Sectors of Economy: Mfg, Service Industries

Industrial
MSME Corporates
Policy

Make in
Skill India Survey
India
 Industrial Policy
1948 Shyama Prasad Mukerjee:
1 industrial policy.
st

1956 policy revised- main focus

on PSU
1991 LPG reforms, Narsimharaos
new industrial policy.
 1991
1. FDI relaxed industrial
2. NRI can invest upto 100% policy
3. Software technology parks features
4. Disinvestment of PSU,
Miniratna-Navratna
5. MRTP act (69)=> CCI act
(2002)
3 sector reserved for public sector

Atomic
Energy
Public Atomic
Secto Minera
r only ls
Rail
Transp
ort
 Industrial License required for

Alcohol Tobacc Electro Industri Hazard

distillat o nic al ous
ion Cigar Aerosp Explosiv Chemic
Brewin License given ace &
by es
Secretarial al
of Industrial
Safety fuse,
g Defens
Assistance (SIA) under
matches,DIPP
Others just file Industrial nitrocellulose
Entrepreneurs
 License
1. HCN: Hydrocyanic acid=
Prussic acid. Dye, explosive, Hazardous
pesticides Chemicals
2. Phosgene: plastic, pesticides
3. Carbons Isocyanates. E.g.
Methyl Isocyanate (MIC)
Union Carbide-
fertilizers/pesticides (Sevin),
Bhopal tragedy 3/12/84
 Policies

Industr MFG IT Teleco FDI

m Policy
ial 2011 policy (BoP
1991 2012 2012 Ch.)
(INFRA
Ch.)
 Manufacturing Policy 2011

MFGs Job & Focus Infra

Share in Skilling Labor Finance via
GDP 100 million inventive PPP
jobs in a Textile, IT, =>REITS,
Raise from
decade MSME INVITS
15% to 25% Start up NIMZ,
CSO New Skilling:
Skill India, cos: tax Industrial
method: benefits corridors,
32% Din Dayal
Antyodaya, Budget mfg.
NSDC etc. 2015: promotion
Royalty boards
 IT Policy 2012

E-Literacy Jobs Software/port Cybercrime

1 E-literate in 1 crore new IT als Strong
Each personnel E-governance framework
household Vernacular CERT-IN
Modis Digital PH friendly
India mission,
NOFN=> rural
E-Kranti system
broadband
 Policies

Industr MFG IT Teleco FDI

m Policy
ial 2011 policy (BoP
1991 2012 2012 Ch.)
(INFRA
Ch.)
 Small industries

Village Organi
Cottag
industr zed
e
y Unorg.

MSME SSI
 Cottage Village industry

Family members
No hired Area <10k
Capital investment population
negligible Investment<15k /
Handmade worker
products
1. Social security, EPF, Maternity benefit 17% of
available. units
2. Factories Act, 1948 [10 workers, with Organized
power = registered units] Sector
3. Shops and Commercial Establishments
Acts of State Governments
4. Industrial Employment Standing
Orders Act, 1946 etc
5. Plantation acts, bidi-cigar
6. PSUs, Cooperatives
1. Not covered under organized
83% units
sector.
Unorganize
2. But no consensus over definition,
d sector
esp. for service sector.
3. Unorganized Workers Social
Security Act 2008
4. Social security boards setup at
national and state levels.
5. Social security, fin.inclusion => in
HRD ppt later.
 Small industries

Village Organi
Cottag
industr zed
e
y Unorg.

MSME SSI
 MSME Classification: investment
Mfg. Sector
(32%)
MICR upto 25 lakhs
O
SMA >25 lakhs
LL
MED. >5 cr.
Upper limit
 MSME Classification: investment
Mfg. Sector Service
(32%) (68%)
MICR upto 25 lakhs upto 10
O lakhs
SMA >25 lakhs >10
LL
MED. >5 cr. >2 cr.
Upper limit upper limit
 Small industries

Village Organi
Cottag
industr zed
e
y Unorg.

MSME SSI
- Pickles & - Safety matches SSI
Investment
chutneys - Fire works
- Bread - Agarbatties
up to 1
- two edible oils - Glass bangles crore
(without solvent - Steel almirah (varies by
extraction) - Rolling shutters item)
-Mustard oil,
Ground nut oil - Steel chairs,
- Wooden tables, furniture
furniture and - Padlocks
fixtures - utensils-
- Exercise books stainless steel,
and registers aluminum
- Wax candles
 SSI
1. Non-MSME industry (=large
industry) must get license + Items
50% export reserved
2. Doesnt apply to SEZ
 License required for

Alcohol Tobacco Electron Industr Hazardo Large

distillati Cigar ic ial us industry
on Aerospa Explosi Chemic in SSI
Brewing ce & ve al product
Defense
License given s
by Secretarial of Industrial
Assistance (SIA) under DIPP
Others just file Industrial Entrepreneurs
No excise duty: 1.5 cr turnover MSME
No Service tax: <10 lakh /year Tax
Capital subsidy: 15 lakhs to Benefits
purchase.
SEDF / SIDBI
Khadi board, Coir Board,
Udhyami mitra Yojana etc.
Budget 2015: MUDRA BANK,
AIM, SETU
 MSME
1. Total >5.5 crore units
2. 40% export contribution Why Mudra
3. 62% owned by SC/ST/OBC Bank?
4. Need small loans: 50k-10L
5. Only 4% can get through
formal lenders (Bankers, NBFC,
MicroFin)
6. Need addl. 80 Billion$ credit
supply
 MFIs cant accept Demand Deposits (CASA)

Borrow from Loan to SHG,

Banks, NBFCs MSME
@14% @24%
MUDRA bank
regulate and
refinance MFIs
For MSME
1. 1990: Bangladesh Palli Karma-
MSME
Sahayak Foundation (PKSF). Mudra
2. Announced in Budget 2015 Bank
3. Initially, a subsidiary of SIDBI Features
4. Later Act => full fledge
institution
5. Bank.X
6. Regulator and Refinancer
7. OF MFIs serving MSME
 MSME
1. MFI: register, regulate,
refinance, rating Mudra
2. Client protection in loan Bank
recovery Functions
3. Last mile delivery of credit +
technology
4. Pradhan Mantri Mudra Yojana
5. Credit guarantee scheme for
micro enterprises
 PSL: What if targets not met?
Desi (+Foreign 20) Foreign bank <20
Remaining $$ to RIDF To SEDF
Rural infra. small enterprises
Development fund development fund
NABARD manages SIDBI manages
NABARD pays interest to
Same by SIDBI
bank
RBI will pull out
State governments 20,000
Similar case: state
get infra. Loan Croresindustrial fin.corp.
& give to MUDRA Bank
 Mudra
1. RBI: 20k Cr. from PSL
shortfalls. Will be Used for Money
refinancing the MFIs for small from
industries where?
2. Government: 3k cr. Credit
guarantee to Micro
enterprises.
 MUDRA
Criticism
1. Duplication
of Efforts
vs. AIFI
2. Why not
reform
SIDBI?
3. + RBI
proposed
Small
Budget 2015 for small industries

MUD
ATAL
RA

SETU
Atal Innovation Mission (AIM) Budget
2015
Atal
Under NITI ayog with Rs.150
innovation
crores.
mission
Innovation using experts and
academicians, R&D hubs.
(SETU) Self-Employment and Budget
2015
Talent Utilization SETU
Under NITI with Rs.1000 startup
crores.
Help start up companies in
tech-expertise, finance,
incubation etc.
Focus: technology / electronics
sector
Policy 2012: 3 years MSME
All central Government units Public
Procureme
20% of total purchase from nt
MSME
Within that 4% from SC/ST
Bill 2012: transparency in
public procurement >50 lakhs.
Competitive bidding, Jail terms
etc. Modi trying to revive. (Mar-
20-2015)
Legal framework for industries

Com
pani
Facto es
ry Act
Labo
r
refor
ms
 WHY?
1. Labor laws: concurrent list
Labor
2. 44 union, 150+ state laws
reforms
3. Inspector-bribe raj
4. Industrial dispute act 47
5. >100 workers, Government
permission before laying off
6. Apprentices used as regular
workers
7. Super-contractors: no EPF, SS
 Solution
1. Budget 2015: If 50 "regular
workers": owner eligible for Labor
deduction. Earlier 100 reforms
required.
2. Two bills in LS (2014, Aug)
1. Factories Bill
2. Apprentice Bill
 Laws
1. 1948: Factories Act
Factories
2. 2010: Narendra Jadhav
Act
Committee
3. 2014: Amendment bill
 Meaning
criteria 1948 2014
Factories
power 10 20 Act
used workers
power 20 40
not used workers
Higher ceiling 70% of units will escape. Heath
safety compromised
Parliament standing Committee on Labor
Government to review the bill (2015-Jan-Feb)
 Factories
1. Women workers can do Women
Bill
nightshift Empowerm
2. Safety provision and home ent
transport
3. Can work on moving / heavy
machinery
4. Exempt: PH and mothers
1. Cool water irrespective of Factories
#workers Bill
Workers
2. Spitton, sitting facilities=> Facilities
compoundable offense.
3. Restroom, lunchroom >75 workers
4. Canteen: 200> workers
5. Self-certification
6. Union can also make rules. (earlier
only states)
 Factories
1. 100 hours overtime per 3
Bill
months Overtime
2. Min. 90 days / year to get
paid leaves.
3. Capacity: horsepower=>
kilowatts
4. Can decide its own
workweek.
 Factory Reforms: 4 Benefits

Women Amnesties Self No arrest

Empower for Certificati on minor
ment Workers on issues
 laws
1. 1961 outdated law
Apprentice
2. 2014 bill
Act
3. Age: 14 non-hz, 18
hazardous
4. non-engineering graduates
and diplomas can enter
5. Common training by multiple
companies
6. Test by National Council for
Legal framework for industries

Com
pani
Facto es
ry Act
Labo
r
refor
ms
 Corporate governance: Meaning?
Way of directing the company
To protect stakeholders interest
To comply with legal-regulatory req.
 Corporate governance: Meaning?
Not mere technical compliance
Moral-ethical compliance
Absence: fraud, mismanagement
 Corporate governance in India
SEBI Norms:
Companies Act
Sep 2012: Adi
Godrej Original 1956
April 2014: Aug 2013 (470
Published section)
Effective 1st Oct.
2014 Feb 2014: rules
notified
Types of companies
Capital: 50 L

Companies Act 2013

One person Turnover 2 cr.

Private ltd.
Capital 1 lakh
2-200 Listed
Public Ltd. Vodafone
Capital 5 lakh India.
Unlisted
7-unlimited
Nokia India
52
Capital req. removed in types
Amendment bill 2014, for Companies
ease of doing act
Anti-argument: shell
companies, tax avoidance
>9 lakh companies in India,
90% of them Private limited
companies.
 Infosys

1992
Privat IPO
e ltd public launc
. Ltd h 1993
1981

54
 Holding vs. Subsidiary Companies
Delight
Reliance Protein

Reliance industries
Retail Reliance
wellness

(Mukesh)
CNN-IBN

CNBC

g
n y Network 18 Colors
i
d n
o l y
H mpa
r
a s
i
sid ie MTV

C o Sub an
p Forbes India
om
c Magazine
 Special Purpose Vehicle

Chandigarh Tricity
MoU

Punjab State Equity

contribution
Metro
Haryana State Reg. as
Company
Chandigarh UT
(Union Min. Urban
Dvlp ) Profit
sharing
 Government owned = RTI applies to all
Not Governm
Gov ent
e
em rnm
plo ent
yee
s Dept.
PSU Undertaki
ngs
Gov
Governm e
ent rnm
Public
ent e
Corporati mplo
Companie es y e
ons
s
 Dept.undertaking
Indian Railways, postal Department.
commercial activity such as engineering,
manufacturing etc.
directly controlled, just like any other
department
not under Companies act
Employees = Government servant. (service
conduct rules apply)
Directly CAG + RTI
58
Government owned = RTI applies to all

Governm
ent

Dept.
PSU Undertaki
ngs
Governm
Public
ent
Corporati
Companie
ons
s
 PSU = RTI applies
Government
Public Corporation
companies
ONGC, SAIL, Coal India LIC, Air India, IDBI, UTI
ltd. Act of Parliament / State
Registered in Companies Legislature
Act Wholly financed by
Government owns >50% Government
Majority BoD. all BoD.
Employees Not public Govt. Employees Not public Govt.
CAG appointed pvt. Directly by CAG (some
auditors exception)
60
 What is SBI then?
Presidency banks: Bengal, Bombay, Madras
Imperial Bank of India (1921)
SBI Act 1955- Government owned Public
Corporation
SBI life insurance COMPANY ltd. JV between
SBI + BNP Paribas
SBI General Insurance COMPANY ltd. JV
between SBI +IAG (insurance Australia group
SBI Mutual funds Private limited Company
Types of companies

One person

Companies
Private ltd.
Act
2-200 Listed
2013
Vodafone
Public Ltd. India.
7-unlimited Unlisted
Nokia India
62
 Companies Act 2013

BoD AGM CSR 4

Audit Statut
Link ory
Bodies
 MD/CEO
Executives
Staff

Board of Directors
Chairman

SHARE-HOLDERS IPO
 Companies
Act
Chairman Board of
directors
Executive
Director/Full-time
BoD
Nominated
(Bank/Govt.)

Independent Director

65
Companies Act: Minimum Directors

Private Public Ltd.

One ltd. 7-unlimited
person
2-200
3-15

1 2
More by AGM

1 woman
1 Indian
RESIDENT
(Min.182 days)
66
 Companies
Act
Chairman Board of
directors
Executive
Director/Full-time
BoD
Nominated
(Bank/Govt.)

Independent Director

67
Companies Act 2013: Independent director
Not a Promoter
Pecuniary interestX (except salary
as the Director of the board)
MD nominatedX
EmployeeX
Companies Act: Independent Directors

Private Public Ltd.

One ltd. 7-unlimited
person
2-200
Min. 1/3 of board
1 guy Max. 7

NA
companies
NA Terms: 5 years X 2
Cooling off 3
years
AGM Perfom.
review
69
 Companies Act 2013

BoD AGM CSR 4

Audit Statut
Link ory
Bodies
Corporate social responsibility Companies
Act
CSR
Definition: companies
2% profit
integrate social and
spending
environmental concerns in
their ops. (-UNIDO)
Last 3 years' avg. profit=> 2%
CSR spend
Applies to? Companies
1. net profit of 50 million (Excluding
Act
CSR
Tax) 2% profit
2. net worth of 5 billion (Asset- spending
liability)
3. turnover of 10 billion (sales
excluding costs)
.Foreign branchX
.~6000 companies covered
.2% profit = ~20k crore Rs in CSR
Companies
Act
CSR
Activities

BoD=>CSR
Committee
Report to
AGM
Serve
directly /
NGOs
 Companies Act 2013

BoD AGM CSR 4

Audit Statut
Link ory
Bodies
 4 statutory bodies

Tribunal Reporti Educati fraud

ng on
Judicial + technical members Bodies
National
Finish case in three months
Company Law
Appeal: NCLAT Tribunal
Present case by Self, Lawyer, CA, CS (NCLT)
Cases:
1. arbitration, compromise, M&A
2. Converting Public ltd. To private ltd.
3. Filing Class action suits (Satyam)
1 Chairman + 15 members Bodies
#2: National
Accounting standards Financial
Reporting
Powers of civil court Authority
Professional misconduct of (NFRA)

CA/accountant=> debar
Appeal: NFRAA
ICAI unhappy (Chartered
Accountants Act, 1949)
 4 statutory bodies

Tribunal Reporti Educati fraud

ng on
 body
1. Since 1956s company act Investor and
Education
2. Unclaimed Dividend, interest, Protection
principal Fund
3. Under Corporate Affairs
Ministry
4. Awareness, seminar, financial
literacy
5. Participation from RBI, SEBI,
experts
 bodyand
Investor
1. 2013s Act: Statutory Education
authority Protection
2. @Delhi HQ, Regional offices Fund
Authority
3. Corp. Affairs Secretary =
Chairman
4. Members:
1. RBI Executive directors
2. SEBI Executive directors
3. Legal experts etc.
 4 statutory bodies

Tribunal Reporti Educati fraud

ng on
Naresh Chandra report on Bodies
Corp. governance Serious Fraud
Investigation
2003: under Corp. Ministry Office (SFIO)
Cases
1. Satyam
2. Reebok fraud
3. Sesa Goa invoice
4. Saradha Chitfund
Statutory body Bodies
Not just document Companies
Act 2013:
examination
SFIO
Search seize arrest
CrPC power- investigator
Once SFIO gets case, other
agencies cant proceed.
State police, CBI -cooperate,
provide documents, witnesses.
Better corporate governance Conclusion
(ID) Companies
Protecting small investors Act 2013
(statuary bodies)
business-friendly regulations,
Self-regulation
Ease of doing business, Less
government approval
 bad
1. Paid up capital ceiling to be
removed = shell companies, Companies
tax avoidance Act
1. private: 1 lakh
2. Public: 5 lakh
2. Women directors not
appointed / kin of promoters
appointed.
 Bad
1. Smallest fraud need to be
brought to AGM & Corporate Companies
ministries Act
2. Some companies begun
converting public ltd. To
private limited (e.g. TVS) to
avoid transparency and
reporting norms
 Adi Godrej
SEBI Norms 1st October 2014

Minority Transparen
shareholders cy
Salary
Independent
Committee
Directors
under ID
Audit
E-Voting
Committee
RPT- Related Whistleblower
party transaction s