Chamber Day

&

175th Year cele

brations

Volume 25 – No.6 – September 2011

In this issue4 President’s message

4 Chamber’s activities

•Chamber Day and 175th Year Celebrations

•Discussion on Global Economic Crisis - Consequences & Remedies

•Business Opportunities between India and Switzerland

•Seminar on Leveraging Information Technology for Business Excellence – Shop Floor To Top Floor

•Seminar on Cost Audit and Cost Record Rules under the Companies Act 1956

•Talk on Reset or Recession?

•Interaction meeting with representatives of VDMA, Germany

4 General Committee

4 Expert Committees

4 SPOT LIGHT - NREGA

4 Policy Watch

GovernorReleasingCoffeeTableBook

MCCISkillDevelopmentCentre-FoundationStonelaidbyDr.K.Rosaiah

Dr.K.Rosaiah,HisExcellencytheGovernorofTamilNaduaddressingtheChamberDayFunction

Ligh

t up y

our spirit of enterprise this D

iwali.

Wish you and your family a Very Happy and J

oyfu

l Diw

ali.

MCCI TEAM

1

PRESIDENT’S MESSAGE

Skill Development – The Need of the hour!Dear members

I am writing this to you after a very successful Chamber Day & 175th year Celebrations! It was a proud moment for all of us! The members’ support for the event and also for all the activities of the Chamber especially in the last one year helped us to have a grand finale of the 175th year celebrations and I am extremely thankful to all the members for this. The event is extensively covered in this issue.

I would like to share with you my thoughts on what we refer as the flagship activity of the 175th year - the Chamber’s endeavour to start a Vocational Training and Skill Development Centre at our land in Tiruvallur, closer to Sriperumbudur. The Foundation for this was laid by H.E Dr K. Rosaiah, the Governor of Tamil Nadu on the Chamber Day.

The impetus provided by our 7%+ GDP growth over the past few years in job creation is commendable. We do not have an unemployment problem, but the corporate India has a problem of unemployability, with large work force available but without industry required skills. The result is a startling 80% unemployability rate among our educated youth.

As our country continues to expand its share of youth population with an expected average age of 29 years by the year 2020, it becomes imperative that we create a fertile environment with productive jobs for the youth. This youth demography has got not only educated youth, but also has semi literate and rural uneducated youth, a vast majority of them are school drop outs for economic reasons. If these

,degagne ylevitcudorp ton era htuoythere is a hidden danger of social unrest and resulting anti social activities.

Therefore there is greater responsibility on all of us to think about a comprehensive model to potentially find employment for them, while at the same time addressing the manpower issue of our industries. This would be possible only with a massive

skill upgradation program. The policymakers are also taking this up as major thrust area in our growth plans setting atarget of training 500 million people by 2022.

The Chamber strongly feels that saying “I should do something” could solve more problems than saying ‘’something needs to be done’’. This is what made us plan for a Vocational Training and Skill Development Centre and fortunately for us we have already acquired a land in a strategic location closer to the industries.

What are our plans then? We would mainly offer three models initially:

1. Providing basic and advanced trainings to the youth of the local community – For this we have already interacting with local schools and households in Tiruvallur and nearby places and are starting basic courses in welding, machining, electrical, plumbing etc. These would immensely benefit the local community and the trainees can get placed in industries or could become self employed.

2. Providing customised courses for people already employed with industries. These could be for a group of industries or could be employees from one company.(Recruit & Train Model)

3. Providing advanced and industry specific finishing courses for students in or passing out from colleges and then placing them

tiurceR & niarT ( .seirtsudni htiwModel).

All our programmes will necessarily have the required Soft Skill Components which would be the differentiator. The Chamber has already developed a well thought over Soft Skill Module which would improve the employability of the candidates, while making the life a lot more easier for industries.

We are soft launching some of the above programmes in a rented place in Chembarambakkam, for the time being, till our own facility gets ready. Member industries can make use of these programs while the Chamber will also be constantly in touch with industries to update our courses and curriculum.

I am aware that initially we may not be in a position to turn out trainees in great volumes. Yet I am confident that in the next few years time, this initiative of the Chamber would blossom into a Centre of Excellence and would speak for our commitment and spirit of responsibility.

I would very earnestly seek the support of all members in making this a reality.

Best wishes

TT Srinivasaraghavan President

2

29thSeptember2011:

ChamberDayand175thyearcelebrationsTheFounders’DayoftheChamber

wascelebratedon29thSeptember

withameetingattheSheraton

ParkHotel&Towers.Italsomarked

the175thyearcelebrationsofthe

Chamber.

The Chamber was privileged to

haveHis Excellency theGovernor of

Tamilnadu,DrKRosaiah,astheChief

Guest andMr S Sandilya, Chairman,

EicherGoup,astheGuestofHonour.

In his welcome, Mr T T

Srinivasaraghavansaidthatitisindeed

a historic andmomentous occasion,

as we commemorate 175 years of

service to trade and industry. We

havetraversedalongandsometimes

arduous road,but through it all,we

have remained committed to the

fundamentalvaluesandobjectivesof

theChamber.Over thedecades, the

Chamberhascometoberecognized

asaresponsibleandcrediblevoiceof

tradeandindustryinTamilnadu.

He said the 175th year celebrations

were launched on 29th September

last year, following which several

new initiativeswere flaggedoff. The

flagship initiative of the Chamber in

its 175th year is the establishment

of a Vocational Training and skill

Development Centre. He also spoke

about the other initiatives like FFT,

bringing out Coffee Table Book and

also about the theme of the year

sustainabledevelopment.(Fullextract

ofhisspeechisgivenseparatelyinthis

bulletin.)

Addressing next, Mr. S. Sandilya,

Chairman, Eicher Group, said for

the last few decades, in the name

of development, we have not done

anything about maintaining the

environmentandwehavealooming

crisis for the future. It was time to

take corrective steps. He also said

drinking water shortage is going to

beamajor issue.Awakeupcallhas

been given quite some time back.

Havewewoken up he asked? But

thegoodnews is that a lotofwork

is beingdone in various sectors. Lot

ofinnovationishappeninginthearea

ofrenewableenergy,greenbuildings,

etc.

Coming to the auto sector, he said

autoindustryisdoinglofofworkwith

regardtoemission.

Mr Sandilya said it is time we

disseminated knowledge on

environment, cleaner technology,

longterminnovationtechnology,etc.,

to the younger generation. He said

“encourage citizen participation and

teachourchildren theconsequences

ofcorruption”.

MrVSriram,thehistorianandauthor

of the Coffee Table Book in his brief

presentation said it was a great

pleasuredocumenting the175years

of theMadras Chamber, the second

oldest Chamber in the country. The

cooperation that he had received

from the Chamber President, Past

Presidents, past secretaries and

the Chamber secretariat had been

excellent.

HesaidtheBookdealtatlengthwith

the formation and evolution of the

Chamber,theroleplayedbyit inthe

infrastructural development of the

State, particularly the Port, railways,

roadways,postandtelegraphamong

others.ItwasbecauseofthePortthat

theCitygrewandneverlookedback.

Chamber Day&

175th Year celebrations

3

Dr.K.Rosaiah,HisExcellencytheGovernorofTamilNaduenteringthemeetinghall

LtoR:Mr.T.T.Srinivasaraghavan,President,MCCI-Dr.K.Rosaiah,HEtheGovernorofTamilNadu-Mr.S.Sandilya,Chairman,EicherGroup

The book also spoke about the

transformation of theChamber from

thepre-independenteratothepost-

liberalisationera.

In conclusion he said, the Chamber

always had the patronage of

Governors.LordConnemarapresided

overtheGoldenJubilee,LordErskine

waspresentat theCentenaryof the

Chamber,Mr S L Khurana addressed

the 150th year celebrations of

the Chamber and it was indeed

appropriate that Dr K Rosaiah, the

present Governor, presided over

the 175th year celebrations of the

Chamber!

The Governor then released the

CoffeeTableBook.Thefirstcopywas

received by Mr Srinivasan K Swamy,

immediate past President of the

Chamber.

He also released the Directory of

Members and unveiled the MCCI

Skill Development Centre. He

also honoured the Past Presidents

and Secretaries of the Chamber by

presentingthemmementoes.

Addressing the gathering he said,

crossingamilestoneof175yearsfor

anyorganisationoranassociation is

aremarkableone.TheMCCIdeserves

commendation for growing and

adapting to the times and for its

farsightedness.Hecongratulated the

present and past office bearers and

membersfortheircontributiontothe

growthofMCCI,totheStateandthe

society.

He said the Coffee Table Book

reveals the impeccable journey of

MCCI. The history of the Chamber

is inter-woven with the history of

the industry and commerce and the

economic development of the State.

He congratulated the Chamber and

theauthorMr.VSriramandall those

who were involved in bringing out

thisbook.

He said Chambers of Commerce are

thebackboneofdevelopmentaround

the world. They are the ones who

conveyinonevoicetothepolicyand

decisionmakerstherequirementsand

expectationsofthebusinesses.

He said Chambers of Commerce

should build mutual networks, act

as a medium to guide, caution and

support businesses to grow. They

should act as a bridge between the

Government and investors and the

businessclass.

He furthersaidtheresponsibilitiesof

the businesses have changed from

the single point of making profit to

work for the triplebottom line– the

planet, people and profit. Chambers

shouldactasamediumtochannelise

the corporate social responsibility

initiatives of themember companies

so as to ensure inclusive growth for

betterresults.

Commending the MCCI’s efforts

on the establishment of Vocational

Training and Skill Development

Centre, he said the Chamber’s role

andresponsibilityshouldbemanifold

andintunewiththeState’sprogress.

TheVoteofThankswasproposedby

Mr T Shivaraman, Vice-President of

theChamber.

A cultural program followed that

andbrieffluteconcertwasorganised

before concluding the celebrations

withDinner.

AviewofPastPresidentswhoattended.

Mr.T.T.Srinivasaraghavan,President,MCCIdeliveringWelcomeaddress

viewoftheaudience

Mr.T.T.Srinivasaraghavan,PresidentwelcomingtheGovernorwithBouquetofflowers

4

GovernorofTamilNaduDr.K.RosaiahreleasingMCCICoffeeTableBookandMr.SrinivasanK.Swamy,PastPresidentofMCCIreceivingthefirstcopy

Dr.K.Rosaiah,HEtheGovernorofTamilNaduunveilingtheFoundationStoneofMCCISkillDevelopmentCentrewithremote

MCCISkillDevelopmentCentre-FoundationStonelaidbyDr.K.Rosaiah

GovernorofTamilNadureleasingMCCIDirectoryofMembers2011-Mr.Sandilyareceivingthefirstcopy

Mr.S.Sandilya,Chairman,EicherGroupaddressingtheChamberdaymeeting

Mr.T.T.Srinivasaraghavan,PresidentwelcoingMr.Sandilyawithbouquetofflowers

Mr.V.Sriram,Author&Historian-addressingtheChamberdaymeeting

5

Mr.C.D.Gopinath

Mr.M.K.Kumar

Mr.N.VenkataramaniHonouringofPastPresidentsbytheGovernorof

TamilNadu

Mr.M.V.Murugappan

Mr.L.Sabaretnam

Mr.N.Srinivasan(F&Rretd)

6

Mr.R.Subramanian,FormerSecretaryGeneralofMCCI

Dr.K.Rosaiah,HisExcellencytheGovernorofTamilNaduaddressingtheChamberDayFunction

Mr.V.Balaraman

Mr.SrinivasanK.Swamy

Mr.A.Sankarakrishnan

Mr.C.S.Krishnaswami,FormerSecretaryofMCCI

HonouringofPastPresidents

bytheGovernorofTamilNadu

7

Mr.T.T.Srinivasaraghavan,President,MCCIpresentingmementotoGovernor

Mr.T.T.Srinivasaraghavan,President,MCCIpresentingmementotoMr.Sandilya

Mr.T.Shivaraman,VicePresident,MCCIproposingVoteofthanks

ClassicalFluteConcertbyTiruvarurS.Swaminathan-M.A.Sundareswaran-violin,-TiruvidaimarudurS.Sankaran(Sankaranarayanan,MCCI)-accompanyingMridangam

MCCIPresident,T.T.SrinivasaraghavanwithChamberSecretariat

GroupphotowithPastPresidents/PastSecretaries

8

ExtractofthePresident’swelcomeaddressattheChamberDayand175thyearCelerbations.Your excellency, Dr. K Rosaiah,GovernorofTamilnadu,Mr.Sandilya,Chairman Eicher group, seniorgovernment officials and dignitariesfrom other Chambers and tradeorganisations, distinguished invitees,membersofthemedia,pastpresidentsof the Chamber, fellow members,ladiesandgentlemen.

Itgivesmegreatpleasuretowelcomeyou all to the 175th Anniversaryfunction of the Madras Chamber ofCommerce and Industry, which wecelebrate as Chamber Day. This isindeed a historic and momentousoccasion, as we commemorate175 years of service to trade andindustry. We have traversed a longand sometimes arduous road, butthrough it all, we have remainedcommittedtothefundamentalvaluesandobjectivesof theChamber.Overthedecades, theChamberhascometoberecognisedasaresponsibleandcrediblevoiceoftradeandindustryinTamilnadu.

The 175th year celebrations werelaunchedonSeptember29thlastyear,followingwhichseveralnewinitiativeswereflaggedoff.TheflagshipinitiativeoftheChamberinits175thyear,istheestablishmentofaVocationaltrainingand Skill Development Centre. Itis a well accepted fact that one ofthe major problems facing industrytoday is the non availability oftrainedmanpower.AsthedebateonUnemployment versus Employabilitycontinues, the stark reality is thatthere is a crying need for formallytrained manpower to keep ourfactories running. It is in thiscontextthat our Chamber has embarked onanambitiousprojecttosetupaSkill

Development Centre. Thanks to theforesight of my predecessors, wehavethenecessarylandatastrategiclocation between SriperumbudurandThiruvallur.Asignificantamountof ground work has already beendone towards this end and we areactively talking topotential sponsorsanddonorsforsettingupthefacility.While, on the one hand, thiswouldhelpourmembercompaniesfill theirmanpower gaps, it would providemeaningful career opportunities toyoungpeoplefromtheneighbouringcommunities,ontheother.

The ‘Food For Thought’ (FFT) series,a monthly forum on wide rangingissues of topical interest, which wecommenced in September2010,hasevokedgreatinterestanddrawnwideappreciation from members. Thesediscussions have served to bringintosharperfocustheburningissuesof the day and helped theChamberreachouttoalargeraudience.

Going back in history, the Chamberhadbeen instrumental in thesettingupoftheMadrasPort.Sadly,theportistodaybesetwithseveralproblemsandhasincreasinglybecomeabottleneckforexportersandimportersalike.TheChamber has been active in voicingthe concerns of industry and hadrecentlycommissionedastudyonthecurrentissuesfacingtheChennaiPort.Thestudyhassincebeencompletedandwillbe releasedshortly. It isourearnesthopethattheauthoritieswillact on the key recommendations, inordertorevitalisethiscriticalgateway.

An interesting and rewardinginitiative taken up during the yearwas the commissioning of a CoffeeTable book, entitled ‘ChampioningEnterprise’, which is to be releasedby His Excellency the Governor,today. This beautifully brought outbook,writtenwithgreatpassionbyMr. V Sriram, author and historian,chronicles the fascinating journeyof this great institution through175eventfulyears.ButthisbookismuchmorethanahistoryoftheChamber,

it is in reality thehistoryofbusinessandenterprise inwhatwasthentheMadras Presidency. It is a valuableaddition to the already impressivecollectionofliteratureonMadrasandI amsure that itwillbea collector’sitem.

Indiaisrecognisedasoneofthefastestgrowing economies in the world,today, driven by a strong domesticmarket, robust manufacturingand services sectors and a steadilygrowing export base. We havealso shown great resilience duringtimes of recession, thanks to ourprudent regulatory mechanisms andour inherent strengths as a nation.However, foreconomicdevelopmentto bemeaningful and sustainable, ithas to be inclusive, and address theneeds of a wide spectrum of ourpopulation. Equally, it must addressconcerns around environmentalprotection and social equity, finallyleading to an improvement inthe quality of life for our teemingmillions.Today,wearefacedwiththechallenges of rising inflation, widespread poverty and the rural urbandivide,tonamejustafew,whichareroadblockstothesustainabilityofourdevelopment. As a Chamberwe aresensitive to these realitiesandhencechose Sustainable Development asthethemeforour175thYear.

We are indeed fortunate to be partof this moment in history and it isa tribute to the able leaders of theChamberwhohavesteereditsaffairsover this long period that it hasremained faithful to the vision of itsfoundingfathers.Wearehonouredtohavesomeoftheminourmidsttoday.It istrulyarareprivilegeandhonourfor me to preside over this greatinstitution at this historic juncture. Iamconfidentthat futuregenerationsof business leaders will be inspiredbytheChamber’sshininglegacyasatruechampionofenterprise.

Ithankyouforyourattention.

9

Sept.2010 ChamberDay&Inaugurationof Inflation–Socio GeneralCommittee– 175thyearcelebrations Economic 25th Dimensions ExpertCommittee • FinancialSector

October2010 ProgrammeonITEnabledSupplyChain EmploymentV/s. GeneralCommittee Management Unemployability –9th Debate ExpertCommittees: • Energy • Environment, PollutionPrevention &Control • CompanyLaw CorporateMatters • IT/ITES • DirectTaxes

November2010 RevisitingIndian GeneralCommittee– MicroFinance 20th ExpertCommittees • VAT • IndirectTaxes • EconomicAffairs

December2010 • ManagementDevelopment TheReal GeneralCommittee– ProgrammeonExcise&ServiceTax Significanceof 17th • ProgrammeonSecureCitiesIndiaII– Scams NewAgeTechnologiesforCombatingTerror • SeminaronTransferPricing • SeminaronBusinessInnovationand EngineeringExcellence • ProgrammeonInvestorAwareness • IndiaCorporateWeek2010Celebrations • SeminaronEmergingTrendsinTaxation atSriperumbudur

January2011 • SeminaronProtectingthePatents,Designs IsCSRthe GeneralCommittee– andBrandsinEuropeanUnion Corporate 8th • ManagementDevelopmentProgrammeon Conscience? ExpertCommittees: TamilNaduVAT • HRD • Energy • Logistics

MCCIprogrammesataglancefromSeptember2010toSeptember2011.

Month FFT Programmes General Committee/Expert Committees

AGM/Chamber Day/ Workshops/Conferences/Seminars/Training Programmes/General Meetings etc.

10

February2011 • DiscussionMeetingwithVisitingStanding IsIndiaIFRS GeneralCommittee- ParliamentaryCommitteeonFinance Ready? 19th • UnionBudgetTelecastMeeting ExpertCommittees: • ManagementDevelopmentProgrammeon • Combinedmeeting OccupationalHealth&Safety ofDirectTaxes& • DiscussionMeetingwithHighLevel EconomicAffairs ParliamentaryDelegationfromAustriaon Austro-IndiaBusinessOpportunities • VideoDiscussionon“BuildingHigh PerformingTeams”

March2011 • WorkshoponCentralBudgetandthe RevitalisingIndian GeneralCommittee– FinanceBill2011-12 Agriculture 9th • MemorialMeetforMrASivasailam • WorkshoponPostUnionBudgetat Kattankulathur • ProgrammeonArbitration–TheIndianand InternationalPerspective • ManagementDevelopmentProgrammeon CentralExcise&ServiceTaxatCoimbatore • ExpertCommitteeonLogistics

April2011 • VideoDiscussiononKaizen:Justin Making GeneralCommittee– TimeTechnologies Democracy 9th • SeminaronCoreSectorDevelopmentin Meaningful ExpertCommittee SouthIndia onCompanyLaw/ • VideoDiscussiononDeming’sRoadmap CorporateMatters forChangeCommitmenttoQuality

May2011 • PressMeettohighlightthewoesofExim WillRightto GeneralCommittee– tradeinviewoffailureofEDIversion1.5 Education 11th • VideoDiscussiononTheMiracleMan becomeaReality? ExpertCommittees: • IT&ITES • Combinedmeeting ofIndirectTaxes andVATCommittees

June2011 • 175thAnnualGeneralMeeting ExpertCommittee: • SeminaronRevisedScheduleVIandXBRL • IT/ITES • DiscussionMeetingwithItalianDelegation • RoundTableDiscussiononFiscalPolicies forLowCarbonInvestments • VideoDiscussiononMiddleManager asInnovator -

July2011 • SeminaronSecuringUSGreenCard GeneralCommittee– • MCCI&MMAVideoDiscussiononBetween 9th YouandMe. - ExpertCommittees: • CompanyLaw CorporateMatters • Logistics • HRD/CSR

11

August2011 • TwoDayAllIndiaWorkshoponIndirect LandAcquisition GeneralCommittee– TaxLaws Policies 20thAugust • InaugurationofFoundationCourseon –Whatworks ExpertCommitteeon EximProcedures andwhat • CompanyLaw/ • LaunchofUnitedNations’Globally doesnot? CorporateMatters renownedResponsibleProduction Framework

September2011 • ChamberDayand175thyearcelebrations GeneralCommittee– • RoundTableDiscussiononGlobal 16th EconomicScenario ExpertCommittees: • FelicitationtoPresident,FICCI • CompanyLaw/ • InteractionMeetingwithGreaterGeneva CorporateMatters BerneArea,Switzerland • IndirectTaxes • SeminaronLeveragingITforBusiness Excellence–ShopFloortoTopFloor • SeminaronCostAuditandCostRecords • TalkbyMrRobertFBruner,Dean, DardenSchoolofBusiness,Universityof VirginiaonResetorRecession • InteractionMeetingwithVDMA,Germany

FromSeptember2010toSeptember2011,91programmeshavebeenheld.

12

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For details:Mr S Sankaranarayanan,

Senior Manager Mail id: ssn@madraschamber.in

3rdSeptember2011

Discussionon“GlobalEconomicCrisis–Consequencesandremedies

Thisprogrammewasjointly

organizedbytheChamberand

InstituteofEconomicEducationand

theIndianLiberalGroupandwas

heldintheConferenceRoomofthe

Chamber.

Mr T T Srinivasaraghavan, President,

MCCI briefly introduced the speaker

MrSKalyanaramanwhowasformerly

withADB.

SpeakingabouttheChamberhesaid

theMCCI is inthemidstof its175th

yearcelebrationsandweareactually

getting towards its finale on the

29th September. It has been a very

longandsatisfying journey.Wehave

undertaken several initiatives, the

mostambitiousonebeingthesetting

up of a Skill Development Centre in

Sriperumbudur.WehadtheFoodfor

Thought seriesof lectureswherewe

hadinterestingspeakersofeminence

who participated and enriched the

knowledgebaseofourmembers.

Hesaidtoday’sprogrammeisalsoone

suchthingtospreadtheknowledge.

Addressing, Mr Kalyanaraman said

we are dealing with a subject of

importance. It will affect every one

eitherinurbanorruralIndia.Hesaid

wehaveproblemsofdifferentkinds.

It is not only in Europe or western

countries,butitisaproblemforusin

Indiaaswell.

Making a presentation, he said

on 5th August 2011, Standard &

Poor, a private rating agency had

downgraded United States rating

fromAAAtoAA+.Inviewofthis,all

stockmarkets in theworld recorded

massivedeclinesandthedowngrade

complementedtheturmoilinEurope

withthedebtproblemfacedbyPIGS

–Portugal,Ireland,GreeceandSpain.

Luckily for us Indiawe do not have

thatmuchofanimpactasthereisno

asset base describing the economy

todayhesaid.

Attheturnofthe21tcentury,thetwo

developing economies were China

andIndiabothaccountingforatotal

of 60%. Poor people are no longer

cared for. The dominant feature of

the past decades has been greed

and accumulation of wealth he felt.

Asenseofresponsibilityshouldcome

fromwithinthateveryoneowestothe

people. A percentage of our income

shouldgoforsocialresponsibility.

He said not much of industrial

production is taking place in the

western world. 90% of the goods

availableinthemarketareallimported

from small countries. The industrial

activityhascompletelycollapsed.He

said the underlying asset is zero as

bogusmoney is circulating. 66%of

the total US dollars are held outside

USA. He said fictitious instruments

were created by financial giants like

MorganStanley.

HereferredtotheKeynesianeconomic

model. Keynes was instrumental in

introducing the current mainstream

economicthoughtinthewakeofthe

firstandsecondworldwars.

What can be done to overcome

the present crisis he asked? He

said promote public works, reduce

unemployment.ChinaandIndiahave

one-third of the world population.

Asia should become a dominant

economic power. Like European

Community and Eurodollar were

formed,anIndianOceanCommunity

and Mudra as common currency of

IOC should be instituted. This will

leadtoemploymentgenerationinall

economiesof theglobe. He further

saidtheLawoftheSeanowexpands

territorialwatersto200nauticalmiles

opening up new zone for economic

exploitation.Projectsarereadytolink

Vladivostok and Bangkok through

Trans-AsianHighwayandTrans-Asian

Railway. These projects will provide

the multiplier effect popularized in

economicsbyKeynes.

Promote savings he said though

this isnotgoingtobeacceptableto

Americanmindswho spend beyond

their means and who think of the

present,notthefuture.

He said ban all financial derivatives/

instrumentssuchasoptions,financial

derivatives, and participatory notes

etc. which create a false sense of

financial health. Indian economy is

veryunique–drivensubstantiallyby

consumption. There is no way the

entirepopulationcanbeabsorbedin

industrialactivity.Governmentisnot

a dominant player in our economic

activity and therefore we have very

dominanthouseholdsavings.

Create National Water Grid – it will

double agricultural production he

said. Inter-linking of rivers alonewill

yieldanadditional35mha. (9crore

CHAMBER’SACTIVITIES

13

CHAMBER’SACTIVITIES

acres)of landwithassured irrigation

and if these 9 crore acres of land is

distributed to 9 crore poor families,

the village India will progress and

India can become a developed

nation by 2020 with increased per

capita income and employment

opportunities.

TheIndianOceanCommunity(IOC)is

readytotakeoffhesaid–mostlikely

thisshouldhappenattheIndia-Japan

summittobeheldinBaliinNovember

2011.

GivinghisviewsMrKPGeethakrishnan

felt that the government should

be only in the field of governance.

Comingtotheeconomyhesaid,ifthe

growthrateisminusintwoquarters,

itiscalledrecession.Ifwelookatthe

US,thereisnogrowthinemployment

for the last onemonth. InGermany,

thegrowthrateiszero.

He said Greece , Spain etc. could

default in thenext15months.Spain

and Italy are large economies. If

Greece and Spain defaults, the Euro

willfall.

American economy is 1/6th of

the world economy. There is no

replacementfordollartoday.Wehave

notbeensuccessful forathirdworld

currency,afterthedollarandEuro.

HesaidinIndia,wehavebeenbrought

upwithHindurateofgrowthandwe

will end up with 7.5% growth. The

threemajorprogrammestakenupby

theGovernmentof Indiahavebeen:

(a) Rural Employment (b) Right to

Educationand(c)FoodSecurity. We

can sustain ourselves if there is tax

buoyancy and if wewant a growth

rate of 9%, the government should

take up major revenue expenditure

programmes. Our problems are

our own he said and we need to

addressallofthem.Canweintegrate

our States internally? 9% growth is

certainly possible if we remove the

barrierswithourStates.

Otherspresentfeltthereistoomuch

hype about the ratings and Stock

Exchangesaregoingoverboardwith

ratings. Generate proper investor

confidence,andnotworrytoomuch

about outsiders. Deficit budgets

have become an obsessionwith the

Government they felt. Reducedeficit

without sacrificing growth – with

productivereturns.Thisshouldbeour

motto.

Financial Analyst, Mr Uppili felt that

S&P’s downgrading US credit rating

is wrong. S&P had a credibility

problem which was known to the

market.Thereisnogrowthinducing

mechanism to pay your debts.

Convergence is not happening in

Euro.Tradewarisgoingonbetween

the countries and no countrywants

to importbutonlyexport. He said

unemployment in Spain is 40% for

peoplearoundtheageof25.

Itwasalsotheviewofthosepresent

that the common denominator

should be “minimum Government

and maximum governance”. This

can be possible only if there are

societalchanges–thesewillhaveto

come slowly –through legislation,

implementation and behavioural

patternofthepopulation.

TheGovernment’s role is to provide

equalopportunitytoeveryone–they

should be the enablers of growth.

However, thegrowthhastohappen

fromthepeople.Unlessthishappens,

therecannotbeownershipofgrowth.

No growth is possible without

national security. We should have

ourdefencemechanisminplace.We

should protect not only our borders

but national interests, intellectual

property, physical protection of

territories,etc.

In summing up, the President said

therewerevalidviewpointsaswellas

differingviewpoints.Thereissomuch

ofemphasisontheeconomybutnot

onthesocialaspectoftheeconomic

growth. He said the discussion has

been lively and thanked all those

presentfortheircontribution.

5thSeptember2011

BusinessOpportunitiesbetweenIndiaandSwitzerland

TheChamberorganisedapresentation

on Business Opportunities between

India and Switzerland by the

representatives of Greater Genera

Bernearea(GGBa)on6thSeptember

atitspremises.

GGBa is a non-profit organisation

createdbytheRegionalGovernment

of Western Switzerland. Its main

objective is to bring the needed

supporttoforeigncompanieswishing

to develop business in Europe and

thissupportisfreeofcostandvaried.

In their presentation, GGBa Director

in India, Mr Luc Prem Jalais and

Deputy Director, GGB, Switzerland,

Mr Thomas Bohn said GGBa is an

EconomicDevelopmentAgencyactive

in 8 countries. India is one of their

14

markets. It supports a large number

of foreign based companies looking

to establish business operations in

their area. They saidmore than 100

Indian companies have established

theirunitsinSwitzerland–tonamea

fewTatas,Infosys,Hindujas,Piramals,

Dr Reddy’s Laboratories, Aditya Birla

Group,JindalGroup,etc.

Theydescribedthefollowingreasons

forinvestinginGGBa:

• Internationalandmultilingual

environment–threenational

languagesbeingused–

German,FrenchandItalian

whileEnglishiswidelyspoken.

• Havebilateralagreementswith

theEuropeanUnion

• Switzerlandisamemberof

Schengen–freemovement

betweenthesecountries

• Switzerlandisnotaffected

bytheglobalcrisis

• IdealcentralEuropeanbase

whereSwissandthe

Germansmeet

• Switzerlandisasafecounty.

Verypeaceful–there

arenostrikes.Unemploymentis

verylow–just2to3%.

• Leadingacademicinstitutions

• Expertiseinscienceand

technology,R&Dmanufacturing

• Highlyqualifiedandproductive

workforce

• Stableandsecureworkingclimate

• Swisspolitics–proactive

authoritiesreadytohelp

• Stateoftheartservicesand

infrastructure–superbroads,

trainservices,hotels,etc.

• Itisaverytaxfriendlycountry–

maximumtaxis20%

They said if the projects are of high

valueaddition,5-10yearstaxholiday

isgiven.

The participants enquired about the

assistance given for R&D, for BPOs/

KPOs etc. and the visitors said they

could give their business plans and

GGBawouldbehappytoprovideall

theinformationrequired.

9thSeptember2011

SeminaronLeveragingInformationTechnologyforBusinessExcellenceShopfloortoTopFloor

Today businesses operate in a

competitive environment and they

constantly have to innovate and

expand to stay ahead of others.

Competitiveness has multiple

parameters like cost, quality,

timeliness, meeting the customer

needs, etc. SMEs, often referred as

the engine of growth, find this to

be particularly challenging, given

the limited resources and lack of

economies of scale. Nevertheless

they also have to aim for business

excellence. Information Technology

could be the right answer to this

paradox.

ThoughIndiahasbeenagloballeader

inITandprovidingbusinesssolutions

to others, ironically, our industries,

particularlySMES,havenotharnessed

thepotentialofITfully.Therearestill

someapprehensionsandreservations

inthemindsoftheSMEentrepreneurs

about the use of IT tools for their

business enhancement. It is with

the objective of taking IT to SMEs

the Madras Chamber jointly with

Tata Consultancy Services, organised

a seminar at Hotel GRT Grand-

ConventionCentre.

The aim of the Seminar was to

explainhow ITcouldhelp inmaking

SMEs competitive by enhancing

efficiency namely: Cost Efficiency;

Value Efficiency; Service Efficiency;

Compliant efficiency and integration

efficiency.

Mr Clynton Almeida, chairman of

the Chamber’s Expert Committee

on IT/ITES welcomed the gathering

and said at the Madras Chamber it

is our constant endeavour to bring

to business community up-to- date

information on all areas impacting

the business. With this mind, we

have planned to have a series of

programmes to fulfill our objective.

This seminar would focus on how

organisations, especially the SMEs,

can become more cost efficient by

usingITandaddmorevaluetotheir

products.

TheChiefGuestfortheeventwasDr.

T.S. Sridhar, IAS., Principal Secretary,

MSME Department, Government of

Tamilnadu.Addressing thegathering

he said nothing can be more

significantor relevant than this topic

sinceITbusinesshasbeenatthetop

oftheladderfortwodecadesnow.

IT–hesaidhasgotitsownadvantages.

Today hardly anything can be done

CHAMBER’SACTIVITIES

15

16

CHAMBER’SACTIVITIES

withouttheuseof ITandhence it is

obviously an important tool. At the

sametimeithastobegarneredtothe

needsoftheindustry.

About90percentofMSMEskeepthe

wheelsofeconomymoving. About

45percentofourexportscomefrom

MSMEs. Tamilnadu accounts for

oneofthelargestnumberofMSMEs

registeredinIndia–6.8lakhsagainst

26 lakhs–all India.MSMEsproduce

about800differentproducts.Weare

oneofthelargestproducersofauto/

autocomponentsinthecountry.

Service sector has grown by leaps

andbounds–itis40to45%todayin

Tamilnaduandverysoonthissectoris

goingtoovertakeothersectorsandit

isgoingtobetheengineofgrowthin

thenextfewyearshefelt.

There is lotof turbulence in industry

due to the meltdown in US and

Europe. It is a complex business

scenariohesaid.

Whatever are the policy changes or

the global scenario, ICT has a great

roletoplayforimprovingthemargins

of the companies. Only thosewho

are quality conscious and able to

deliverontimeatcompetitiveratecan

standcompetition.

IT enables more efficient processes

and bring the products to markets.

E-invoicing, electronic payment

systems, as well as the use of

computer aided designs for shoes,

textiles,etc.canmaketheworkmore

creative and less labour –intensive.

Hehowevercautionedthatexcessive

mechanisation is also dangerous

especiallyfordevelopingcountrieslike

Indiabecausejobsarenotgoingtobe

created.

He also felt that technicians are in

greatdemand.Wedonothavetrained

and qualified technicians today. He

referred to the skill Development

Mission of the Government of India

andthatofTamilnadu.Hesaididentify

tradewherethereislotofdeficiency,

identify the numbers and the units

and organise skill development

programmes for them, the cost of

which will be reimbursed by the

MSMEDepartmentoncethetraining

is over and the candidate has been

placedinemployment.

The State and Central Governments

have been taking lots of initiatives

towards e-governance. A number of

departmentsandMinistrieshavebeen

identifiedforpilotprogrammeswhere

its services will be computerized.

About6lakhcustomerservicecentres

will be set up. ELCOT is the nodal

agency and a number of companies

arepartneringwith theGovernment

hesaid.

ICThaspaidrichdividendsinairlines

ticket booking, railway reservations,

passport offices, etc. where there is

accountabilityandspeed.

As regards Tamilnadu he said, there

isStatepolicyforMSMEsectorwhere

a number of initiatives have been

undertaken. Various sectors (13 of

them) have been identified as thrust

sectors.

Government of India is laying great

emphasisonclusteringofenterprises.

Once the SPV is formed, enterprises

can prepare detailed project reports

and submit it to the SPV. He said

clusterproposalsaresupportedbythe

Government of India with common

infrastructure.Upto70%ofthecostof

theunit isgivenby theGovernment

of India and the State Government

supplementsbyanother10%.

Developing web portals for clusters

is another areawhere there is great

potential he said. Networking of

clusterportalswithnationalportsfor

sellingtheproductshasbeenplanned.

Also, there canbe a commonbrand

for their products – this is an area

whereclusterscanworktogether.

MSMEscandefinitelytakeadvantage

of the ICT and thereby effectively

contribute to the economy of the

country.

His address was followed by a

presentation by Mr.V.Ramaswamy,

GlobalHead–TCS iONonthetopic

“ShopFloorToTopFloor”.Theother

topics that were covered were - Is

Security a concern for SMEs? and

using social networks for business

growth.

iON stands for “Information On”

he said and asked how do you

ensure that there is visibility for the

management at the top floor about

whatishappeningattheshopfloor?

iON provides end-to-end business

solutions to the SMB segment, the

growth engine of the economy.

iON caters to the needs of multiple

industrysegmentswithbestpractices

gainedthoughTCS’globalexperience,

domesticmarket reach, skills, know-

howanddeliverycapabilities.

Hefurthersaidthismodeleliminates

capitalinvestmentastheyprovidethe

lTinfrastructureandsoftwareonrent.

Youpayasyouuseandonly for the

numberofuserswhoactuallyusethe

software.

There was a Panel discussion at

whichMr V Ramaswamy,Mr R Vittl

Raj, Mr Clynton Almeida and Mr

Madhavan were the panelists. The

panel discussion was moderated by

Mr Malli J Sivakumar, Co-Chairman

of the Chamber’s Expert Committee

on IT/ITES. At the Q&A session, a

number of queries were clarified by

thepanelists.

The programme was attended by

about70participants.

10thSeptember2011:

SeminaronCostAudit&CostRecordRulesundertheCompaniesAct1956

In recent months, there has been

a paradigm shift in the legal

requirementsformaintenanceofcost

records and cost audit as applicable

to corporates consequent on certain

initiatives taken by the Ministry of

Corporate Affairs (MCA). Cost audit

has been made mandatory for all

companies in 14 specified industries

which are listed companies and

which meet the threshold limits

prescribed. This is in sharp contrast

totheerstwhilepracticeofcompany-

wise orderingof cost audit. Similarly

industry-wisecostaccountingrecords

havebeensupersededin36industries

andacommonsetofcostaccounting

recordshavebeenprescribedforthese

as well as other industries and the

filingofaComplianceCertificatehas

been made mandatory for all listed

companies meeting the threshold

limits engaged in manufacture,

mining, production and processing.

There has also been a streamlining

of the procedure for appointment

of the cost auditor. The Cost Audit

Reportformathasbeenmodifiedand

a new Performance Appraisal report

to the Board of Directors has been

introduced.

Theabovechangestobeintroduced

with immediate effect or from the

currentfinancialyearareexpectedto

haveamajorimpactonthecorporate

sector.

To get a clear understanding, the

Chamber organized this seminar.

Mr.B.B.Goyal, Advisor (Cost), Cost

Audit Branch, Ministry of Corporate

Affairs, Government of India, who

is the architect of the changes

brought about by the Ministry was

the Chief Guest and delivered the

keynote address. Mr. S.A. Murali

Prasad,aleadingCostandChartered

Accountant in Chennai, made a

presentation on the impact, issues

and implementation of the new

provisions.

Mr T T Srinivasaraghavan, President,

extending a special welcome to Mr

Goyalthankedhimfortakingtimeoff

tobewithus.HesaidMrGoyal isa

civilservantwithadifference,willing

todiscussissuesthatconfrontusand

find solutions as well. We are here

todiscussan issueof topical interest

whichhasgeneratedafairamountof

heat,debateanddiscussion.

It is important to recognize that in

the175yearsofitsillustrioushistory,

theMCCIhasbeenseenasacredible

voiceofindustry.Wealwaysembraced

change.Wehavebeenattheforefront

ofthatchangeandourmembersare

notafraidofchange.Hesaidwehave

beenaresponsibleChamber,andwe

have been able to bring to the fore

issuesfacedbyourmembers.

TherecentchangesbytheMinistryof

CorporateAffairsofallowingallthree

professions to certify certainmatters

like XBRL filing, is a welcome step.

By the same token, if compulsory

cost records are necessary and the

compliance needs certification, the

certification must be thrown open

tomembers of all three professions.

If XBRL documents audited by

Chartered Accountants can be

certified by any of the three groups

ofprofessionals,similarshouldbethe

case for certification of maintenance

ofcostrecords.

He said pre-notification discussion

is very healthy and requested re-

examination of the set of rules

prescribed.

In his keynote address, Mr Goyal

said that the consultative process

hadbeengoneintoalready.Agroup

was constituted in January 2008

which had participation from all

stakeholders. All professional bodies

were on the Expert Group. After

following the consultative process,

a questionnaire was drafted. Major

groups were addressed and their

viewswereincorporatedinthedraft.It

wasputonthewebsiteoftheMinistry

for 90 days and a large number of

commentswerereceived.Afterthese

rules were drafted, they were again

senttoalltheIndustrialAssociations,

Institutesandotherregulatorybodies

like theMinistryofFinanceandonly

17

CHAMBER’SACTIVITIES

18

CHAMBER’SACTIVITIES

after their views were obtained, the

draftwasprepared.TheGovernment

is conscious that this exercise has

been done in consultation with all

the stakeholders and is now in the

processofissuingclarifications.

Speaking furtherhe saidwehave to

have a mechanism to ensure that

all the companies in India follow

a structured system. In the entire

West the countriesarenotefficiently

managing their resources – from

household savings to the national

level.Wehavetoaddressthelarger

issue of resources management

and we have to address our cost

managementaswell.Andifyouare

given guided approach to follow a

structured system, the companyand

thecountrybothstandtobenefit.

A majority of the time spent in the

Board room is not on company’s

performance but on the procedures

and systems followed. It is not the

intentiontointroducenewsystemsto

the corporatebut tohelp themout.

Throughthisprocess,inthenext5-10

years,youwillseevisibleimprovement

in their cost audit culture. It has to

havelongtermimpacthesaid.

He called upon companies to

maintaincostrecords,iftheyhavenot

beenmaintainingthem.Therehasnot

been any intervention in corporate

functioning. The Government is

trying to improve your functioning

hesaid.ItisnotfortheGovernment’s

benefitbutforthecompany’sbenefit

andforthecountry’sbenefit.Hesaid

ifthereareimplementationproblems,

itistheGovernment’sjobtohelpthe

corporate world to smoothen the

implementation.

MrGoyalsaidanumberofcountries

are coming to India to understand

theanti-dumping law. Wehave the

Competition Commission of India

– more than 90% of international

commercial disputes are because

of transfer pricing. He said different

departments need cost data for

differentreasons.

Indiahas slipped in theglobal index

by5points(from51to56)whileeven

our neighbouring country Pakistan

has gained by five points. Our level

of competitiveness has gone down

andtheseeffortsareintendedforthe

bettermentofourcountry.

HesaidtheMCAwouldbepleasedto

consideranysuggestionsmade.

Mr S A Murali Prasad in his

presentation covered the global

scenarioonmaintainingproperbooks

ofaccounts.

Coming to the Indian scenario he

saidnearlyallcompaniesengagedin

awiderangeofactivitieswillhaveto

maintaincostrecords.Inviewofthis,

thecostofcostaccountingwillgoup.

He questioned why a certificate of

compliance?andsaid“certificate”and

“opinion”aretwodifferentthings.

HesaidtheRulesaresilentaboutthe

powers of the certifying accountant.

He also brought out many other

issueswhichneededattention.

Inconclusionhesaid

• letusnotrantontherules

• Seekthechangesweneed;and

• Governmentwillberesponsive

MrGoyalwas good enough to stay

on for the entire session and also

clarifymanyoftheissuesraisedbythe

participants; The participants gave

himastandingovation.

12thSeptember2011

Talkon“ResetorRecession”?byMrRobertFBruner,VirginiaUniversity

The Chamber organized a talk

on “Reset or Recession”? by Mr

Robert F Bruner who is the Dean

and Charles C. Abbott Professor

of Business Administration at the

DardenGraduate School of Business

Administration,UniversityofVirginia,

USA.

Mr M R Venkatesh, Chairman of

the Expert Committee on Economic

Affairs of the Chamber presiding

overthemeetingsaidthatweatthe

MadrasChamberhavebeendebating

thissubjectforalmostfiveyears.We

have reached a stagewhere, in our

globalizationefforts,theglobalevents

willimpactusseverely.

He said we expect a 25% GDP

to come from the manufacturing

sector. However, this has not been

happening.Hecautionedthatweare

informoreproblemsaheadofus.

Mr. Dalmia introduced the speaker

MrRobertFBrunerandbrieflyspoke

aboutDardenSchoolofBusiness.

Thiswas followed by a presentation

by Mr. Robert Bruner on “Reset or

Recession? EconomicOutlook–We

arefleeingfromRisk.”

He said IMF sees slower expansion

for 2012. The situation in Indiahas

been slowing growth in consumer

demand; lagging industrial growth;

Pendingcriticaleconomicreformslike

Labour, foreign investment in retail

businesses,etc.

Coming to US he said US

manufacturing is slowing; inflation

is rising; there is deterioration in

confidenceintheEuro;

Speaking about global outlook he

saidgrowthwillbeslowtemporarily

as purchasing by firms has softened

andprivateconsumptionissubdued.

There are global supply disruptions

fromJapaneseearthquake.

Some implications for global trade

andforeigndirectinvestmentwere–

growthofconsumerspendingatbest

ismuted,possiblynegativefor12–18

months.HesaidGovernmentpolicies

must steer away from unbalanced

growth.

Somepossiblebrightspotsinmedium

termwere:

Natural resources –continued

jockeying for competitive advantage

especiallybyChina.

Energy: Investment continuesowing

toenvironmentanddiscoveryofnew

reserves,andalternativeenergy

Growingmiddleclassinthebuoyant

emerging economies with attendant

expectationsforeducation,healthcare

and life style. Global transfers of

technology and best practices will

boostproductivity.

Concludinghe said, there is slowing

growth in developed economies,

continued but slower growth in

emergingeconomies;big increase in

risk aversion currently is under way.

Thiswillhavepossibleadverseimpact

on foreign trade and huge volatility

in capital flows. In this environment,

learningandtransferofbestpractices

cangivedecisiveadvantages.

His presentation was followed by a

Q&Asessionwherehetookupmany

questionsfromtheaudience.

The programme was attended by

about65participants.

15thSeptember2011

InteractionmeetingwithrepresentativesofVDMA,Germany

VDMA which refers to German

Engineering Federation has a

networkofaround3100engineering

companies making it one of the

largestandmostimportantIndustrial

AssociationsinEuropewithover400

industryexperts.VDMAwasfounded

in 1892 and has been one of the

activeplayers in the region for trade

betweenIndiaandGermany.

At an interactive session at the

Chamber, Mr Ulrich Ackermann,

Managing Director of Foreign Trade

OfficeofVDMAmadeapresentation

on “Indo- German Trade in the

Machinery Sector – Challenges &

Opportunities”.MrUlrichAckermann

wasaccompaniedbyMrRajeshNath,

ManagingDirector-VDMA,India.

Ms K Saraswathi, Secretary General

of the Chamber, welcoming the

gathering said that the MCCI can

beapointofcontact forany further

relations between industries in

TamilnaduandVDMAGermany.

Mr Ackermann said VDMA is 120

years old institution with 3000

membercompaniesemployingabout

920,000employees.Itsturnoverwas

175BillionEuros.

Hereferredtotheworldcrisisandthe

crisis in the US and therefore there

is a shift in export markets as well

fromEurope toAsia anddeveloping

countries.

He further said Germans are world

leaders inmanysectors.Formember

companies of VDMA, India is a new

and emerging market. However,

he referred to the lack of good

infrastructureinIndiawhichisacritical

factor.Germancompaniesfacethisas

a hindrance to do business in India.

Availabilityoflandatreasonableprice

aswellasskilledmanpowerareother

factorshesaid.

VDMA is looking for 5000 qualified

engineers -without quality people

we cannot produce quality products

hefelt.

He said discussions are on for an

India-EU FTA where all goods and

servicesintheindustrialsectorwillbe

covered.

VDMA would be happy to assist

Indiancompanieswantingtechnology

partners to link them with German

companies. He said 400 VDMA

membersarewellestablishedinIndia.

For automotive companies, India is

a sourcing hub. Indo-German trade

willpickupinthenexttwoyearsand

VDMAiseverreadytosupportIndian

companies.

The Chamber enquired whether

19

CHAMBER’SACTIVITIES

20

CHAMBER’SACTIVITIES

any assistance would be available

for setting up the skill Development

Centre.

The CD on Who Makes Machinery

in Germany is available with the

Chamberforreferencebymembers.

OtherMeetings

4thSeptember2011

FelicitationtoPresident,FICCI

The Consultative Committee of City

Chambers of Commerce organized

a meeting to felicitate Mr Harsh C.

Mariwala, during his recent visit to

ChennaiinhiscapacityasthePresident

of Federation of IndianChambers of

Commerce & Industry (FICCI). The

MadrasChamber isaconstituent of

the Consultative Committee of City

Chambers,auniquesetupfoundonly

inChennai.

23rdSeptember2011:

MeetingoftheConsultativeCommitteeofCityChambersofCommerce

The Secretariat of the Consultative

Committee of City Chambers of

Commerce rotates between each

Chambereveryyear.Atthemeeting

heldon23rdSeptemberattheMCCI,

the Secretariat which was with the

NationalChamberofCommercewas

handedovertotheTamilChamberof

Commerce.

26thSeptember2011:

Tamilnadu–Vision2025document–ConsultativeMeeting

TIDCOhasbeenentrustedwith the

task of preparing the Vision 2025

document for the industries sector.

For this purpose, TIDCO organized

a consultativemeetingwith industry

leaders and experts to gather their

views on the policy, strategy and

actionplanforVision2025.

The following thrust sectors were

discussed:

Energy (Natural Gas) ; Petroleum

and Petrochemicals; Information

Technology & Electronic Hardware

Manufacturing, Heavy Engineering,

InfrastructureandAutomotive.

Mrs.K.Saraswathi,SecretaryGeneral

attended this meeting on behalf of

theChamber.

GENERALCOMMITTEE16thSeptember2011

Arisingoutoftheminutes,Memberswereinformedasfollows

• Study on Port Sector: The

consultants have given the

second draft after

incorporating the suggestions

madebytheLogisticsCommittee

and the Logistics Committee is

lookingintothesame.

• EximCourseisgoingasper

schedule.

• Job Fair – This had to be

postponed to October due to

unavoidablereasons.

• FDI in Retail Sector: The

Presentation received from Mr

Srinivasan K Swamywas sent to

MrSrinivasa,CEOofVivek&Co.

forhisopinion.His responsehas

beenreceived.ThePresidentsaid

that both the presentation and

the opinion be circulated to the

members of the Committee for

theirfeedback,ifany.

-MCCI–SkillDevelopmentCentre-Update

The President reported that the

Chamber now has a full time Chief

OperatingOfficerandhehasalready

startedworkonthesoftlaunch.

ChamberDay–29thSeptember2011–Updateofarrangements

The Committee noted the broad

programmeoftheevent.

Regarding advertisement in The

Hindu, itwasdecided togo in fora

full page advertorial, which would

be inthemainpage itselfwhichhas

been offered to the Chamber at a

special rate. The President requested

members tosponsor thisadvertorial.

Due creditwill be given to themby

insertingtheirnameandlogo.

The President said that Sundaram

Finance would host the Dinner.

Membersexpressedtheirappreciation.

Mr Vittal Raj suggested that the

ChamberDaycelebrationsbewebcast

which would provide good mileage

for theChamber. A suggestionwas

also made that the cover page and

contentsofCoffeeTableBookbeput

onthewebsitetogenerateinterest.

The SecretaryGeneral then reported

onthefollowingmeetingsheld:

• MCCI&ASSIST–UNEP’s

Responsible Production

Framework–CEOForum

-25th August 2011.

• MCCI&MMA–Video

Discussion–OneforAll–

Teamwork–TheMeerkatway-

29th August.

• Round table discussion on

Global Economic Crisis-

Causes, Consequences and

concerns–3rdSeptember.

• FelicitationtoPresident,FICCI

by Consultative Committee of

CityChambersofCommerce–

4th September

• BusinessOpportunities

betweenIndiaand

Switzerland–5thSeptember

• SeminaronLeveragingITfor

BusinessExcellence–Shop

FloortoTopFloor–9th

September 2011

• Seminar on Cost Audit and

Rules under the Companies

Act1956–10thSeptember

2011.

• Talk by Mr.Robert F Bruner,

VirginiaUniversityon

ResetorRecession?–12th

September.

• PresentationbyMr.Ulrich

Ackermann, Managing

Director, Foreign Trade

Department,VDMA,German

EngineeringFederation–

15th September.

The President said all the above

programmeshavebeenvalueadding

anddetailedreportsonthesamewill

bepublishedinthemonthlybulletin.

ForthcomingProgrammesWorldHabitatDayTheSecretaryGeneralreportedthat

theChamberjointlywithUniversity

ofMadrashasplannedaoneday

programmecoincidingwiththe

WorldHabitatDayinOctober.

UNobservesthefirstMondayof

everyOctoberastheWorldHabitat

Dayandthisyearitfallson3rd

October.Consideringthepooja

holidaysduringthattime,ithasbeen

decidedtoholdtheprogrammeon

Wednesday,9thNovember2011.

ThethemeforWorldHabitatDay

2011isCitiesandClimateChange

–SustainableChennai.Broadlythe

programmecoversthefollowing:

• Inauguration

• Launch of Sustainable Chennai

Forum(SCF)

SCFwillbeanchoredbyMCCIand

theSustainableChennaiResearch

Forum(SCRF)willbeanchoredby

theMadrasUniversity

Technicalsessionson:

• UrbanisationandclimateChange

• SustainableBusinesses

• SustainableCampuses

• SustainableCommunities

• RoadmapforSustainableChennai

–ValedictorySession

Speakers,topicsandfundingisbeing

workedout.

AdministrationandAlliedmatters

Newmembers enrolledwere placed

before the committee and were

approvedbytheCommiittee.

ServicetaxcollectionforCertificateof

Origin/Visa recommendation letters

andSpecialcertificationfees.

The Secretary General reported that

subsequent to the last meeting of

ourCommittee,aclarificatorycircular

wasissuedbytheMinistryofFinance

statingthatissueofcertificateoforigin

byChambersofCommerceandother

Trade Associationswould fall under

the categoryof ‘Technical Inspection

orCertification”definedinSection65

(108)ofFinanceAct,1994.AChamber

or Trade Association which issues

CertificateofOriginactsasatechnical

inspection and certification agency

andissuanceofCOOattractsservice

tax under ‘Technical inspection and

certificationagency”service,whichis

aspecificdescriptionwhencompared

to a general description like ‘clubor

associationservice’bytheapplication

of the principles of classification

provided in Section 65A of Finance

Act1994.

Basedontheabovenote,ameeting

was called by the Consultative

Committee of City Chambers of

Commerce to decide the course of

21

GENERALCOMMITTEE

MCCIrepresentationonTaxationofServicesbasedontheNegativelistofServices

The Madras Chamber of Commerce

& Industry (MCCI) is oneof thewell

establishedorganisationsinSouthern

India andwe complete175 years of

servicetotradeandindustryon29th

September 2011 and enter into the

176th year. The Chamber is one of

the pioneer industrial organisations

comprising of, medium, large scale

manufacturing establishment and

our members have made significant

contribution to the growth of the

National Economy and have set

standards in quality business and

compliance.

The Members of the Indirect Taxes

Committee has discussed extensively

the Negative List of Taxation of

Servicesandwesubmitourconcerns

foryourkindconsideration.

1.Ourpreliminaryviews

1.1 The 115th Constitutional

Amendment Bill has been

introducedintheParliamentand

is pending before the standing

committee. India ispoised fora

pathbreakingindirecttaxreform

in the form of GST with the

current draft bill indicating that

the centrewould tax the supply

ofgoodsbeyondthefactorygate

andtheStatewouldtaxservices.

Both these are not currently

possible and hence the 115th

ConstitutionalAmendmentBill.

1.2.Astheentireconceptof ‘supply’

as a taxable event is part and

parcelofthe115thConstitutional

Amendment, the negative list

concept should be first referred

to the Parliamentary Standing

Committee on GST which will

have to study the repercussions

and take an informed decision.

On theotherhand thenegative

listbasismaybe incorporatedas

andwhenGSTisintroducedafter

takingintoaccounttheeconomic

repercussions.

1.3.The recent concept paper

issued by CBEC, contemplates a

negativelistofservicesasalistof

serviceswhichwillnotbesubject

to service tax. It clearly states

that “other than the services

mentionedinthenegativelist,all

22

actiononthisissue.Afterdiscussion,

itwasacceptedbytheChambersthat

witheffect from1stSeptember2011

service tax would be collected for

issue of certificate of origin, issue of

visarecommendation lettersandany

specialcertifications.

ConceptPaperbasedonthenegativelistoftaxationofServicesannouncedbytheMinistryofFinance

ItwasinformedthattheIndirectTaxes

Committeewouldbemeetingat the

Chamber to analyse and discuss the

ConceptPaperbasedonthenegative

list of taxation of services announce

bytheMinistryofFinance.

Governmenthascalledforcomments

bythe30thSeptember.

EXPERTCOMMITTEES8thSeptember2011

CompanyLaw/CorporateMatters&FinancialSector

The Company Law committee had

decidedtoorganizeaSeminaronCost

Audit & Rules under the Companies

Act on 10th September 2011. The

programwassinceorganised

19thSeptember2011

IndirectTaxes

TheExpertCommitteemettodiscuss

about taxation of services based

on the negative list of services and

finalized a representation to be sent

totheGovernment.TheGovernment

had indicated 30th September

2011 as the last date by which the

suggestionsshouldbesenttoit.The

representationhassincebeensentby

theChamber–reproducedelsewhere

inthisBulletin.

GENERALCOMMITTEE

23

otherserviceswillbecometaxable

whichfallwithinthedefinitionof

thesupplyofservices”.

1.4.Theconceptpaperworksonthe

premisethat thecost totheend

customer is lower when cenvat

credit is available andhence the

paper makes a case for a levy

across all services except specific

servicessetoutinthenegativelist.

Our humble submission is that

this premise is not correct since

cenvat credit is not available

on all input services to a

manufacturer. The definition

of ‘input service’ prior to

01.04.2011 was subject

matter of litigation because

of the Government denying

credit insisting that the service

should actually participate in

manufacture.After01.04.2011,

the definition is even more

restrictive and calls for a service

to participate in manufacturing

activity to qualify for creditwith

afurther limitedsetof inclusions

and wider set of exclusions.

Hence the assumption that the

costwouldbe lower is incorrect

forthefollowingreasons:-

(i) When all services other than

the negative list is taxed and

the credit is not available since

the law requires participation in

manufacture and central excise

duty continues to be a levy on

manufacture.

(ii) Availment of cenvat credit has

always been questioned for

some reason or other increasing

litigation.

(iii) Many important services which

arealreadysubject toservice tax

arenotconsideredasinputservice

as per definition and hence the

argument in the concept paper

that thecostwouldcomedown

because of credit availability is

flawed.

(iv) Inthecurrentsystemoftaxation,

sale of goods attracts VAT;

manufacture of excisable goods

attractsexciseduty.Theargument

thatcreditwouldbeavailableon

services fails in the background

that the current system does

not allow service taxes to be

set off against VAT and vice

versa.OnlyintheGSTregimeas

proposed, the credit system can

beimplementedascontemplated

intheconceptpaper.

(v) In many service industries, the

costisbecauseofemployeesand

goods which are subjected to

VATandhencetherewouldbea

reverseeffectofhighercascadeif

servicetaxisimposed.

(vi) Inmany cases taxing all services

would result in taxing the end

usersincethereisnocredittothe

enduser.

1.5.As the concept paper admits,

there is clarity in law and

development of jurisprudence

withthecurrentsystemoftaxing

specific service. A general law

whichtreatsanythingotherthan

supplyofgoodsasaservicewill

lead to chaos and unbridled

litigation. Further, each item in

the negative list would be the

subjectmatterofinterpretation.

1.6.Theconceptpaper,whileseeking

to tax services based on a

negativelist,presumesthatcredit

is available at every link in the

supplychain,whichpresumption

is erroneous, given the present

scenario of indirect tax levy by

both Centre and States. Unless

a system is evolved and put in

place for seamless credit of all

indirecttaxes,asiscontemplated

in the proposed system of GST,

implementation of service tax

based on negative list could

be disastrous, especially to the

manufacturingsectoristheworst

hitbythedrasticchangestothe

CENVAT Credit Rules with effect

from1stApril2011.

1.7.If the negative list basis of

taxation is implement sans such

system for seamless credit the

manufacturing sector may not

beinapositiontoavailcreditof

various services that go into its

business processes resulting in

cost hikes. The concept paper

onlyspeaksofaneedfor“certain

changes”totheServiceTaxRules

and to a “lesser extent” to the

CENVATCreditRules.

1.8.Further, even the concept of

‘services being activities for the

purpose of business’, which

was there as part of inclusion

in the definition even though

subjectmatteroflitigationbythe

Department has been deleted

from01.04.2011.

1.9.Therefore,unless the levymoves

beyondthepointofmanufacture

and the Constitution facilitates

taxation of supply of goods and

servicesby theCentre and State

(in other words GST) it is not a

right step to experiment with a

negativelistofservices.Without

GST,ourChamber isof theview

that the concept of negative

list of services should not be

implemented.

2.Commentsonthe ConceptPaper

Without prejudice to our basic

contentionthattheNegativeList

is a development which would

formpartandparcelofGST,from

an academic perspective our

viewsareasunder:-

2.1DefinitionofService

2.1.1The definition of ‘Service’

excludes anything which does

not constitute supply of goods,

money or immovable property

and includes various elements.

What about consideration? Is it

notarelevantfactorfortaxation?

2.1.2. Whether it is correct to

refer to ‘SupplyofGoods’ in the

current system when the law

taxes ‘Sale of Goods’; and there

is a concept of ‘Deemed Sale of

Goods’;‘manufacture’?

2.1.3. Manyoftheelementsinthe

inclusivepartofthedefinitionare

amirrorreflectionoftheexisting

taxable services in connection

with immovable property.

However,Item-Dinthedefinition

is very vague. How can ‘non-

compete’ which is a restrictive

covenantbetreatedasaservice?

Howcananobligationtotolerate

andanactorasituationortodo

anactbeconsideredasaservice?

These elements are too vague,

general and ambiguous andwill

openthefloodgatesoflitigation.

2.1.4. Thefinedistinctionbetween

subjects of taxation amongst

CentreandStatesgetsquestioned

through the definition and the

abatement is not the solution

when primarily the Centre has

nopower to tax a State subject.

Further abatements are without

creditandhencewillonlyincrease

thecost.

2.1.5. A number of items are not

even excisable goods. Further

some items are exempted from

exciseduty.Hencetheexclusion

referring to manufacture of

excisable goods and inclusion in

value for the purpose of duty is

notcorrect.

2.1.6. The servicemust specifically

excludeall itemswhichareliable

toVATsinceVATisclearlyaState

subjectandindirectlevythrough

the definition of service is not

permissible.

2.1.7. How can a right to enter a

premisesbeaservice?Whoisthe

serviceproviderandtherewould

be serious issues with reference

topowertotaxeasementrights.

2.2NegativeList

2.2.1. What happens if the

services are provided by quasi

governmental authorities and

authorities delegated by the

government to exercise certain

powers?

2.2.2. Health care should not

be taxed at all. The insurance

relatedhealthcareisaverysmall

percentageandfurtherthecostof

healthcareislargelyduedoctor/

nurses/employeecostapartfrom

establishment costwhich in any

eventdoesnotqualifyforcredit.

2.2.3 Term “interest” needs to be

24

defined.Mereexclusionmaynot

be enough as itmay give room

forinterpretations.

2.2.4. Eachdefinitionsectorwiseis

pronetolitigation.

2.2.5 The Negative List indicates

that railway freight as well as

railwaypassenger farewouldbe

taxed. In the current scenario,

where the country is going

through a high inflation and

growth is already impacted, any

taxwhichcontributestoinflation

shouldbeavoided.Further,there

isnopointintaxingrailwayfreight

without giving corresponding

dutycreditonfuel.

2.2.6 Taxation of residential

accommodation would again

contribute to inflation since

there is no credit to the tenant

and the landlord does not get

any creditonamounts spenton

construction.

3.Summary

3.1.Negative List of services should

beconsideredforimplementation

after a wide debate and should

beintroducedonlyaspartofGST

withseamlesscreditandwithout

anyrestrictionsoncredit.

3.2.Whenthereissomuchofdisputes

between ‘Goods’ and ‘Services’

even with the current defined

system, there is every possibility

of chaos and unintended

consequences if thenegative list

is implemented in the current

servicetaxlaw.

3.3.Any attempt to introduce the

conceptinthecurrentservicetax

law should be avoided for the

variousreasonsstated.

3.4.Health care shouldnot be taxed

at all since it affects everybody

since unlike other countries; the

private sectorhealthcare ismore

thanthepublichealthcare.

3.5.Even under the GST system

certainservicesinthenegativelist

shouldbezeroratedasprevalent

inothercountries.

4.Conclusion

4.1 The Chamber requests the

Government to go through our

concerns and the conceptpaper

needs further modifications

and changes before the

implementation along with GST.

We trust that the Government

willhaveare-lookatthepaperto

havesmooth,friendlylegislation,

avoidinglitigationforthebenefit

of trade, industry and the

Government.

25

Awarmwelcometoourfollowingnewmembers:

AmrutanjanHealthcareLtd.Business: FMCG, manufacturing of

Ayurvedic pain balms

PentlandIndiaTechnologyPvt.Ltd.

Business: Servicing & Retail

SemasAbacus&MentalArithmaticsAcademy

Business: Education

TechnologyAssociatesBusiness: Management & Technical

Consultancy

ExcelOpticsPvt.Ltd.Business: Manufacturers of

Intraocular lenses

InstituteforFinancialManagementandResearch

Business: Education & Training

India-Zimbabweagreetofasttrackbilateralagreement

Seeking to put the trade relations

and economic cooperation on fast

track, India and Zimbabwe agreed

to accelerate the approval of a

decade old pact Bilateral Investment

PromotionandProtectionAgreement

(BIPA) that aims at boosting bilateral

investments,

The BIPA which was signed in

February 1999, has not come into

forceyet.

Mr Jyotiraditya Scindia, Minister of

Trade forCommerce& Industrywho

held talkswith Zimbabwe’s industry

minister W Nucbe, said there was

huge scope to significantly diversity

bilateraltradewhichstoodatapaltry

$125million in 2010-11.He offered

India’s full support to Zimbabwe in

areas such as telecom, highways

landrailwayslandextendedtechnical

assistanceinstrengtheningrailtracks,

logisticsandaviationsectors.

IndiainkstaxationtreatywithUruguay

India inked a Double Taxation

Avoidance Agreement with Uruguay

foravoidanceofdoubletaxation

and prevention of fiscal evasion

withrespecttotaxesonincomeand

capital.

TheDTAA, signedbyCentral Board

ofDirect Taxes Chairman,MC Joshi

andUruguay’sAmbassadortoIndia

Cesar Ferrer, provides that business

profits will be taxable in the source

State if theactivitiesof anenterprise

constituteapermanentestablishment

(PE)inthatState.

Profits of construction, assembly or

installation projects are to be taxed

in the State of source if the project

continuesinthatStateformorethan

sixmonths.

DTAAalsoincorporatesprovisions

foreffectiveexchangeof information

including banking information

and assistance in collection of taxes

between tax authorities of the two

countries in linewith internationally

accepted standards, including anti

abuse provisions to ensure that the

benefits of agreement are availed

of by genuine residents of the two

countries.

Panelforassuredreturnsonnewpensionsystem-Suggestsimposinga26%caponFDIinpensionprogrammes

A Parliamentary panel has

recommendedthatsubscriberstothe

new Pension System should get an

assured return on their investments,

that is, at least equal to the interest

rategivenbytheEPFscheme.

The StandingCommittee on Finance

headed by Shri Yashwant Sinha has

also suggested imposing a 26 per

centcaponforeigndirectinvestment

inpensionprogrammes.

TheBill introducedintheLokSabha

inMarch 2011 has no provisions

pertainingtoFDIasyet.

CurrentlyFDIisnotallowedinpension

schemes.

The Committee also suggested

that the Government devised a

mechanism so that subscribers of

the NPS get guaranteed returns on

theirpension, so that theywerenot

at any disadvantage vis-à-vis other

pensioners.

The Committee further suggested

thattheGovernmentmadeconcerted

efforts to extend the coverage of

thescheme in both thepublicand

private sec tor. The Committee said

thataPensionAdvisoryCommitteebe

setupundertheBillwhichwouldlook

intotheinterestofthesubscribers.

26

POLICYWATCH

MCCI Conference

Room

The Chamber's Conference Room is available for hire. Ideal for meetings, interviews, etc. Has a seating capacity of 26.

Charges:

Full day - Rs 4000 (for members)

Rs 5000 (for non members)

Half day - Rs 2000 (for members)

Rs 3000 (for non members)

LCD Projector - Rs 1000 (full day)

Rs 500 (half day)

For details:

Mr S Sankaranarayanan,

Senior Manager

Mail id: ssn@madraschamber.in

27

IndiaandIndonesialaunchedCECANegotiations

IndiaandIndonesiaformallylaunched

thenegotiationsforaComprehensive

Economic Cooperation Agreement

(CECA) that would cover economic

cooperation, trade in goods and

servicesandinvestment.

The negotiations have got off to a

goodstart.TheCECAwouldbuildon

whathasalreadybeenachievedunder

theASEAN-IndiaFTAandwouldbea

comprehensive agreement, covering

economiccooperation,tradeingoods

andservicesandinvestment.’’

The successful conclusion of the

CECA would lead to a higher-level

and mutually beneficial economic

cooperation between the two

countries.

Both governments also agreed to

establish a working group on trade

and investment forum and another

working group on identification and

elimination of trade barriers. Issues

relating to non-tariff barriers have

beendiscussed.

Indonesia and India will intensify

efforts to explore ways and means

of increasing trade and investment

relations by eliminating trade

barriers and creating better business

environment.

NationalAwardforPrevention of Pollution and Rajiv Gandhi Environment

Award for Clean Technology for the year 2010-11

TheMinistryofEnvironment&Forests,GovernmentofIndiaconfers

annually the National Awards for Prevention of Pollution and Rajiv

GandhiEnvironmentAward forcleantechnology.Theseawardsare

given annually to encourage industrial units, particularly those in

the highly polluting categories for taking significant steps towards

adoption and use of clean technologies, products or practices that

substantiallyreduce,eliminateandpreventenvironmentalpollution.

TheNational Awards comprise a cash award of Rupee one lakh in

additiontoatrophyandacitationandtheRajivGandhiEnvironment

Award forCleanTechnologywillbe in the formofacashawardof

rupeestwolakhinadditiontoatrophyandacitation.

CategoriesofIndustries:

LargeScale:

• Sugar • Fertilizer

• Cement • Fermentationanddistillery

• Aluminium • Petrochemicals

• Thermalpower • CausticSoda

• Oilrefinery • Sulphuricacid

• Tanneries • Coppersmelting

• Zincsmelting • Ironandsteel

• Pulpandpaper • Dyeanddyeintermediates

• Pesticides • Pharmaceuticals

Smallscaleindustries:

• Tanneries • Pulpandpaper

• Dyeanddyeintermediates • Pesticides

• Pharmaceuticals

Eligibility:Theindustrialunitsbelongingtotheabovementioned

categoriesofindustrieswhichmeettheprescribedstandardswould

beeligiblefornominationfortheaforesaidawards.

FordetailspleaserefertothisMinistry’swebsitehttp://envfor.nic.in

orcontactDrRKSuri,CentralPollutionControlBoard.

The Mahatma Gandhi National

Rural Employment Guarantee

Act (MGNREGA) is an Indian job

guarantee scheme, enacted by

legislation on August 25, 2005. The

schemeprovidesalegalguaranteefor

onehundreddaysofemployment in

everyfinancialyeartoadultmembers

of any ruralhouseholdwilling todo

publicwork-relatedunskilledmanual

workatthestatutoryminimumwage

of 120 (US$2.68) per day in 2009

prices.TheCentralgovernmentoutlay

for scheme is 40,000 crore(US$8.92

billion)inFY2010-11.

Thisactwas introducedwithanaim

of improving the purchasing power

of theruralpeople,primarilysemior

un-skilled work to people living in

rural India, whether or not they are

belowthepoverty line.Aroundone-

third of the stipulated work force is

women. The law was initially called

the National Rural Employment

Guarantee Act (NREGA) but was

renamedon2October2009.

Dr. Jean Drèze, a Belgian born

economist, at the Delhi School of

Economics,hasbeenamajorinfluence

on this project. A variety of peoples

movementsandorganisationsactively

campaignedforthisact.

ProvisionsunderNREGA

• Adult members of a rural

household,willingtodounskilled

manual work,registration in

writing or orally to the local

GramPanchayat.

• The Gram Panchayat after due

verification will issue a Job

Card.TheJobCardwillbearthe

photographofalladultmembers

ofthehouseholdwillingtowork

underNREGAandisfreeofcost.

• The Job Card should be issued

within15daysofapplication.

• A Job Card holder may

submit a written application

for employment to the Gram

Panchayat, stating the time

and duration for which work is

sought. The minimum days of

employment have to be at least

fourteen.

• The Gram Panchayat will issue

a dated receipt of the written

application for employment,

against which the guarantee of

providingemploymentwithin15

daysoperates.

• Employmentwillbegivenwithin

15daysofapplicationforwork,if

itisnotthendailyunemployment

allowanceasper theAct,has to

be paid liability of payment of

unemployment allowance is of

theStates.

• Work should ordinarily be

provided within 5 km radius

of the village. In case work is

provided beyond 5 km, extra

wages of 10% are payable to

meet additional transportation

andlivingexpenses.

• Wages are to be paid according

totheMinimumWagesAct1948

for agricultural labourers in the

State,unlesstheCentrenoticesa

wageratewhichwillnotbe less

than60(US$1.34)perday.Equal

wages will be provided to both

menandwomen.

Note:Theoriginalversionof theAct

was passed with Rs 60/ day as the

minimum wage that needs to be

paid under NREGA. However, a lot

of states in India alreadyhavewage

regulationswithminimumwagesset

atmorethan100(US$2.23)perday.

NREGA’s minimum wage has since

beenchangedto120(US$2.68)per

day.

• Wages are to be paid according

SPOTLIGHT

KnowAboutNREGA–NationalRuralEmploymentGuaranteeAct

28

to piece rate or daily rate.

Disbursement of wages has to

bedoneonweeklybasisandnot

beyondafortnightinanycase.

• At least one-third beneficiaries

shall be women who have

registered and requested work

underthescheme.

• Worksitefacilitiessuchascrèche,

drinkingwater,shadehavetobe

provided.

• Theshelfofprojects foravillage

will be recommended by the

gramsabhaandapprovedbythe

zillapanchayat.

• At least 50% of works will be

allotted to Gram Panchayats for

execution.

• Permissibleworks predominantly

include water and soil

conservation, afforestation and

landdevelopmentworks.

• A 60:40 wage and material

ratio has to be maintained. No

contractors and machinery is

allowed.

• TheCentralGovt. bears the100

percent wage cost of unskilled

manual labour and 75 percent

ofthematerialcostincludingthe

wagesof skilledand semi skilled

workers.

• SocialAudithastobedonebythe

GramSabha.

• Grievance redressal mechanisms

havetobeputinplaceforensuring

a responsive implementation

process.

• Allaccountsandrecords relating

totheSchemeshouldbeavailable

forpublicscrutiny.

TheMGNREGAaimstoachievetwin

objectives of rural development

and employment. The MGNREGA

stipulates that works must be

targeted towards a set of specific

rural development activities such as:

water conservation and harvesting,

afforestation, rural connectivity,

flood control and protection such

as construction and repair of

embankments, etc. Digging of new

tanks/ponds, percolation tanks and

constructionofsmallcheckdamsare

alsogivenimportance.

SPOTLIGHT

29

Unlesstheschemesuccessfullygeneratesproductiveassetsintheruralareas,itwillfailtomeetitsobjectives.Ananalysisofthechallengesandtheirpossiblesolutions.

The National Rural Employment

Guarantee Act (NREGA), enacted by

the Government of India in 2005,

is perhaps the most ambitious anti-

poverty scheme launched anywhere

in the world. However, the scheme

has shown several anomalies when

itcomestoitsimplementationinthe

rightmanner. Someof the problems

areasfollows-

Pooradministrativeandplanningskills.

UnderNREGA, villages are the basic

unit of planning. Panchayats (the

village local bodies) are required to

prepareprojectestimatesthatinvolve

extensivemappingofvillageresources

andmakinganannualplaneveryyear

to identify works that can be taken

up for local resource improvement.

Howeverwithlimitedskillinplanning,

resource management, handling

of monetary resources and poor

leadership skills, village Panchayats

fail to implement the scheme in the

desiredmanner.

Since it involves rigorous planning

and resource management, many

Panchayat members are hesitant

to implement NREGA as it greatly

increases their workload. In many

places, Rozger Sevaks have been

appointedtoadvisegrampanchayats,

toprovidetechnicalinputs,preparing

the budget or village level planning

needs, but they themselves are not

trainedadequately.

Even the report by the Comptroller

and Auditor General (CAG) has

highlightedthelackofadministrative

NationalRuralEmploymentGuaranteeAct-Areview(Author–MrHarshAgarwal,FormerAmbassadorforUNMillenniumDevelopmentGoals(MDGs)

SPOTLIGHT

30

capacity of the village panchayat

members to run this scheme in the

desired decentralized manner. It

also focused on the need to build

this capacity quickly and effectively.

The CAG report highlights the

deficiencyofadequateadministrative

and technical manpower at the

Block and Gram Panchayat (GP)

levels, especially at the Programme

Officer, Technical Assistants, and

Employment Guarantee Assistant

level. “The lack of manpower

adversely affected thepreparationof

plans, scrutiny, approval,monitoring

and measurement of works, and

maintenance of the stipulated

records at the block and GP level.

Besides affecting the implementation

of the scheme and the provision

of employment, this also impacted

adversely on transparency”, said the

report.

It is well known that employment

schemes have high administrative

costs. However administrative cost

underNREGAhasbeenkeptlow.This

mustbeincreased.Thereisanurgent

need to ensure more administrative

assistance for the programme at all

levels, which means both resources

and personnel devoted to the

actual implementation, monitoring

and financial management of the

programme.Muchneedstobedone

to strengthen village-level planning.

Panchayatsneedtobeequippedwith

the necessary personnel and funds

for effective implementation of the

programme.

Inadequateawareness.

NREGAisarightsbasedprogramme,

which guarantees 100 days of

employment to poor household in

rural areas. However due to poor

awareness among rural population,

people are not aware about their

basic entitlements suchas job cards,

minimum wage amount, minimum

number of employment days,

unemployment allowance, etc. Even

Panchayats,RozgarSevaksandblock

development officers are ignorant

about all the details of the scheme.

They are poorly informed about

various processes like registering

household, forming vigilance

committees,makingmusterroll,etc.

Under NREGA there is a provision

of unemployment allowance in case

the local authorities fail to provide

employment, however there is a

widespread ignorance about how

to avail the allowance. Sometimes

even the officials deliberately do not

giveoutthisinformationastheyfear

punishmentfornotprovidingjobs.

Poor awareness not only leads

to corruption but also to poor

managementoftheschemeandthus

truepotentialofNREGAisnotbeing

realised. At the local level, officials

have made inadequate efforts to

raise awareness about the scheme.

The government must carry out an

intensive training and awareness-

building programme to make the

officialsandcitizensfullyawareofall

thedetailsoftheprogramme.People

atthegrassrootslevelmustbemade

awareofRighttoInformation(RTI)Act

andbeencouragedtouseit.

Plaguedwithdiscrimination.

NREGA has provided a unique

opportunitytopeoplefromruralIndia

to earn their own income without

anydiscriminationofcasteorgender.

Most remarkable feature of NREGA

is that it pays women the same as

men, something that was virtually

unimaginableinruralIndia.However

casesofdiscriminationagainstwomen

andpeoplefrombackwardgroupsare

reported from several regions of the

country. Some states such as Kerala

and Andhra Pradesh have registered

high percentage of women workers

getting enrolled in the scheme

whereasothershaveregisteredavery

low percentage of women availing

benefitunderNREGA.

It has been reported that in some

regions few job cards are issued

when the applicants arewomen, or

therearedelaysintheissueofcards.

Women are sometimes told that

manual labour under the NREGS is

not meant for women. Women are

toldthattheycouldnotparticipatein

ongoingworksas itentaileddigging

andremovingsoil.Sometimesworkers

areexpectedtobringtheirowntools,

suchas spades and shovels and this

becomesdifficultforwomencarrying

infants. Moreover lack of facilities

suchasdrinkingwater,acrècheatthe

worksites,etcaddstotheproblemsof

thewomenworkers.

No specific tasks for women have

been identified. More thought must

be given to ensuring that a larger

number of women get work which

they can do easily. Also facilities like

drinking water and crèche must be

ensuredattheworksites.

Corruptionandirregularities.

Thereareseveralcasesoffakemuster

roll entries, overwriting, false names

and irregularities in job cards. Even

thenamesofdeadpeoplehavebeen

SPOTLIGHT

31

entered in themuster rolls. Similarly,

the names of people who have not

registeredoftenfeatureinthemuster

rolls, or the same name is repeated

more than once. There are cases of

paymentsbeingmadewithouttaking

theworker’ssignature.Inmostofthe

Statesthereisahugegapbetweenjob

carddistributionandactualprovision

of employment. In Madhya Pradesh

morejobcardshavebeendistributed

than thenumberofhouseholds and

only35percentof ruralhouseholds

actually received some employment

underthescheme

Thereshouldbeastrictenforcement

of transparency safeguards. Muster

rolls must be kept at the worksite,

job cards must be regularly

maintained,wagesbepaidinpublic,

implementation agencies should be

separated from payment agencies,

formation of vigilance committees

should be done, muster roll record

mustbeverifiedperiodicallyetc.Also,

Panchayatsmustbedirectly involved

inmakingpayments.

Lack of credible and participatory

social auditing with active people’s

participation is a major problem.

Government must encourage

independent auditing through CSOs

andacademicexperts.

Delayinpaymentofwages.

According to the NREGA guidelines,

paymentsfortheworkshouldbemade

within 14days of the completionof

thework.Howeverdelayinpayment

andincorrectpaymentsareacommon

problemunderNREGA.Thisdelaycan

be from severalweeks to sometimes

months.Oftenworkershavetomake

severalvisitstothepostofficeorthe

co-operative bank only to find that

their wages have not been credited

into theiraccounts. Sometimesdelay

is also caused because works are

carried out without proper approval

andthusthepaymentiswithheld.

Government must ensure easier

availabilityoffundsthroughabackup

fundat thedistrict level. Theremust

be a provision of compensation for

any delay in payment. In case of

delay in payments workers must be

compensated as per the Payment of

WagesActof1936.Thereisonlyone

instance where compensation was

paid to the workers only after the

intervention of the social activists.

There must also be an independent

grievance redressal system under

NREGA.

Challengesincreatingusefulassets.

So far, works related to rainwater

harvesting and conservation,

desilting of canal distributaries,

desilting and renovation of old

ponds/tanks and digging up of new

farmponds aremainly being carried

outunderNREGA.Thereisaneedof

improvisation in creating/identifying

new employment opportunities and

dovetailing various programmes

run by the Central and the State

GovernmentswithNREGA.

Importance should also be given to

afforestationunderNREGAbylinking

ittootherforestryprogrammes.Rural

Sanitation is anotherareawhichcan

be dovetailed with this programme.

Thiswillalsohelp in the ruralhealth

policy and achieving the goals

of National Rural Health Mission

(NRHM).

Several works that were taken up

under NREGA remain incomplete

even after two years of their start.

Sincethereisnoprovisiontofactorin

thecompletionofworkintheoverall

planning, state governments have

initiatedalargenumberofnewworks

and abandoned the old incomplete

works mid-way. In many states,

buildings and other structures built

under the programmewerewashed

away during monsoons. This led to

enormous wastage of financial and

human resources. Completion and

maintenanceofworksunderNREGA

shouldbemadecompulsory.

Success of NREGA should not only

beassessed in termsof employment

provided but also the asset created.

Village development through

productive asset creation should

be made an important objective

of this scheme. Premium wage

must be provided for development

programmes. This will ensure that

workdoneiscompletedandisuseful.

With so much money involved in

this scheme the government should

take serious measures to see that

themoneyisutilisedtocreateassets

villages, thus bringing about a real

changeintheruraleconomy.Record

of the assets created under NREGA

must be maintained at the district

headquarters. A national/state level

auditneeds tobedone to seewhat

all productive work has been done

underNREGA.

Problemoflabouravailabilityandinflation.

Manyeconomistsattributeincreasing

labour scarcity in agriculture, rising

food price and inflation to NREGA.

NREGA has no doubt raised rural

SPOTLIGHT

TheMCCI’sCoffeeTableBook“Championing Enterprise”andtheDirectory of Members 2011areavailableforsaleandthepricesareasunder

Coffee Table Book

Members Rs.1500(percopy)Non-Members Rs.2000(percopy)

Directory of Members

Printedcopy Rs.750(percopy)

Complimentary copies of

DirectoryandCoffeeTableBook

arebeinggiventomembers.We

havesentintimationtomembers

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Pleasenotetosendyourperson

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32

daily wage rates, reduced migration

andledtoseveralotherpositivesocial

effectsinruralIndia.Butatthesame

time ithasalso contributed to rising

farminputcosts,withdrawaloflabour

from the farm sector and therefore

impacted agricultural operations and

food prices. Farmers in Punjab and

Haryana now find it increasingly

difficulttogetlabourandareleftwith

no other choice but to increase the

wageratetoattractthelabourers.

Highlabourcostsduenon-availability

oflabourisresultinginhighcultivation

cost and thus leading to higher

foodprices.Many critics feel thatby

focusing on the employment and

not on the production, the scheme

merely redistributes the proceeds of

a limitedproduction.Theschemeno

doubt inflates demand but, without

correspondingincreaseinproduction

ofusefulasset,leadstoinflation.

MinimumwageunderNREGAshould

be cautiously increased keeping in

viewitsimpactonotherunorganised

sectors, especially agriculture and

that it must be ensured that it is

targeted at only the really poor and

needy. Possibilities of NREGA being

dovetailedwiththefarmingactivities,

soastominimizeitsadverseeffecton

agriculture,shouldbeexplored.

The constructive impact of the 100-

day employment guarantee must

be confined strictly tomonthswhen

there is no harvesting or sowing

activity so that it does not affect

agriculture adversely. With the rural

workforcedrawnintothisschemethe

mechanisation andmodernisation of

agricultureneedstobefocusedupon.

Government must study the impact

of NREGA on various other sectors

andtakecorrectivemeasuressoasto

ensure that this programme doesn’t

exacerbatetheproblemoffoodprice

riseandinflation.

Conclusion

We must understand that NREGA

cannot be a long-term solution to

the unemployment problem of rural

India. A comprehensive and a more

sustainablesolutionthatcreateslarge-

scale self-employment opportunities

in thesecondaryandtertiarysectors

intheruralareas,stimulatesdemand

and last but not the least, increases

rural productivity still need to be

found.

FORTHCOMINGPROGRAMME

9thNovember

WorldHabitatDay2011–SeminaronCitiesandClimatechange&LaunchofSustainableChennaiForum

9.30a.mto2p.m.

Venue:ThanthaiPeriyarHall,UniversityofMadras,Chennai600005

2012-2013 Fulbright-Nehru-CII Fellowships for Leadership in

ManagementThe United States-India Educational Foundation (USIEF) and the Confederation

of Indian Industry (CII) invite applications from Indian business managers to

attend a 10-week management program at Carnegie Mellon University’s Tepper

School of Business (TSB), Pittsburgh, USA, starting on May 23, 2012. Aimed

to broaden overall perspectives and to strengthen strategic, functional and

leadership skills in global business, this program combines classes with group

work, industry visits and networking. The fellowship includes tuition and fees,

roundtrip air ticket, monthly stipend, accident and sickness coverage, J-1 visa

support and other applicable allowances.

Indian business managers with graduate degree and five years’ managerial

experience, whose employers agree to bear 50% ($ 18,400)

of the total cost ($ 36,800) may apply.

The ten-week program includes participation in the Global Leadership Executive

Forum (GLEF), an outstanding general management program offered by the

Tepper School of Business. Participants will have the opportunity to engage in

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For complete details and application form, visit: www.usief.org.in or contact the

USIEF Regional Office in Chennai at usiefchennai@usief.org.inTel. 044 28574423. The Application deadline is November 30, 2011.

33

SeminaronLeveragingITforBusinessExcellence-ShopFloortoTopFloor-

Paneldiscussion-Panelists:LtoR-Mr.ClyntonAlmeida,Mr.Madhavan,Mr.MalliJSivakumar,Mr.R.VittalRajandMr.V.Ramaswamy

Mr.V.Ramaswamy,GlobalHead,TCSiON-addressingtheSeminar

Dr.T.S.SridharIAS,PrincipalSecretary,MSMEDept.GovernmentofTamilNadu-addressingtheseminar

Aviewoftheaudience.

34

TalkonResetorRecession-12thSeptember

LtoR-Mr.RobertFBruner,Mr.M.R.VenkateshandMr.V.N.Dalmia

Sectionoftheaudience

DiscussiononGlobalEconomicCrisisheldon3rdSep.heldintheMCCIoffice.

Mr.T.T.Srinivasaraghavan,President,MCCI,Dr.S.KalyanasundaramIRAS(Retd)formerlyofAsianDevelopmentBankandinviteesviewingthepresentation.

InteractionmeetingwiththevisitingdelegatesfromVDMA,Germany

Mr.UlrichAckermann,MD,ForeignTradeOffice,VDMAinteractingwiththemembers

35

SeminaronCostAuditandCostRecordRulesundertheCompaniesACt1956heldon10thSeptember

BusinessopportunitiesbetweenIndiaandSwitzerlandheldon5thsepintheMCCIOffice.

Mr.LucPremJalaisandMr.ThomasBohninteractingwiththemembersandinvitees.

Mr.T.T.Srinivasaraghavan,President,MCCIdeliveringwelcomeaddress

Mr.B.B.Goyal,Advisor(Cost),MinistryofCorporateAffairs,NewDelhideliveringkeynoteaddress

Mr.S.A.MuraliPrasad,Chartered&CostAccountant,Chennaiaddressingtheseminar

Ms.BhavaniBalasubramanian,Chairperson,MCCICompanyLawCommitteeproposingVoteofthanks

36