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Guidelines for Small Business Cluster Development Programme Approved

On 27th May 2022 the government approved the revised guidelines of its key scheme for cluster development, “Micro and Small Enterprises-Cluster Development Programme (MSE-CDP)”. The guidelines shall be implemented during the 15th Finance Commission cycle (FY22-FY26). 

The scheme aims at enhancing the competitiveness and productivity of micro and small enterprises by undertaking specific interventions.

These guidelines of MSE-CDP encompass, inter-alia, the procedure and funding pattern for the following admissible components:

  1. Common Facility Centers (CFCs)
  2. Infrastructure Development
  3. Marketing Hubs/Exhibition Centres by Associations
  4. Thematic Interventions
  5. Support to State Innovative Cluster Development Programme 

Additionally, the central government’s grant for the development of Common Facility Centres (CFCs) shall be restricted to 70 per cent of the cost of the project from Rs 5 crore to 10 crores and 60 per cent of the cost of the project from Rs 10 crore to Rs 30 crore.

Further, in the case of north-east and hill states, island territories and aspirational districts, the government’s grant will be 80 per cent of the cost of the project from Rs 5 crore to Rs 10 crore and 70 per cent of the cost of the project from Rs 10 crore to Rs 30 crore. 

It has also been envisaged that the central government grant will be restricted to 60 per cent of the cost of the project from Rs 5 crore to Rs 15 crore for the setting up of new industrial estate/flatted factory complex. The grant will be 50 per cent of the cost of the project from Rs 5 crore to Rs 10 crore for the upgradation of the existing industrial estate/ flatted factory complex.

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SEBI: Risk Management Framework for Options on Commodity Indices

SEBI, vide Circular no. SEBI/HO/CDMRD/DNP/CIR/P/2022/34 dated March 24, 2022, permitted the recognised Stock  Exchanges having a Commodity  Derivative segment, to introduce options on commodity indices.

The said framework has been formulated based on the recommendation of the Commodity Derivatives Advisory Committee (CDAC) and proposal from Stock Exchanges. The circular mandates the recognised Stock Exchanges with a Commodity Derivative segment, willing to introduce trading in options on commodity indices to take prior approval of SEBI for the same.

Further, such Stock Exchanges are directed to submit the data index of at-least the past three years constructed along with data on monthly volatility, rollover yield for the month and monthly return while seeking approval from SEBI.  

On approval, the Stock Exchange shall publish the above data on their website before launching the contract. Additionally, the Stock Exchanges have to make requisite disclosures, such as the open interest of top 10 largest participants/group of participants in “option in indices” (both long and short) and the details of their combined open interest in underlying constituents, etc., in line with SEBI Circular No. SEBI/HO/CDMRD/DNPMP/CIR/P/2019/08 dated January 04, 2019, regarding “Disclosures by Stock Exchanges for commodity derivatives”.

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Draft Notification to Formalize Movement of Foreign Personal Vehicles Released

On 16th March, 2022, the Ministry of Road Transport and Highways (MoRTH) issued a draft notification which proposes to formalise the movement of personal vehicles registered in other countries when entering or plying in Indian territory. Under the Inter-Country Non-Transport Vehicle Rules, foreign vehicles operating in the Indian territory are mandated to carry a valid registration certificate.

Such a vehicle is also required to carry a valid insurance policy, driving licence or an international driving permit and a pollution under control certificate (if applicable in the country of origin). The notification states that, “All the documents shall be in the possession of the person driving the motor vehicle at the time of entering India and during the entire period of stay and shall always be available for inspection by the respective competent authority to inspect a passenger vehicle.”

Further, if the documents are in a language other than English, then an authorized English translation of the document which duly authenticated by the relevant issuing authority has to be carried along with the original documents. The Rules also seek to make it mandatory for vehicles with non-English registration marks to show the unique identity of the vehicle in English, at the front and back.

Additionally, the Rules also state that motor vehicles registered anywhere other than India are not permitted to transport local passengers and goods within the Indian territory. Such vehicles are also required to comply with the rules and regulations under Section 118 of Motor Vehicles Act, 1988 of India.

News

Government Brings Clarity to the FDI Policy

On 14th March, 2022, the government released a Press Note issuing clarification and amendments to certain provisions of the Consolidated FDI Policy of 2020.

One of the significant changes was introduced to the definition of the ‘real estate business’ under the Policy. To bring more clarity in its FDI policy for the realty sector it has been clarified that FDI shall not be permissible for an entity that is engaged or proposes to engage in real estate business, construction of farm houses and trading in transferable development rights. Additionally, earning of rent/income on lease of a property, not amounting to transfer, shall not amount to real estate business.

The note stated that “Real estate business means dealing in land and immovable property with a view to earning profit therefrom and does not include development of townships, construction of residential /commercial premises, roads or bridges, educational institutions, recreational facilities, city and regional level infrastructure, townships…”

The Press Note has also issued changes to the rules governing the acquisition of shares under the Scheme of merger/demerger/amalgamation.

Where a scheme of compromise or arrangement or merger or amalgamation of two or more Indian companies, or a reconstruction by way of demerger or otherwise of an Indian company …the transferee company or the new company, as the case may be, may issue capital instruments to the existing shareholders of the transferor company resident outside India.” However, the same shall be subjected to certain conditions.

The Press Note has also issued clarifications and changes to the definitions of ‘Capital’, ‘Convertible note’, ‘Foreign Investment’ and ‘Indian Company’ under the existing FDI Policy.  

News

Draft National Policy for MSMEs Notified

The draft national policy for MSMEs was notified on 2nd March, 2022. It aims to address pressing sectoral issues in the areas like intergovernmental roles and responsibility, legislation and regulatory framework for MSMEs in India, access to finance, technology upgradation/adaptation, skill development, knowledge management, ease of doing business, development of MSME Code and exit code. The objective of the draft policy is to create a robust framework for affordable technology upgradation and sustaining a conductive environment that proffers ease of doing business for MSME with a competent exit code.

The action areas were identified following the observations by KV Kamath Committee in 2015, One Member Committee report by former cabinet secretary Prabhat Kumar in 2017 and RBI Committee and Working Group report in 2019.

The Draft Policy observed that, “the MSMED Act does not provide any moratorium from seeking approvals/inspections which becomes a barrier in the ease of doing business for MSMEs. There is a need to suitably relax the process. Accordingly, a set of modification is required to ensure – Production First & Permission Later.”

Intergovernmental Role and Responsibility: Identifying the existing friction of work that the intergovernmental system created for MSMEs at the central, state and local levels. The policy has recommended a host of guidelines for each of these to encourage better coordination between the bodies and merge the gaps that intergovernmental systems often create.

Legislation/Regulatory Framework for MSMEs in India: From the MSME Development Act to state MSME policies, the draft has identified segments that demand simplification of the existing regulations for the MSMEs. These include dispute resolution within 90 days, a streamlined and seamless registration process, structuring a simplified winding up framework for MSMEs etc.

Access To Finance: The policy suggests that the loan application process and forms should be made simpler for MSMEs. Further, they should be encouraged to obtain Zero Defect Zero Effect (ZED) Certification from QCI which shall aid banks to extend credits and other key measures that could help MSMEs improve their credit capacities.

Technology Upgradation: The draft has recommended the establishment of Centres of Excellence with specialised staff to periodically study issues faced by MSMEs and build capacity through SOPs, and develop tech-enabled skill sets.

Skill Development: The draft has observed a pressing need to converge skill development schemes by the government at the district level, of different ministries such as NULM of Ministry of Housing and Urban Affairs, NRLM of Ministry of Rural Development, schemes of Ministry of Skill Development etc. to promote a holistic and skilled human resource development for the sector.

Knowledge Management: The draft has recommended developing varied innovative strategies to connect suppliers with buyers both national as well as international, at the district, state and central level.

Ease of Doing Business: The draft also recommends providing an all-encompassing legal help to micro-enterprises, linking trade clusters and MSME centres, and a state-level helpline and national level chat services.

Exit Code: As per the Draft, MSMEs should be aligned with the Fast Track Corporate Insolvency Resolution Process under the provision of Insolvency and Bankruptcy Code, 2016 to establish a seamless winding-up process for MSMEs.

 

News

India Bans Import of Drones

With the objective to boost the ‘Make in India’ scheme, the government has banned import of foreign manufactured drones with an exception of those required for the defence, security and R&D purposes. It is pertinent to note that, import of drone components shall be permitted as before, without the requirement of prior approvals.

As per the Rules, import of drones by government entities, educational institutions recognised by central or state government, government recognised R&D entities and drone manufacturers for R&D purpose shall be allowed in CBU, SKD or CKD form. The said exception is subjected to import authorisation issued by DGFT in consultation with concerned line ministries.

Additionally, import of drones for defence and security purposes shall be allowed in CBU, SKD or CKD form that shall be subject to further import authorisation issued by DGFT in consultation with the concerned line ministries.

 

The notification which was released on 9th February 2022 is scheduled to be implemented with immediate effect.

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Rules governing Vehicle Fitness Certification amended

The Ministry of Road Transport and Highways issued a draft notification on 2nd February 2022 that further amended the Central Motor Vehicles Rules, 1989. The proposed rules make Vehicle Fitness Certification mandatory only via an automated testing station (ATS). As per the notification the ATS is required to be registered as per the provisions of Rule 175 for the purpose of recognition, regulation and control.

For Heavy Goods/Heavy Passenger motor vehicles the rules shall apply from 1st April 2023. While, for Medium Goods Vehicles/Medium Passenger Motor Vehicles and Light Motor vehicles the applicability shall commence from 1st June 2024.

The proposed rules also stipulate revised timelines for renewal of fitness certificates of transport vehicles:

  • Two years for vehicles up to eight years old.
  • One year for vehicles older than eight years.

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Firm of the Year 2021 – In House Community

Fox Mandal has been ranked as one of the ‘Most Responsive Domestic Law Firm’ in the Law Firm of the Year 2021 ranking by InHouse Community. Only three other top law firms in India have received the accolade. The firm has also been recognized as the winner of the Law Firm of the Year 2021 for ‘Compliance/ Regulatory’ practice. In addition, the firm has recieved an honourable mention for its services in ‘Litigation and Dispute Resolution’ Category.

Organization: InHouse Community