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Telangana should intensify ‘ease of doing business’ to attract investors in large nos.: ASSOCHAM  

24 Friday Jun 2016

Posted by in Current Affairs, Economics, INDIA, NATIONAL NEWS, Telangana

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Investment projects attracted by state in transport services sector facing time & cost overruns

The state of Telangana needs to intensify focus on ease of doing business thereby adhering to the principle of ‘minimum government, maximum governance,’ to become top investment hub thereby promoting more efficient and effective business practices across the state, apex industry body ASSOCHAM said today.

“Telangana should make efforts to ease the process of doing business for all categories of industries with special focus on small and medium enterprises that hold potential to create more employment,” said Mr D.S. Rawat, secretary general of The Associated Chambers of Commerce and Industry of India (ASSOCHAM) while releasing a study titled ‘Analysis of infrastructure investment in India,’ along with chamber’s Telangana Development Council chairman, Mr Srikanth Badiga at a press conference held in Hyderabad.

States across India had attracted total investments worth over Rs 53 lakh crore in different categories of infrastructure sector – transport services (71 per cent share), miscellaneous services like storage & distribution, health, education, recreational services and others (13 per cent), communication services (5 per cent), wholesale and retail trading (5 per cent), information technology (4 per cent), hotels and tourism (2 per cent).

Public sector accounted for highest share of 59 per cent in the total investments attracted by infrastructure sector, this is worrisome as India needs to look for more private sector participation in perking up infrastructure across the country, but it is seen that over the years reliance on public sources have increased.

“So far public investments have been the dominant form of infrastructure financing in India, but this is expected to change as large deficits and other commitments together with social obligations will constrain government’s financial flexibility, thus there will be a greater need to mobilise private sector capital that can be invested into infrastructure,” noted the study.

At the state level, public sector investment shows that in 2015 public sources had highest share of over 95 per cent in investments attracted by Chhattisgarh followed by Bihar (92 per cent), Uttarakhand (87 per cent), Himachal Pradesh (80 per cent) and Madhya Pradesh (77 per cent) amid top five states in terms of public investments.

While on an average, public sector sources accounted for over 59 per cent share in terms of investments attracted by infrastructure sector across India. Though in West Bengal (59 per cent), Tamil Nadu (58 per cent), Odisha (50 per cent), Uttar Pradesh (47 per cent), Gujarat (27 per cent) and Haryana (10 per cent) public investments’ share was below that of the country’s average share thereby implying that these six states would be leading in terms of private sector’s contribution to infrastructure sector.

While the total investments attracted by infrastructure sector across India have increased at a compounded annual growth rate (CAGR) of over 10 per cent between 2010-2015 thereby increasing from over Rs 32 lakh crore to over Rs 53 lakh crore.

Investments attracted by transport services sector have increased at maximum growth of over 13 per cent followed  by miscellaneous services (6.5 per cent), communication (5 per cent), wholesale and retail (two per cent), hotels and tourism (two per cent) and IT (one per cent).

Infrastructure investment attracted by transport services sector:

“Transport services have garnered highest share of over 71 per cent in terms of investments worth over Rs 53 lakh crore attracted by infrastructure sector across the country as of 2015 followed by miscellaneous services (13 per cent), communication (five per cent), wholesale and retail trading (five per cent), information technology (four per cent) and hotels & tourism (two per cent),” highlighted the study.

However, investments attracted by the transport services sector have registered steep cost escalation of 47 per cent thereby exceeding the actual cost of projects by a whopping Rs five lakh crore, besides these projects are also facing an average delay of over 44 months.

Investment projects attracted by Telangana in transport services sector have registered highest cost escalation rate of about 89 per cent and are facing delay of over 51 months as of 2015, noted the study prepared by The ASSOCHAM Economic Research Bureau (AERB).

“It is highly imperative for the government of Telangana to perk up transportation, communication, water and energy networks across the state to promote accessibility, quality of infrastructure and attract domestic firms and global investors,” said Mr Rawat.

Punjab (65 per cent), Jharkhand (59 per cent), West Bengal (58 per cent) and Gujarat (56 per cent) are other among top five states to have recorded high cost escalation rate in delayed transport services investment projects.

Infrastructure investments’ scenario in Telangana:

Telangana has recorded a meagre two per cent share in investments attracted by infrastructure sector from both public and private sources across India as of 2015 and there has been literally no change in its share in 2010.

It also registered 10.2 per cent CAGR in investments attracted by infrastructure sector during the course of past five years which is similar to the national average growth rate in this regard.

Telangana recorded third highest growth rate of over 36 per cent after Chhattisgarh (44 per cent) and Himachal Pradesh (38 per cent) in investments made by the public sources in infrastructure sector across India.

“While in terms of investments made by the private sector in infrastructure sector in India, Telangana had seen a negative growth of about five per cent, as such the state needs to mobilise private sector capital that can be invested into infrastructure,” suggested the ASSOCHAM study.

Besides, the state recorded under implementation rate of about 83 per cent which is way ahead than national under implementation rate of 58 per cent, this implies that most of the infrastructure projects in Telangana and across India are still in the process and are yet to be completed.

“This does not augur well for both the state and the country as actual benefits of an investment are only derived upon completion,” the study asserted.

Suggestions:

In its study, ASSOCHAM has suggested various measures like reducing delay in creating businesses, obtaining approvals, enforcing contracts; providing sufficient legal protection for investors; ensuring more transparent and predictable government decision making thereby minimising political and regulatory risks.

Co-ordination between government agencies together with a single window clearance system should be implemented with specific guidelines for time bound approvals. Besides, land acquisition and environment clearances continue to remain critical concerns for infrastructure developers as such these issues should be addressed proactively to balance the interests of all stakeholders.

There is also an urgent need to fill-up the skills related gap in handling infrastructure projects and the government should create a skill ecosystem in partnership with private players with a view to formalise professional training for project managers, suggested ASSOCHAM.

It also added that there is a need to improve depth and liquidity of corporate bond market to provide additional source of funding for infrastructure companies.

Investment Commitmentsunder ‘Make In India’progamme

09 Wednesday Mar 2016

Posted by in Current Affairs, Economics, INDIA, NATIONAL NEWS

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The investment commitments, through Foreign Direct Investment (FDI) equity inflows after launch of ‘Make in India’ Initiative in September, 2014 has been worked out as USD 45,682 million for the period between October 2014 – December 2015 (15 months after Make in India initiative launch).

The Government is taking various measures for bringing investments to the country like opening up Foreign Direct Investment in many sectors; carrying out FDI related reforms and liberalization and improving ease of doing business in the country. Some of the recent initiatives are as below:

  1. 100% FDI under the automatic route has been allowed in the specified rail infrastructure projects.
  2. Investment made by NRIs, PIOs and OCIs under Schedule 4 of FEMA (Transfer or Issue of Security by Persons Resident Outside India) Regulations on non-repatriation basis is now deemed to be domestic investment at par with the investment made by residents.
  3. The special dispensation of NRIs has also been extended to companies, trusts and partnership firms, which are incorporated outside India and are owned and controlled by NRIs.
  4. 100% FDI under automatic route for manufacturing of medical devices has been permitted.
  5. FDI Policy on Insurance sector reviewed to increase the sectoral cap of foreign investment from 26% to 49% with foreign investment up to 26% to be under automatic route. Similar changes have also been brought in the FDI Policy on Pension Sector.
  6. In order to provide simplicity to the FDI policy and bring clarity on application of conditionalities and approval requirements across various sectors, different kinds of foreign investments have been made fungible under one composite cap.
  7. FDI up to 100% through automatic route has been allowed in White Label ATM Operations.
  8. Reforms in FDI Policy on Constructions Development sector include:
  9. a) Removal of conditions of area restriction of floor area of 20,000 sq. mtrs in construction development projects and minimum capitalization of US $ 5 million to be brought in within the period of six months of the commencement of business.
  10. b) Exit and repatriation of foreign investment is now permitted after a lock-in-period of three years. Transfer of stake from one non-resident to another non-resident, without repatriation of investment is also neither to be subjected to any lock-in period nor to any government approval.
  11. c) Exit is permitted at any time if project or trunk infrastructure is completed before the lock-in period.
  12. d) 100% FDI under automatic route is permitted in completed projects for operation and management of townships, malls/ shopping complexes and business centres.
  1. Foreign investment up to 49% in defence sector has been permitted under automatic route along with specified conditions. Further portfolio investment and investment by FVCIs has been allowed up to permitted automatic route level of 49%. The foreign investment in access of 49% has been allowed on case to case basis with Government approval in case of access to modern and ‘state-of-art’ technology related manufacturing.
  1. FDI policy on Broadcasting sector has also been amended as under:
Sector/Activity New Cap and Route
6.2.7.1.1

(1)Teleports(setting up of up-linking HUBs/Teleports);

(2)Direct to Home (DTH);

(3)Cable Networks (Multi System operators (MSOs) operating at National or State or District level and undertaking upgradation of networks towards digitalization and addressability);

(4)Mobile TV;

(5)Headend-in-the Sky Broadcasting Service(HITS)

 100%

 

(Up to 49% -Automatic route

Beyond 49% – under Government route)
6.2.7.1.2 Cable Networks (Other MSOs not undertaking upgradation of networks towards digitalization and addressability and Local Cable Operators (LCOs))
6.2.7.2 Broadcasting Content Services
6.2.7.2.1 Terrestrial Broadcasting FM (FM Radio), 49%

Government route
6.2.7.2.2  Up-linking of ‘News & Current Affairs’ TV Channels
6.2.7.2.3 Up-linking of Non-‘News & Current Affairs’ TV Channels 100%

Automatic route
Down-linking of TV Channels

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  1. Government has decided to introduce full fungibility of foreign investment in Banking-Private sector. Accordingly, FIIs/FPIs/QFIs, following due procedure, can now invest up to sectoral limit of 74%, provided that there is no change of control and management of the investee company.
  2. Government has opened certain plantation activities namely; coffee, rubber, cardamom, palm oil tree and olive oil tree plantations for 100% foreign investment under automatic route.
  3. It has been decided that a manufacturer will be permitted to sell its product through wholesale and/or retail, including through e-commerce under automatic route.
  4. Government has reviewed single brand retail trading (SBRT) FDI policy to provide that sourcing of 30% of the value of goods purchased would be reckoned from the opening of first store. In case of ‘state-of-art’ and ‘cutting-edge technology’ sourcing norms can be relaxed subject to Government approval. Further, an entity operating SBRT through brick and mortar stores has been permitted to undertake e-commerce activities as well.
  5. Indian brands are equally eligible for FDI to undertake SBRT. In this regard, it has been decided that certain conditions of the FDI policy on the sector namely; products to be sold under the same brand internationally and investment by non-resident entity/ entities as the brand owner or under legally tenable agreement with the brand owner, will not be made applicable in case of FDI in Indian brands.
  6. 100% FDI is now permitted under automatic route in Duty Free Shops located and operated in the Customs bonded areas.
  7. FDI policy on wholesale cash & carry activities has been reviewed to provide that a single entity will be permitted to undertake both the activities of SBRT and wholesale.
  8. 100% FDI is now permitted under the automatic route in Limited Liability Partnerships (LLP) operating in sectors/activities where 100% FDI is allowed, through the automatic route and there are no FDI-linked performance conditions. Further, the terms ‘ownership and ‘control’ with reference to LLPs have also been defined.
  9. Regional Air Transport Service (RSOP) has been opened for foreign investment up to 49% under automatic route. Further, foreign equity cap of activities of Non-Scheduled Air Transport Service, Ground Handling Services have been increased from 74% to 100% under the automatic route.
  10. Foreign investment cap on Satellites- establishment and operation has now been raised from 74% to 100% under thegovernment route.
  11. Foreign investment cap on Credit Information Companies has now been increased from 74% to 100% under the automatic route.
  12. Government has decided that for infusion of foreign investment into an Indian company which does not have any operations and also does not have any downstream investments, Government approval would not be required, for undertaking activities which are under automatic route and without FDI-linked performance conditions.
  13. FDI policy on establishment and ownership or control of the Indian company in sectors/activities with caps requiring Government approval has been reviewed to provide that approval of the Government will be required if the company concerned is operating in sectors/ activities which are under Government approval route rather than capped sectors. Further no approval of the Government is required for investment in automatic route sectors by way of swap of shares.
  14. Certain conditions of FDI policy on Agriculture and Animal Husbandry, and Mining and mineral separation of titanium bearing minerals and ores, its value addition and integrated activities have been simplified.
  15. In order to achieve faster approvals on most of the proposals, the Government has decided to raise threshold limit for approval by FIPB to Rs 5000 crore.
  16. Further, Finance Minister in its Budget Speech on 29.2.2016 has announced that 100% FDI will be allowed through FIPB route in marketing of food           products produced and manufactured in India. This will benefit farmers, give impetus to food processing industry and create vast employment opportunities.