Indo-Japan Trade & Investment
Bulletin
December Issue
Japan Desk, Corporate Professionals

2013
INDEX

Indo-Japan Trade & Investment Highlights
Japanese Carmakers Commit Huge Investments to India
Japan’s Toyo Suisan & ...
Indo-Japan Trade & Investment Highlights

Japanese Carmakers Commit Huge Investments to India
Although the domestic car ma...
global market. However, growth in India at 22 per cent is manifold compared with global growth
of around 3 per cent making...
slowdown globally and that has proved to be an important factor in making the manufacturing
sector of Japan in choosing In...
exports all products to the US, South America, the Middle East and Africa. However, the
company does not have sales in Ind...
is exploring new business prospects from projects like metro trains, mono-rail and bullet trains.
Hitachi‟s announcements ...
(USL). The two prospective suitors have separately begun preliminary talks in this regard, said a
person close to the proc...
Knowledge Center

Work Hours and Overtime
India has two major laws concerning working hours of workers i.e. the Factory Ac...
factory. If a worker shift extends beyond midnight11, a holiday of a whole day12 means 24
consecutive hours beginning when...
For the contract labourers, as per the Contract Labour Act, 1971 a notice showing the place and
time of disbursement of wa...
(management level and other white collar employees) rarely make any demands or are paid any
overtime wages, although legal...
CONTACT US

MUMBAI
Mastermind- I, Royal Palms Estate, Aarey Colony,
Goregaon (East), Mumbai -400065
Tel: +91 9820079664
Fa...
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Indo Japan Trade and Investment Bulletin

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Highlights of IJTIB-December 2013:
• Japanese Carmakers Commit Huge Investments to India
• Japan’s Toyo Suisan & Ajinomoto Forming 51:49 Instant Noodle JV in India
• India and Japan Eyeing Joint Tenders for LNG
• Ecovis RKCA Partners Japanese Firm Ecovis XAT
• Manufacturing Firms in Japan Prefer India for Investments
• CAC Corporation to Acquire Majority Stake in Accel Fortline
• Japan’s Kokuyo Acquires Riddhi Enterprises
• Isuzu Earmarks Three Thousand Crores for Sri City Unit
• Japan's KITZ Corp Acquires Indian Valve Manufacturer Micro Pneumatics
• Hitachi to Invest Rs. 4,700 Crore in India in 2015-16
• Suzuki to set up Export Headquarters in India
• Japanese Companies Keen to Establish Telecom Gear Test Labs in India
• Japan's Whisky Maker Suntory May Join Race for Whyte & Mackay
• Samurai Incubate to Fund Indian Startups

Knowledge Centre: Work Hour and Overtime (Indian labour and Employment Law)

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Indo Japan Trade and Investment Bulletin

  1. 1. Indo-Japan Trade & Investment Bulletin December Issue Japan Desk, Corporate Professionals 2013
  2. 2. INDEX Indo-Japan Trade & Investment Highlights Japanese Carmakers Commit Huge Investments to India Japan’s Toyo Suisan & Ajinomoto Forming 51:49 Instant Noodle JV in India India and Japan Eyeing Joint Tenders for LNG Ecovis RKCA Partners Japanese Firm Ecovis XAT Manufacturing Firms in Japan Prefer India for Investments CAC Corporation to Acquire Majority Stake in Accel Fortline Japan’s Kokuyo Acquires Riddhi Enterprises Isuzu Earmarks Three Thousand Crores for Sri City Unit Japan's KITZ Corp Acquires Indian Valve Manufacturer Micro Pneumatics Hitachi to Invest Rs. 4,700 Crore in India in 2015-16 Suzuki to set up Export Headquarters in India Japanese Companies Keen to Establish Telecom Gear Test Labs in India Japan's Whisky Maker Suntory May Join Race for Whyte & Mackay Samurai Incubate to Fund Indian Startups Knowledge Centre Work Hour and Overtime (Indian Labour & Employment Laws)
  3. 3. Indo-Japan Trade & Investment Highlights Japanese Carmakers Commit Huge Investments to India Although the domestic car market in India is not doing so well for past two years but that has not affected the flow of fresh investment from Japanese car makers that have made their investment commitment in India for a long term. Japanese companies like Maruti Suzuki, Honda, Nissan and Isuzu have together committed investments in fresh capacity of about Rs. 25,000 crore 1 and Toyota, the world‟s largest car maker, has recently completed an expansion of its production unit near Bangalore. The Japanese car makers have seen to be the most successful in India, starting with Maruti Suzuki in the late 1980s and the success of Japanese car makers has been attributed to the Indian buyers‟ preferences. At present, the four Japanese players - Maruti Suzuki, Toyota Kirloskar, Honda and Nissan, together, command 52% share of India‟s passenger vehicle market. The success of Maruti has been so tremendous in India that it has encouraged its parent Suzuki to utilize it as an export base and product development centre for other emerging markets like Africa, South America and Southeast Asia. Japan’s Toyo Suisan & Ajinomoto Forming 51:49 Instant Noodle JV in India Japanese processed foods makers, Toyo Suisan Kaisha Ltd and Ajinomoto Co are establishing a joint-venture company in India for instant noodle business. Ajinomoto is into the business of seasonings, amino acids and other products. It entered India in 2003. Toyo Suisan is into instant noodle business and holds a strong market share in the US and Mexico. In the proposed joint venture, Toyo Suisan will hold 51 per cent with Ajinomoto owning the rest 49 per cent which is expected to absorb investment of around $10 million (Rs. 62 crore). The sales are expected by the firms to commence in 2016 and the firms are aiming to reach sales of 500 million with a market share of 15 per cent in four south Indian states within 10 years of starting up. As per the World Instant Noodles Association, Indian market size comprises of around 4.4 per cent of the 1 1 Crore = 10 Million
  4. 4. global market. However, growth in India at 22 per cent is manifold compared with global growth of around 3 per cent making India a very profitable market. India and Japan Eyeing Joint Tenders for LNG India and Japan are trying to ease the pain of high prices and rising demand of LPG. It is undisputable that Asia is already the top destination for LNG supplies and economic expansion. Buyers in India and Japan are searching for ways to cut down their gas import bills. An agreement has been signed between the two countries in September, 2013 to study joint procurement of supplies. In furtherance of this effort, the two countries will now hold meetings to work out the details of joint purchases. In this regard, India‟s oil secretary Vivek Rae said “It is a very serious move, which means when you float a tender, maybe Japan and India could combine and can float a joint tender and see what price comes,” Ecovis RKCA Partners Japanese Firm Ecovis XAT Ecovis RKCA and Ecovis XAT are part of the leading global management consultancy, Ecovis and recently, RKCA XAT Advisors, their new venture, has been officially launched in India (Delhi) to provide focused business opportunities between India and Japan. More than a thousand Japanese companies have already set up base in India. The company on the occasion said that the expertise of more than 300 experts in India and Japan would be the backbone of RKCA XAT Advisors. “India has embarked on an interesting journey with so many midsized family businesses guided with entrepreneurial energy looking to put a mark on international stage” said Kay Friedrich Thomsen, President of Ecovis International. He further added "Japan is the leader in technology and infrastructure know-how. India with abundance in natural resources and a desirable geographic location and closer to ship Japanese goods can be a true partner for Japanese Mid size companies to penetrate in Middle East and Africa with India as a hub." Manufacturing Firms in Japan Prefer India for Investments As per the report by Masanori Nakano, consul general of Japan in Chennai, India is being viewed by manufacturing companies in Japan as the top destination for investments over the next three years. India has been successful in maintaining a growth rate of 5 per cent despite the economic
  5. 5. slowdown globally and that has proved to be an important factor in making the manufacturing sector of Japan in choosing India over China, Thailand, Vietnam, Brazil and Indonesia for their investments. He focused on the need to hold talks for exploring procurement possibilities by the Japanese automobile industry, which will form part of India-Japan initiative to strengthen their ties. CAC Corporation to Acquire Majority Stake in Accel Fortline Accel Fortline‟s share price at BSE was locked at 5 per cent circuit filter at Rs. 35.50 after news broke that CAC Corporation, one of the oldest software development company in Japan would acquire majority stake in the company. Accel Frontline Limited (AFL) is a company founded in India in1991 as Accel Automation, and is a leading provider of integrated IT services to small, medium and large enterprises. AFL operates in over 100 locations in India and it has subsidiaries in USA, UAE, Singapore and Japan. The existing promoters of Accel Frontline have announced that they have signed definitive agreements with CAC Corporation, Japan on 9 December 2013 to induct CAC as a strategic partner in the company. As per the terms of the agreements, CAC Japan will acquire a minimum of 51% equity shareholding in the company by way of purchase of equity shares from the existing promoters. Accel Fortline Limited will be run as a joint venture between CAC and the current promoters of AFL and the current promoters of the company will continue to be significant owners of the company. CAC, Japan will invest in fresh equity in Accel Fortline to expand its capital base. However, for this transaction, statutory approvals from regulatory authorities in both the countries are still pending. Opportunities are expected to grow between the two companies with the formation of this joint venture. IT sector market in India is growing at a good pace, which will provide CAC with an appropriate platform. On the other hand, it will enable Accel Fortline to access CAC's relationships in Japan to provide IT services with India as service hub. Japan’s Kokuyo Acquires Riddhi Enterprises Japan's Kokuyo has recently acquired Riddhi Enterprises, a notebook manufacturing company based in Mumbai, for $8 million. Riddhi Enterprises began manufacturing notebooks in 2002 and has its head office and notebook manufacturing factory in Maharashtra. The company
  6. 6. exports all products to the US, South America, the Middle East and Africa. However, the company does not have sales in India. The acquisition was made by Kokuyo through its subsidiary Kokuyo S&T Co. Ltd. In September 2013, Kokuyo had entered into an agreement to acquire all tangible and intangible assets of Riddhi Enterprises. Kokuyo Group entered India in October 2011 by acquiring majority shares of Camlin, a leading stationery manufacturer in India. Isuzu Earmarks Three Thousand Crores for Sri City Unit Isuzu, an auto major in Japan is contemplating its debut in India as its engines have long powered a number of SUV models with CK Birla group company AVTEC manufacturing the powertrains. The company clarified that the company‟s decision to set up a production base in India will not change any existing arrangements. AVTEC has been manufacturing Isuzu engines for local and MNC players like General Motors India. The company's first India-made product, the MU-7, was launched recently and bookings have begun. Japan's KITZ Corp Acquires Indian Valve Manufacturer Micro Pneumatics Japan‟s KITZ Corporation has recently signed an agreement to buy 100 per cent stake in Micro Pneumatics Pvt Ltd, an Indian valve manufacturer, in order to expand its operations overseas. The acquisition will provide KITZ Corp with a production facility and a sales network in India. The deal is expected to close by the end of February 2014. Micro Pneumatics having development, production and sales base of industrial and ball valves in India, has the ability to produce high quality products. Development of products can be accelerated by the Indian market with synergy of production engineering between Kitz Group and Micro. It will enable both the companies to meet customer needs for various products by suggesting KITZ products to the sale network of Micro. Hitachi to Invest Rs. 4,700 Crore in India in 2015-16 Japanese manufacturer of heavy equipment Hitachi Ltd. has recently made a statement that the company would invest Rs. 4,700 crore in India till 2015-16. During the same period, the company looks to expand its revenue from India threefold to Rs.20,000 crore. Substantial business is expected to come from sectors such as construction, infrastructure and services and it
  7. 7. is exploring new business prospects from projects like metro trains, mono-rail and bullet trains. Hitachi‟s announcements come amid its efforts to reduce dependence on the Japanese market. This move is being followed by other Japanese companies also, such as Suzuki Motor Corp. and Honda Motor Co. Suzuki to set up Export Headquarters in India Japan‟s Suzuki Motor corp. has recently announced that by the end of 2014, the company will shift its entire export operations for the Middle East, Africa, Latin America and South-East Asia to India. The entire process is expected to be over by 2014-15. Suzuki Motor owns 56% shares of Maruti Suzuki. To offset the rising input costs in Japan and other overseas markets, the Renault-Nissan alliance, Hyundai Motor Co. and Ford Motor Co. have strengthened their focus on manufacturing and exports from India. Rupee depreciation is another factor in increasing exports from India. India has contributed to a great extent in Suzuki‟s growth as Maruti has contributed about 40% of Suzuki‟s net profit. Japanese Companies Keen to Establish Telecom Gear Test Labs in India Japanese companies are keen to establish telecom gear test labs in India. The telecom department has decided to mandate the upcoming Telecom Testing & Security Certification centre for inviting bids from private, public and joint sectors organizations which are keen to set up telecom gear test labs in India. Japan wants the telecom department to share the vulnerability levels of Indian mobile networks and privacy laws on protecting the intellectual property rights. A top official from Japanese embassy said in its letter to department of telecom "Japanese companies want to understand the attack situation in Indian telecom networks and the privacy regulations, and whether there would be implications on the testing standards." The gear testing business is seen as a great opportunity having regards to the absolute volume of equipment that gets organized in Indian telecom networks annually. Japan's Whisky Maker Suntory May Join Race for Whyte & Mackay Japanese whisky maker Suntory has joined UK-based private equity fund Vasari Global as a possible bidder for Whyte & Mackay, which is owned by Diageo-controlled United Spirits
  8. 8. (USL). The two prospective suitors have separately begun preliminary talks in this regard, said a person close to the process who didn't want to be named. Whyte & Mackay is up for sale due to antitrust concerns in the UK. "Vasari and Suntory will soon be given formal offer documents Imerman, who sold Whyte & Mackay to USL for $595 million in 2007, has said he'd like to buy it back as the brands will fit into the portfolio of beer and spirits companies that he's been acquiring through Vasari. Five years ago, USL run by Vijay Mallya, who sold a controlling stake in Diageo amid a financial crunch owing to the travails at his Kingfisher Airlines, which hasn't flown for more than a year. "There is a lot of legacy value attached to the White & Mackay brands," said Harminder Sahani, CEO, Wazir Advisors, which guides companies on strategy. "So, the acquisition will definitely help in building up the profile of the company which is acquiring the brands apart from scaling up market share." Diageo offered to sell most of the Whyte & Mackay brands after the Office of Fair Trading, which enforces competition law in the UK, said the USL acquisition is likely to lead to a monopoly situation. Diageo's Bell's whisky competes with Whyte & Mackay in the UK. Any sale plan may be threatened by the Karnataka High Court order cancelling the sale of USL's shares by Mallya to Diageo. Samurai Incubate to Fund Indian Startups Japan‟s Samurai Incubate is exploring various opportunities to participate in investment process of startup companies in India along with other Indian incubators. From the experience of making investment in Japanese start-ups the company is keen to expand its investments in Indian startups. The company is also exploring the opportunities to have a set up in India through which it can extend support to start-ups both in India and Japan.
  9. 9. Knowledge Center Work Hours and Overtime India has two major laws concerning working hours of workers i.e. the Factory Act, 1948 and Shops & Establishment Act. The regulations related to the working hours can be separated into four broad categories that help demarcate the dimensions of the discussion. Working Hours for Factory Workers I. Employment of Adults An adult worker2 shall not be employed for more than 48 (forty eight) hours3 in a week4 and not more than 9 (nine) hours in a day5. A compulsory rest of at least half an hour (30 minutes) between each period of work and such period of work shall not exceed five hours 6. Total period of work inclusive of rest interval cannot be more than 10.5 hours. The Chief Inspector may by giving a reason in writing increase the workday time up to twelve hours. According to Minimum Wages Act, 1948 the working day of a worker shall be so arranged that inclusive of the interval of rest it shall not exceed 12 hours on any day. The State Governments have the power to make rules in respect of adult workers in factories and to make exemptions to the abovementioned rules. However, a the total number of hours of work in a week, including overtime, shall not exceed sixty7 and the total number of hours of overtime shall not exceed fifty for any one quarter8. The employer has to make sure that no worker works more than 10 days without a rest day of 24 hours. Therefore, if the worker is asked to work on weekly holiday, he should have full holiday on one of three days immediately or after the normal day of holiday. The Factories Act puts restriction on double employment9 and overlapping of shifts10. No worker is allowed to work in any factory on any day on which he has already been working in any other "adult" has been defined in the Factories Act , 1948 as “a person who has completed his fifteenth” year of age; The Factories Act, 1948, Chapter VI, “Working hours of adults” Section 51 4 "week" has been defined in the Factories Act, 1948 as “a period of seven days beginning at midnight on Saturday night or such other night as may be approved in writing for a particular area by the Chief Inspector of Factories;” 5 The Factories Act, 1948, Chapter VI, “Working hours of adults” Section 54 6 Ibid, at Section 55 7 Ibid, at Section 64(4) (iii) 8 Ibid, at Section 64(4) (iv); “Quarter” has been defined as a period of three consecutive months beginning on the 1 st January, 1st April, 1st July, or the 1st October. 9 Ibid, at Section 60 10 Ibid, at Section 58 2 3
  10. 10. factory. If a worker shift extends beyond midnight11, a holiday of a whole day12 means 24 consecutive hours beginning when his shift ends must be provided to him. Weekly holiday is compulsory as per the Factories Act. First day of the week 13 i.e. Sunday shall be a weekly holiday. Compensatory holiday in lieu of weekly holidays deprived and such compensatory holiday must be given within the same month or two months following the month when the weekly holiday was missed. II. Employment of Women A woman worker cannot be employed beyond the hours 6 a.m. to 7.00 pm. State Government can grant exemption to any factory or group or class of factories, but no woman can be permitted to work during 10 PM to 5 AM. Shift change can be only after weekly or other holiday and not in between14. III. Employment of Young Person Child below the age of 14 years is not allowed to be employed in a Factory15. Young person above 14 but below 15 years of age can be employed only for 4.5 hours per day16 and that too subject to a doctor's permission by way of certification of fitness for work 17. A person over 15 but below 18 years of age is termed as „adolescent‟. He can be employed as an adult if he has a certificate of fitness for a full day's work from certifying surgeon. There are more restrictions on employment of female adolescent. Procedure for Overtime A notice of period of work18, in English and local language, should be displayed at some prominent place. No worker shall be required or allowed to work in any factory otherwise than in accordance with the notice of periods of work displayed in the factory. Copy of notice of period in duplicate and any change is to be sent to the Inspector. Therefore, although, no direct procedure for overtime has been laid out, it becomes mandatory that work periods are notified. Moreover, for overtime, the consent of the worker would be required as the law prohibits the employer to require a worker to work in a factory for more than forty-eight hours in a any week and nine hours in a day, unless notified by the state government. 11 Ibid, at Section 57 "day" has been defined in the Factories Act, 1948 as “a period of twenty-four hours beginning at midnight” 13 The Factories Act, 1948, Section 52 14 Ibid, at Section 66 15 Ibid, at Section 67 16 Ibid, at Section 71 17 Ibid, at Section 69 18 Ibid, at Section 61 12
  11. 11. For the contract labourers, as per the Contract Labour Act, 1971 a notice showing the place and time of disbursement of wages, rate of wages, hours of work, wage period, dates of payment of wages, name and addresses of the Inspector having jurisdiction and date of payment of unpaid wages should be displayed in the premises in the local language understood by majority of the contract labourers. Overtime Wages If workers work for more than 9 hours a day or more than 48 hour a week, extra wages should be given at twice the ordinary rate.19For agricultural labour under the Plantation Act, this is extended to 54 hours a week as the norm, rather than 48 for factory work. Total working hours including overtime should not exceed 60 hours in a week and total overtime hours in a quarter should not exceed 50. Register of overtime should be maintained. An employee working outside the factory premises like field workers etc. on tour outside headquarters are not entitled to overtime.20 Working Hours for Non-Factory Workers The Shops and Establishment Act (“SEA”), which is a state legislation and each state has framed its own act and rules for the act, regulates the working hours of non-factory workers i.e., shops and establishments. SEA is applicable to all the employees (including managerial and nonmanagerial workers) of any shop of establishment covered under it. SEA also fixes the maximum number of work hours to 9 hours a day and 48 hours a week. The work hours may be increased upto 54 hours a week with prior notice to the local labour inspector subject to the condition that overtime work hours do not exceed 150 in one year. In line with the Factories Act, the SEA also requires payment of wages at twice the rate of regular wages. Similarly, the rest and substitute holiday provisions under the SEA are in line with the provisions of the Factories Act unless state governments have changes to their respective SEAs. The law does not really differentiate between managerial and non-managerial workers when it comes to regulations relating to working hours. However, it is a common practice that employees 19 Ibid, at Section 59; similarly, Section 33 of the Minimum Wages Act, 1948 reaffirms this requirement of payment of overtime wages at twice the rate of ordinary wages of the worker. 20 R Ananthan v. Avery India 1972(42) FJR 304 (Mad HC) * Director of Stores v. P S Dube 1978 Lab IC 390 = 52 FJR 299 = 1978 I LLN 464 = 36 FLR
  12. 12. (management level and other white collar employees) rarely make any demands or are paid any overtime wages, although legally entitled to. Penalties The Factories Act provides for penal consequences for contravention of provisions of the act; any violation of overtime regulations under the Factories Act is punishable with imprisonment for a term which may extend to two years or with fine which may extend to one lakh (one lakh = 100,000) Rupees or with both, and if the contravention is continued after conviction, with a further fine which may extend to one thousand Rupees for each day on which the contravention is so continued. The penalties under the SEA depend on the specific laws of the states but in general are very low (as low as Rs. 100 in case of some states) in comparison with the penalties under the Factories Act. DISCLAIMER: The document has been prepared and produced only for the information purpose only and is not to be construed as an advertisement, solicitation, invitation, personal communication or inducement of any kind by the Firm, the author or any of its Partner or associates. The entire content of this document has been developed on the basis of relevant statutory provisions and as per the information available at the time of the preparation. Though the author has made utmost efforts to provide authentic information, however, the material contained in this document does not constitute/substitute professional advice that may be required before acting on any matter. The author and the firm expressly disclaim all and any liability to any person who has read this document, or otherwise, in respect of anything, and of consequences of anything done, or omitted to be done by any such person in reliance upon the contents of this document.
  13. 13. CONTACT US MUMBAI Mastermind- I, Royal Palms Estate, Aarey Colony, Goregaon (East), Mumbai -400065 Tel: +91 9820079664 Fax: +91 9810037390 FARIDABAD (DELHI NCR) PANKAJ SINGLA Japan Desk, Corporate Professionals NEW DELHI D-28, South Extension Part - I, New Delhi – 110049 Tel: +91-11-40622200 Dir: +91-11-40622293 Fax: +91-11-40622201 Mob:+91-99715-08320 Email: pankaj@indiacp.com 565, Sector-7B, Faridabad, Haryana-121006 Tel: +91 129 4061130 Fax: +91 129 2241017 BEDFORD (UNITED KINGDOM) 2-4 Mill Street, Bedford MK40 3HD U.K. Tel: +44 (0) 2030063240 Fax: +44 (0) 2030063241

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