BUSINESS ENVIRONMENT – PAPER - VI

Q .1) What is importance of DFC in railway transport ? Explain it’s features and benefit.

A.1) The Dedicated Freight Corridor Corporation of India Limited (DFCCIL) is a corporation run by the Government of India to undertake planning & development, mobilization of financial resources and construction, maintenance and operation of the Dedicated Freight Corridors. DFCC has been registered as a company under the Companies Act 1956 on 30 October 2006.

DFC may become strategical importance for India as it will help in transferring the military equipment such as heavier tanks to the border in much faster way.

The Indian Railways’ quadrilateral linking the four metropolitan cities of Delhi, Mumbai, Chennai and Kolkata, commonly known as the GoldenQuadrilateral; and its two diagonals (North-South (Delhi - Chennai) and East-West (Howrah - Mumbai)), adding up to a total route length of 10,122 km carries more than 55% of revenue earning freight traffic of Indian Railways.

Unique features and benefits of Dedicated Freight corridors:-

1. World's first and only double-stack, international standard container freight trains run using electric locomotives, which are superior in terms of environment and economics. DFC uses the pantographs which hold world record for their height, as India is the only country to have double-stack trains on an electric locomotive, which can transport international standard containers.

2. One of the best axle-load in the world, though railway engineers and India may not write their name in the history books as Australian private railway line holds the record for Heaviest haul railway in the world. Dedicated Freight corridors will have higher axle load of 32.5-tons/axle (currently 40-tons/axle loads is the upper load limit for railways due to rail metallurgy limitations) and speed of freight transport at 100 km/h.

3. Indian freight movement will move away from inflationary diesel fuel to the indigenous electrical power, helping India to control its Current Account Deficit. India, of late has become one of world leader in electricity generation by renewable sources. India will not be dependent on foreign countries for its freight railway network's energy needs.

4. India will move away from single-stack freight trains to double-stack configuration. Technology used for the double-stack electrical locomotive will be used in passenger trains to introduce double-decker passenger electrical trains, which will result in lower ticket prices.

5. DFC using electric locomotive has major environmental benefits. World Bank study has shown that DFC will reduce Green House Gas emission and will have positive effect on reducing the pollution.

6. India will have speed of freight trains up to 100 km/hour, from the current average freight train speed of 20–30 km/h. It may be increased to 120 km/h achieved by the Chinese freight trains, to boost India's cargo capacity by 12 percent.

Q.2) What are the Tariff barrier and Non-tariff barrier?

A.2) Tariff barrier :Tariff barriers are duties imposed on goods which effectively create an obstacle to trade, although this is not necessarily the purpose of putting tariffs in place. These barriers are also sometimes known as import restraints, because they limit the amount of goods which can be imported into a country. Many organizations

which promote trade are concerned about both tariff and non-tariff barriers to free trade, and a number of nations have agreed to radically reduce their trade barriers to promote the exchange of goods across their borders.

A number of different types of duties can be levied when goods cross international boundaries. With an ad valorem duty, for example, the importer must pay a fee which is calculated as a percentage of the value of the goods being imported. Specific tariffs are set amounts which are levied on products which are imported, regardless of values, while environmental tariffs penalize nations with poor environmental records.

For importers, tariff barriers can make it difficult to bring goods into a country. The importer may be forced to import less because the tariff barriers cannot be afforded otherwise, and it may need to charge more for the goods to make importing worthwhile. Tariffs are designed to force importers to do this to level the field between domestic producers and importers, allowing costly domestic producers to compete with importers who may be able to bring in goods at lower cost.

Non-tariffbarrier: Placing tariff barriers are not enough to protect domestic industries, countries resort to non tariff barriers that prevent foreign goods from coming inside the country. One of these non tariff barriers is the creation of licenses. Companies are granted licenses so that they can import goods and services. But enough restrictions are imposed on new entrants so that there is less competition and very few companies actually are able to import goods in certain categories. This keeps the amount of goods imported under check and thus protects domestic producers.

Import Quotas is another trick used by countries to place a barrier to the entry of foreign goods in certain categories. This allows a government to set a limit on the amount of goods imported in a particular category. As soon as this limit is crossed, no importer can import further quantities of the goods.

Examples of Non-Tariff Barriers

Import bans General or product-specific quotas Complex/discriminatory Rules of Origin Quality conditions imposed by the importing country on the exporting countries Unjustified Sanitary and Phyto-sanitary conditions Unreasonable/unjustified packaging, labelling, product standards Complex regulatory environment Determination of eligibility of an exporting country by the importing country Determination of eligibility of an exporting establishment (firm, company) by the importing country. Additional trade documents like Certificate of Origin, Certificate of Authenticity etc

Q.3) What are the Indirect taxes?

A.3) Indirect taxes are the charges that are levied on goods and services. Some of the significant indirect taxes include Value Added Tax, Central Sales Tax, Central Excise Duty, Customs Duty, stamp duties and expenditure tax.

Unlike Direct Taxes, Indirect Taxes are not levied on individuals, but on goods and services. Customers indirectly pay this tax in the form of higher prices. For example, it can be said that while purchasing goods from a retail shop, the retail sales tax is actually paid by the customers. The retailer eventually passes this tax to the respective authority. The indirect tax, actually raises the price of a good and the customers purchase by paying more for that product.

Indirect taxes are those paid by consumers when they buy goods and services

Meaning of Indirect Taxes:

The term indirect tax can be defined from different views. In the colloquial sense, an indirect tax is the charge that is collected by intermediary (like retail store) from the individual who holds the actual economic burden of the tax ( like customer). The intermediary files a tax return and eventually passes to the government.

The indirect tax can be alternatively defined as the charge that is paid by one individual at the beginning, but the burden of which will be passed over to some other individual, who eventually holds the burden.

In colloquial sense, one example of indirect tax includes VAT (Value Added Tax).

Q.4) What is Free Trade Agreement?

A.4) Free trade is a policy in international markets in which governments do not restrict imports or exports. Free trade is exemplified by the European Union / European Economic Area and the North American Free Trade Agreement, which have established open markets. Most nations are today members of the World Trade Organization (WTO) multilateral trade agreements. However, most governments still impose some protectionist policies that are intended to support local employment, such as applying tariffs to imports or subsidies to exports. Governments may also restrict free trade to limit exports of natural resources. Other barriers that may hinder trade include import quotas, taxes, and non-tariff barriers, such as regulatory legislation.

Free trade policies generally promote the following features:-

1. Trade of goods without taxes (including tariffs) or other trade barriers (e.g., quotas on imports or subsidies for producers)

2. Trade in services without taxes or other trade barriers

3.Trade agreements which encourage free trade.

To develop a free trade area, participating nations must develop rules for how the new free trade area will operate. What customs procedures will each country have to follow? What tariffs, if any, will be allowed and what will their costs be? How will participating countries resolve trade disputes? How will goods be transported for trade? How will intellectual property rights be established and managed? The goal is to create a trade policy that all countries in the free trade area agree upon.

Free trade areas benefit consumers, who will have increased access to less expensive and/or higher quality foreign goods and who will see prices decrease as governments reduce or eliminate tariffs. Producers may struggle with increased competition, but they may also acquire a greatly expanded market of potential customers. Workers in some countries and industries are likely to lose jobs as production shifts to become more efficient overall. Free trade areas can also encourage economic development in countries as a whole, benefiting everyone who resides there through increased living standards.

Q.5) How Nagpur developing as logistics hub of lndia?

A.5) Nagpur is located in the north eastern part of Maharashtra and India's geometrical centre, the "zero mile" lies within the city.

Proximity to Mumbai, the commercial capital of the country, has made Nagpur a favorite destination for commercial activities. Nagpur airport is set to become the country's first national air cargo hub. MIHAN - Multi-modal International Cargo Hub and Airport at Nagpur is the biggest economical development project currently underway in India in terms of investment and spread over an area of 4354 Hectares.

Nagpur is very well connected with major cities in India. It is equidistant from all major metros like Mumbai, Delhi, Chennai and Kolkata located apart by approx 1000km and is within 24hours reach by rail or road. The major highway NH-6 connecting to Mumbai-Kolkata and NH-7 connecting to Delhi -Hyderabad passes through the city. The east-west and north-south corridor of golden quadrilateral also passes through the city making it directly accessible to virtually every city in India. There are international flights from Nagpur to UK and USA and domestic flights connect directly to major cities like Mumbai, Kolkata, Delhi, Hyderabad, Goa, Indore and Bangalore.

In future with elimination of central sales tax (CST), most companies would prefer to consolidate number of warehouses in India. Major industries like apparel, 3PL, consumer durables and auto spares would want to set up national distribution center (NDC) close to India’s geometric Centre for servingentire India. Other industries like retail, FMCG and pharmaceutical will have demand for regional distribution centre (RDC) to serve local markets. Nagpur becomes obvious choice for serving local markets or entire India due to its strategic location. This would lead to growing logistics activity in Nagpur and the city will emerge as the country's most important logistics centre.

In the past, logistics operations for a company were state specific. Due to local sales tax requirements, they had to necessarily maintain a warehouse in each. That is no more required under VAT, so companies can now adopt hub & spoke system for their inventory management.

Q.6) What is Golden quadrilateral project?

A.6) The Golden Quadrilateral is a highway network connecting many of the major industrial, agricultural and cultural centres of India. A quadrilateral of sorts is formed by connecting Delhi, Mumbai, Kolkata and Chennai, and hence its name. Other cities among the top metropolises namely Pune, Ahmedabad, Jaipur, Kanpur, Surat at north and Bengaluru, Visakhapatnam & Bhubaneswar at south are also connected by the network.

The largest highway project in India and the fifth longest in the world, started by NDA Government led by MrAtalBihari Vajpayee[1] it is the first phase of the National Highways Development Project (NHDP), and consists of building 5,846 km (3,633 mi) four/six lane express highways at a cost of INR600 billion (US$10 billion).[2] The project was launched in 2001 by Atal Bihari Vajpayee under the NDA government, and was planned to complete in January, 2012.[3]

The vast majority of the Golden Quadrilateral (GQ) is not access controlled, although safety features such as guardrails, shoulders, and high-visibility signs are in use.

The GQ project is managed by the National Highways Authority of India (NHAI) under the Ministry of Road, Transport and Highways. The Mumbai-Pune Expressway, the first controlled-access toll road to be built in India is a part of the GQ Project though not funded by NHAI, and separate from the main highway. Infrastructure Leasing & Financial Services (IL&FS) has been one of the major contributors to the infrastructural development activity in the GQ project.

Economic benefits :

The projected economic benefits of the GQ project are -

1 Establishing faster transport networks between major cities and ports.

2 Providing an impetus to smoother movement of products and people within India.

3 Enabling industrial and job development in smaller towns through access to markets.

4 Providing opportunities for farmers, through better transportation of produce from the agricultural hinterland to major cities and ports for export, through lesser wastage and spoils.

5 Driving economic growth directly, through construction as well as through indirect demand for cement, steel and other construction materials.

6 Giving an impetus to Truck transport throughout India.

Q. 7) How India is diversifying trade from West to East?

A.7) Trade diversification reflects an economy’s growing competitiveness resulting from its broadening productive base with processes getting more efficient, improving fundamentals and its increasing willingness and capabilities to effectively integrate with the world economy. Over the years, India has been successfully diversifying in terms of its direction of trade. Asia and ASEAN region is India’s largest trading partner. During the period April- September 2009-10, Asia and ASEAN region accounted for about 59% of India’s trade (exports and imports). Europe and America, together, account for around 32% of India’s trade. The share of America (including North America and Latin America) has remained stable at around 11.7%.

India’s trade with East Asia and ASEAN region comprising the ASEAN countries (viz. Indonesia, Malaysia, Singapore, Thailand, Philippines, Brunei, Vietnam, Myanmar, Laos and Cambodia), Australia, New Zealand and countries of Oceania stood at US$ 58.48 billion during the year 2008-09, registering a growth of 19.7% over the previous year. Major destinations for India’s exports in the region are Singapore, Indonesia, Malaysia, Thailand, Australia and Vietnam Socialist Republic, while the major sources of imports are Australia, Indonesia, Malaysia, Singapore, Thailand and Myanmar.

India has Joint Trade Committees with New Zealand, Myanmar, Fiji, Brunei and Thailand and a Joint Working Group on Trade & Investment with the Philippines. In addition, there is a Joint Commission with Australia at the Ministerial level (JMC). India and Australia set up a joint feasibility study of a Free Trade Agreement (FTA) between the two countries in 2008.

Engagements with ASEAN and South-East Asian countries

India and the ASEAN (Association of South East Asian Nations) signed the Trade in Goods Agreement on 13th August, 2009 under the broader framework of Comprehensive Economic Cooperation Agreement between India, and the ASEAN. The Agreement has come into force on 1st January 2010 in respect of Malaysia, Singapore and Thailand.

Negotiations for a Comprehensive Economic Cooperation Agreement (CECA) between India and Malaysia commenced in 2008. The CECA would be negotiated as a single undertaking including agreements on trade in goods, services, investment and other areas of cooperation. The last round of negotiations was held in July 2008 in New Delhi, and two rounds of Video Conference have taken place subsequently. The negotiations would resume in 2010.

India and Indonesia had set up a joint feasibility study of a Comprehensive Economic Cooperation Agreement (CECA) between the two countries in 2007. The Joint Study Group has submitted its Report in September, 2009.

The negotiations for the comprehensive India –Thailand Free Trade Agreement (FTA) are underway and considerable progress has been made on the Trade in Goods part of it.

Q .8) What is business environment(IMP)

A.8) Business environment can be defined as “the forces, factors and institutions with which the businessman has to deal with to achieve its objectives”. In general words we can say business environment is the surroundings in which business exists.

Whenever any businessman is operating or working then he has to interact with the customers, suppliers and he has to perform the transactions within the rules and regulations of the government.

All these persons, institutions and policies form a part of business environment. Understanding all these factors, persons and institutions carefully is must for every businessman.

The complete awareness and understanding of business environment is known as environment scanning. Environment scanning is conducted to find out the influence of different factors and persons on the business transactions.

Environment scanning can be defined as a process by which organisations monitor their relevant environment to identify opportunities and threats affecting their business.

No company can survive in market by ignoring the effects of Business Environment. The efficient management analyses the environment and makes changes in organisational policies to integrate its activities with Business Environment. The most suitable example to prove the impact of Business Environment is the controversial case of Pepsi and Coke Company.

Recently a Consumer Organisation (CES) has claimed to find pesticide contents in the cola drinks of Pepsi and Coke. Although government, health ministry and court have given clean chit to Pepsi and Coke company but then also both the companies are continuously advertising to prove and convince customers that these drinks are safe.

They are doing so because the sale and success of these companies not only depend upon internal environment but these depend upon external forces also.

Business Environments provide constraints as well as opportunities for the businessman. For example, the regulation such as MRTP Act and wealth restriction put constraints on the businessman. On the other hand, the liberalisation policies, import relaxation policies bring opportunities for the businessman.

Q .9)Evaluate business environment with special reference to India'sa)Political scenario b) Economy c) Social issues and D) Technology

A.9) Dimensions of business environment (or macro environment or general environment) have the following important factors:

(1) Economic Environment

Among the various factors of macro environment, the economic environment has a special significance. Economic environment can be divided into three parts. We shall now study their effect on business. They are as under:

(i) Economic system, (ii) Economic policies, (iii) Economic conditions,

(i) Economic System:

It is necessary to know about the economic system prevailing in a country in order to understand the economic environment. Economic system influences the freedom or openness of business. Economic system is mainly of three kinds:

(a) Socialistic Economic System (b) Capitalistic Economic System (c) Mixed Economic System.

(ii) Economic Policies:

Economic policies deeply influence the business of a country. The economic policies are laid down to direct the economic activities.

Economic activities include import-export, employment, tax structure, industry, public expenditure, public debt, foreign investment, etc. In order to direct all these economic activities, the following economic policies are laid down:

(a) Export-Import Policy (b) Employment Policy

(c) Taxation Policy (d) Industrial Policy

(e) Public Expenditure Policy (f) Public Debt Policy

(g) Agriculture Policy (h) Foreign Investment Policy.

(iii) Economic Conditions:

Economic conditions are those conditions which are related with the possibilities of economic development of a country. On the basis of the economic conditions the government starts various programmes for the welfare of the people.

(2) Political Environment

Political environment is the outcome of a combination of various ideologies advocated by different political parties.

Factors connected with the activities of the government are included in it, e.g., the type of government (single-party government or multi-party government), the attitude of the government towards different industries, progress in passing different laws.

A living example of this can be seen during elections in the shape of fluctuations in the share market. It is quite possible that the mere possibility of a particular political party coming into power can make the prices of share rise sky high. It is true conversely when the possibility of some other political party coming into power may bring the price of shares really nose-diving.

It clearly shows that the attitude of the first political party towards business is positive which gets reflected in the positive effect on the share market. On the other hand, the negative attitude of the

second political party towards business is reflected in the nose-diving of prices of shares in the share market merely on the possibility of its coming to power.

The following are some of the examples of the impact of the political environment on business:

(i) In 1977, the Janata Government adopted a stringent attitude towards the multinational companies. As a result of this attitude, the multinational companies like the IBM and the Coca-Cola had to ignore India.

(ii) The new government encouraged the multinational companies for investment in India. This led to the opening of the doors of the Indian market for the multinational companies. Consequently, the Coca-Cola entered the Indian market once again.

(3) Social Environment

Business originates and develops in society. Therefore, the effect of various social factors on business is but natural.

Social factors include customs, fashions, traditions, wishes, hopes, level of education, population, standard of living of the people, religious values, distribution of income, corruption, family set-up, consumers’ consciousness, etc.

All social factors influence business in some way or the other. For example, the production of things should be according to the fashion. Similarly, religious values also influence business. For example, some years ago the manufacturers of Vanaspati Ghee used to import animal fat for manufacturing ghee.

On the basis of the strong public protests, the government cancelled the import license of these manufacturers. Similarly, with the news that some popular cold drinks contain pesticide elements, people protested against it and minimised the consumption of these cold drinks.

(4) Legal Regulatory Environment

Many Acts are passed from time to time in order to control and regulate business activities.

The sum total of all these Acts creates legal regulatory environment. Acts are mossy passed to regulate such business activities as sale-purchase, industrial disputes, labour, regulating partnership business, regulating company business, foreign exchange, etc.

In India, the following Acts have been passed in connection with the above business activities:

(i) Sale of Goods Act (ii) Industrial Disputes Act (iii) Minimum Wages Act (iv) Indian Partnership Act (v) Companies Act (vi) Trademark Act (vii) Essential Commodities Act (viii) Consumer Protection Act (ix) Standards of Weights and Measures Act. All these Acts influence business decisions.

The following are the examples of the impact of the legal regulatory environment on business:

(i) By removing control on the capital market, a huge amount of capital was collected by issuing various new issues in the primary market.

(ii) With introduction of relaxation in Foreign Direct Investment (FDI) and Foreign Exchange, many multinational companies entered the Indian market. Consequently, there has been a tremendous increase in the foreign exchange reserves in the country.

(5) Technological Environment

Technological environment includes the discovery of new methods and implements for the production of goods and services. Technological changes make available better methods of production and that makes the optimum use of the raw material possible.

The technological changes offer both the possibilities and threats for business. In case a company understands these things well in time it can achieve its objective, otherwise the very existence of the company is threatened.

For example, it becomes a technological change for the automobile industry to produce vehicles which consume less petrol in view of the ever increasing prices of petrol.

The following are the examples of impact of technological environment on business:

(i) With the advent of television in the market, the cinema and the radio industry were adversely affected.

(ii) With the arrival of the Photostat machines in the market, the carbon paper industry suffered a setback.

(iii) With the entry of synthetic thread in the market, the cotton cloth industry was badly affected.

(iv) The digital watches have almost eliminated the market of the traditional watches.

Q.10) How infrastructural issues badly affected to Logistics sector oflndia? Discuss with special reference to container traffic and railway

A.10) Container traffic:

Inland connectivity and delays at ports remain the two greatest areas of concern for container traffic in India. The two issues are actually not unrelated, and require increased focus on developing a strong supporting inter-modal infrastructure for the container terminals.

In an ideal intermodal transport system, road traffic would feed into a railway hub, and the railway lines would feed into a port, for export of containerized cargo. In India, due to the absence of such connectivity, trucks are preferred for direct transport to and from ports. Given the much lower carrying capacity on trucks as well as the absence of a dedicated land corridor for cargo vehicles, this obvious inefficiency further affects the already strained terminals.

Almost 35 per cent of the containers handled on India's west coast ports are bound for destinations closer to the east coast, which is a good indicator of the need for rationalising the hinterland infrastructure.

Some of the other issues that have slowed container traffic growth in India are:

Absence of roads that could handle multi-axle load Difficulty in ensuring filled containers on both legs of a journey Lack of sufficient and economic handling facilities at intermodal points Seeming lack of coordination between ministries of surface transport, railways and shipping while planning

infrastructure development

Railway:

The failure in augmenting the freight carrying capacity and efficiency of the railways has denied the logistics sector cheaper and efficient mode of transport.

Rail is a highly reliable, environmental friendly, safe and secure mode of transport. Indian Railways boast of the second largest rail network in the world, yet its share in goods transportation is much less compared to the share of roadways.

In comparison with countries like USA, Russia and China, the cost of transport per tonne per kilometer in India is very high almost three times that of China. The railways has the potential to bring down the freight cost to greater extent with favorable commercial characteristics, dense and long-distance freight lines and strong flows of bulk products.

Freight trains travel on the same tracks as passenger trains at an average speed of 25 kilometers per hour causing considerable delays in transportation. Of course there are many other challenges like wagon utilization, multi-modal

transport, etc. Also, the public private partnership (PPP) model has been working better but is restricted to a few biggies owing to high entry barrier.

For cost effective movement of goods it is essential to have quality infrastructure in place. The challenge is to meld the different modes of transport together into seamless network such that the cost is at the lowest. The development of world class infrastructure like modern integrated logistics cum transport hubs and freight corridors at major locations across the country will facilitate more efficient logistics operations. To help Indian logistics sector overcome the challenge and make them globally competitive it is imperative to remove the infrastructural bottlenecks and plan new projects taking into consideration the future growth requirements.

Q.11) Major Ports of lndia and logistics problem.

A.11) Major Ports In India

Visakhapatnam ,Kandla ,Chennai ,Navi Mumbai ,Mumbai ,Paradip ,Kolkata ,Kochi ,Tuticorin ,Kollam , Ennore(Corporate) ,Mangalore ,Mormugoa.

The long coastline of India is dotted with 12 major ports that are managed by the Port Trust of India under Central Government jurisdiction. There are also 139 minor operable ports under the jurisdiction of the respective State Governments. The ports are located at Calcutta/Haldia, Mumbai, Jawaharlal Nehru Port at NhavaSheva, Madras, Cochin, Vishakhapatnam, Kandla, Mormugao, Paradip, New Mangalore and Tuticorin. The major ports handle 90 percent of the all-India port throughput, and thus bear the brunt of sea-borne trade. During 1996-1997, the total cargo handled at major ports was 227.13 million tons, registering a growth of 5.6 percent over 1995-1996. Dry and liquid bulk make up about 80 percent of the port traffic in volume with general cargo, including the containerized cargo, constituting the remaining traffic.

Issues With Indian Ports

* Ships have to wait long in the channel for berthing, and productivity in loading and unloading is low. The national average turn-around time of vessels for liquid, dry bulk, general cargo and containers is estimated at 3.4 days, 9 days and 3.6 days respectively.

*It is labor intensive and mechanization process is non-existent or slow.

* Night navigation is not available, and ships have to wait for daylight.

* Equipment used is outdated and obsolete.

* Restrictions in navigation channels do not allow bigger vessels to be berthed.

* Handing vessels and feeder vessels in container berths is time consuming.

* The road links to ports are insufficient and badly maintained.

* Lack of coordination between ports and the custom authorities delays quicker dispensation of documentation and goods.

Q .12)What are problems in railway goods traffic

A.12) Rail is a highly reliable, environmental friendly, safe and secure mode of transport. Indian Railways boast of the second largest rail network in the world, yet its share in goods transportation is much less compared to the share of roadways.

In comparison with countries like USA, Russia and China, the cost of transport per tonne per kilometer in India is very high almost three times that of China. The railways has the potential to bring down the freight cost to greater extent with favorable commercial characteristics, dense and long-distance freight lines and strong flows of bulk products.

The slow pace of progress in network expansion and modernization of existing facilities in the rail segment coupled with poor customer service has resulted diversion of freight traffic — even bulk items such as steel and cement — to the road sector. The market share of Indian Railways in total freight traffic has been falling consistently. Some of the reasons for that are highlighted below.

Freight trains travel on the same tracks as passenger trains at an average speed of 25 kilometers per hour causing considerable delays in transportation. Of course there are many other challenges like wagon utilization, multi-modal transport, etc. Also, the public private partnership (PPP) model has been working better but is restricted to a few biggies owing to high entry barrier.

The logistic sector would be greatly benefitted and achieve higher efficiency if the Indian Railways is successful in implementing its plans for improved speed of freight trains, up-gradation of rolling stock, improved signaling and communication, setting up additional container depots and rationalization of the freight rates to remove distortions. Restructuring and corporatization of the railways will go a long way in meeting the formidable challenges of the future

Q.13) India's roads condition has badly affected to logistics sector

A.13) Infrastructure is one of the biggest challenges faced by the Indian logistics sector and has been a major deterrent to its growth. Infrastructural problems like bad road conditions, poor connectivity, inadequate air and sea port capacities and lack of development of modes of transports like railways and alternates like inland water transport and domestic aviation have been constant irritants. Due to the infrastructural bottlenecks costs per transaction in Indian logistics sector is very much high compared to those in the developed markets.

Transport of freight by road forms an important component of freight movements within India, with a large chunk of goods, over 65 percent, being moved by road. The poor infrastructure has severely crippled the smooth functioning of logistics operations. With narrow and congested highways, poor surface quality of roads and 40 percent of villages not having access to all-weather roads, the efficiency of the transport system is severely affected.

Poor road conditions increase the vehicle turnover, pushing the operating cost and reducing efficiency. National highways are being upgraded but they account for a meager 2 per cent of the total road network. (Sanyal, 2006a). More importantly, due to non-contiguous development of expressways, truck traffic has to frequently move from the expressway on to old national highways and vice-versa.

Goods vehicle run only 250-300 km a day in India as compared to 800-1000 km in developed countries (Sanyal, 2006b). Inter-state check posts, surprise checks and unauthorized hold ups on highways (some due to security reasons while others are to establish the authenticity of the cargo as declared) create bottlenecks. Entry taxes into cities for goods also create procedural bottlenecks

Q.14) Furnish long form of following terms

A.14) GATS : General Agreement on Trade in Services

UNCTAD : United Nations Conference on Trade and Development

ASEAN : Association of Southeast Asian Nations

SAARC : South Asian Association for Regional Cooperation

CVD : Countervailing duties

DFC : Dedicated Freight Corridor

BCD :Basic Customs Duty

GATT :- General Agreement on Tariffs and Trade

VAT :- Value-added tax

PPP :- Public–private partnership

SAARC :- South Asian Association for Regional Cooperation

CVD :- Countervailing duties

DFC :- Dedicated Freight Corridor

JICA :- Japan International Cooperation Agency

Q .15)SAPTA AND NAFTA

A.15) South Asian Preferential Trade Arrangement (SAPTA) :-

One of the first significant collaborative agreements of the member countries was the SAPTA agreement. SAPTA was implemented in December 1995, and since then there have been four rounds of SAPTA negotiations. Concessions under the first round in 1996 included 226 tariff lines. The second round covered around 1,868 tariff lines.During the third round, 3,456 tariff lines were added. Thus, a total of 5,550 tariff line concessions are included in the agreement. The SAPTA agreement was ground breaking, as all negotiations were conducted on an item-by-item basis. Under SAPTA, tariffs were reduced only for goods specified in the agreement.

Currently, South Asian countries trade in similar goods. Textiles, clothing, and apparel constitute a significant portion of total exports from the region. All of the countries also import crude oil for fuel.

There are, however, potential opportunities for increased trade. For example, Bangladesh, Maldives, Nepal and Sri Lanka import cotton fabrics for the production of their textile exports, and cotton is a substantial export commodity for Pakistan. Nevertheless, throughout all stages of SAPTA, the participating countries have generally not granted concessions on such highly traded goods.

India exports much more to most of its South Asian neighbors than it imports. The overall levels of India’s trade with individual countries, the region, and the world have been rising fairly steadily over the last decade. Levels of trade with most of its neighbors reached a peak around 1994–1996. This was then followed by a slump and then renewed growth again. In nearly all cases, recent trading surpasses the peak levels of the mid-1990s but whether this can be attributed to SAPTA is difficult to ascertain.

North American Free Trade Agreement (NAFTA) :-

The goal of NAFTA was to eliminate barriers with trading and investment between the U.S., Canada and Mexico. On January 1, 1994, the North American Free Trade Agreement between the United States, Canada, and Mexico (NAFTA) entered into force.

All remaining duties and quantitative restrictions were eliminated, as scheduled, on January 1, 2008.

NAFTA created the world's largest free trade area, which now links 450 million people producing $17 trillion worth of goods and services.Trade between the United States and its NAFTA partners has soared since the agreement entered into force. U.S. goods and services trade with NAFTA totaled $1.6 trillion in 2009 (latest data available for goods and services trade combined). Exports totaled $397 billion. Imports totaled $438 billion. The U.S. goods and services trade deficit with NAFTA was $41 billion in 2009.

The United States has $918 billion in total (two ways) goods trade with NAFTA countries (Canada and Mexico) during 2010. Goods exports totaled $412 billion; Goods imports totaled $506 billion. The U.S. goods trade deficit with NAFTA was $95 billion in 2010.Trade in services with NAFTA (exports and imports) totaled $99 billion in 2009 (latest data available for services trade). Services exports were $63.8 billion. Services imports were $35.5 billion. The U.S. services trade surplus with NAFTA was $28.3 billion in 2009.

Q .16) BCD and CVD (Basic Customs Duty & Countervailing Duties)

A.16) BCD:A Basic customs duty is an indirect tax levied on the import or export of goods in international trade. In economic sense, a duty is also a kind of consumption tax. A duty levied on goods being imported is referred to as an import duty. Similarly, a duty levied on exports is called an export duty. A tariff, which is actually a list of commodities along with the leviable rate (amount) of customs duty, is popularly referred to as a customs duty.

Calculation of customs duty

Customs duty is calculated on the determination of the assessable value in case of items for which the duty is levied ad valorem. This is often the transaction value unless a customs officers determines assessable value in accordance with the Harmonized System.

However, for certain items like petroleum and alcohol, customs duty is realized at a specific rate applied to the volume of the import or export consignments.

Harmonized System Code

For the purpose of assessment of customs duty, products are given an identification code that has come to be known as the Harmonized System code. This code was developed by the World Customs

Organization based in Brussels. A Harmonized System code may be from four to ten digits. For example 17.03 is the HS code for molasses from the extraction or refining of sugar

Evasion of customs duty

Evasion of customs duties takes place mainly in two ways. In one, the trader under-declares the value so that the assessable value is lower than actual. In a similar vein, a trader can evade customs duty by understatement of quantity or volume of the product of trade. Evasion of customs duty may take place with or without the collaboration of customs officials. Evasion of customs duty does not necessarily constitute smuggling.[citation needed]

Duty-free goods

Many countries allow a traveller to bring into the country good duty-free. These goods may be bought at ports and airports or sometimes within one country without attracting the usual government taxes and then brought into another country duty-free. Some countries impose allowances which limit the number or value of duty-free items that one person can bring into the country. These restrictions often apply to tobacco, wine, spirits, cosmetics, gifts and souvenirs. Often foreign diplomats and UN officials are entitled to duty-free goods. Duty-free goods are imported and stocked in what is called bonded warehouse.

CVD : Countervailing Duties

Definition of 'Countervailing Duties'

Tariffs levied on imported goods to offset subsidies made to producers of these goods in the exporting country. Countervailing duties (CVD) are meant to level the playing field between domestic producers of a product and foreign producers of the same product who can afford to sell it at a lower price because of the subsidy they receive from their government. If left unchecked, such subsidized imports can have a severe effect on domestic industry, forcing factory closures and causing huge job losses. As export subsidies are considered to be an unfair trade practice, the World Trade Organization (WTO) – which deals with the global rules of trade between nations – has detailed procedures in place to establish the circumstances under which countervailing duties can be imposed by an importing nation.

Explains 'Countervailing Duties'

Consider the following example of countervailing duties. Assume Country A provides an export subsidy to widget makers in the nation, who export widgets en masse to Country B at $8 per widget. Country B has its own widget industry and domestic widgets are available at $10 per widget. If Country B determines that its domestic widget industry is being hurt by unrestrained imports of subsidized widgets, it may impose a 25% countervailing duty on widgets imported from Country A, so that the resulting cost of the imported widgets is also $10. This eliminates the unfair price advantage that widget makers in Country A have due to the export subsidy from their government.

The WTO’s “Agreement on Subsidies and Countervailing Measures,” which is contained in the General Agreement on Tariffs and Trade (GATT) 1994, defines when and how export subsidies can be used and regulates the measures that nations can take to offset the effect of such subsidies. These measures include the affected nation using the WTO’s dispute settlement procedure to seek withdrawal of the subsidy, or imposing countervailing duties on subsidized imports that are hurting domestic producers.

The definition of “subsidy” in this regard is quite broad. It includes any financial contribution made by a government or government agency, including a direct transfer of funds (such as grants, loans and infusion of equity),

potential direct transfer of funds (for example, loan guarantees), fiscal incentives such as tax credits, and any form of income or price support.

Q 17) GATT and GATS

A.17) GATT vs GATS

These are agreements that pertain to trade in goods and services respectively to boost international trade. There are similarities in GATT and GATS though there are many differences that will be talked about in this article.

What is GATT?

It was at the behest of United Nations Conference on Trade and Employment that GATT (General Agreement on Tariffs and Trade) was instituted in 1947, and countries signing the agreement went through 8 grueling rounds starting in Geneva in 1947 to Doha in 2001 to agree on rules and regulations for international trade. These deliberations were a part to reduce tariffs and other duties to bolster international trade. When the participating countries could not come to grips with the idea of International Trade Organization, another body that was proposed by the US, the World Trade Organization came into effect in 1995 and replaced GATT. Today, more than 90% of international trade is being conducted under the guidelines of GATT that evolved over a period of nearly half a century. GATT has been responsible for reduction in tariffs all over the world and has led to a much higher volume of trade in goods.

What is GATS?

The creation of GATS took place in 1986. GATS stands for General Agreement on Trade in Services, and though it covers for a majority of trade internationally, it was surprisingly not a part of GATT for a number of years. But grievances of those trading in services could not be ignored for long with the result that GATS came into effect in 1995 in Uruguay round of GATT. The provisions of GATS are similar to those of its counterpart called GATT, but whereas GATT deals in trade in goods (merchandise), the provisions of GATS apply on trade in services.

Today, nearly all members of WTO are also members of GATS and follow the guidelines issued to the member countries.

Highlighted Points :- • GATT was General Agreement on Tariffs and Trade whereas GATS is General Agreement on Trade in Services

• While GATT pertained to trade in merchandise only, GATS applies to trade in services

• It was in Uruguay round of GATT in 1995 that GATS finally came into existence.

Q.18) Short Note on BRICS?

A.18): BRICS is the acronym for an association of five major emerging national economies: Brazil, Russia, India, China and South Africa.The grouping was originally known as "BRIC" before the inclusion of South Africa in 2010.

The BRICS members are all developing or newly industrialised countries, but they are distinguished by their large, fast-growing economies and significant influence on regional and global affairs; all five are G-20 members. As of 2013, the five BRICS countries represent almost 3 billion people, with a combined nominal GDP of US$16.039 trillion,and an estimated US$4 trillion in combined foreign reserves.Presently, South Africa holds the chair of the BRICS group, having hosted the group's fifth summit in 2013. The BRICS have received both praise and criticism from numerous quarters.

The 2013 BRICS summit was the fifth annual BRICS summit, an international relations conference attended by the head of states or heads of government of the five member states Brazil, Russia, India, China and South Africa. The summit was held in Durban, South Africa in 2013.This completed the first cycle of BRICS summits.

A declaration at the end of 2012 BRICS summit read that: "Brazil, Russia, India and China thank South Africa for the proposal to host the 5th summit in 2013. They intend to provide multifaceted support for it.The BRICS leaders are expected to discuss the establishment of a new development bank.According to Mikhail Margelov they will seek agreement on the amount of starting capital.

Q.19) What is FDA?

A.19) The Food and Drug Administration (FDA) is an agency within the U.S. Department of Health and Human Services. It consists of the Office of the Commissioner and four directorates overseeing the core functions of the agency: Medical Products and Tobacco, Foods and Veterinary Medicine, Global Regulatory Operations and Policy, and Operations.

FDA is responsible for Protecting the public health by assuring that foods (except for meat from livestock, poultry and some egg products which are regulated by the U.S. Department of Agriculture) are safe, wholesome, sanitary and properly labeled; ensuring that human and veterinary drugs, and vaccines and other biological products and medical devices intended for human use are safe and effective Protecting the public from electronic product radiation Assuring cosmetics and dietary supplements are safe and properly labeled Regulating tobacco products Advancing the public health by helping to speed product innovations FDA's responsibilities extend to the 50 United States, the District of Columbia, Puerto Rico, Guam, the Virgin Islands, American Samoa, and other U.S. territories and possessions.

Q.20) What are the terminal handling charges ?

A.20)Terminal Handling Charges (THC) is the charges collected by terminal authorities at each port against handling equipments and maintenance. THC varies port to port of each country, as the cost of handling at each port differs one to another port, depends up on the total cost of port terminal handling at each location.

Normally, Terminal handling charges (THC) for exports is collected from shipper by shipping lines while releasing Bill of Lading after completion of export customs clearance procedures. Let the sale contract between buyer and seller be anything, the THC at port of loading need to be paid at load port only. As per terms of delivery, if buyer has to pay such load port THC, such THC is paid at load port by either buyer’s representative or his authorized agent. In the case of shipments moved from inland destinations other than sea port, the said THC is collected at same location while releasing bill of lading by carrier. The import terminal handling charges is collected by shipping carriers at the time of issuing delivery order to consignee to take delivery of goods.

Q.21) Import duty & taxes when importing into India?

A.21) Import duty and taxes are due when importing goods into India whether by a private individual or a commercial entity. The valuation method is CIF (Cost, Insurance and Freight), which means that the import duty and taxes payable are calculated on the complete shipping value, which includes the cost of the imported goods, the cost of freight, and the cost of insurance. Duty in particular is calculated on the sum of the CIF value and landing charges (explained below). Some duties are also based on quantity measurements. In addition to duty, imports are subject to other taxes and charges such as landing charges, countervailing duty, CESS, and education CESS.

Duty Rates

Duty rates in India can be ad valorem (as a percentage of value) or specific (rupees per unit). Duty rates vary from 0% to 150%, with an average duty rate of 11.9%. Some goods are not subject to duty (e.g. laptops and other electronic products).

Sales Tax

There is no sales tax in India for imported goods.

Minimum thresholds

There is no minimum threshold in India, i.e. all imports regardless of their value are subject to duty and taxes.

Other taxes and custom fees

Landing charges: (1% CIF)

Countervailing duty (CVD): (0%, 6% or 12% (CIFD + Landing charges))

CESS (Education + Higher Education): 3% (Duty + Countervailing duty)

Additional CVD: 4% (CIFD + Landing charges + Countervailing duty + CESS)

Q.22) Explain IMPORT PROCEDURE?

A.22) Import Procedures: - For clearance of import goods, the importer or his agents have to undertake the following formalities:-

Bill of Entry:-

It is a document certifying that the goods of specified description and value are entering into the country from abroad.

If the goods are cleared through the (Electronic Data Interchange) EDI system no formal Bill of Entry is filed as it is generated in the computer system, but the importer is required to file a cargo declaration having prescribed particulars required for processing of the entry for customs clearance.

The Bill of entry, where filed, is to be submitted in a set, different copies meant for different purposes and also given different colour schemes.

Bill of Entry are of three types :-

Bill of Entry for home consumption: is to be submitted when the imported goods are to be cleared on payment of full duty for consumption of the goods in India. It is white colored.

Bill of Entry for Warehouses : is to be submitted when the imported goods are not required immediately by the importer but here they are to be stored in a warehouse without payment of duty under a bond and cleared later when required on payment of duty.

Bill of Entry for Ex-Bond Clearance : is used for clearing goods from the warehouse on payment of duty. The goods are classified and valued at the time of clearance from the Customs Port. Value and classification are not determined on such Bill of Entry.

In the non-EDI system along with the bill of entry filed by the importer or his representative the following documents are also generally required:-

•Signed invoice

•Packing list

•Bill of Lading or Delivery Order/Airway Bill

•GATT declaration form duly filled in

•Importers declaration

•License wherever necessary

•Letter of Credit/Bank Draft/wherever necessary

•Insurance document

•Import license

•Industrial License, if required

•Test report in case of chemicals

•Adhoc exemption order

•DEEC Book/DEPB in original

•Catalogue, technical write up, literature in case of machineries, spares or chemicals as may be applicable

•Separately split up value of spares, components machineries

•Certificate of Origin, if preferential rate of duty is claimed

•No Commission declaration

Green Channel facility:-

Some major importers have been given the green channel clearance facility. It means clearance of goods is done without routine examination of the goods. They have to make a declaration in the declaration form at the time of

filing of bill of entry. The appraisement is done as per normal procedure except that there would be no physical examination of the goods. Only marks and number are to be checked in such cases. However, in rare cases, if there are specific doubts regarding description or quantity of the goods, physical examination may be ordered.

Q.23) What is the role of CONCOR in container transportation?

A.23) CONCOR's core business is characterised by three distinct activities, that of a carrier, a terminal operator, and a warehouse operator.

Carrier: -Rail is the mainstay of CONCOR's transportation plans & strategy. Majority of CONCOR terminals are rail-linked, with rail as the main carrier for haulage. Facilities are, however, provided for first and last mile transportation by road also. As rail is price-competitive over long distances, the price advantage can be passed on to clients, thus allowing for flexible and competitive pricing. The rail link also plays a major role in decongesting our ports and the road corridors that lead to these ports.

Though rail is the mainstay of CONCOR's transportation plan, some CONCOR terminals are exclusively road-fed as well. Road services are mostly in the form of supplementary services to provide the door to door linkages having carried the bulk of long lead by rail. However, where ever it is operationally or economically a superior option, road is used as an alternative to rail as well.

In the area of domestic business door pick up and door delivery services are the most popular. We also use our terminal network to plan hub and spoke movements that allow single customers to move cargo to multiple locations at a single time, with CONCOR taking care of the distribution and re distribution requirements.

Terminal and CFS Operator:-

A terminal operator oversees activities at a terminal — a site where vehicles that transport materials empty their cargo and load new products. Terminal operators must ensure the safe and efficient delivery and packing up of goods on ships and trucks, for instance. They also keep terminals in suitable shape, supervise employees, complete training on company-specific scenarios and follow government regulations for handling various types of freight.

Terminal operators must know how to operate construction equipment such as bulldozers, hoisting cranes, backhoes and front-end loaders, all of which might require certain certifications to operate. A terminal operator can use this equipment to place cargo on railroad cars, remove cargo from barges, store products and anchor transporting vessels as necessary. terminal operators generally should be able to lift at least 50 pounds (22.7 kg) and be in good physical condition to do climbing, work in tight spaces and stand for hours on end. These professionals additionally must know how to operate a conveyor system and should know how to work with computerized equipment.

Warehouse Operator:

A warehouse operative is a personwho works in a warehouse. A warehouse operative might have many duties, all of which are essential to the productionenvironment. A warehouse operative will be able to unload trucks, store materials, and fill out the proper paperwork for shipping and receiving goods.

If you enjoy physical work and want to be part of a team, this job could be just right for you. As a warehouse operative, you would deal with goods and products that come into a warehouse or stockroom.

You do not need any specific qualifications to be a warehouse operative. Basic English, maths and IT skills would be useful.

To become a warehouse operative, you will need to have a good level of fitness. You’ll need to be able to work quickly. And you’ll also need to complete paperwork and count stock items.

Q.24) How, India is developing its port sector by using PPP Module?

A.24) Ports: - With 12 major ports and 187 minor ports, 7,517 km long Indian coastline plays a pivotal role in the maritime transport helping in the international trade. Traffic handled at major ports during April 2008 to January 2009 is recorded to be 436686 units. The ports in India offer tremendous scope for international maritime transport both for passenger and cargo handling.

Approach: - Indian Government plans to bring a new orientation to encourage the private sector to come forward in developing port activities and operations. The goal is planned to be achieved through numerous initiatives and policies. Many international port operators are invited to submit competitive bid for BOT terminals on a revenue share basis, which has attracted foreign players, such as Dubai Ports International (Cochin and Vishakhapatnam), Maersk (JNPT, Mumbai) and P & O Ports, (JNPT, Mumbai and Chennai), and PSA Singapore (Tuticorin). The National Maritime Development Plan (NMDP) has been set up by the Indian government to improve facilities at all the 12 major ports in India. At an investment of about US$ 12.4 billion, by November 2009, many projects are expected to be completed. Kochi port is being developed as a transshipment hub for India.

Private Participation :-

A leading private shipyard, ABG Shipyard has decided to set up a greenfield shipyard in south Gujarat with an investment of USD 255.58 million. The new shipyard will be set up over 300 acres.

• Gujarat-based Adani group is setting up a ship building and repair yard at about USD 212.98 million.

• Larsen and Toubro Ltd has chosen Kattupalli port, in Thiruvallur district, near Chennai, as the location to build the over USD 425.97 million mega- shipbuilding yard.

Policy :-

•100% FDI under the automatic route is permitted for port development projects

•100% income tax exemption is available for a period of 10 years

Q.25) How logistics cost is high due to poor infrastructure in india with examples?

A.25) Physical commodities require efficient management of sourcing and deliveries for profit maximisation. The logistical costs fluctuate between 3% and 10% of the price for the commodity in trade and may reach 15% for some specialised products.

The reason behind high logistics cost is:

Poor road quality: The road quality in India, on the National Highways as well and other roads, is improving but is still poor in many locations. Estimates suggest that motorable roads are still less than 10% of the total road network.

Infrastructure issues: Inadequate infrastructure (transport & storage) causes escalation of logistical costs (which must be identified and kept under control) as the size of logistical investments is more or less concentrated. To illustrate an example, though Bihar wheat was cheaper during last year's wheat arrival season, private flour millers of western India were buying wheat from other origins. The reason: the rake availability compared to other origins was poor and the possibility of road movement of wheat made the landed price more expensive. One must also consider that warehousing facility in the state is inadequate.

The inadequate infrastructure and poor condition of roads in India translates directly into higher vehicle turnover. This in turn increases operating costs and reduces efficiency.

Logistics cost contribution of India in GDP is 13 % which shows the high logistics cost of the Indian Logistics industry and also higher than the developed countries. Due to the poor infrastructure and other logistics service is not better than the developed countries like USA and Japan.

Q 26)What is PPP in infrastructure?

A.26) A public–private partnership (PPP) is a government service or private business venture which is funded and operated through a partnership of government and one or more private sector companies. These schemes are sometimes referred to as PPP, P3 or P3.

PPP involves a contract between a public sector authority and a private party, in which the private party provides a public service or project and assumes substantial financial, technical and operational risk in the project. In some types of PPP, the cost of using the service is borne exclusively by the users of the service and not by the taxpayer.In other types (notably the private finance initiative), capital investment is made by the private sector on the basis of a contract with government to provide agreed services and the cost of providing the service is borne wholly or in part by the government. Government contributions to a PPP may also be in kind (notably the transfer of existing assets). In projects that are aimed at creating public goods like in the infrastructure sector, the government may provide a capital subsidy in the form of a one-time grant, so as to make it more attractive to the private investors. In some other cases, the government may support the project by providing revenue subsidies, including tax breaks or by removing guaranteed annual revenues for a fixed time period.

There are usually two fundamental drivers for PPPs. Firstly, PPPs are claimed to enable the public sector to harness the expertise and efficiencies that the private sector can bring to the delivery of certain facilities and services traditionally procured and delivered by the public sector. Secondly, a PPP is structured so that the public sector body seeking to make a capital investment does not incur any borrowing. Rather, the PPP borrowing is incurred by the private sector vehicle implementing the project and therefore, from the public sector's perspective, a PPP is an "off-balance sheet" method of financing the delivery of new or refurbished public sector assets.

Q.27)Why private sector participation is required in infrastructure?

A.27) Civil infrastructure is vital to the nation’s economic growth. Infrastructure may be considered to be the skeleton on which the society is built. It includes highways, railways, ports, bridges, hydraulic structures, power plants, tunnels, municipal facilities like sanitation and water supply, and other facilities serving public needs. Adequate funding is required to construct and maintain the requisite infrastructure. The immediate need for such projects coupled with chronic budget shortages experienced by public agencies encouraged the use of innovative financing. To achieve meaningful growth, developing countries have to promote infrastructure development, which has a positive ‘knock on’ effect in catalyzing continuous economic development, apart from meeting basic needs.

PPP projects are characterized by non-recourse or limited-recourse financing where lenders are repaid from only the revenues generated by projects. The concessionaire is a special purpose vehicle in which the sponsoring entities are not responsible for the repayments of the loans. These projects have a capital cost during construction and a low operating cost afterwards which implies that the initial financing cost are very large compared to the total cost.

Value for money, defined as the effective use of public funds on capital project, can come from private sector innovation and skills in asset design, construction techniques and operational practices. It may also come from transferring key risks in design, construction delays, cost overruns and finance to private sector entities. However, in some cases the emphasis on risk transfer can be misleading as value for money requires equitable allocation of risk between the public and private sector.

Q.28)What is role of World bankon infrastructure project?

A.28) The World Bank is an international financial institution that provides financial and technical assistance to developing countries for development programs (e.g. bridges, roads, schools, etc.) with the stated goal of reducing poverty.

Provide assistance to developing and transition countries Promote the economic development of the world's poorer countries Finance the poorest developing countries whose per capita GNP is less than $865 a year special financial assistance through the International Development Association (IDA)

Build capacity Infrastructure creation Development of Financial Systems Combating corruption Research, Consultancy and Training

Investment loans: Support of economic and social development projects Development policy loans: Quick disbursing finance to support countries

International Bank for Reconstruction and Development (IBRD) :186 member countries International Development Association (IDA): 168 members countries

The World Bank Group played a strong countercyclical role throughout the global financial crisis by maintaining long-term infrastructure investment programs and by sustaining the potential for private-sector led economic growth and employment creation. The International Finance Corporation (IFC) delivered positive results primarily in low-income countries, with existing clients and in cofinancing operations, while the Multilateral Investment Guarantee Agency (MIGA) provided guarantees to several key financial institutions in Eastern Europe. The distribution of lending in infrastructure broadly mirrored the differences in crisis impact and financing needs.

Q.29) Infrastructural development in India

A.30) India’s rise in recent years is a most prominent development in the world economy. India has re-emerged as one of the fastest growing economies in the world. India’s growth, particularly in manufacturing and services, has boosted the sentiments, both within country and abroad. With an upsurge in investment and robust macroeconomic fundamentals, the future outlook for India is distinctly upbeat. According to many commentators, India could unleash its full potentials, provided it improves the infrastructure facilities, which are at present not sufficient to meet the growing demand of the economy. Failing to improve the country’s infrastructure will slow down India’s growth process. Therefore, Indian government’s first priority is rising to the challenge of maintaining and managing high growth through investment in infrastructure sector, among others.

The provision of quality and efficient infrastructure services is essential to realize the full potential of the growth impulses surging through the economy. India, while stepping up public investment in infrastructure, has been

actively engaged in involving private sector to meet the growing demand. The demand for infrastructure investment during the 11th Five Year Plan (2007-2011) has been estimated to be US$ 492.5 billion (Planning Commission, 2007). To meet this growing demand, Government of India has planned to raise the investment in infrastructure from the present 4.7 percent of GDP to around 7.5 to 8 percent of GDP in the 11th Five Year Plan. In general, efforts towards infrastructure development is continued to focus on the key areas of physical and social infrastructure.

PROFILE OF INDIA’S PHYSICAL INFRASTRUCTURE :

Performance of physical infrastructure in Indian economy in last one and half decades has been mixed and uneven. Over years, India’s soft infrastructure grew much faster than the hard infrastructure. For example, India’s rising trade has been reflected in growing container port traffic, which increased from less than a million in 1991 to about 5 million in 2005 with an annual growth rate of about 266 percent since 1991. In contrast, hardware components, like railways, roadways and airways, witnessed little expansion in last one and half decades. In general, performances of these sectors (hardware) are nevertheless poor, when counted their densities in terms of country’s surface area or population. Densities in terms of access or spread of rail and road length clearly indicate that road sector has been successful, compared to railways, in spreading the network as 107well as providing an access in the economy.

Q.30) Can India develop road sector based on PPP modal?

A.30) India is developing road sector based on PPP modal

With an extensive road network of 3.3 million kilometers, India is the second largest in the world. Indian roads carry about 61% of the freight and 85% of the passenger traffic. All the highways and expressways together constitute about 66,000 kilometers (only 2% of all roads), whereas they carry 40% of the road traffic. To further the existing infrastructure, Indian Government annually spends about Rs.18000 crores (USD 3.704 billion).

Approach

National Highways Authority of India (NHAI) is the apex Government body for implementing the NHDP. All contracts whether for construction or BOT are awarded through competitive bidding

Private sector participation is increasing, and is through construction contracts and Build-Operate-Transfer (BOT) for some stretches based on either the lowest annuity or the lowest lump sum payment from the Government

BOT contracts permit tolling on those stretches of the NHDP A large component of highways is to be developed through public-private partnerships and several high

traffic stretches already awarded to private companies on a BOT basis.

Policy

100% FDI under the automatic route is permitted for all road development projects 100% income tax exemption for a period of 10 years Grants / Viability gap Funding for marginal projects by NHAI. Formulation of Model Concession Agreement

Opportunity :

Road development is recognized as essential to sustain India’s economic growth. Road development is a priority sector and the ongoing focus on the highway infrastructure development is targeted to projected annual growth of 12-15% for passenger traffic and 15-18% for cargo traffic. The project has been attracting huge Direct Foreign Investment (FDI).

Outlook

Annual growth projected at 12-15% for passenger traffic, and 15-18% for cargo traffic

Over $50 to 60 billion investment is required over the next 5 years to improve road infrastructure

Potential :

Road development is recognised as essential to sustain India’s economic growth

The Government is planning to increase spends on road development substantially with funding already in place based on a cess on fuel

A large component of highways is to be developed through public-private partnershipsSeveral high traffic stretches already awarded to private companies on a BOT basis.

Government Initiative

For a country of India's size, an efficient road network is necessary both for national integration as well as for overall socio-economic development. The National Highways (NH), with a total length of 65,569 km, serve as the arterial network across the country. The four-laning the 5,900 km long Golden Quadrilateral (GQ) connecting Delhi, Mumbai, Chennai and Kolkata is on the verge of completion. The ongoing four-laning of the 7,300 km North-South East-West (NSEW) corridor is scheduled to be completed by December 2009. The Committee on Infrastructure adopted an Action Plan for development of the National Highways network. An ambitious National Highway Development Programme (NHDP), involving a total investment of Rs.2,20,000 crore (USD 45.276 billion) up to 2012, has been established. The main elements of the programme are as follows:

Steps Taken

100 per cent FDI under the automatic route in all road development projects. 100 per cent income tax exemption for a period of 10 years Cabinet Committee on Economic Affairs (CCEA) has agreed upon the National Highways Fee

(Determination of Rates and Collection) Rules, 2008 to establish uniformity in fee rate for public funded and private investments projects.

An increment in the overseas borrowing amount of infrastructure sectors, to US$ 500 million from US$ 100 million.

Offering cheaper loans for highway projects that will speed up the projects worth more than US$ 12. 70 billion under separate phases of the NHDP.

Q.32)Why congestion occurs in India ports?

A.32) Lack of infrastructural facilities in Indian ports is negatively affecting exports as the ports are struggling to cope with commodity traffic. Ports are unable to handle the container and vessel traffic despite a decline in economy and exports.

According to the Indian Ports Association, India has a 6000-km long coast line, 12 major ports and 175 minor ports. These ports handle over 85 percent of the country's international trade and the major ports under the jurisdiction of the Central Government handle about 90 percent of the sea cargo traffic.

Majority of these ports face infrastructural problems resulting in delay in cargo exports.

India's port infrastructure is over stretched and there is a berthing delay of several days in the major ports. Though the manufacturing and factory output rate has declined now, the ports are unable to handle the current traffic. The delay at ports is effecting out international trade

Infrastructure at Indian ports has not grown in tandem with India's growth rate. The figures of traffic handling in major ports of India show that congestion at ports has increased over the years.

Issues With Indian Ports

* Ships have to wait long in the channel for berthing, and productivity in loading and unloading is low. The national average turn-around time of vessels for liquid, dry bulk, general cargo and containers is estimated at 3.4 days, 9 days and 3.6 days respectively.

*It is labor intensive and mechanization process is non-existent or slow.

* Night navigation is not available, and ships have to wait for daylight.

* Equipment used is outdated and obsolete.

* Restrictions in navigation channels do not allow bigger vessels to be berthed.

* Handing vessels and feeder vessels in container berths is time consuming.

* The road links to ports are insufficient and badly maintained.

* Lack of coordination between ports and the custom authorities delays quicker dispensation of documentation and goods.

Q.33) How free trade agreement are useful to international trading

A.33) Free Trade Agreements (FTAs) have proved to be one of the best ways to open up foreign markets to U.S. exporters. Trade Agreements reduce barriers to exports, and imports. The reduction of trade barriers and the creation of a more stable and transparent trading and investment environment make it easier and cheaper for companies to export their products and services to trading partner markets. In 2012, 46 percent of U.S. goods exports went to FTA partner countries. U.S. merchandise exports to the 20 FTA partners with agreements in force totaled $718 billion, up 6 percent from 2011. The United States also enjoyed a trade surplus in manufactured goods with our FTA partners totaling $59.7 billion in 2012, a 30 percent increase from the surplus in 2011.

International trade is the modern framework of prosperity. Free trade policies open up new areas to competition and innovation. Free trade leads to better jobs, new markets and increased investment. Free trade spreads values and beliefs as well as goods and services. Since international trade relies on traders keeping their agreements, countries and companies are more accountable to each other and therefore more stable.

Increased Production

The purpose of trade is to provide access to a greater variety of goods and services. According to the Heritage Foundation, free trade increase competition, spurring companies to innovate and develop better products & help the keeping prices low and quality high Free trade allows regions and companies to focus on the goods or services that they do best. International trade increases a company market share. This causes lower cost and increased productivity, leading to higher rates of production.

Economic Development

Free trade rewards risk-taking through increased sales and market share. When larger countries like the United States take advantage of free trade, their economies grow. This growth overflows into smaller countries that are economically unstable or mired in poverty but are open to trade. The Heritage Foundation reports The advantage for poor countries in being able to trade for capital is that the payoff is more immediate in their private sectors

International Cooperation

Free trade forces companies to support the rule of law. The World Trade Organization requires members to honor all agreements and abide by all WTO rulings. Countries that do not enforce contracts lose business and investors move their money elsewhere. If a country wants to retain the benefits of free trade, then they must obey the rules. The Heritage Foundation reports that free trade also important transmits ideas and values,which it says leads to stronger and more stable governments in smaller countries.

Resource Allocation

Free trade improves the allocation of global resources. If countries or people can trade for the items they need, they can focus on making the ones they do best. Imports tend to suppress inflation, since each product or service comes from the best supply source. According to the CATO institute, benefit from the lower prices that imports give us, and we can use the money we save to buy things made at home.

Business Incentives

Trade agreements open markets and offer business incentives and protections. They include commitments to protect intellectual property rights and labor rights and open regions to competition. They also govern environmental standards and improve customs facilitation. According to Alan Blinder, professor of economics at Princeton University,free trade tend to be more technologically sophisticated and to create better jobs. Trade and finance are mutually supportive. Finally, global investment allows for greater diversification and risk sharing.

Q.34) What are factor effecting to business environment?

A.34) There are various environmental factors which can impact the businesses in an economy. These environmental factors can be categorized into external and internal environment of the businesses. The internal environment of the company includes the factors which are within the company and under the control of company like product Organizational culture, Leadership, and Manufacturing(quality). On the other hand, the external factors are not under the control of the company and include Social environment, political conditions, suppliers, competitors

of the company, Government regulations and policies, accounting agencies like Accounting standard board, Resources in an economy and demographics of people.

1.) Social

2.) Political

3.) Financial

4.) QoS

5.) Product Quality

6.) Distribution Channels

7.) Promotional Channels

8.) Manufacturing

9.) Employee

10.) Leadership

Environmental factors affecting sales

Political factors. These refer to government policy such as the degree of intervention in the economy. What goods and services does a government want to provide? To what extent does it believe in subsidising firms? What are its priorities in terms of business support? Political decisions can impact on many vital areas for business such as the education of the workforce, the health of the nation and the quality of the infrastructure of the economy such as the road and rail system.

Economic factors. These include interest rates, taxation changes, economic growth, inflation and exchange rates. For example: higher interest rates may deter investment because it costs more to borrow a strong currency may make exporting more difficult because it may raise the price in terms of foreign currency inflation may provoke higher wage demands from employees and raise costs.higher national income growth may boost demand for a firm's products

•Social factors. Changes in social trends can impact on the demand for a firm's products and the availability and willingness of individuals to work. In the UK, for example, the population has been ageing. This has increased the costs for firms who are committed to pension payments for their employees because their staff are living longer. It also means some firms such as Asda have started to recruit older employees to tap into this growing labour pool. The ageing population also has impact on demand: For example, demand for sheltered accommodation and medicines has increased whereas demand for toys is falling.

•Technological factors: New technologies create new products and new processes. MP3 players, computer games, online gambling and high definition TVs are all new markets created by technological advances. Online shopping, bar coding and computer aided design are all improvements to the way we do business as a result of better technology. Technology can reduce costs, improve quality and lead to innovation. These developments can benefit consumers as well as the organisations providing the products.

Q.35) Mundra is major or minor port?

A.35) Mundraport :

Mundra is ideal for global trade due to multiple benefits. It situated enroute most international shipping destinations. The gulf acts as a natural shelter for the port, facilitating 24x7 safe berthing, unberthing and vessel operations. The port also provides a distance advantage to the northern and western hinterland of India vis-a-vis other ports. This makes it the natural gateway for the cargo hubs functioning in the northern and western states of India as well as the NCR.

APSEZ is connected with the Indian Railway network by a privately developed and maintained 76-km rail line. The railway line connects Multi purpose terminals, Container Terminals - CT-I, CT-II, South Basin and West Basin, the dedicated Coal import terminal of Mundra Port to the nearest Indian Railways railhead at Adipur. Adani Ports and SEZ Ltd, Mundra has completed doubliing of Mundra Port - Adipurrailway line in November 2012. The line has a increased capacity to handle rake movement of 80 trains to and from Mundra Port.

Mundra is connected to the Northern & Western states and NCR through the Palanpur route and rest of the hinterland by Ahmedabad route. The rail infrastructure has capacity to handle double stack container trains from Mundra to Kishangarh, Rajansthan / Patli.

The Port has Long Loop line station to form and accommodate Long Haul train (two trains of 660 meters each joined together) . This is the only port in Western Railway which is having dedicated Long Haul formation line. Running Long haul trains further increases train movement capacity of Mundra from 80 to 100 trains per day.

Q.36) What is problem of Chennai port.

A.36) Chennai Port has been struggling to meet growing container traffic. With just two container terminals, one gate and limited infrastructure, Chennai Port Trust (CHPT) is struggling to cope with the 15-20% annual growth in container volume in the harbour.

vessels have been forced to wait in the outer anchorage for 36-48 hours, whereas some months ago berthing was available on arrival. As a result, Exim trade has suffered much in the last two months due to the difficulties in evacuating containers or exporting them on time. On top of it, Importers are asked to pay congestion surcharges.

Q .37) Why shipping ministry replaced NMDP with vision 2020

A.37) India's new maritime plan, which will replace the National Maritime Development Programme (NMDP) that is due to expire in 2012

The existing NMDP only covers projects which have been under implementation as on April 01, 2005 or those likely to start by March 31, 2012.

Therefore, the ministry of shipping is in the process of drafting a new plan that would contain year-wise projects for the next decade, covering the 12th plan and the initial period of the 13th plan.

The resultant new plan is expected to include policy frame-work for stimulation of capacity expansion as well as growth of maritime sector. Supplementary projects for ports development from other infrastructure ministries such as National Highway Authority of India, Roads, Railways and Inland Waterways.

Q 38 : What is problem of JNPT (nhavasheva)port'?

A.38) JNPT is struggling these days with myriad challenges ranging from implementing its planned projects on time to improving connectivity to the problem of falling tariffs.

“Fast implementation of projects is important. Currently, for every two ships, JNPT is accepting one. Ships should not have to wait for berth, it should be the other way round. This can happen only when capacity is enhanced,”

The biggest challenge is not just timely implementation of projects, but also improving connectivity through water, road and rail. The dedicated freight corridor still remains a faraway dream and the road connectivity at the port remains abysmal, with serpentine queues of trucks, said one industry insider. “The problems of JNPT would not be solved till it is corporatised and given the independence to take its own decisions

Another major blow has come from a ruling of the Tariff Authority of Major Ports, the sectoral regulator for service charges, that forced tariffs down by 44 per cent. Coupled with this, JNP has also been feeling the heat with a neighbouring non-major port, Mundra in Kutch, giving it stiff competition. Mundra, with a depth of up to 15.5 metres and ability to handle large ships like post Panamax and Capsize vessels, has become a viable option especially as JNP struggles with congestion problems.

Q 39)What is impact in India of Excise duty?

A.39) Impact or Objectives of Excise Duty

1. Increase in government revenue

2. Developing stable source of government revenue

3. To make the tax system more transparent

4. To avoid cascading effect.

5. To reduce tax evasion practices

6. To increase in exports.

Excise Tax and othertaxes are various forms of indirect taxes. They are imposed by the government with the intention of raising the final price of the product. Their prime objective is to reduce the consumption of that specific product. This mechanism is very simple. Obviously when the price will be high, lesser people will be motivated to buy that item. For example government imposes taxes on demerit goods for the purpose of discouraging their consumption and eventually reducing their negative impacts.

Q.40) How heavy taxation is affecting domestic business

A.40) Indirect taxes are those which are not directly levied on the income of any individual or a firm. These taxes are are taken by the public through their consumption. Such taxes are added into the price of the products and therefore when an individual pays for a product, he also has to pay the tax. Some times many people do not even know that they are paying a large amount of tax in this way.

INADEQUATE INCOMES

The total outcome of all of the effects listed below is a large tax burden. And only workers feel the brunt of this burden, because only workers create wealth. When all of these effects are combined, the tax burden on the average worker is currently about 73 percent of income. So people can't live on their incomes.

LOW WAGES

Multiple governments levy so many taxes on businesses that "taxes" is the highest budget items on the ledger sheets of most businesses. These taxes take away some of the money otherwise used to pay wages. So employers can't pay good wages.

HIGH PRICES

Multiple governments levy so many taxes on businesses that "taxes" is the highest budget items on the ledger sheets of most businesses. Businesses have to raise prices to get money to pay these taxes. So product prices go up. This leads to inflation.

SHODDY PRODUCTS

Multiple governments levy so many taxes on businesses that "taxes" is the highest budget items on the ledger sheets of most businesses. These taxes take away money otherwise used to improve quality. Instead, businesses must cut corners to make the products and pay the high taxes. Many recalls are the results of businesses cutting too many corners, to save money so they can pay the high taxes.

PRODUCT UNAVAILABILITY AND DISCONTINUATION

Because high taxes cost businesses more, they can't provide as many products as they used to be able to. Property taxes make it expensive to stock products with lower quantities demanded. And manufacturers can't afford to produce the low-demand products and also pay their taxes. The result is that people with allergies to the mainstream products can't buy any products they can use.

LOST JOBS

Many businesses go bankrupt, because they can't afford to operate after government takes it s cut. Other businesses flee the country, to escape the high taxes. And still other businesses must cut their payrolls to stay within their incomes. The result in each case is the loss of jobs those businesses provided in the economy.

FORECLOSURES, EVICTIONS, AND HOMELESSNESS

Because taxes are so high, people who originally entered into mortgages or rental contracts with the ability to pay them now no longer have the money to pay the monthly payments. Landlords also can't pay their taxes and their mortgages, causing the loss of the rental units. And if the taxes are not paid instead, government quickly seizes the property and sells it at auction at a sheriff sale. Thus, high taxes cause foreclosures and evictions.

With the foreclosure or eviction comes homelessness, because these victims of government greed can no longer afford to pay rent or mortgage payments. So high taxes cause homelessness.

POVERTY AND HIGH CRIME

Because more people can't afford to live on their incomes, the poverty rate goes up. This causes an additional drain on the budgets of government social programs. This means that each poor person can't get enough to live on.

Many poor people, unable to find jobs because government overtaxed the economy, turn to crime to get the money needed to support their families. This causes the crime rate to go up. And since many of those crimes are robberies, the violent crime rate goes up too.

CHRONIC RECESSION

The high taxation takes so much away from the economy that it enters a permanent form of recession. If government tries to boost the economy with increased government spending, the result is stagflation (simultaneous high inflation and unemployment) instead of prosperity. The only cure for stagflation is to cut both taxes and government spending. But this takes time to happen, keeping the effects of overtaxation in place for a time after the overtaxation ends.

LOW REAL TAX REVENUES

The permanent recession and losses of jobs caused by the high taxes cause a drop in government revenue, as economic production drops. If government then raises tax rates to recoup the lost revenue, production drops again, and the revenue drops even more. In addition to this, the increase in prices caused by the increased taxation prevents government spending from purchasing as much. So high tax rates cause lower real tax revenue collection.