: Another game-changing reform in Telecom Sector

Close on heals of the decision on spectrum sharing, the Union Cabinet chaired by the Prime Minister, Shri Narendra Modi, today approved a proposal of the Department of Telecommunications on guidelines for spectrum trading arising from the recommendations of the Telecom Regulatory Authority of India (TRAI). Together with the earlier decision, this is expected to transform the spectrum usage in the telecom sector.

The salient features of the norms for spectrum trading shall include:-

1. Spectrum trading will be allowed only between two access service providers only outright transfer of right to use the spectrum from the seller to the buyer shall be permitted.

2. Spectrum trading will not alter the original validity period of spectrum assignment as applicable to the traded block of spectrum.

3. The seller shall clear all his dues prior to entering into any agreement for spectrum trading. Thereafter, any dues recoverable up to the effective date of transfer shall be the liability of the buyer. The Government shall, at its discretion, be entitled to recover the amount, if any, found recoverable subsequent to the effective date of the transfer, which was not known to the parties at the time of the effective date of transfer, from the buyer or seller, jointly or severally.

4. A licensee shall not be allowed to trade in spectrum if it has been established that the licensee had breached the terms and conditions of the licence and the Licensor has ordered for revocation/termination of its licence.

5. Spectrum Trading shall be permitted only on a pan-LSA (Licensed Service Area) basis. In case the spectrum assigned to the seller is restricted to part of the LSA by the Licensor, then, after trading, the rights and obligations of the seller for the remaining part of the LSA with regard to assignment of that spectrum shall also stand transferred to the buyer. Further, relevant provisions of NIA with respect to spectrum assignment in part of the LSA, which were applicable to seller before the spectrum trade, will apply to buyer subsequent to the spectrum trade.

6. All access spectrum bands earmarked for Access Services by the Licensor will be treated as tradable spectrum bands.

7. Only that spectrum in the specified bands is permissible to be traded which has either been assigned through an auction in the year 2010 or afterwards, or on which the Telecom Service Provider (TSP) has already paid the prescribed market value (as decided by the Government from time to time) to the Government. In respect of spectrum in 800 MHz band acquired in the auction held in March 2013, trading of spectrum shall be permitted only if the differential of the latest auction price and the March 2013 auction price on pro-rata basis on the balance period of right to use the spectrum is paid.

8. Buyer will be allowed to use the spectrum acquired in 800 MHz/1800 MHz band through trading to deploy any technology by combining it with their existing spectrum holding in the same band after converting their entire existing spectrum holding into liberalized spectrum in that band as per the prevalent terms and conditions.

9. The terms and conditions attached to the spectrum under the provisions specified in the relevant NIA document or otherwise shall continue to apply after the transfer of spectrum unless specifically mentioned in the guidelines.

10. If any TSP sells only a part of its spectrum holding in a band, both, buyer as well as seller, will be required to pay the remaining instalments of payment (in case seller had acquired the spectrum through auction and opted for deferred payment), prorated for the quantum of spectrum held by each of them subsequent to the spectrum trade.

11. The buyer should be in compliance of the prescribed spectrum caps from time to time. The spectrum acquired through trading shall be counted towards the spectrum cap by adding to the spectrum holding of the buyer.

12. The seller should clear its Spectrum Usage Charges (SUC) and its instalment of payment (in case seller had acquired the spectrum through auction and opted for deferred payment) till the effective date of trade.

13. Where an issue, pertaining to the spectrum proposed to be transferred is pending adjudication before any court of law, the seller shall ensure that its rights and liabilities are transferred to the buyer as per the procedure prescribed under the law and any such transfer of spectrum will be permitted only after the interest of the Licensor has been secured.

14. A Telecom Service Provider will be allowed to sell the spectrum through trading only after two years from the date of its acquisition through auction or spectrum trading or administratively assigned spectrum converted to tradable spectrum. It is clarified that in case of administratively assigned spectrum converted to tradable spectrum after paying the prescribed market value, period of two years will be counted from the effective date of assignment of spectrum.

15. A non-refundable transfer fee of one percent of the transactional amount or one percent of the prescribed market price, whichever is higher shall be imposed on all spectrum trade transactions, to cover the administrative charges incurred by Government in servicing the trade. The transfer fee shall be paid by the buyer (transferee) to the Government. The amount received from trading shall be part of Adjusted Gross Revenue (AGR) for the purpose of levy of License fee and Spectrum Usage Charges (SUC).

16. Frequency swapping/reconfiguration from within the assignments made to the licensees will not be treated as trading of spectrum. The conditions in the NIA shall govern frequency swapping/reconfiguration.

17. Existing rates as prescribed by the Government from time to time for Spectrum Usage Charge (SUC) shall continue to apply on spectrum held by the buyer which inter alia includes the spectrum acquired through trading. Spectrum acquired through spectrum trading will be treated akin to spectrum acquired through auction.

18. Both the licensees trading the spectrum shall jointly give a prior intimation for trading the right to use the spectrum at least 45 days before the proposed effective date of the trading. Both the licensees shall also give an undertaking that they are in compliance with all the terms and conditions of guidelines for spectrum trading and the licence conditions. In the event, it is established that any of the licensee was not in conformance with the terms and conditions of the guidelines for spectrum trading as well as the licence at the time of giving intimation for trading of right to use the spectrum, the Government is entitled to take appropriate action which inter-alia may include annulment of trading agreement.

In December, 2013, the then Government had approved in-principle the spectrum trading but the detailed guidelines were not issued and therefore this policy could not be implemented.

The issue was under active consideration of the present Government as this arrangement leads to greater competition; provides incentives for innovation; better data services, utilising state of art technologies, being available to consumers at cheaper tariffs; better choice to consumer etc. This also facilitates ease of doing business in India by allowing free play in the commercial decisions and leads to optimisation of resources. This will fulfil the present Government’s commitment of ease of doing business apart from improving the spectral efficiency and quality of service which is very essential to fulfil the dream of digital India.

Background:

Historically, in most countries, the Telecom sector was a highly regulated sector where the Government used to decide the procedure for allocation of spectrum. Recognising the benefits of telecommunication facilities, over the past two decades, there has been growing consensus that because of significant increase in the demand for spectrum, the prevalent regulatory paradigm would prove inadequate to deal with the situation on hand. Licensed Service Providers need flexibility to respond quickly to changes in the market demand and technology. In India also, attention has been drawn to new ways of spectrum regulation, with increasing emphasis on evolving more flexible and market oriented approach to increase opportunities for efficient spectrum usage, for better services to consumers.

In India the spectrum assignment is made for a period of 20 years. During this period, some operators are able to acquire subscribers and grow at a faster rate as compared to other operators. This results in the spectrum lying unutilised with some of the players while other operators face spectrum crunch as spectrum is a scare resource. In India, unlike other countries, the availability of the Spectrum is relatively small. Therefore, Spectrum Sharing and Spectrum Trading are necessary to make up the inadequacy. It will not only improve the quality of service and but also help address the issue of call drops.

Spectrum trading allows parties to transfer their spectrum rights and obligations to another party. This allows better spectrum usages as the idle spectrum from the hands of one service provider gets transferred to the other service provider who is facing spectrum crunch. This also improves customer satisfaction and services of the service provider acquiring spectrum