Success in my Habit

Thursday, June 21, 2012

Green buildings gain momentum in India

An R&D centre gives back more power than it takes; a residential complex and a hospital have cut power and water consumption by 40-60 per cent. Green buildings are gaining momentum and could account for 20 per cent of all construction by 2030.

If you want a taste of the green building movement in India, there are plenty of interesting places to visit in cities. ZedEarth, a residential enclave being developed about 20 km from the heart of Bangalore, is as good a place as any if your interest is in green homes. This 20-acre enclave is being developed for around 130 villas that do not rely on the external world for basic needs, barring 15 per cent of its power requirements. It does not use deep bore wells but would have sufficient fresh water. No sewage or water or waste is let out of the enclave, except things like old electronic equipment or some recyclable items.

Zed Earth is not sold at a premium. It does not use sophisticated technology either. It uses instead a sophisticated mindset to analyse the finer points of living and save resources. Most of its electricity needs are met by solar panels, and unused electricity is given to the grid. All the water is recycled, bio waste composted, and clinical waste used in 'scientific landfills' inside the enclave. Recycling agencies take care of the rest of the waste. The villas themselves are marvels of low-footprint design, bringing nature inside as much as possible. It restricts water and energy use by nearly 60 per cent of non-green homes.

ZedEarth is built by Biodiversity Conservation India Ltd (BCIL), which had built India's first platinum-rated green home in the city. Set up in 1995, BCIL has remained small and has focused on developing deeplyresearched and intensely-specific homes for different locations. "We consider ourselves pioneers rather than leaders," says its founder-chairman Chandrashekar Hariharan. This is because BCIL's efforts are increasingly being muffled by the din of larger and more ambitious projects now sprouting around the country. According to the India Green Building Council (IGBC), 450 million square feet of green homes have come up in India now. This is apart from the green homes certified by Griha, the agency managed by the Ministry of New and Renewable Energy (MNRE).

The Indian green building movement is now so deep and vast that it promises to change the course of its construction industry. The country has 1.2 billion square feet of green buildings being built or ready, and pre-certified by Leadership in Energy and Environmental Design (LEED), of which IGBC is the representative in India. It has another 105 million square feet of Griha-certified buildings ready or being built. India's total built-up space is 25 billion square feet, and it is expected to increase to 80 billion by 2030. The share of green buildings in this construction boom could be as high as 20 per cent. New cities, such as those coming up along the Delhi Mumbai Industrial Corridor (DMIC), would have a substantially higher green building component. Says Prem Jain, chairman of IGBC: "Since 60 per cent of the buildings that would exist in 2030 are yet to be built, we have a big opportunity to develop environment-friendly cities in the country." IGBC estimates that green building products provide a $100-billion opportunity by 2015.

The country's green buildings span a large variety. They include corporate campuses, residential complexes, R&D units, commercial complexes, universities, hospitals, factories, schools, hotels and so on. The truly environment-conscious aim for nothing less than a platinum rating, and sometimes exceed even all LEED requirements. The government, aided by the National Building Code and energy efficiency laws, has been pushing all builders to confirm to minimum standards in cities and towns. Some municipalities (Pimpri in Maharashtra is an example), seeing the reduced need for services in green buildings, now offer incentives in the form of lower taxes. New campuses of the Indian Institutes of Science Education and Research (IISER) are being developed as zero waste campuses. The green building movement has penetrated even slums, as is evident from the slum rehabilitation at Lonar in Maharashtra. Says Priyanka Kochhar, programme manager of Griha: "We develop ratings for green buildings right from slums to large multistoried complexes."

Noida near Delhi is one of the nodes of the green building movement. The builder 3C was an early mover. 3C built what was the country's largest green apartment complex. Called Lotus Boulevard, this was planned as a 500-unit complex, but all of it was immediately sold out and the enclave ended with 3000 units. The success of this project and some incentives by the Uttar Pradesh government have led to a rush of green building development in Noida. None of them is probably more impressive than the Bayer ECB Centre of Excellence. It claims to have bagged highest number of points in its LEED certification process, making it the greenest LEED certified building in the world.

The building is the R&D centre of Bayer Material Science. It is inside a larger campus of Bayer, with buildings that are attached to it electrically. The R&D centre, which has solar panels, draws power from the other building at night but gives it back during the day. Last year it gave back more than it took, thus making it a net-positive energy building, but Bayer claims it to be only a net-zero energy building. "We have ensured that we get segment-wise energy consumption data from each part of the building," says Ram Sai Yelaminchili, head of the centre. "That helps us monitor and control energy consumption efficiently."

The R&D centre becomes a net zero energy building not by generating a lot of electricity but by incorporating features that are now becoming common in many platinum-rated green buildings in the country. It uses natural light during the day, and through good design - that uses a mixture of wall and glass - and orientation ensure that light gets through without heat. High quality foams insulate the building, making sure that heat is not let in during summer and not let out during winter. "It does not need very high technology to make a building energy efficient," says Jain. But high technology helps sometimes, and ingenuity helps even more than technology.

Take the Beary Golden Research Triangle (BGRT) in Bangalore, a name inspired by both the triangular nature of the land and the Research Triangle in North Carolina. This building, when ready for occupation in four months, would be let out mostly to R&D units of companies. Two major multinational companies have taken up space for global R&D centres. BGRT has been pre-certified as a platinum-rated building - the final certification is usually given after the construction is complete and occupants have moved in - and it has design features that will become common in many large buildings across the country.

Visitors would note from a distance the unusual alignment of the building. It slopes on one side, thus keeping out direct sunlight till late afternoon. The glazing lets light through but not heat. The air-conditioning is extremely efficient; the outgoing air partly cools the incoming air without mixing, and water cools it further and minimizes the energy consumption. It is designed to use air from outside for cooling when outside temperature is below a certain level, a feature that is very useful in the salubrious climate of Bangalore. Says Syed Mohammed Beary, chairman of the Beary Group: "This is the first time a private developer has built a platinum-certified commercial R&D space."

Such features are part of many buildings certified by LEED or Griha. Technology comes in handy too, especially in large corporate offices. You could have the most energy-efficient lighting in the world, but leaving the lights on all the time defeats the original purpose. In the year 2008, a study commissioned by the US non-profit New Buildings Institute showed that some green buildings do not save energy as much as planned. Many green buildings now avoid this problem by becoming smart. "Smart technologies are necessary to minimise energy consumption," says Sandeep Dave, principal of Booz & Company, who studies smart buildings in the country.

Many green buildings now use Intelligent Building Management Systems (IBMS) to optimise energy consumption. "IBMS is not just about controlling the entry and exit of people," says Srimanikandan Ramamoorthy, assistant vice-president of administration at Cognizant, who is overseeing the development of a large green campus in Chennai. In three other gold-rated campuses in the country, Cognizant has reduced per capita carbon dioxide emissions by 35 per cent and energy use by 34 per cent. "Many buildings are over-optimised," says Honeywell Automation India managing director Anant Maheswari. "IBMS can save 20-30 per cent of energy used." Honeywell and other IBMS companies have been involved in a large number of green buildings in the country.

While smart technologies are useful, smart strategy works even well after certification. That is how Kohinoor Hospital in Mumbai, Asia's only LEED-certified and platinum-rated hospital, slashed its electricity bills by a third, its water taxes by a fourth and substantially increased patient footfall after certification. "When we save on water and electricity costs, these benefits get passed on to patients who pay less for their treatment," says Rajeev Boudhankar, vice president of Kohinoor Hospital. Because of the nature of their business, which requires round-the-clock operation, hospitals find it hard to get LEED certifications.

"You are open day and night, running facilities that are highly energy-consuming," says Sandeep Shikre of SSA Architects and IGBC member. This puts tremendous pressure on your power resources." The IGBC also awarded points to the hospital for some of its human resource initiatives, like encouraging employees to car-pool to work and limiting the total parking area to only 10 per cent of the plan.

Such extensions of the green concept are not uncommon in other green buildings. Wipro, which has the largest number of LEED-certified office campuses in the world, has now started looking 20 years ahead and merge its building futures with the master plan of the area. Its aim is to build an ecological plan that fits with the master plan. "We are linking sustainability across the supply chain," says Hari Hegde, Wipro's global head of operations. It is now studying the impact on the surroundings of a Bangalore campus that is being built. Companies now want to see how their campuses influence the life around them. Being green is acquiring a new meaning, which will drive the growth of sustainable cities.

RBI issues norms for non-bank entities to set up ATMs


Mumbai: An ATM at every nook and cranny may become a reality in a couple of years.

The Reserve Bank of India has issued final guidelines permitting permit non-bank entities to set up, own and operate ATMs in India. This is to ensure the expansion of ATMs in smaller centres across the country.

The ATM roll-out conditions stipulated for the non-bank entities, which will be christened as white label ATM operators (WLAOs), are stiff. It has prescribed three schemes under which the roll-out of white label ATMs (WLAs) can happen.

Three schemes
Under the first scheme, WLAOs have to install at least 1000 WLAs in the first year; in the second year install at least twice the number installed in the first year; and in the third year install at least thrice the number installed in the second year.

Under the aforementioned scheme, for every three WLAs installed in Tier III to VI centres, one WLA can be installed in Tier I (metros) to II centres (big cities).

Under the second scheme, WLAOs have to install at least 5000 WLAs every year for three years. For every two WLAs installed in Tier III to VI centres, one WLA can be installed in Tier I to II centres.

Under the third scheme, WLAOs have to install at least 25,000 WLAs in the first year and at least another 25,000 in the next two years. For every one WLA installed in Tier III to VI centres, one WLA can be installed in Tier I to II centres.

What is common under the three schemes is that out of the WLAs installed in Tier III to VI centres, a minimum of 10 per cent should be installed in Tier V and VI centres.

No switchover possible
The RBI has stipulated that no switchover of schemes is permissible. The date for determining the time line for implementation would commence 30 days after issuance of the authorisation.

Non-bank entities intending to set up WLAs may approach the RBI within four months from the date of issuance of these guidelines, beyond which the authorisation-seeking window will be closed.

Only cards issued by banks in India (domestic cards) will be permitted to be used at the WLAs in the initial stage

The RBI observed that although there has been 23-25 per cent year-on-year growth in the number of ATMs (over 90,000 currently), their deployment has been predominantly in Tier I and II centres.

The regulator said that there is a need to expand the reach of ATMs in Tier III to VI centres. In spite of banks’ pioneering efforts in this direction, much needs to be done. Hence, the need for WLAs.

Indian drug outlook favourable: ICRA & Moody's

Ahmedabad: Outlook on the Indian pharmaceutical industry remains favourable, says ICRA & Moody report released on Wednesday. Domestic formulation market grew by 13-16% per annum in last five years.

According to the report, domestic formulation market size stood at Rs 58,300 crore, ranked third in terms of volume and tenth in terms of value, globally. The domestic growth was driven mainly by expansion in volumes and new introductions. Lifestyle-related disorders are driving growth at faster pace in chronic segments along with increasing healthcare spending.

Product patent regime was not a major constraint currently, as companies have however, not been affected as existing products continue to exhibit extended life cycle and companies continue to launch novel combinations to support growth. Lastly, limited number of products have been launched under patent protection in India. Compulsory licensing route also provides faster access to market

However, domestic companies will face challenges and competition from regulatory driven price cuts, smaller players aggression and MNCs generic majors are setting an eye on the $12-13 billion market growing at 14-15% per annum.

From 2011, trends are changing, MNCs has stepped up their focus on the Indian market as they are pursuing a comprehensive strategy. They are focusing on chronics, branded generics and launching patented products from portfolio of parent companies. Expanding their field force and focusing on Tier -II as well as Tier - IV towns. Domestic market grew at 15%, while MNC pharma revenue grew at 18.7%.

For Indian companies eyeing US generics market, seven out of the top 20 innovators products will face generic competition in 2012 with $35 billion in value. Key products losing patent protections in 2012 include - Lexapro, Geodon, Seroquel, Plavix, Tricor, Singulair and Actos. Branded drugs worth $70 billion are likely to loose patent protections between 2013-17, the report indicates.

Malaysia and India bi-lateral trade at an all time high


The growth in the merchandise trade between Malaysia and India has reached an all-time high, with over US$10 billion worth of trade transacted for the year 2011. Total trade between Malaysia and India for 2011 was US$12.54 billion, an increase of 40% compared to US$8.98 billion in 2010. This impressive growth has been predominantly attributed to the burgeoning economies of both nations and the strengthening of bilateral trade between the two countries.

Beginning with an exponential rise in the tourism, the relationship between the two countries has been further enhanced, opening new avenues for Malaysia and India to benefit mutually from each other's economies. Over the past 10 years, trade between Malaysia and India has seen a healthy average growth rate of over 15.6% p.a.

In spite of a slowdown in the global trading scenario, Malaysia has shown signs of rapid growth, recording a total trade value of US$415 billion in 2011 - the highest ever achieved. For the 14 thconsecutive year, Malaysia has recorded a trade surplusfigure of US$39 billion - a growth rate of 9.4% for the year 2011. The merchandising trade has registered an impressive growth of 8.7% p.a. with exports from Malaysia growing to US$226.98 billion, while imports recorded a figure of US$187.66 billion - an 8.6% rise. This notable feat is at par with other developed countries in the region, like Singapore and ROK, which have registered similar records.

According to the World Competitiveness Yearbook 2011 Report by the Institute for Management Development (IMD), Malaysia has been ranked among the Top 5 countries in terms of international trade, after Singapore and Hong Kong. Malaysia has now surpassed most of the developed countries such as the USA, Switzerland, Australia, Canada and the United Kingdom, in terms of international trade

Leaders agree policies must shift to boost growth: PM


Los Cabos: India today said the heads of G-20 nations agreed policies in these countries must target growth. It also expressed satisfaction on the fact that the leaders agreed to India’s appeal to augment resources of multi-lateral development banks to fund infrastructure needs in developing and poor countries.

Prime Minister Manmohan Singh said, “My overall assessment of the meeting is there was a general agreement that policies in all countries must shift to strengthening growth. There are many things that have to be done to achieve this. There was also a general agreement that the most urgent problem we must tackle is reducing uncertainty about the Euro zone.”

He said the G-20 summit was held amid very difficult circumstances. “Faltering growth in most countries was overshadowed by the threat of uncertainty in the Euro zone, arising from a combination of excessive sovereign debt and banking weakness. The summit provided a very valuable opportunity for G-20 leaders to share their concerns.”

The prime minister said the Los Cabos Declaration fully reflected India’s demand that infrastructure investment in developing countries could play a major role in stimulating a global recovery. The declaration indicates multilateral development banks should be strengthened for this purpose. “We would work with G-20 countries to transform their commitment to specific action,” Singh said.

At the opening of the summit on June 18, Singh had suggested resources of multi lateral development banks be enhanced for lending to infrastructure needs of both poor, as well as developing countries to stimulate growth there, as the Euro zone crisis had choked capital inflow into these nations.

He said Euro zone leaders had assured other G-20 countries they were committed to protecting the integrity of the Euro zone. “They recognise the need to move beyond the present monetary union towards unified banking supervision and adoption of common and enforceable fiscal rules,” he said.

However, this would be a gradual process.” Making changes in treaties involving 17 parliaments (for the Euro zone) and 27 (for the European Union) is a time-consuming process,” Singh said.

Euro zone leaders indicated a strong commitment to take whatever action was needed to protect the Euro area, as long-term institutional structures were built, Singh said, adding they would be able to give more specific indications after the European Summit.

He added India’s contribution of $10 billion to the International Monetary Fund reflected its recognition of the fact that it should play its part as a responsible player in the global community.

The IMF has assured contributors it would be available whenever needed, he said, adding, “It will, therefore, continue to form part of our reserves.”

Many leaders had also emphasised the importance of accelerating governance reforms in the IMF, including a change in the quota formula to reflect economic weight, he said.

He added the summit also reiterated the stand against new protectionist measures.

“This is an important statement of intent by G-20 leaders to resist protectionist tendencies, which, typically, increase in periods of high unemployment and low growth,” he said.

Wednesday, June 20, 2012

Diabetes, skin care will hold key for drug makers' growth: Credit Suisse


Mumbai: The next round of growth for Indian pharma companies will be driven by the fastest growing molecules in the diabetes, skincare and eye care segment according to a report by research firm Credit Suisse.

The market share of a drug company is directly related to the number of fast growing molecules in the company's pipeline, the report said.

"Every company wants to be present in the fastest-growing and high-margin molecules and launching products in the high growth segment in India is not difficult. However, in our view, execution on high growth molecules holds key" said Anubhav Agarwal, research analyst Credit Suisse in the report titled 'Does bottom analysis matter?'

According to the report 15% of sales of Indian drug makers is driven by molecules which are growing at less than 5% , and 1/6 thof sales are contributed by molecules that are growing at more than 30%, these are primarily the diabetes and cardiac products.

Credit Suisse is betting on the diabetes therapy that would play significant role in pushing the company's revenues. It says that half of diabetes segment in India is growing is a rate of 30% with maximum chunk of revenue coming from the high growing molecules. This is followed by dermatology where 70% of sales come from molecules that are growing above 15% followed by eye care molecules.

The report has given a buy call on Sun Pharma, Lupin and Glenmark, as according to the firm these companies have the best overall portfolio in the fast growing segments.

BhartiSoftBank ,Yahoo! Japan tie-up to provide mobile internet


New Delhi: BhartiSoftbank (BSB), a 50:50 joint venture (JV) between Bharti Enterprises and SoftBank, on Tuesday partnered with Yahoo! Japan for developing mobile internet portal for the Indian market.

The companies have formed a JV company christened BSY Pte Ltd for this purpose. The new company would combine Bharti’s Indian market with SofBank group’s (Japan) experience in internet portal space.

BSB was launched in October 2011 to focus on mobile internet in India.

“This will be an important piece in our strategy to drive the uptake of mobile internet and data services,” Mr Kavin Bharti Mittal, Head of Strategy & New Product Development, BSB said.

Yahoo! Japan, with over 84 per cent internet users using it, has largest user base on mobile in Japan driven by its mobile internet portal.

“The Indian market will see growth of data usage on mobile. Through this partnership we hope to contribute to enhance people’s lives through mobile internet,” Mr Shin Murakami, Chief Mobile Officer of Yahoo! Japan said.

Tommy Hilfiger on expansion spree in India; other retailers entering the market through joint ventures


New Delhi/Bangalore: American apparel-maker Tommy Hilfiger plans to add 500 stores in India over the next five years to capitalize on the brand's surging popularity, the company has told the Department of Industrial Policy and Promotion (DIPP), the nodal agency that clears such foreign investments.

Tommy Hilfiger Arvind Fashion Pvt Ltd, a 50:50 joint venture between the US premium lifestyle brand and Ahmedabad-based Arvind Ltd, will invest Rs 60 crore in 45 company-owned stores; a significant number of the stores will be opened through franchisees, according to a foreign investment application filed by the company and reviewed by ET.

Currently, Tommy Hilfiger operates 58 franchisee outlets and over 60 shop-in-shops in other department stores. The expansion will take Tommy Hilfiger's presence to 631 points of sale by 2016-17.

Both partners will invest Rs 15 crore each, whilst Rs 30 crore will come from the company's internal accruals, the alliance said in its application to the DIPP.

"Engaging in retail operations directly would enable the applicant company to set up retail stores in locations all over the country including in those which at present are found commercially unfeasible by our franchisee partners," the application said.

"The company will announce its concrete plans in due course," Jayesh Shah, director & CFO of Arvind said, without commenting on specific queries.

A year ago, Tommy Hilfiger had bought out the 50% stake of the Murjani group in a joint venture called Arvind Murjani Brands, which owned the franchisee rights for the American brand in India. The Murjani group held the Tommy Hilfiger trademark licence in India.

In 2011 the JV applied to the Registrar of Companies for a change of name from Arvind Murjani Brands to Tommy Hilfiger Arvind Fashion with an authorized share capital of Rs 20 crores. Now, the alliance has filed an application with the DIPP seeking approval to open Tommy Hilfiger branded stores in India via the window for single-brand retailing.

Tommy Hilfiger Arvind Fashion is bullish on India as the brand has shown "robust financial performance" over the years and clocked total sales of Rs 80 crore for the fiscal year ending March 2011. Revenue is expected to have swelled four times to Rs 320 crores for the fiscal year ended March 2012, the documents filed by the company to the DIPP said.

Nearly 17 per cent of the $40-billion Indian apparel market is organised, management consulting firm Technopak Advisors estimates.

The $4.6-billion Tommy Hilfiger, a unit of PVH Corp, also owns brands such as Calvin Klein, Van Heusen (the Indian rights are owned by Madura Fashion & Lifestyle), and operates more than 1,000 stores in over 90 countries in North and South America, Europe, Asia Pacific among others.

Tommy Hilfiger has been one of the early movers among international lifestyle brands, having entered India in 2003. "It has stayed away from much discounting and created a loyal following across metro cities," Arun Sirdeshmukh, former CEO of Reliance Trends and co-founder of portal Fashionara, says. "But given their premium positioning it remains to be seen if there is a market for an additional 500 stores," he adds.

Meantime, in a separate DIPP application, French fashion brand Promod SAS has filed for a 51 per cent stake in a joint venture with local Modex Trading Pvt. Ltd. Modex is co-owned by Tushar Ved, the promoter of Major Brands, which currently owns Promod's franchisee rights in India.

Retail analysts say the brand had low recall value before it launched in India and a limited footprint, which is slated to change with the JV. "Promod has done fairly well in India also on the back of its mall locations, being a part of Major Brands' portfolio that includes Mango, Charles & Keith and Aldo," a rival retailer, said seeking anonymity.

The four-decade old brand, which claims to refresh its collection with 100 new products every two weeks, competes with women-centric, trendy brands such as Zara, s.Oliver and Esprit.

Incidentally, Madura Fashion & Lifestyle (MF&L) too is in the process of converting the distribution agreement it signed with Esprit in 2005 into a joint venture. "We have been in talks with Esprit and are trying to fine-tune things," Ashish Dikshit, CEO of MF&L said, without divulging details. "Our approach is to look for deep and long-term alignments," he added.

A study by management consulting firm Booz & Co revealed that around 100 multinational retail & consumer companies had entered India between 1990 and 2010. As many as 86 companies entered before 2009, and a little over a fifth of this lot (or 18 companies) changed their partnership model.

"Over the past few years, consumer brands that had followed the low-risk and low-return model through franchisees and distribution agreements, have gained confidence in the market and increased commitment," Raghav Gupta, principal at Booz & Co, says. Take for instance, UK-based retailers Clarks, and Marks & Spencer, which extended their distribution or franchise agreements into joint ventures with Future Group and Reliance Retail respectively.

India's economic outlook is positive: Zinnov

Zinnov Management Consulting, a market globalization Advisory firm, today presented a positive & robust outlook on the Indian economy as opposed to the sentiments that are doing rounds in the industry. In a striking contrast to Fitch's recent downgrade of India's credit rating outlook to negative, Zinnov believes this to be a momentary phase and showcased reasons for it to be a promising decade.

Praveen Bhadada director (market expansion) Zinnov said, India is no longer an emerging market but a happening one, where such market ups and downs should be acceptable. Both multinationals as well as Indian companies aspiring for growth should continue to take focus on the long-term view, with which they established their presence in country.

"While quarterly numbers are important, it is also equally essential to focus on market creation activities and opportunity realization to reap benefits in the next five-year horizon. With the rapidly growing internet and mobile user base and increasing demand for services through new technology challenges, investors should not be deterred by a temporary phase when the fundamentals continue to remain strong," he added.

Showcasing and listing some of the strong reasons why various spokes of the ecosystem need to keep faith in these turbulent times, Zinnov brought to light some of the factors on which, we should be betting high on:

India technology consumption is exploding:India currently has over 123 million internet users, over 600 million people use mobile phones, 15 million people do online transactions and over 51 million people log on to Facebook. Over 170 million UID numbers have already been allocated to Indian residents. The $30 B+ domestic IT market is growing at a much faster rate than the exports market. India is already seeing $B+ start-ups emerging. E-commerce market is expected to reach $23 B+ in the next 4 years. Cloud computing is expected to see revenues of the order of $5 B in the next 5 years.

GST implementation will accelerate economic growth:While GST implementation has been long delayed, but once implemented, GST is expected to increase India's GDP by 0.9% to 1.7% as per NCAER. This will also result in export gains of 3.2-6.3% and import gains of 2.4-4.7%. GST along with FDI in retail segment will increase the FMCG industry size by $50 Billion.

Indian MNCs and vast base of SMBs will be impossible to ignore:61 Indian companies feature in the Forbes list of top 2,000 global companies. Over 175 companies can potentially feature in the list by 2020. India also has 45 million SMBs, making India the second-largest country in terms of SMB potential, next only to China.

Large states in India are already booming: India's top 5 most populous states can hold the combined population of Brazil, Mexico, Philippines, Vietnam and Egypt. Maharashtra's GDP is equivalent to that of Singapore. GDP of states such as Delhi, Bihar, Chattisgarh, and Goa has grown over 10% in FY12. Over 2,700 investor MOUs were signed in Gujarat in just one day as part of the global investors' summit in 2012.

Govt to promote IT SEZ in smaller towns

New Delhi: The government is likely to announce incentives to promote IT-related export hubs in small towns as part of its effort to woo back investors to special economic zones.

The commerce ministry is amending the rules for special economic zones (SEZs), which have become unattractive to investors following imposition of minimum alternative tax (MAT) and dividend distribution tax (DDT) in 2010-11. Earlier, SEZs were exempted from most levies.

While SEZs across sectors will benefit from the new rules, IT SEZs stand to gain the most as their contribution to exports is more than that of others, an official said.

"As IT accounts for more than a fourth of the exports from SEZs, the reforms will have a special dispensation for the sector," the official said, adding, "It would streamline incentives in a way that it encourages such zones to come up in tier-II and tier-III cities."

After imposition of MAT and DDT, growth in exports from SEZs slowed to 15.4% in 2011-12, from 43.1% in 2010-11 and 121% in 2009-10.

The proposals being considered include a sharp reduction in the mandatory minimum area requirement for different categories of SEZs, easier norms for building social infrastructure like schools, shopping complexes and residential blocks in SEZs in smaller cities, besides relaxation in vacancy and contiguity or continuity norms that have often proved to be hurdles for proposed zones.

The government may also allow broadbanding of sectors, which will allow ancillary units to come up in sector-specific SEZs. To factor in more certainty for investors, the government is also planning to issue clarifications in advance on investment and regulatory issues.

"Investors got a jolt when the finance ministry decided to impose minimum alternate tax and dividend distribution tax on SEZs in 2011, as the investment decisions had been taken keeping the initial tax-free status in mind," the official said.

The incentives, however, will mostly be aimed at simplifying rules for setting up SEZs and not have any direct revenue implications. "The revenue department has made it clear that it does not want to take on additional financial burden. We respect that and are ready to stay within the mandate specified by the SEZ Act," the official said.

Interestingly, the revenue department had given a list of objections to the proposed changes, many of which the commerce department has chosen to ignore. However, experts say the SEZ Act gives the commerce department enough powers to make significant changes in rules.

"The SEZ Act allows the government to make amendments, either for all or a particular class of zones, and it can come out with notifications on provisions that it finds appropriate," said Hitender Mehta, co-chairman of industry body Assocham's SEZ council. Plans are afoot to simplify contiguity or continuity norms, which often require developers to build infrastructure to by-pass public structures.

"IT SEZs need not have the same nature of physical fencing as required for a manufacturing SEZ. Even for manufacturing SEZs, contiguity issues can be examined on a case-to-case basis," the official said.

Several developers in the country have already written to the government for relaxation in these rules.