PROPOSAL FOR CREATING A JOINT
VENTURE WITH AN AIM OF
INSTALLING WIND POWER IN INDIA
Groupe F
EMPLOYMENT
Our priority is to create employment and to provide enriching training in an
underdeveloped country in order to enhance economic growth. It’s our way of working.
We would like to hire qualified Indian engineers as well as unskilled workers who will be
trained by 4 French manager and 2 French engineers.
Organisation of the management
It consist of 4 managers :
Mister DURANT : Business man specialized in human resources, he will be the manager of
all the project.
Mister DUPONT : Business man specialized in financial part.
Mister MARTIN : Engineer, manager of the assembly .
Mister DUCOIN :Engineer, will be in charge of public relations, buying, logistics.
Recruitment in India
The 4 managers will go to GUJARAT, one month in advance, so as to begin to hire
local inhabitants. Indeed, they will be able to choose their suitable team according to their
effective needs and the required abilities.
They will rent an office and put advertisements at the Universities in GUJARAT and in local
newspapers in order to find candidates for interview.
The 4 managers and 2 engineers will receive contracts limited in time period as follows :
engineers and unskilled workers.
A two- week training on windmill systems and assembly will be given to all the engineers
and under skilled workers.
After sales services
The human resources manager will choose among the staff one engineer and one
unskilled worker to be permanently in charge of the maintenance of the windmills.
Assembly site in GUJARAT
There will not be any buildings on the site, only an open-air area surrounded by wires
and controlled by guards 24 hours a day to prevent the degradation of the equipment.
Administration
A building will be rented in AHMEDABAD. There will be the secretary and four offices
for the managers where the accounting issues will be dealt with :
The French secretary employed and one Indian house keeper.
Facilities
Transport :
Drivers will be employed to transport the staff from AHMEDABAD to the assembly site
and several trucks will be bought
Meals :
Three persons will be in charge of cooking and bringing fast food to the staff on site.
House keepers :
They will be employed to work in the manager flats.
Details of employment and wages
French staff
4 managers
2 engineers
1 secretary
wages for
wages for
one person one person
and 1 month and 7 month
($)
($)
7 860
5 000
3 570
Indian staff
8 engineers
20 unskilled workers
4 guards
1 house keeper
2 drivers
3 cookers
4 house keeper for manager houses
55020
35000
24990
115010
wages for
wages for
one person one person
and 1 month
and 7
($)
months ($)
800
250
150
100
100
100
100
5600
1750
1050
700
700
700
700
11200
TECHNICAL TERMS
Windmill manufacturer recommended by EOLE society
As we decided on the chat, we have proposed you a windmill manufacturer to help you
produce the windmills. EED group (Espace Eolien Developpement) is one of our main
manufacturers for this type of site. ESPACE EOLIEN DEVELOPPEMENT-EED- is a French,
private, independent company providing expertise and technical assistance in the field of
Wind Energy. Established in Lille, in 1992, EED is the fruitful result of ten years of vigorous
daily effort to promote and experiment wind energy on a very difficult market
We have been cooperating with them for ten years, so that we can ensure that they are
totally competent and reliable. With their technology, we can plan a project of site installation.
To produce a wind powered farm using 10MW, we suggest the installation of 14 windmills of
750kW with the following characteristics:
!
!
!
!
!
!
!
!
!
!
!
!
!
!
!
Hub height: 46 m
Rotor diameter: 48m
Total height: 70m
Rated wind speed: 14m/s
Rotor speed (variable): 5-26 rpm
Cut-in wind speed: 4m/s
Cut-out wind speed: 25m/s
Gearbox Type: integrated 2 stage with parallel shafts, or three-step planetary spur gear
system
Generator type: rotary current asynchronous with slip rings
Inverter type: IGBT-frequency inverter
Braking system: individual pitch regulation brake control system: fail safe
Yaw system: motor driven with wind direction sensor and automatic cable unwind
Control system: 32 bit microprocessor-based, embedded micro-controller, remote control
operating system; microprocessor-based programmable logic controller (PLC); or
equivalent
Lightning protection system: lightning protection installed on blade tips, discharge inside
the rotor blades along nacelle and tower.
Sound proofing: structure borne noise insulation of the tower, sound reduced gearbox,
noise reduced nacelle.
Here is a forecast of the value breakdown for each step in the project development.
Windmill project budget
Windmill
Civil Engineering
Electricity
Lifting/Transport
Engineering
75%
8%
10%
4%
3%
For the windmill itself, we have got the second value breakdown for each component:
Components
% (value)
Blades
Hub
Multiplicator
Generator
Bearings
Hydraulics system
Electricity
Pod and Hood
Assembly
Others
Tower
14%
3%
14%
8%
4%
8%
9%
8%
3%
5%
24%
Assembly explanations:
We will be in charge of the assembly on the site and will provide all the materials and
machines required to do a good job.
We estimate that the assembly of one windmill will take approximately one month with ten
persons.
As a result, we will send EOLE experts during …..and local inhabitants that we will train
especially for the windmill assembly methods.
The financial details of such a project will be defined in the financial part of this document.
As far as the maintenance is concerned, two local persons will be in charge of this task:
during one month, they will be trained by our competent staff, then they will work
permanently on the site to ensure an optimized level of performance of the wind power farm.
Settlement of the wind farm site
IWVC Site Selection committee has chosen the city of Ahmedabad as designee for the Joint
Venture wind power project, however the site location has not been decided yet. Whatever
the site location chosen, we can assert that the installation of a wind power plant will need a
special national and regional development:
! Firstly, the ground will have to be smoothed by caterpillar tracks.
! Roads will have to be built in order to provide an access for materials trucks.
! Workers will need barracks and a system of shuttles to communicate with Ahmedabad.
! Finally, an electricity output will be made to connect to the national electricity grid.
Developed by Espace Eolien Developpement - EED, Anémone is a tool to help to achieve
windmill projects from the identification of the sites to the integration of the projects in the
environment.
Anémone is well adapted to develop a real project and can predict all the installations
required: technical housing, achievements of roads and access ways, foundations and
trenches built….
Environmental considerations
India shows obviously great concerns about environment protection.
Wind and other renewable energy forms must be preferred over conventional sources of
generation.
Indeed, wind energy is a free, renewable resource, source of clean, non-pollutant electricity.
Unlike conventional power plants, wind plants emit no air pollutants or greenhouse gazes.
The little impact of windmills over the noise produced by the rotor blades, aesthetic (visual)
impacts, and the death of some birds by flying into the rotors, has been mostly resolved or
greatly minimized through our technological development.*
FINANCIAL TERMS
The cost of the pre-project is about 50% of the total budget (R&D…)
The cost of the global construction of a wind powered farm is estimated to $900 per kW
900*750*14 =
9,450,000
Total construction and assembly cost: $9,450,000
Total project budget: $18,900,000
Assembly costs details ($):
Before assembly
Clean the line
Road construction
Electric plant
Links to network
Subtotal
250000
275000
1000000
275000
1800000
Rental
Cranes
400000
Machines, trucks
Subtotal
500000
900000
Wages
126210
Total
2,826,210
=15% of the total project budget
We propose to share the JV as following:
Equity:
Capital:
IWVC 70%
IWVC 65%
EOLE 30%
EOLE 35%
We accept that the JV shall be financed through: debt 60%, and Equity 40%.
After debate and prospecting Indian investors, we believe that IREDA financing contribution
would be the most appropriate choice for this project.
The J-V Board of Directors should consist of highly educated and experienced
professionals.
•
•
•
•
•
•
•
•
2 IWVC executives, 1 EOLE executive (CEO, COO, a lawyer or policy liaison)
1 IWVC environmental engineer
2 EOLE engineers for development of plans
1 IWVC and 1 EOLE member for technical consulting
1 IWVC production manager
1 former/retired government official with experience with global politics of alternative
energy issues
1 academic from a private alternative energy research firm
1 academic from a local university, specializing in wind powered farms as related to India
JURIDICAL ASPECTS
1) PROCEDURES Of APPROVAL OF THE FOREIGN INVESTMENTS
There are two procedures distinct from approval of the files of direct investment in India:
automatic procedure of the Central Bank Indian (Reserve Bank of India or R.B.I.) and the
normal procedure of Foreign Investment Board Promotion or F.I.P.B., depending on the
Ministry for Industri.
Procedure of approval of R.B.I
.La R.B.I. is entitled to approve in an automatic way of the files of investment subject to the
following principal conditions:
- The total estimated remuneration of the transfer of know-how, in the form of fixed
price (payment cash or " lumpsum ") and of royalties (" royalties "), should not exceed a
ceiling of 2 milion USD.
- The royalties do not exceed 5% of the local sales, and if they are exports, 8% of the
turnover export.
- The fixed price is regulated in three payments.
- The products being the subject of the Indian joint venture are reproduced on the lists of
the priority fields concerned with the automatic procedure (Parts A, B, C, D of the "
eligible priority Sectors to automatic approval ")
100% of foreign capital authorized in the field of the production and electric
distribution of power.
Procedure of approval of " Foreign Investment Promotion Board " or F.I.P.B
If the activity does not correspond to a priority sector, or if one wants to hold a participation in
capital more significant than those envisaged by the automatic procedure of the R.B.I., the
encountered higher level can be directly seized, i.e. the F.I.P.B., body dependent on the
Ministry for the Industry whose office is ensured by the Secretariat for Industrial Assistance
(S.I.A.). The F.I.P.B. formulates its recommendation on the file for the suitable authorities for
final decision.
Any project authorized by the F.I.P.B. and not exceeding an investment of 6 billion rupees is
subject to the approval of the Minister of Industry. For the great projects of a value higher
than this threshold, the decision of the F.I.P.B. must be confirmed by a committee of foreign
investment of the Council of Ministers (" Cabinet Committee one Foreign Investment " or FI).
Elsewhere, the F.I.P.B. can also authorize the creation of a subsidiary company with 100% of
capital foreign for one duration of 3 with 5 year to allow with foreign investor to find an Indian
partner on this periode.
The F.I.P.B. itself endeavours in theory to make know its decision in a time of 30 days.
2) PROCEDURES OF APPROVALTHE PROJECT
PROCEDURES Of APPROVAL OF the PROJETS COENTREPRISE
(" jointed venture ")
AUTOMATIC
PROCEDURE
PROPER
AUTHORITY
RESERVE BANK OF
INDIA (RBI) at Mumbai.
This project has to
respond to the following
criteria :
Main sectors
Capital participation
50 %,
< 51%, <74% ou 100%
NORMAL PROCEDURE
FOREIGN
INVESTMENT
PROMOTION BOARD
(FIPB) at New Delhi
Project < 6 MD
Rs. +
authorization of
the minister
Transfer of the
remuneration roof : 2 M
$ US
CABINET
COMMITTEE ON
FOREIGN
INVESTMENT
the royalties : 5%
local sales, 8% of
export benefic
when minister
disagrees with the
FIPB decision
cash subscription
Project > 6 MD Rs.
supression of
requirement of
contribution covering
the importation
equipement
not machine
occasion
DECISION
CRITERIA
decision with
It is not
individually,
but criteria
necessary any more
published
to obtain the
Consultation of
authorization as a
supervision ministry
preliminary when
the investment is
Prioritees :
not accompanied by
exportation,
creation
a transfer of knowof job
how
Explanation asked
information to if necessary
the RBI within 1
month
TIME
15 DAYS
30 DAYS
3) CUSTOMS DUTIES AND TAXES
The custom duties in India are composed normally of two categories:
basic duties (" BASIC duty " or data base) and additional duties (" additional duty " or AD).
This last component is also known under the name of " countervailing duty ", because it is
indeed the equivalent of the excise duties (" excise duty ") which levies the administration on
the local manufacture of a similar product.
-
-
The budget of 1999-2000 added a surtax (" special BASIC duty " or SBD) of 10% on the
data bases. Only the goods subjugated to the maximum rate of 40% of data base are
exempted of this surtax. The budget also maintained an imposition additional of 4%
introduced by the budget 1998-99 (" special additional duty " or SAD).
There exists, in addition, of the characteristics as for the method of calculation of the
custom duties. It is first of all necessary to apply the basic duties plus the surtax of 10%
to CIF price of the imported good, the additional duties applying then to the total. The
additional imposition of 4% (SAD), once more, is applied to the amount cumulated after
the taking into account of the additional duties.
The rate can vary from a product to another, although pertaining to the same sector.
Tax on the interest (" Interest Tax "):
The banks and institutions and finance companies are subjugated with a tax of 2% on the
interests.
Tax rent:
A private individual subjected to a rent exceeding 120 000 rupees per annum is held to
deduce with the source a tax from 15% and to discharge it with the tax authorities. The
applicable rate is 20% when the tenant is not a private individual (e.g.: company).
Tax on the interest (" Interest Tax "):
The banks and institutions and finance companies are subjugated with a tax of 2% on the
interests.
Tax rent:
A private individual subjected to a rent exceeding 120 000 rupees per annum is held to
deduce with the source a tax from 15% and to discharge it with the tax authorities. The
applicable rate is 20% when the tenant is not a private individual (e.g.: company).
Tax on the interest (" Interest Tax "): The banks and institutions and finance companies
are subjugated with a tax of 2% on the interests.
Tax rent:
A private individual subjected to a rent exceeding 120 000 rupees per annum is held to
deduce with the source a tax from 15% and to discharge it with the tax authorities. The
applicable rate is 20% when the tenant is not a private individual (e.g.: company).
4) THE PROCEDURES OF RECORDING
Conditions of recording
the founders (" promoters ") of the company must initially obtain the agreement of the "
Registrar of Companies " on the selected corporate name, and certain rules will have to
be complied with.
A bill aiming at modifying the legislation of the marks in India, proposes a clause
prohibiting a company from using like corporate name the name of the already existing
mark of another company. This measurement, if it is adopted by the Parliament, will
require from now on a consultation of the Register of the Marks by the " Registrar of
Companies ", which will give its agreement to the name suggested.
The file of request for recording must comprise the statutes of the company (the "
Memorandum of Association " or MOA and the " Articles of Association " or AOA) and the
certificate of checking of a lawyer or an auditor. The composition of the board of directors
of the company must also accompany the MOA. The procedure of creation of a company
in India can last approximately a month. It is the " Registrar " being competent on the
sites which give its agreement to creation.
It issues a certificate of recording then (" Certificate of Incorporation "). If it is about "
Private Limited Company ", the activity will be able to begin with immediate effect. On the
other hand, for a " Public Limited Company ", it will remain to obtain a " Certificate of
Commencement of Business " delivered after mobilization of the minimum capital to
subscribe.
5)
TAXES
TAXES ON THE WAGES
Convention free-Indian of nondouble taxation does not apply when the wages are paid by
the Indian employer. If expatried is sent by the French company for a short duration and if
its wages are versed in France by the French company, it is not indebted in India,
provided that its presence in India extends over one period or from the periods not
exceeding on the whole 183 days during the fiscal year considered.
The scale (1997-98) applied to the wages is the following:
Annual income in rupees
Rate
0 to 50.000
0%
for part 50.001 to 60.000
10%
for part 60.001 to 150.000
20%
for the part exceeding 150.000 30%
CORPORATION TAXES
Companies of FOREIGN RIGHTS (succursale, arranges banking, building site)
•
•
•
•
•
Corporation tax: 48%
Tax on the dividends: this tax was suppressed.
Interests on the granted loans: 20%
Capital gains tax long-term: 20%.
Other incomes: 48%.
6) WAGES
REMUNERATION OF THE LEADERS
Although the authorization of the Central Bank or the government necessary any more for
the nomination of one is not expatried as general manager of the company, his wages in
India remains nevertheless subjected to ceilings fixed by the authorities.
With regard to a company which releases from the benefit, the wages of the senior
executive (" managerial let us persons "), including that of the general manager, should not
exceed 10% of its benefit Net. If there would not be that only one higher framework, the
ceiling is brought back to 5% of the benefit Net.
You can have a look at the annexes for more precisions.
ANNEXES
WAGES
MONTHLY WAGES FOR THE OFFICE STAFF IN
ROUPIES
Director
20 000 à 55 000 Rs
Engeneer
15 000 à 40 000 Rs
Accountant
10 000 à 30 000 Rs
Secretary
5 000 à 15 000 Rs
operator
3 000 Rs
Orderly
2 500 Rs
DOMESTIC STAFF
Driver
2 500 à 4 000
Cooker
2 000 à 4 500
House keeper
1 500 à 2 500
Babysiter
1 200 à 3000
Sweeper
600 à 2 300
Dhobi (for washing dress)
350 à 1 200
gardener
600 à 1800
Chowkidar (body guard)
1 500 à 2 500
Couple (for the task of cook, house keeper...)
3 000 à 5 000