CRZ notification

The Union Cabinet chaired by Prime Minister Shri Narendra Modi has approved the Coastal Regulation Zone (CRZ) Notification, 2018 which was last reviewed and issued in 2011, with periodic amendments to some clauses. The move comes in the backdrop of a series of representations received by the Ministry of Environment, Forest & Climate Change from various Coastal States/UTs, besides other stakeholders, for a comprehensive review of the provisions of the CRZ Notification, 2011, particularly related to the management and conservation of marine and coastal eco-systems, development in coastal areas, eco-tourism, livelihood option and sustainable development of coastal communities etc.

Benefits

The proposed CRZ Notification, 2018 will lead to enhanced activities in the coastal regions thereby promoting economic growth while also respecting the conservation principles of coastal regions. It will not only result in significant employment generation but also to better life and add value to the economy of India. The new notification is expected to rejuvenate the coastal areas while reducing their vulnerabilities.

Salient Features:

(i)         Allowing FSI as per current norms in CRZ areas: As per CRZ, 2011 Notification, for CRZ-II (Urban) areas, Floor Space Index (FSI) or the Floor Area Ratio (FAR) had been frozen as per 1991 Development Control Regulation (DCR) levels. In the CRZ, 2018 Notification, it has been decided to de-freeze the same and permit FSI for construction projects, as prevailing on the date of the new Notification. This will enable redevelopment of these areas to meet the emerging needs.

(ii)        Densely populated rural areas to be afforded greater opportunity for development: For CRZ-III (Rural) areas, two separate categories have now been stipulated as below:

(a)  CRZ-III A - These are densely populated rural areas with a population density of 2161 per square kilometre as per 2011 Census. Such areas shall have a No Development Zone (NDZ) of 50 meters from the HTL as against 200 meters from the High Tide Line stipulated in the CRZ Notification, 2011 since such areas have similar characteristics as urban areas.

(b)  CRZ-III B - Rural areas with population density of below 2161 per square kilometre as per 2011 Census. Such areas shall continue to have an NDZ of 200 meters from the HTL.

(iii)       Tourism infrastructure for basic amenities to be promoted: Temporary tourism facilities such as shacks, toilet blocks, change rooms, drinking water facilities etc. have now been permitted in Beaches. Such temporary tourism facilities are also now permissible in the "No Development Zone" (NDZ) of the CRZ-III areas as per the Notification. However, a minimum distance of 10 m from HTL should be maintained for setting up of such facilities.

(iv)      CRZ Clearances streamlined: The procedure for CRZ clearances has been streamlined. Only such projects/activities, which are located in the CRZ-I (Ecologically Sensitive Areas) and CRZ IV (area covered between Low Tide Line and 12 Nautical Miles seaward) shall be dealt with for CRZ clearance by the Ministry of Environment, Forest and Climate Change. The powers for clearances with respect to CRZ-II and III have been delegated at the State level with necessary guidance.

(v)       A No Development Zone (NDZ) of 20 meters has been stipulated for all Islands: For islands close to the main land coast and for all Backwater Islands in the main land, in wake of space limitations and unique geography of such regions, bringing uniformity in treatment of such regions, NDZ of 20 m has been stipulated.

(vi)       All Ecologically Sensitive Areas have been accorded special importance: Specific guidelines related to their conservation and management plans have been drawn up as a part of the CRZ Notification.

(vii)      Pollution abatement has been accorded special focus: In order to address pollution in Coastal areas treatment facilities have been made permissible activities in CRZ-I B area subject to necessary safeguards.

(viii)     Defence and strategic projects have been accorded necessary dispensation. 

Background:

With the objective of conservation and protection of the coastal environment, Ministry of Environment and Forest and Climate Change notified the Coastal Regulation Zone Notification in 1991, which was subsequently revised in 2011. The notification was amended from time to time based on representations received.

A need was felt overtime to undertake a comprehensive revision of the notification on the basis of number of representations from various Coastal States/UTs, besides other stakeholders particularly related to the management and conservation of marine and coastal eco-systems, development in coastal areas, eco-tourism, livelihood options and sustainable development of coastal communities etc. Therefore, the Ministry of Environment, Forest & Climate Change constituted a Committee in June 2014 under the Chairmanship of Dr. Shailesh Nayak (Secretary, Ministry of Earth Sciences) to examine the various issues and concerns of Coastal States/UTs and other stakeholders for recommending appropriate changes in the CRZ Notification, 2011.

The Shailesh Nayank Committee held wide ranging consultations with State Governments and other stakeholders and submitted its recommendations in 2015. The recommendations were further examined in consultation with Members of Parliament of Coastal States and Union Territories besides other concerned Ministries of Government of India. A draft notification was issued in April, 2018 for inviting comments from public at large.

A number of suggestions and comments were received by the Government and based on overall imperative of sustainable development of Coastal areas and need for conserving the Coastal environment, Government has approved the Coastal Regulation Zone Notification 2018 which is expected to go a long way in meeting the aspirations of Coastal communities besides ensuring welfare of poor and vulnerable populations.

The changes brought about in the CRZ Notification will further add to creating additional opportunities for affordable housing. This will benefit not only the housing sector but the people at large looking for shelter. The Notification is so designed that it balances the needs in such a way that both are fulfilled. Tourism has been one of the greatest creators of livelihood and jobs. The new Notification will boost tourism in terms of more activities, more infrastructure and more opportunities and will certainly go a long way in creating employment opportunities in various aspects of tourism. This will also give boost to people, desirous of seeing and enjoying the beauty of the mighty seas.

FDI in e-commerce

Review of the FDI policy in e-commerce issued by the DIPP on 26th December, 2018

1.0       To provide clarity to FDI policy on e-commerce sector, Para 5.2.15.2 of the Consolidated FDI Policy Circular 2017 will now read as under:

5.2.15.2 E-commerce activities

Sector/Activity	% of Equity/FDI Cap	Entry Route
E-commerce activities	100%	Automatic

5.2.15.2.1 Subject to provisions of FDI Policy, e-commerce entities would engage only in Business to Business (B2B) e-commerce and not in Business to Consumer (B2C) e-commerce.

5.2.15.2.2 Definitions:

i)    E-commerce- E-commerce means buying and selling of goods and services including digital products over digital & electronic network.

ii)   E-commerce entity-     E-commerce entity means a company incorporated under the Companies Act 1956 or the Companies Act 2013 or a foreign company covered under section 2 (42) of the Companies Act, 2013 or an office, branch or agency in India as provided in section 2 (v) (iii) of FEMA 1999, owned or controlled by a person resident outside India and conducting the e-commerce business.

iii)  Inventory based model of e-commerce- Inventory based model of e-commerce means an e-commerce activity where inventory of goods and services is owned by e-commerce entity and is sold to the consumers directly. 

iv)  Marketplace based model of e-commerce- Marketplace based model of e-commerce means providing of an information technology platform by an e-commerce entity on a digital & electronic network to act as a facilitator between buyer and seller.

5.2.15.2.3 Guidelines for Foreign Direct Investment on e-commerce sector

i)          100% FDI under automatic route is permitted in marketplace model of e-commerce.

ii)         FDI is not permitted in inventory based model of e-commerce.

5.2.15.2.4          Other Conditions

i)          Digital & electronic network will include network of computers, television channels and any other internet application used in automated manner such as web pages, extranets, mobiles etc.

ii)         Marketplace e-commerce entity will be permitted to enter into transactions with sellers registered on its platform on B2B basis.

iii)        E-commerce marketplace may provide support services to sellers in respect of warehousing, logistics, order fulfillment, call centre, payment collection and other services.

iv)        E-commerce entity providing a marketplace will not exercise ownership or control over the inventory i.e. goods purported to be sold. Such an ownership or control over the inventory will render the business into inventory based model. Inventory of a vendor will be deemed to be controlled by e-commerce marketplace entity if more than 25% of purchases of such vendor are from the marketplace entity or its group companies. 

 v)        An entity having equity participation by e-commerce marketplace entity or its group companies, or having control on its inventory by e-commerce marketplace entity or its group companies, will not be permitted to sell its products on the platform run by such marketplace entity.

vi)        In marketplace model goods/services made available for sale electronically on website should clearly provide name, address and other contact details of the seller. Post sales, delivery of goods to the customers and customer satisfaction will be responsibility of the seller.

vii)       In marketplace model, payments for sale may be facilitated by the e-commerce entity in conformity with the guidelines of the Reserve Bank of India.

viii)      In marketplace model, any warrantee/ guarantee of goods and services sold will be responsibility of the seller.

ix)        E-commerce entities providing marketplace will not directly or indirectly influence the sale price of goods or services and shall maintain level playing field. Services should be provided by e-commerce marketplace entity or other entities in which e-commerce marketplace entity has direct or indirect equity participation or common control, to vendors on the platform at arm’s length and in a fair and non-discriminatory manner. Such services will include but not limited to fulfilment, logistics, warehousing, advertisement/ marketing, payments, financing etc. Cash back provided by group companies of marketplace entity to buyers shall be fair and non-discriminatory. For the purposes of this clause, provision of services to any vendor on such terms which are not made available to other vendors in similar circumstances will be deemed unfair and discriminatory.

  x)       Guidelines on cash and carry wholesale trading as given in para 5.2.15.1.2 of Consolidated FDI Policy Circular 2017 will apply on B2B e-commerce.

xi)        e-commerce marketplace entity will not mandate any seller to sell any product exclusively on its platform only.

xii)       e-commerce marketplace entity will be required to furnish a certificate along with a report of statutory auditor to Reserve Bank of India, confirming compliance of above guidelines, by 30th of September of every year for the preceding financial year.

            Subject to the conditions of FDI policy on services sector and applicable laws/regulations, security and other conditionalities, sale of services through e-commerce will be under automatic route.

3.0       The above decision will take effect from 01 February, 2019.

form NFRA-1

MCA has vide its notification dated 13th December, 2018 extended the last date for filing of form NFRA-1. The new date is 30 days from the date on which the form is deployed on the website of the ministry.

Form NFRA-1 is a new form for giving particulars of auditors of listed companies as per the new NFRA regulations. NFRA will be regulator of the auditors of the listed companies, for the time being. Later on it might extend to auditors of other unlisted big companies as well.

Ostensibly the form is not ready at the MCA side which is why they have extended the last date. This has happened with other forms also such as BEN-1, BEN-2 and the form for intimating commencement of business. One would have thought that MCA should do all its homework before introducing new regulations or changes in the existing regulations. Shows MCA in poor light in this regard.

http://www.mca.gov.in/Ministry/pdf/NoticeAndCirculars_13122018.pdf

GST annual return

The Ministry of Finance vide its notification dated 11th December, 2018 has extended the last date for filing of the annual return of GST for the period from 1st July, 2017 to 31st March, 2018 to 31st March, 2019. The annual return is required to be filed online, but the system is not yet ready at their end, so the extension.

Every registered person,  a casual taxable person and a non resident taxable person is required to file this annual return electronically.

The form for the annual return is not ready, so one does not know the contours of this return. Already taxpayers are burdened with two returns GSTR3B and GSTR1. The latter could be quarterly for taxpayers who have less than Rs.1.5 crore turnover and they have to opt for quarterly method of filing.

One does not know what is the reason for one more return under the GST regime. It does not help in "ease of doing business" 

Ease of Doing Business

Indian Ports Association (IPA), under the guidance of Ministry of Shipping launched the Port Community System ‘PCS1x’. The url www.indianpcs.gov.in was launched today. 

‘PCS 1x’ is a cloud based new generation technology, with user-friendly interface.  This system seamlessly integrates 8 new stakeholders besides the 19 existing stakeholders from the maritime trade on a single platform.

The platform offers value added services such as notification engine, workflow, mobile application, track and trace, better user interface, better security features, improved inclusion by offering dashboard for those with no IT capability. A unique feature of ‘PCS1x’ is that it can latch on to third party software which provides services to the maritime industry thereby enabling the stakeholders to access wide network of services. The system enables single sign on facility to provide one stop interface to all the functionalities across all stakeholders. Another major feature is the deployment of a world class state of the art payment aggregator solution which removes dependency on bank specific payment eco system.

This system will enable trade to have an improved communication with the customs as they have also embarked on an Application Programming Interface (API) based architecture, thereby enabling real time interaction.

This System offers a database that acts as a single data point to all transactions. It captures and stores data on its first occurrence thereby reducing manual intervention, the need to enter transaction data at various points and thereby reducing errors in the process. It is estimated that this feature alone will reduce one and half to 2 days in a life of transaction. The application will have a cascading effect in reducing dwell time and overall cost of transaction. The platform has the potential to revolutionize maritime trade in India and bring it at par with global best practices and pave the way to improve the Ease of Doing Business world ranking and Logistics Performance Index (LPI) ranks.

A major training and outreach program is under way to educate the stakeholders about the uses and benefits of ‘PCS 1x’.

This system is also an initiative that supports green initiatives by reducing dependency on paper. The web-based platform has been developed indigenously and is a part of the ‘Make in India’ and ‘Digital India’ initiative of the Hon’ble Prime Minister.

The Ministry of Shipping is separately issuing order to make usage of the PCS platform mandatory.

Significant Beneficial Ownership

https://www.sebi.gov.in/legal/circulars/dec-2018/disclosure-of-significant-beneficial-ownership-in-the-shareholding-pattern_41245.html

SEBI has now come out with a circular as per the above link to ask for details of significant beneficial ownership to be provided by companies as part of their quarterly shareholding pattern disclosure under LODR. It will become effective from quarter ended 31st March, 2019.

So this is apart from the BEN1, BEN2 under the Companies Act, 2013 which I believe is not yet notified.

Of course, SEBI regulations will apply to the listed companies only so the listed companies will have to file dual disclosures at the stock exchanges and also with the MCA. So much for "ease of doing business".

Guidelines on Loan system

Gist of RBI notification dated 5th December, 2018 follows:

Interesting from the point of view of bringing some much needed discipline in the credit system in banks and to follow a standard operating procedure so that the discretionary powers are taken away from the individual banks/ bankers. This is going to be effective from 1st April, 2019. More than 40% to be allowed only under cash credit facility which has some form of security for which a charge is created with the Registrar of Companies. 

Guidelines on Loan System for Delivery of Bank Credit

With a view to enhance credit discipline among the larger borrowers enjoying working capital facility from the banking system, delivery of bank credit for such borrowers shall be as under:

1. Minimum level of ‘loan component’ and Effective date

In respect of borrowers having aggregate fund based working capital limit of ₹1500 million and above from the banking system, a minimum level of ‘loan component’ of 40 percent shall be effective from April 1, 2019. Accordingly, for such borrowers, the outstanding ‘loan component’ (Working Capital Loan) must be equal to at least 40 percent of the sanctioned fund based working capital limit, including ad hoc limits and TODs. Hence, for such borrowers, drawings up to 40 percent of the total fund based working capital limits shall only be allowed from the ‘loan component’. Drawings in excess of the minimum ‘loan component’ threshold may be allowed in the form of cash credit facility. Working examples for bifurcation of working capital limit are provided in Appendix I. The bifurcation of the working capital limit into loan and cash credit components shall be effected after excluding the export credit limits (pre-shipment and post-shipment) and bills limit for inland sales from the working capital limit. Investment by the bank in the commercial papers issued by the borrower shall form part of the loan component, provided the investment is sanctioned as part of the working capital limit.

2. Sharing of Working Capital Finance

The ground rules for sharing of cash credit and loan components may be laid down by the consortium, wherever formed, subject to guidelines on bifurcation as stated in paragraph 1 above. All lenders in the consortium shall be individually and jointly responsible to make sure that at the aggregate level, the ‘loan component’ meets the above mentioned requirements. Under Multiple Banking Arrangements (MBAs), each bank shall ensure adherence to these guidelines at individual bank level.

3. Amount and tenor of the loan

The amount and tenor of the loan component may be fixed by banks in consultation with the borrowers, subject to the tenor being not less than seven days. Banks may decide to split the loan component into WCLs with different maturity periods as per the needs of the borrowers.

4. Repayment/Renewal/Rollover of Loan Component

Banks/consortia/syndicates will have the discretion to stipulate repayment of the WCLs in instalments or by way of a "bullet" repayment, subject to IRAC norms. Banks may consider rollover of the WCLs at the request of the borrower, subject to compliance with the extant IRAC norms.

5. Risk weights for undrawn portion of cash credit limits

Effective from April 1, 2019, the undrawn portion of cash credit/ overdraft limits sanctioned to the aforesaid large borrowers, irrespective of whether unconditionally cancellable or not, shall attract a credit conversion factor of 20 percent.

6. The guidelines will be effective from April 1, 2019 covering both existing as well as new relationships. The 40 percent loan component will be revised to 60 percent, with effect from July 1, 2019.

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Appendix I

Working Example for Bifurcation of Working Capital Limits

(After adjustment as at paragraph 1 of the circular)

(₹ in mn)
S. No.	Sanctioned Aggregate Fund based Working Capital Limit	Current Outstanding	40% of column 2 is to be drawn as WCL
(1)	(2)	(3)	(4)
Scenario 1	₹2100	₹780	WCL - ₹780 CC - Nil
Scenario 2	₹2100	₹1700	WCL - ₹840 CC - ₹860
Scenario 3	₹2100	₹1600	WCL - ₹840 CC - ₹760
Scenario 4	₹2100	₹2000	WCL - ₹840 CC - ₹1160
Scenario 5	₹2100	₹2050	WCL - ₹840 CC - ₹1210

Legal Entity Identifier - Non derivative markets

Gist of RBI notification dated 29th November, 2018 follows:

Legal Entity Identifier Code is now mandatory for participants in non derivative market as per schedule given below.

The Legal Entity Identifier (LEI) code has been conceived of as a key measure to improve the quality and accuracy of financial data systems for better risk management post the Global Financial Crisis. The LEI is a 20-character unique identity code assigned to entities who are parties to a financial transaction. Globally, use of LEI has expanded beyond derivative reporting and it is being used in areas relating to banking, securities market, credit rating, market supervision, etc.(https://www.gleif.org/en/about-lei/regulatory-use-of-the-lei). The LEI system has been implemented in a phased manner for participants (other than individuals) in the over-the-counter markets for rupee interest rate derivatives, foreign currency derivatives and credit derivatives in India  and for large corporate borrowers of banks.

2. In the Statement on Developmental and Regulatory Policies, First Bi-monthly Monetary Policy Statement for 2018-19 (Paragraph No. 8), dated April 05, 2018, it was proposed to implement the LEI mechanism for all financial market transactions undertaken by non-individuals in interest rate, currency or credit markets regulated by RBI. Accordingly, draft directions in this regard were issued for public comments on June 20, 2018. Based on comments received during the consultation, the directions on requirement of LEI Code for participation in non-derivative markets have been finalized as below.

3. All participants, other than individuals, undertaking transactions in the markets regulated by RBI viz., Government securities markets, money markets (markets for any instrument with a maturity of one year or less) and non-derivative forex markets (transactions that settle on or before the spot date) shall obtain Legal Entity Identifier (LEI) codes by the due date indicated in the schedule given in Annex. 

Only those entities that obtain an LEI code on or before the due dates applicable to them shall be able to undertake transactions in these financial markets after the due date, either as an issuer or as an investor or as a seller / buyer. Transactions undertaken on recognized stock exchanges are outside the purview of the LEI requirement.

4. In case of non-derivative forex transactions, while all inter-bank transactions shall be subject to LEI requirement, client transactions shall require LEI code for transactions involving an amount equivalent to or exceeding USD one million or equivalent thereof in other currencies.

5. Non-resident entities undertaking financial transactions in the relevant markets shall also require LEI code. Such entities that are not legal entities in their country of incorporation (e.g., funds operated by a non-resident parent/management company that are each registered as an FPI) shall use the LEI code of the parent/management company.

6. Entities responsible for executing transactions, reporting or for depository functions in these markets shall capture the LEI code of the transacting participants in their systems.

7. Entities can obtain LEI from any of the Local Operating Units (LOUs) accredited by the Global Legal Entity Identifier Foundation (GLEIF) (https://www.gleif.org/en). In India LEI code may be obtained from Legal Entity Identifier India Ltd. (LEIL) (https://www.ccilindia-lei.co.in). The rules, procedures and documentation requirements may be ascertained from LEIL 

8. Entities undertaking financial transactions shall ensure that their LEI code is considered current under the rules of the Global LEI System. Lapsed LEI codes shall be deemed invalid for transactions in markets regulated by RBI.

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Annex

Schedule for Implementation of LEI in the Money market, G-sec market and Forex market

Phase	Net Worth of Entities	Proposed deadline
Phase I	above Rs.10000 million	April 30, 2019
Phase II	between Rs.2000 million and Rs 10000 million	August 31, 2019
Phase III	up to Rs.2000 million	March 31, 2020