RESTORE EXEMPTION OF WITHHOLDING TAX ON FCL: ASSOCHAM

Thesynergyonline Economic Bureau

NEW DELHI, AUGUST 01 :
THE Associated Chambers of Commerce and Industry of India (ASSOCHAM) has sought restoration of exemption on payment of withholding tax on Foreign Currency Loans (FCL) in a bid to make such loans much more competitive and reasonable.

In a representation made to Finance Minister, Mr. Pranab Mukherjee, the chamber has argued that withholding tax on FCL needs to be withdrawn immediately so as to make cost of such loans more competitive and reasonable.

The Chamber also holds that such a withholding tax on behalf of lender is never claimed as refund or credit is claimed as they do not file returns to clear the refund.

ASSOCHAM president, Dr. Swati Piramal has, however, pointed out that interest on FCL works out to be over 26 per cent which used to be exempted until fiscal 2000. The Finance Act of 2001, however, has withdrawn the benefits of exemption under section 10(15)(4)(f) of the Income Tax Act. Since then, industry has been demanding restoration of exemption in respect of interest paid on foreign currency loans but is of no use.

Dr Piramal further pointed out that withdrawal of benefit of exemption under aforesaid section has substantially increased cost of borrowing funds from outside India, since interest paid on such loans is subject to withholding tax at the effective tax rate of 26.77 per cent.

It has said that justification given for withdrawal of this benefit was loss of tax revenue of India since foreign lenders were entitled to claim a tax credit for tax paid on interest income in their respective countries of residence which is true only in theory.

The Chamber has emphasized that in most cases, foreign lender is unable to claim any tax credit for Indian withholding tax, arguing that in case of foreign currency bonds issued by Indian borrowers to raise loans, these bonds are regularly traded in Euroclear which does not disclose identity of bondholders as per their agreement with them.

Consequently, Indian borrowers are not in a position to issue any TDS certificate in name of correct bondholder so as to enable them to claim tax credit. According to ASSOCHAM, since these bonds change hands on Euroclear quite often, the interest paid on due date comprises of income of not one but multiple investors, whose share of interest and identities are not known to Indian borrowers.

It is also highlighted that in case of syndicated loans etc., a large proportion of lenders are resident in low or nil tax countries like Singapore, Hong Kong, UAE etc. Since, lenders are generally financial institutions/banks, actual income earned by them is only 'spread' between their interest income earned from the Indian borrower and the interest paid by them on the funds raised by them from investors.

Therefore, the actual tax paid by them in their country of residence is significantly lower than Indian withholding tax deducted on gross interest paid. Any excess Indian withholding tax deducted cannot be refunded to them and, therefore, is a cash loss to them.

The chamber has further stressed that Organization for Economic Co-operation and Development (OECD) also supports economic justification of interest on cross-border loans and, therefore, it is reiterated that the demand of ASSOCHAM has full economic justification for restoring exemption in respect of interest paid on foreign currency loans. (editor@thesynergyonline.com)

ASSOCHAM FOR 20% SLR DIVERSION INTO PSUs EXPANSION

Thesynergyonline Banking Bureau

NEW DELHI, JULY 28 :
THE Associated Chambers of Commerce and Industry of India (ASSOCHAM) has proposed to the Reserve Bank of India (RBI) to convert 20 percent of its Statutory Liquidity Ratio (SLR) deposits into equity of Navratna and Mini-Navratnas Public Sector Undertakings (PSUs) to enable nationalized banks to play a decisive role in India's capital market.

According to rough estimates, the RBI has over Rs.10 lakh crore SLR investments in its possession contributed by scheduled commercial banks, nearing 87 in number. This also includes contributions from private banks in the category of scheduled banks.

The suggested proposal, if accepted by the apex bank will help move `block funds' into more `mobilizing funds' and bring down control of capital market from clutches of Foreign Institutional Investors (FIIs).

The Chamber holds that if a 20 percent of the estimated SLR is allowed to be converted into PSUs, especially in Navratna and mini-Navratna categories, nearly Rs.2 lakh crore funds are released within the government system for fruitful purposes as PSUs especially profit making need equity absorption to fund their modernization and expansion plans, said ASSOCHAM Secretary General Mr. D S Rawat,

This,according to the Chamber , will boost up the capital market by pushing up liquidity inflow and gradually enable banking system to play a decisive role in governance of capital market.

The RBI can make an offer to leading PSUs to absorb part of its SLR deposits and help Indian banking system to directly become part of their growth as PSUs do need funds.

This conversion option would suit the PSU best under the given circumstances and reduce their dependence of loans from other agencies especially multi and bilateral financial institutions and in course of time fetch banking system through RBI higher assured returns.

In addition, the Chamber has also suggested modifications in the Employees Provident Fund Act so that a part of investments made by its subscribers both in public and private sector is allowed to be directly invested to PSUs equity by the Employees Provident Fund Organizations at the time of their maturity.

This move will take care to some extent post retirement needs of EPFO subscribers for certain assured return. The option of allowing EPFOs to invest into PSU equity should be entirely left on subscribers but in view of the Chamber it could be 25 percent of the total amount. Remaining 75 percent should straightway be disbursed to subscriber at the time of his retirement to take care of his other urgent needs. (editor@thesynergyonline.com)

Thesynergyonline Economic Bureau

NEW DELHI, JULY 26 :
HE Indian Sugar Mills Association (ISMA) has shared its estimates of cane acreage and production in 2010-11 with the Department of Food and Public Distribution, Ministry of Consumer Affairs, Food & Public Distribution. The industry association has also urged the government department to revise the official acreage data for 2009-10.

As per ISMA’s analysis area under cane during 2009-10 was underestimated at 41.79 lakh hectares while cane output under reported at 253 million tonnes. Based on actual sugar production, utilization of cane by alternate sweeteners and seed etc, the total cane output works out to a much higher figure of 313 million tonnes.

Assuming the average yield of sugarcane per hectare at 70 tonnes, this corresponds to an area of 44.5 lakh hectares in 2009-10 against the reported figure of 41.79 lakh hectares. The industry has urged the government to rectify this anomaly in order to get a proper estimation of projections for 2010-11.

Further for the sugar season 2010-11, ISMA estimates a total sugarcane output of 370 MT on account of fairly spread monsoons and actual data received from the mills. 275 sugar mills out of a total of 486 units have reported an increase in acreage of 18.7 percent in 2010-11 over 2009-10. Based on average yield of 70 tonnes per hectare, this corresponds to area under sugarcane cultivation to be around 52.8 lakh hectares. (editor@thesynergyonline.com)

ECONOMIC OUTLOOK FOR 2010-11 ON EXPECTED LINES

Thesynergyonline Economic Bureau

NEW DELHI, JULY 23 :
REACTING to Economic Outlook released for 2010-11 by Chairman, Economic Advisory Council to the Prime Minister, Dr. C. Rangrajan, the Associated Chambers of Commerce and Industry of India (ASSOCHAM) has said that it was on expected lines accepting that containment of inflation at 6.5 per cent will remain a challenge even beyond March 2011 due to supply constraints.

In a statement, ASSOCHAM president, Dr. Swati Piramal said that buoyancy in Indian economy will continue and fuel GDP growth even beyond 8.5 per cent but fiscal deficit will remain consolidated close to 8.5 per cent of GDP in current fiscal. External engagements are likely to suffer slightly on account of Euro crisis but economy in general will perform better than what it did for National GDP in fiscal 2009-10.

Dr. Piramal added that inflationary pressures will remain for remaining months of current fiscal though in subdued form and Reserve Bank of India (RBI) is expected to swing into action to bring about balancing act between growth and inflation.   (editor@thesynergyonline.com)

40% RESOURCE RENT UNIFORMITY IN MINING SECTOR MOOTED

Thesynergyonline Economic Bureau

NEW DELHI, JULY 20 :
THE Associated Chambers of Commerce and Industry of India (ASSOCHAM) has sought a complete ban on exports of iron ore, having more than 60 per cent iron content in it adding that 40 per cent resource rent tax uniformity be imposed across mining sector to check windfall profits made by iron ore minors in case the former cannot be considered.

In a communication addressed to Prime Minister Dr. Manmohan Singh, the ASSOCHAM said that in spite of initiatives of UPA government for imposing an export duty on iron ore, it has not been able to reduce exports of iron ore.

The Chinese Government which happens to be the largest importer of Indian iron ore has been continuously increasing export tax on commodities like coal, coke and steel products in order to conserve it’s raw material.

It has pointed out that Australia, the 2nd largest Global Iron ore exporting country, has recently planned to levy a 40 per cent Resource Rent Tax uniformly across the mining sector to check the windfall profits made by iron ore miners. India should follow similar practices if it cannot impose a complete ban on exports of iron ore having more than 60 per cent iron content in it.

The Chamber , therefore, strongly recommends that the government should impose a complete ban on iron ore exports since, domestic steel industry is again in the spot light where infrastructure, real estate and automobiles will continue to play a decisive role in India’s growth.

The chamber has observed that windfall profits that are being reaped by a handful of private minors would have far reaching consequences that may go beyond mere profiteering. ASSOCHAM has always maintained that such abnormally high profits not only impact development of any particular industry but has it’s fallout in the political stability of some of the states.

The private iron ore minors, that are making a windfall profit through iron ore exports have created a myth that iron ore fines are laying in excess in India as Indian Steel Industry is not equipped to use the same.
However, it is a total distortion of facts as most of the integrated steel plants using sinter and pellets use iron ore fines extensively which results in increased efficiency of iron making process.

It should be observed that China has been very judicious in controlling it’s natural resources through quantitative measures on steel making raw-material with a 40 per cent export tax on export of coke, thereby crating a shortage of coke in global market. It has pushed the prices by almost 200 per cent in last one year and spells the Chinese ambition of gaining undivided control of world steel industry.

The Chamber is of the view that India has just started its infrastructure development and would require huge steel in next 10-15 years. Therefore, adequate steps should be taken right now to make Indian Steel Industry more competitive in order to meet these challenges.

The chamber has also pointed out that the recent rise in cost of raw materials is challenging viability of entire Indian Steel Industry. Iron ore exports from India remain robust and in an excess of 100 Mnt per annum. This constitutes a whooping 50 per cent of the total iron ore production of the country. On the back of the windfall profits, iron ore exports have increased from 32 million tons in the year 2000 to around 100 million tons in the last fiscal. (editor@thesynergyonline.com)  
 

Thesynergyonline Economic Bureau

NEW DELHI, JULY 14 :
INDIA Inc. fears a steady build- up in input prices might disturb business-economic stability during the coming six months, according to ASSOCHAM’s BIZCON Survey.

Besides, premature withdrawal of stimulus measures and the government’s anti-inflationary measures pushing up the cost of credit to prohibitive levels are the two domestic policy risks that the business sector faces at present, said  BIZCON, a new quarterly national survey by ASSOCHAM.

A cross sector comparative analysis of the industrial sectors have revealed that intermediate goods, capital goods and infrastructure sectors are likely to feel the heat of relatively stronger inflationary pressures as compared to the consumer durables, consumer non-durables and services sectors.
The inflationary pressure originally started in the form of food and fuel prices hike in the first half of the year 2009-10. By the second half of 2009-10, mainly due to the persistent supply side pressures and bad monsoons, inflation became generalized. By the last quarter of 2009-10, the average rate of inflation climbed up to double digits.

The downward rigidity of food prices, hike in fuel prices alongside inefficient logistics management have directly contributed to inflation, the survey noted. Further, demand side pressures owing to the pickup in economic activity have been leading to an increase in the prices of manufactured products.

BIZCON analyzed the behavior of raw material prices, prices of other inputs as well as output and demand conditions for these broad sectors. Of the total surveyed respondents, 83.8 per cent, 75.8 per cent and 77.9 per cent expect an increase in cost of raw material, energy cost and labour cost respectively for the first half of 2010-11. The corresponding figures for the March quarter of 2009-10 stood relatively lower at 77.5 per cent, 64.6 per cent and 72.8 per cent respectively.

The anti-inflationary measures adopted by the Reserve Bank of India are expected to result in interest rates going up further. The increased cost of credit on one hand would prohibit industries to avail credit for expansion and on the other hand, it is likely to squeeze domestic demand.

According to BIZCON, this dual impact is bound to have negative implications on private corporate profitability. Coupled with a fall in the private final consumption expenditure, the business units would not be able to meet higher operational costs through proportionate adjustment of their sale prices, cautioned the Survey findings.

The Associated Chambers of Commerce and Industry of India (ASSOCHAM) has initiated a quarterly national survey titled ‘ASSOCHAM BIZCON’.  The first round of the survey was conducted in the second half of the last quarter of the year 2009-10 and covered the three months period to March 2010. The survey carried 10 broad qualitative questions related to overall economic and business conditions and firm level operating conditions. (editor@thesynergyonline.com)
 

GREENHOUSE GAS EMISSIONS UP BY 58%: ASSOCHAM, E&Y

Thesynergyonline Economic Bureau

NEW DELHI, JULY 13 :
INDIA Inc will have to monitor, report and get their emissions externally verified and strengthen strategic and operational actions on mitigation voluntary emission intensity reduction target by 2020, since industries would be subject to individual carbon emission caps or sectoral energy benchmarks, says the joint study of ASSOCHAM and E&Y on 'Reducing Carbon Footprint in the Power Sector'.

The study points out that India's greenhouse gas emissions increased by 58 per cent from 1994-2009 from 1.2 billion to 1.9 billion tones, primarily resulting from coal based power sector that nearly doubled its share in emissions. The power sector accounted for 719.30 million tones of emission until recently as against 355.03 million tones in 1994, which represents a growth of around 102 per cent.

The Indian power sector is well poised for significant growth in the coming few decades. India has 10 per cent of the world's coal reserves, and it plans to add 78.7 GW of the power generation capacity during the five years ending March 2012, with most of it emanating from coal. The growth in the power sector would inevitably result in the expansion of the carbon footprint in the sector.

As per projections, India's GHG emissions per-capita emissions would still be half the global average. However, the shift in energy profile from fossil fuel-based carbon intensive sources carbon and sustainable trajectory. Investments and initiatives in the upcoming new technologies for energy-efficient power generation and the loss reduction in subjected to climate change regulatory norms. Coal gratification and demand side management initiatives would emerge as the most attractive technologies and shall receive immediate attention, concludes the study.

In order to comply with upcoming climate regulations and achieve growth in a low carbon sustainable trajectory, Indian industries would also have to reduce their carbon footprints significantly, adds the study.

It, however, emphasizes that individual companies need to strengthen their endeavor to increase the efficiency of their processes, explore alternative fuel usage and strategize the investments in cleantech. Climate change and regulations around it impact all the basic drivers of business, such as revenue generation, cost reduction, regulatory compliances and managing stakeholders' expectations.

This, thus, gives an opportunity to more efficient companies to act proactively with a well laid down strategic direction across all the domains of business, creating a significant gap between their performance levels vis-à-vis those of the other companies whose approach is more on how to somehow comply with these regulations.

The next exhibit represents how the response to climate change and its regulations are required to be program-managed right from the board level, down across almost all functions of business to the operating levels.
Releasing its findings ASSOCHAM Secretary General, Mr. D.S. Rawat said that one may appreciate that earning carbon revenues through the route of the clean development mechanism (CDM), wherein some of the Indian companies, primarily in the private sector have done quite well, is not the only opportunity that imminent climate change regulations bring for Indian industries.

The larger opportunity lies around developing a proactive climate change strategy and driving it down various levels and functions in order to establish a sustainable business model around these regulations.

This will crate a key differentiator between leading organizations as well as others in a carbon constrained economy. It is very encouraging to note that some of the leading Indian business houses and especially those in carbon intensive sectors such as the thermal power sector or the steel sector have already embarked upon such a journey. (editor@thesynergyonline.com)

AGRICULTURE MANAGEMENT WARRANTS PERIODIC RE-OCCURENCE OF DEBT WAIVER SCHEMES

Thesynergyonline Economic Bureau

NEW DELHI, JULY 12 :
THOUGH the credit to the agriculture sector has more than doubled during the last five years, the rise in productivity has not been commensurate to absorb excessive incremental demand over supply side constraint. If this trend continues, the ASSOCHAM study says India would face dual problem of food imports and a mounting debt trap for farmers.

Releasing the study on "Agriculture Credit, Input Costs & Productivity - Pre Vs Post Debt Waiver Scenario", ASSOCHAM president Dr. Swati Piramal said the credit flow to the agriculture and allied sector has more than doubled from Rs 1,80,485 crore in FY 2005-06 to Rs 3,75,000 crore in FY 2010-11 and during the same period, the year-on-year growth rate of agriculture credit registered double digit growth.

Indebtedness or overhang of debt has been both due to the exogenous factors such as weather induced crop uncertainties and endogenous reasons such as the consumption needs of the farmers that have taken precedence over the repayment obligations says the ASSOCHAM Eco Pulse (AEP) study. The low income farmers are generally forced to sell their crop at low prices because of debt servicing requirements.

The Apex Chamber chief further added, the agricultural debt can be mitigated only when the income from agriculture is able to take care of the cost of inputs for which credit has been taken. (editor@thesynergyonline.com)

POTATO : GLOBAL SOLUTION FOR FOOD SECURITY

Thesynergyonline Economic Bureau

NEW DELHI, JULY 08 :
INDIA International Potato Expo 2010 was started here with National Anthem and a welcome address by the President ICC,  Mr Jayanta Roy explaining four focused issues i.e. Potato remunerative prices for potato farmers, Promotion of National  Potato Promotion Group, strengthening of domestic market and consumption promotion, availability of cheaper and easy export credit and development of post-harvest infrastructure logistics.

Dr Sanjeev Chopra, Joint Secretary, Ministry of Agriculture talking on behalf of the Ministry Of Agriculture, explained the great significance of potato in rural economy ,National economy as well as in food security and made an appeal to all value chain partners to come together to strengthen this very important crop which can play a  major role in future as far as the food safety and hunger issues are concerned.

He assured that Ministry of Agriculture will make all the possible efforts through NHM and NHB to strengthen Potato sector of our country.
 Dr Swapan Kumar Dutta, DDG,ICAR ,addressing the conference on behalf of Indian Council Of Agriculture Research, the apex research organization of the country for agriculture research and development, said that Potato is a wonderful and third most important crop which is being grown in 150 countries and came to India only 400 years before but made a remarkable growth as far as the research & development is concerned and established it’s presence internationally.

He also informed that special varieties which will have quality and more proteins in Potatoes increasing their food value are likely to be released after trials and the varieties which can be grown in summers will also be soon released after the successful trials.

He also said that now, India is a member of the consortium of Potato Genome Sequencing which will enable our scientists to have access to better tools for development of new and specialized varieties of Potatoes.
 

r Bijay Kumar, Managing Director of National Horticulture Board emphasized on the issues being addressed by the  Ministry Of Agriculture through NHB and highlighted some of the initiative like strengthening the cold chain etc.
 Mr Ashok  Sinha, Secretary ,Department of Food Processing said that their Ministry is very aggressively engaged in participating in the development of food processing in the country and it is like a relay race for achieving efficiency and proficiency in the sector and his Ministry is at the third position .

He emphasized that we should have world class Food Processing Research and Incubator centers to facilitate industry and take our country to the world leadership. He also made an appeal to the various channel partners to come together to strengthen each other and  create self-employment opportunities with the help of food processing.
 

Prof.M.S.Swaminathan, the legendary agriculture scientist and founder member of Green Revolution , said that India has come a long way as far as research and development in Agriculture are concerned. He gave a major emphasis on the  availability of disease free Potato seeds and a special reference for the promotion of  true potato seeds .Explaining how Potato and sweet potato are going to play a major role in food safety in  next two decade, he made an appeal to establish Potato Villages to have a integrated activities, addressing the entire value chain of potatoes.
 

Mr Subodh Kant Sahai,the chief guest of the inaugural session expressed his happiness on the initiatives taken to promote potatoes and hoped that this will certainly bring the solutions for all potato channel partners and assured all possible support from his Ministry to strengthen Potato Processing in the country.

He said that he has already made potato processing tax free for five years. By quoting the example of Europe that in Europe the agriculture is being done by 7 percent population while in India 70 percent population is involved in agriculture and even than we are behind, so let’s team up ourselves and grow together to strengthen ourselves and our country.

He gave a message to the farmers that their farming should be market driven and made an appeal to all the participating states to come forward with the potato policies for helping the  farmers and industry.   (editor@thesynergyonline.com)

GOVT DECIDES TO INCREASE NMDFCs AUTHORIZED CAPITAL TO Rs. 1,500 CRORE : KHURSHID

Thesynergyonline Economic Bureau

NEW DELHI, JULY 08 :
THE Government has decided to raise the authorized capital of National Minorities Development Financial Corporation (NMDFC) from existing Rs. 1000 crore to Rs. 1,500 crore to give it more financial teeth and broaden it’s exposure in a bid to ensure that the Financial Inclusion becomes accessible to large number of minorities, disclosed Minister of Corporate Affairs and Minority Affairs (Independent Charge) Mr. Salman Khurshid.

Inaugurating ASSOCHAM organised conference on International Financial Reporting Standards (IFRS) here today, the Minister categorically stated that India will not go back on the roadmap it laid out for IFRS and it will ensure that all large companies converge with IFRS as per scheduled stated for it.

Mr. Khurshid announced that India’s convergence process for IFRS has been agreed with countries like China and Japan and consultation process in this regard continues with other partners. However, the Minister added that SMEs would be allowed to follow Indian Accounting standards and will not be forced to converge with existing IFRS. But, the large companies would have to harmonise, converge and adopt IFRS as per schedule laid out for it.

Mr. Khursid made it clear that in the next phase, category 2 companies would also have to converge with IFRS because India would usher into an era of financial sector reforms with vigorous speed to ensure it’s financially integration with rest of the world. We cannot afford to miss it and will have to speak world’s language so that India does not lag behind, pointed out Mr. Khurshid.

As regards to NMDFCs authorized capital raise issue Mr. Khurshid said that minorities’ financial inclusion can be achieved to uplift them to intended levels and provide them skills and necessary training by extending them loans. This is one way in which minorities can be given larger financial assistance. It is in view of this that the government has decided to increase the authorized capital of NMDFC.

In his welcome address, ASSOCHAM Vice-President, Mr. Raj Kumar Dhoot emphasized that adoption of fair-value method should be delayed for Indian industry for making it’s balance-sheet. The current practice of making balance-sheet through historical methods should continue, he added.

Among others who spoke on the occasion include Mr. N.P. Sharda, Former President, Indian Institute of Chartered Accountancies and Secretary General, ASSOCHAM, Mr. D.S. Rawat. (editor@thesynergyonline.com)

CIOS MUST DEVELOP WORLD CLOASS MERGER AND ACQUISITION CAPABILITIES

Thesynergyonline Infotech Bureau

NEW DELHI, JULY 07 :
WHILE merger and acquisition (M&A) activity dipped during the recession, it is widely expected to rise again, especially strategic M&As, in which one company buys and integrates another, as opposed to pure financial plays. IT's role is becoming ever-more-critical in ensuring integration success, and Gartner's Executive Programs analysts say CIOs in both the public and private sectors must develop world-class M&A integration capabilities.

Gartner Executive Programs analysts believe that M&As are among the biggest challenges for enterprises and their IT organizations to navigate and that conventional leadership and management techniques often are not enough.

"Reaping the benefits of a merger or acquisition is a notoriously tricky business. There is no established governance body spanning the whole enterprise, there are normally aggressive goals and time frames, and there are often many surprises along the way, as each side learns about the other," said Dave Aron, vice president at Gartner. "On top of all this, the business must continue to serve clients, run operations and execute in the face of major, often disruptive, integration activity, making IT's role in M&As critical."

Mr. Aron explained that IT plays a key role, along with other parts of the business, in five critical M&A integration phases:

The Due Diligence/Planning Phase, in which a basic plan of action is sketched out. In the most successful integrations, integration planning happens concurrently with due diligence and data gathering, with an initial hypothesis that is refined as information becomes available. That integrations must be conducted quickly is a myth. Rather, planning and communication should be conducted as quickly as possible. The speed of integration depends on the context and goals.

The Welcome/Signaling Phase, in which a limited number of visible changes are instituted to signal the new reality that the merged organization brings. Tactics include giving everyone harmonized e-mail addresses, phone accounts and security badges, and moving key people to different physical locations. Important outcomes center on setting expectations, reducing uncertainty and motivating key staff.

The Initial/Commercial Phase, in which the most urgent practical changes are instituted. This initial phase of the actual integration addresses urgently needed outcomes, which vary depending on the nature and goals of the integration.

Common activities include addressing legal and regulatory issues and achieving transparency through integration of financial and management information. Other goals may include presenting one face to the customer and addressing human capital management disparities. Execution risk is highest during this phase, as a high level of personal uncertainty, along with transitional governance and project management, normally exist.

The Main Integration Phase, in which most of the big process and system changes are executed. In this main phase of integration, the pieces of the post integration landscape are put in place over time, in a series of waves.

For absorption-style integrations, it means bringing everything in the target organization onto the parent platform. For best-of-breed-style integrations, it means putting the integration architecture in place.
The Reap-the-Benefits Phase, in which the remaining benefits such as cost synergies or increased market share are harvested and monitored. This phase can also help capture lessons for subsequent M&A activities and other major transformations.

"A good rule of thumb is that roughly 25 percent of a typical M&A integration effort will come from IT, but the time and effort that each phase requires from IT vary significantly," said Mary Mesaglio, research director at Gartner. "For example, a large amount of IT resources is typically needed for a relatively short time in the initial/commercial phase, whereas a smaller, but still substantial, IT effort is needed over a longer period in the main integration and reap-the-benefits phases."

Each phase of integration breaks down into workstreams - with IT representing one workstream, while functional areas and business units represent others. IT also normally has a role in the other workstreams, uncovering their dependencies and coordinating between them.

The IT workstream normally breaks down further into substreams, such as data conversion and end-to-end integration testing. This creates complex areas of activity requiring high degrees of coordination, project management and governance both within IT and with other business workstreams. In enterprises where IT traditionally has strong project and service management skills, IT has an opportunity to play a larger role in the integration.

The different phases of integration may have multiple subphases, or waves - particularly Phases 3, 4 and 5. For example, Phase 3 may have a pilot wave to prove, with minimal risk, that the integration approach works. Similarly, Phases 4 and 5 may be implemented first by geography or by line of business to reduce effort and risk, and to maximize improvement through ongoing learning. Phases may also overlap - especially the due diligence/planning phase, which may continue through Phases 2 and 3.

"M&A integrations are among the most challenging situations that CIOs and their IT organizations will ever face, and they are fraught with risks. However, they also present a powerful opportunity to demonstrate the capabilities and business value of IT, and to stretch the performance of IT team members," said Mr. Aron.

"While successful M&A integration does not rely exclusively on the CIO and IT, they bear a large part of the burden, since integrating people, operations, information and processes requires significant technology investments," he added. (editor@thesynergyonline.com)

BHARAT BANDH PARALYSES ECONOMY

Thesynergyonline Economic Bureau

NEW DELHI, JULY 05 :
THE Opposition- led ‘Bharat Bandh’ almost paralyzed Indian economy on Monday and eroded its national GDP (Gross Domestic Product) by a production loss of nearly a full day which in monetary terms can be roughly estimated at Rs. 10,000 crore, assuming that India’s GDP would stay around Rs. 50 lakh crore with a growth rate of over 8 per cent in current fiscal, feels the Associated Chambers of Commerce and Industry of India (ASSOCHAM).

This is because manufacturing and services in bulk of India remained suspended as the Bharat Bandh call evoked reasonably good response in majority of states, barring Delhi, Haryana, Uttar Pradesh, Jammu and Kashmir, Tamil Nadu and almost entire North-Eastern region, said ASSOCHAM Secretary General, Mr. D.S. Rawat.

The assessment of ASSOCHAM is based on feedback it received from it’s various affiliates in states like West Bengal, Mumbai, Gujrat, Kerela, Karnataka, Punjab, Himachal Pradesh, Madhya Pradesh, Bihar and Uttrakhand which says that economic activities including vehicular traffic came to virtual halt due to Bharat Bandh call.

The movement of goods and natural persons remained largely affected due to Bharat Bandh as public transport became a casualty on account of day-long strike in which major political parties participated, said Mr. Rawat. (editor@thesynergyonline.com) 

CREATE BALANCE BETWEEN ECONOMIC GROWTH AND HABITAT ; SCOPE CHIEF

Thesynergyonline Economic Bureau

NEW DELHI, JUNE 29 :
WITH a view to give impetus to environmental safety and prevention of chemical accidents, Standing Conference of Public Enterprises (SCOPE) organized a two-day Programme on "Environment & Safety - Prevention and Management of Chemical Accidents" here today.

It was inaugurated by Mr. Arup Roy Choudhury, Chairman, SCOPE and CMD, NBCC. Dr. U.D. Choubey, Director General, SCOPE also addressed the inaugural session. The programme is being attended by over 80 senior executives from various public enterprises.

Inaugurating the programme, Mr. Arup Roy Choudhury, Chairman, SCOPE said there is need to create balance between economic growth and protection of natural habitat as it is linked to basic survival of human species.

He said PSEs are cautious and have been taking effective measures to protect environment, control pollution and manage chemical accidents.

They are adopting the latest technologies and monitoring the performance of pollution abatement facilities.

He said that the process of living creates lot of waste and there is need to devise ways and means to see how the waste can be treated, recycled and reused.

He said lot of chemical waste is generated by our industries and they owe a huge responsibility towards society. They should devise systems in a responsive manner and prevent chemical waste as its treatment and neutralization involves huge cost.

Dr U D Choubey, DG, SCOPE, said that people are the largest stakeholders of any corporate. They have high expectations from businesses towards environment and safety. PSEs are giving top priority to the protection of environment and safety of people.
He said while SCOPE has instituted Environment Excellence Award, the MOU carries certain marks for specific targets on safety and environment.

DG, SCOPE said that all the system oriented bench markings like environment safety standards, quality safety standards or health safety standards are recognized at the world level. However, PSEs and other corporates need to go beyond these as it is their duty to pass on safer and greener environment inherited from the forefathers to the future generations. Mr. M.K. Suri, Management Consultant and Mr. A.U. Ghatak, Programme Director also spoke on the occasion. (editor@thesynergyonline.com) 

Thesynergyonline Economic Bureau

 
NEW DELHI, JUNE 28 :
CORPORATE India recorded an increase of over 14 times in their preference for Qualified Institutional Placement (QIP) between calendar year 2008 and 2009 since economic recession eased off and new instrument established its popularity as a great source of funding, say a joint study of SMC capitals and ASSOCHAM.

 According to it, as many as 45 companies including names like Axis Bank, Unitech, HCL Infosystems, Punj Lloyd and L & T made QIPs in 2009 with a total issue size of Rs 32,631 crore as against just 4 companies that made QIPs in 2008 with a total issue size of Rs 2104.43 crore.
 
However, the study name “Qualified Institutional Placement (QIP)” reveals that in 2010 Year to Date (YTD), 11 companies have made QIPs with an issue size of Rs 4298.28 crore with BFSI (Banking, Financial Instruments and Insurance) taking lead in the pack, the study titled “QIC-the flavor of the corporate world” revealed adding that 50 companies were already in the QIP pipeline with valid board resolutions in hand, said ASSOCHAM President Dr. Swati Piramal.
 

Domestic corporate went through a period of cash-flow crunch in the backdrop of global meltdown of year 2008, which lasted upto first quarter of calendar year 2009. However once the recovery commenced from April 2009, the QIP instrument proved to be of a great source of funding for Indian corporates

 The study paper has credited SEBI for creating a highly flexible, timely and effective instrument that is equipped with relatively simple regulatory requirements, beneficial to the issuing companies and investors at large.
 In comparison to an IPO, FPO or any other fund raising mode which take about four to five months, in the case of QIP, everything can be wrapped up in a matter of four-five days. Besides with QIP, investors get guaranteed allotment with no lock-in period and a pricing that is simply the average of the last 2 weeks, said Mr Subhash Chand Aggarwal, chairman and MD of SMC capital. 

ASSOCHAM president, however, pointed out that SEBI’s proactive approach introduced the QIP process in 2006 to prevent listed companies in India from developing an excessive dependence on foreign capital and in the process created a very useful and time effective instrument that made capital investment and capacity build up a much easier task.

 Mr Jagannadham Thunuguntla of SMC Capitals said that staggering amounts raised by Indian corporates via QIP underlines the significance this instrument has gained within a short span of three years, since the concept was commenced in May 2006.
Through QIP, companies can get cash from a few large investors called QIBs (Qualified Institutional Buyers) which are generally large institutional investors who have the expertise to evaluate market offerings and invest large amounts. SEBI, our market regulator has given elaborate directions on who are eligible to qualify as a QIB. (editor@thesynergyonline.com) 
 

Text of the Prime Minister, Dr. Manmohan Singh’s statement prior to his departure for the G-20 Summit in Toronto:

“I am leaving today to attend the G 20 Summit in Toronto at the invitation of Prime Minister Stephen Harper.

The theme of the Toronto Summit is “Recovery and the New Beginning”. The coordinated policy actions taken by the G 20 since the first Summit in Washington in November 2008 have not only helped to prevent a crisis of the type the world saw in the 1930s but also contributed to global economic recovery. This is a sign of the G 20’s success. At the same time, we have to be conscious that the recovery is still fragile and uneven. New worrying signs have emerged in the Euro zone.

The challenge of the Toronto Summit will be three fold - to ensure that global economic recovery is durable, balanced and sustainable; to calibrate exit strategies in the light of growing concerns over expansionary fiscal policies; and to focus on medium and long-term structural issues relating to governance issues. As the Indian economy grows and further integrates with the international system, we have an increasingly direct stake in all these matters. To meet our ambitious development targets it is necessary that the global economy continue to recover in a stable and predictable manner. We need investment and capital flows, as well as an open and rule based trading system that does not succumb to protectionist tendencies.

The Summit is expected to deliberate on a Framework for Strong, Sustainable and Balanced Growth. India will participate in this exercise and project our expectations from the global economic and financial system, and the kind of global growth processes that we seek. We will highlight the importance of development issues in the future work of the G20.

During my stay in Canada I will also hold bilateral talks with Prime Minister Stephen Harper. Our relations with Canada are becoming broad based and there is a mutual desire on both sides to impart fresh vigour and vitality to them. India and Canada share the same values and there are many opportunities for us to contribute to each other’s welfare and prosperity.

I also look forward to having separate meetings with President Nicolas Sarkozy, President Barack Obama, Prime Minister David Cameron, Prime Minister Naoto Kan and to a meeting of the BRIC leaders.”

CALL FOR ADOPTION OF WATER HARVESTING TECHNOLOGY

Thesynergyonline Economic Bureau

NEW DELHI, JUNE 26 :
THE Minister of state for water resources Mr. Vincent H Pala today stressed upon the use of innovative technology in the effective management of water resources in the country, laying special emphasis on rain water harvesting and its benefits.

Speaking at a seminar on “Water: will it run out?” organized by ASSOCHAM here today, Mr. Pala said that sophisticated technology can be utilized to treat sewage and purify water, making it potable for the general population. He cited the example of Israel which has implemented effective storage technology to harness rain water, practically reducing all sorts of losses and ensuring greater self sufficiency.

The minister expressed concern over contamination of soil and ultimately water through undesirable pollutants such as chemicals, fertilizers, arsenics and fluoride used rampantly by industries and agriculturists.

“Over exploitation of ground water by industries, agriculture and general households is also a matter of concern and efforts should be made to curtail this”, he added.

He spoke on the national water mission under which the government has been taking continuous initiatives to minimize losses and integrate water resources and management in the country. The government is trying hard to promote waste water management, re-use of water and rainwater harvesting, he added.

“The National Action Plan on Climate Change has been launched by the Prime Minister in June 2008. Eight National Missions have been envisaged under the National Action Plan which inter-alia, includes a National Water Mission. The objectives of National Water Mission is conservation of water, minimizing wastage and ensuring its more equitable distribution both across and within States through integrated water resources development and management”, he said.

The Central Government has already taken up works related to preparation of feasibility reports or detailed project reports with respect to projects identified under National Perspective Plan for interlinking of rivers aimed at utilizing the surplus flood water by diverting the same to deficient regions, he said.

The Ministry of Water Resources also promotes rainwater harvesting and various means of ground water recharge, he said adding that demonstrative schemes have been taken up by the Central Ground Water Board.

 “All sections of the society have to join hands and contribute to address the challenges in the water sector – be it Central Government, State Governments, Panchayati Raj Institutions, Urban Local Bodies, Industrial Houses, Civil Societies or any stakeholder”, Mr Pala said. Achieving the objectives of meeting the demand for clean water for domestic purpose, developing sustainable infrastructure for irrigation, and ensuring water supplies for consumptive and non-consumptive uses for various categories of industries, are important objectives to be achieved while keeping environmental in mind, he added.

Mr Pala further said there two major challenges before the country: Food security and Climate change but he added, that the issue of water was a central issue that affected all development programs in the country. He also spoke about the adverse impact of climate change on the availability of clean water and said that research based studies should be made to analyze the issue and the reliable data hence used in policy measures.

Mr AK Bajaj, Chairman Central Water Commission said the scale and magnitude of the water problem in India was quite huge and is compounded by centre-state differences, owing to the fact that water is basically a state subject.

“Centre on its own cannot do much and can only provide time-to-time guidelines and financial assistance to the states to ensure optimum utilization of water resources in the country”, he said pointing out that a 1996-97 scheme called ‘Accelerated Irrigation Benefit program’ that focused on  financial assistance to water related programs in state had indeed proved to be a reasonable success.

Mr Bajaj further said that out of the total 4,000 billion cubic metres of precipitation that the country receives every year, unfortunately only 1,133 BCM can be effectively utilized. He said the maximum precipitation took place in the Brahmaputra basin where incidentally the requirement was the least, as against the peninsular areas and western region including Rajasthan where there was serious water deficit.

The challenge, therefore, lay in redirecting the water from surplus areas to deficit areas through effective programs aimed at curtailing this variability. An extensive study has been done in this regard and 30 inter basin transfer links in the country have been proposed but the centre-state cooperation remains a key factor in successful implementation of this program, he said.

Also, we have to build storages in the form of more and more dams and reservoirs which however, invariably meet roadblocks in the form of protests by the local people and the question of their resettlement, Mr Bajaj said adding that hence, ground level storage has assumed importance. “Aquifers in the ground are being used as an important solution to the problem in India, which has one of the lowest storage capacities in the world”, he said.

Delhi Jal Board CEO Mr Ramesh Negi started his speech by saying that water indeed was the biggest concern for every Delhi citizen today. He pointed out that only 45 per cent of Delhi was planned and had authorized construction while the rest of the city comprised slums, unauthorized colonies and resettlement areas. (editor@thesynergyonline.com) 

ORGANIZED RETAIL SHARE LIKELY TO SURPASS 30% BY 2013

Thesynergyonline Economic Bureau

NEW DELHI, JUNE 24 :
ORGANISED retail which presently accounts for close to 4 percent of total market will increase its share to over 30 percent by 2013, offering huge potential for growth in coming years, says a study, 'Indian Retailing-The way forward'.

The study brought by The Associated Chambers Of Commerce and Industry of India (ASSOCHAM), points out that retailing in India is characterized by a high degree of fragmentation with street markets and convenience stores (kiranas) accounting for more than 96% of retail business. There are over 10 million outlets, 96% of them are very small with an area of less than 50sqm.

The organized retail sector with emergence of new store formats is recording phenomenal growth and will completely revolutionize retailing over next 3-4 years. The changing structure and scale of retail will critically impact several industries immediately - the retail industry itself, manufacturing, real estate and in the long term, cascading effects will be felt on tourism, information technology and others.

Releasing its findings, ASSOCHAM president, Dr. Swati Piramal said that impact on brand management and advertising will be huge, even as professionals in sales, marketing, merchandising and promotions will have to cope with radical changes. Through backward and forward linkages, growth of retailing impacts the performance of interlinked sectors such as tourism, manufacturing of consumer goods, recreational and cultural services and agro-based industries.

Key market drivers, fueling retail growth will include rapid economic development of India which will positively influence future of retail industry in India since its economic performance in recent years have given rise to more affluent and demanding set of consumers. Consumers are increasingly becoming brand conscious due to greater exposure to western lifestyle and are another key target for retailers.

With rising income levels, contribution of Indian middle class to retail is likely to increase from existing 20 percent now to over 30 percent in next 3 years. Consumers in this segment are likely to spend a greater part of their incomes on further upgrading and diversifying their lifestyles and moving to higher margins under the age of 25 years. It is anticipated that close to 50 percent of their income would go towards retailing in this age group in future.

The study points out that while price has been a key motivator for many purchases among older generation, this notion is being dispelled by younger generation as they become more ostentatious in their purchasing habits, as this brand savvy urban population is likely to derive demand for lifestyle products such as perfumes, jewellery and watches. Therefore, growing consumerism will be a key driver of over-all retail growth in India, said Dr. Piramal.

According to Chamber's estimates, the organized retail in urban market is expected to grow at the rate of 50 percent to reach a value of 30 percent of the total retail market in India. Currently, the rural organized retail in India is at nascent stage with hardly a value of 2 percent of total organized retail but the industry expects it to grow over 10 percent by 2013.

Retail in India comprises various segments of which food and grocery is the biggest accounting for around 75 percent of total retail trade. In contrast, food and grocery accounts for minuscule proportion of organized retail penetration.

While traditional street markets and kiranas remain the dominant formats, the assault by major retailers like Reliance and Tata into the sector will help to boost the share of sales through the organized route. (editor@thesynergyonline.com)