IamSME of India Circular: Economy faces difficult times, Tread with caution

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FSIA/ IamSME of India e-circular

26th September, 2011
For Private Circulation only

Dear friends,


I. Meeting with Hans Peter Egler, Minister, Govt. of Switzerland


FSIA SCoRE Committee & the members of FSIA Women Entrepreneur Cell met with His Excellency Hans Peter Egler, Hon’ble Minister, the Govt. of Switzerland on Saturday, 24th September, 2011 at Hotel Park Plaza, Faridabad to discuss FSIA & Cluster Development projects for SMEs.

The detailed report attached.

II. 45th MEETING OF ISO/DEVCO, VIGYAN BHAWAN, NEW DELHI, INDIA


The meeting of DEVCO, the ISO Committee on issues relating to developing countries, was held on September 19-20, 2011 in New Delhi, India, and was attended by 276 participants, representing 97 National Standard Bodies, 4 regional and 3 international organizations.

During the opening remarks from the Secretary General of ISO, Rob Steele, he presents the current work of interest to developing countries; the Secretary of DEVCO, Beer Budoo, comment on the progress of the Action Plan of ISO for developing countries 2011-2015.

Mr. Rajive Chawla, President of the Integrated Association of Micro, Small and Medium Enterprises of India (IamSME of India) delivered the Keynote address at the Inauguration. He made a presentation highlighting the interventions on the issue “The quality challenges SMEs face and how international standards help them achieve their business goals.”

Report attached.


III. Meeting with Bankers:

A. Luncheon Meeting with Managing Director, State Bank of India, Sh. A. Krishna Kumar:
FSIA President Sh. Rajive Chawla and  Gen. Secy. Mr. Ravi Vasudev attended the luncheon meeting hosted by MD, SBI, Sh. A Krishna Kumar at New Delhi on 22nd Sep, 2011 and discussed wide range of issues including new challenges to SMEs in the months to come in the backdrop of falling growth rate of Indian and international economy. 

They also discussed about various initiatives taken by The State Bank of India to facilitate the growth of SMEs.

B. Meeting with Chairman, The Nainital Bank:

FSIA President Sh. Rajive Chawla alongwith Gen. Secy. Mr. Ravi Vasudev and Treasurer, Sh.C.J.Sachdeva, met with Sh. D. P. Singh, Chairman, the Nanital Bank Ltd. on Friday, 23rd September, 2011 at Hotel Park Plaza, Faridabad to apprise with the needs/requirements of SMEs in the region and share the views on the pertinent issues.
 
The Chairman of the bank was accompanied for the meeting with the CGM Mr. Mehra and Sh. Deepak, Manager Faridabad Branch.  President FSIA Mr Rajive Chawla and Chairman The Nanital Bank Ltd. discussed wide range of issues including new challenges to SMEs in the months to come in the backdrop of falling growth rate of Indian and international economy. 

They also discussed about various initiatives taken by The Nanital Bank Ltd to increase the facilities and advantages for SMEs especially that of Faridabad. Mr Chairman reiterated his commitment to introduce more business friendly schemes for SMEs and promised to explore more options to provide better services and facilities to its SME clients. He also acknowledged the role of FSIA in promoting bank among the SMEs of Faridabad and expressed his intention to increase the scope of cooperation between FSIA and The Nanital Bank Ltd.

Mr Rajive Chawla expressed his gratitude to the bank for  providing all the support to small and medium enterprises of Faridabad and hoped that the bank will continue to remain their partner of growth in future also.


IV. President FSIA writes:


A. Industry situation to worsen in short term!



I, as SME entrepreneur, am shaken! US Dollar Fluctuation, 3rd increased Fuel Cost this year, 12th Interest rate hike in one and half year, disappointing IIP and “Do nothing New” approach of policymakers. Absolutely shaken inside, though trying to pose all calm outside so as to keep my stakeholders in right spirits.

I am living two lives nowadays. Certainly I am not walking the talk. While in office and at work, I hope and expect others to buy and spend more in the forthcoming festive season starting Navratra (28th Sep) through Diwali (26th Oct) so that the market revs up, economy stirs ahead and we produce more, so we employ more, so we enable more to buy more and therefore conitinue to produce more and more and we all grow more…. at home, I am issuing another drastically opposite advisory… “Buy Nothing New Month” Policy for next two months”.

However, the festive season is early this year. Diwali is on 26th Oct. October has lot of holidays (Gandhi Jayanti, Dussehra, Diwali) which bring manufacturing work to halt- expect at least 7 days production halt through Oct). Post Diwali lull in the market coupled with year closing months of Nov, Dec, may further make the manufacturing segments of automotive markets lacklustre. 

The growing sluggishness in the world economy front is here to persist longer looking at debt problem in the euro area and other advanced economies. Crude oil prices remain high. India is witnessing a slowdown, with the inflation much beyond the comfortable trajectory—lead indicators like IIP decelerating sharply, core industries production growing lesser than expected, manufacturing growth falling and the Wholesale Price inflation inching towards the double digit mark.


Developments in the global economy over the past few weeks are a matter of serious concern. Growth momentum is weakening in the advanced economies as crisis may linger for longer. Although our exports have performed extremely well in the recent period, this trend is unlikely to be sustained in the face of weakening global demand in general and re-emergence of recession in advanced economies in particular. This combined with the slowing down of domestic demand due to rising costs of living such as fuel and energy prices on the one hand and rising costs of money/borrowing costs on the other hand suggests further downside risks to our real GDP growth.



B. TDS (Tax deducted at Source):






Income tax refunds are running at 40% of the collections, which shows that TDS rates for some categories are very high.

Not following TDS rules attracts draconian penalty.

Corporate tax refunds as of 15 September 2011 have reached an all-time high of Rs48,426.20 crore. The gross collection of corporate tax for this period stood at Rs118,489 crore and net collection after refunds at Rs70,062.80 crore. This means that as much as 44% of the money collected as income-tax was on higher side!

Corporate tax collection as of 15 September 2011 (in Rs crore)
Gross collection =  1,18,489.00
Less refunds =  48,426.20 (The refunds given in the 1 April 2011 to 15 September 2011 period relate to collections of the previous year) 
Net collection = 70,062.80

Clearly, the rates of TDS are higher and as can be seen above, almost Rs.50,000 crores are locked in govt. treasury when the Taxpayers could invest in their businesses and grow faster. This must be addressed immediately by reducing the rates of TDS, to unlock the funds so that entrepreneurs can reinvest and bring higher growth to themselves and thereby paying higher taxes the following year.

Businessmen, employers and corporate entities and even individuals doing business do the work of tax collectors by deducting tax at source (TDS) and pay it into the government account. The punishment for violation of TDS rules is draconian. 

The failure to deduct tax at source can entail a penalty equal to the tax amount deductible that has not been deducted. The interest penalty in case of delay is 1% per month of tax deductible. 

The failure to deposit tax deducted at source can invite a penalty equal to the tax amount not deposited. If the individual responsible for deposit of TDS is prosecuted, the punishment is rigorous imprisonment for a period not less than three months and which can be extended up to seven years with a fine. 

Failure to apply for the tax deduction at source account number has a penalty of Rs10,000. 

It is time that the rates of TDS are amended to make them realistic.

C. Insurance woes addressed:

The Insurance Regulatory Authority of India (IRDA) asked insurance companies not to mechanically reject claims on technical grounds, like delay in filing claim documents.

“Rejection of claims on purely technical grounds in a mechanical fashion will result in policy holders losing confidence in the insurance industry, giving rise to excessive litigation,” the regulator said in a communication to life and non-life insurance companies.

Although the policyholders are required to file claims within a prescribed time frame, the IRDA said, “This condition should not prevent settlement of genuine claims, particularly when there is delay in intimation or in submission of documents due to unavoidable circumstances.”

It further said insurers should develop a mechanism to handle such claims with “utmost care and caution”. Insurers, it said, must not repudiate claims unless the reasons of delay are specifically ascertained and recorded. Besides, the insurers should satisfy themselves that the delayed claims would have otherwise been rejected even if reported in time.

We have a special redressal cell at IamSME of India to help our members by advising them and representing them in case of unfair rejection of claims by the Insurance Companies. Write to iamsmeofindia@gmail.com


D. Danger Ahead!

The world economy has entered a “dangerous new phase,” according to the chief economist of the International Monetary Fund. “The recovery has weakened considerably. Strong policies are needed to improve the outlook and reduce the risks.”

“Markets have clearly become more sceptical about the ability of many countries to stabilize their public debt. Fear of the unknown is high.”

Overall, the IMF predicts global growth of 4 per cent for both years. Stronger growth in China, India, Brazil and other developing countries should offset weaker output in the United States and Europe.

V. Single Point Registration with NSIC:

Members are aware that the National Small Industries Corporation Ltd. (NSIC) acts as a nodal agency in the country at the National level to facilitate and support the growth of the MSMEs in the country. There are various schemes evolved by National Small Industries Corporation Ltd. (NSIC) to provide MSMEs the competitive advantage in marketing such as Government Purchase Scheme, Tender and Consortia Marketing Scheme, Raw Material Distribution, Performance & Credit Scheme; B2B enabled marketing support and other support services like skill development etc. A large no. MSMEs have been benefitted by these schemes in the country.
 
You are also aware that Government of India introduced “Single Point Registration Scheme” under Government Store Purchase Programme, where in the Micro & Small Enterprise registered under this Scheme with NSIC are given the facilities/benefits by the Government Departments and its PSUs such as Issuee of Tender set free of cost; Exemption from payment of Earnest Money Deposit; and Waiver of Security Deposit to the Monetary Limit etc. In his regard the Hon’ble High Court of Delhi, recently passed a land mark judgement dated 12.08.2011 in a (WPC) No. 7704 of 2009 in the case of M/s Delkon Textiles Pvt. Ltd. Vs. Ministry of Railways & ors., where in it was held that all the above in terms of circulars dated 28th August, 2000” should be extended to qualified SSI units. M/s. Delkon Textiles Pvt. Ltd. are FSIA Members and they contested against the non-implementation of the Circular issued by the Ministry of MSMEs (earlier SSI), by various PSUs and govt. departments, thereby denying the intended due benefit to MSMEs. With this valuable judgement from Hon’ble High Court of Delhi, the Govt. is reaching out to PSUs, Railways, Defence etc. to implement the govt. circular in letter and spirit.   
 
Further the Director, Ministry of MSME also issued a Circular No.9 (14)/2007-SSI(P)-I dated 08.03.2011 reiterating the instructions to all Central/State Government Departments for extending the facilities/benefits to the MSEs registered with NSIC under its single Point registration Scheme in erms of circular dated 28th August 2000 by Ministry of MSME, Govt. of India. A copy of this circular is also enclosed for your ready reference and dissemination among your MSME members.

Members are advised to avail of the benefits of this Single Point Registration. Please write to us in case of any difficulty.


VI. Institute for Training in Employment & Entrepreneurship (I-TREE): 

  

We are pleased to share that our much awaited Vocational Training Institute’s project which aims at bridging the gap between Education and Employability has started under the name of “Institute for Training in Entrepreneurship & Employment” (i-TREE) with its study centre at the FSIA Secretariate at Sector-24, Faridabad (with subsequent addition of 2 more centres by the year end.

With more than 40,000 Micro, Small  Medium Enterprises in the town and almost about 2,00,000 in the NCR region, the availability of right skilled man-power has always been a bane and the huge gap between the availability and requirement has been long felt. It was couple of years back we envisaged to have our Skill Development Centre. With Germany as benchmark in Infrastructure, engineering excellence and R&D, we couldn’t have a better partner/guide to support us on the expertise and methodology and in the Bavarian-Indian Centre for Business and University Cooperation, Germany we found the most suitable partner.

Subsequent to a series of meetings/discussions with them, finally we signed an MoU with them on 20th May, 2011 to set up a Vocational Training Institute under this Project. Also, Ms. Gisela Mosburger from the Bavarian-Indian Centre is already in Faridabad with us since July and we are working together to identify the right courses (and corresponding German courses) for our vocational training project. Dr. Ms. Gisela Mosburger, PHD, Vocational Programmes, is here from Germany. She is doing detailed study on available skills and level of preparedness of our youth and areas of employability and entrepreneurship as available with industry today and is suggesting programmes & detailed curriculums.


However, in the meantime we have started few courses wherein we have the indigenous expertise available and we had developed the curriculum beforehand.

We’re launching Vocational Trainings in areas where we have immediate placement requirement from industries, like,
1. Basics in HR (ESI,PF, Factory Act Registers), 
2. Basic Tax Compliances (TDS,TCS,Service Tax,Excise Duties,E-Tax Returns,E-payments,VAT), 
3. Shopfloor Supervisors, 
4. Quality Supervisors, 
5. Inventory/Stores Management, 
6. ERP Services, 
7. Bar Coding, Packaging & Logistics
8. ISO implementation Managers etc.


In the next phase, we shall also be introducing other highly specialized Vocational Programmes on Advanced Production Processes, Design & Development, Electricals, Repair & Maintenance of CNC Machines and other programmes which are need of the hour in Advanced Technologies.

 
We’re also launching “Finishing School for Engineers & Engineering students” who wish to enhance their skills and employability, to bridge the GAP between what comes to us and what we actually need.
 

We need full time Project Managers to handle activities.

Immediate Requirement:
1. Founder Principal i-TREE: Experienced, qualified and self-driven Lecturer/ Professor in Technical/ Engineering fields who can help us establish i-TREE.  

2. Project Manager Communications: To independently handle/coordinate/design newsletters, websites, Advertising, PR activities.

Job Profile: PR, Communication, Circular writing/e-mailing, Organizing Seminars/Talks/Events, Coordinating activities, Reporting to Head Quarters,Handle accounts/expenses, Motivate SMEs, Review Progress, Make Presentations, write and edit newsletters etc.

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