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Draft law sets SSI purchase quota for govt

New Delhi, Aug. 29: The central government has circulated a draft law that will make it mandatory for the government sector to reserve up to a quarter of all its purchases for the small scale sector.

The government sector, which includes the public sector and central and state governments, purchase goods and services from the market worth nearly Rs 150,000 crore a year. A 25 per cent slice of this market translates into a nearly Rs 40,000 crore market.

C. P. Thakur, minister for SSIs, told The Telegraph in an interview: “I have circulated this bill to other ministries and will be bringing it for cabinet approval soon. Legally, this is compatible with WTO provisions on competition and many nations, including the US, have adopted such laws.”

The minister is also trying to convince finance minister Jaswant Singh to agree to a move which will ensure bank credit goes to small scale sector units at rates which are 2 per cent below prime-lending rates.

Thakur was given a specific mandate by Prime Minister Atal Bihari Vajpayee some months back to work out a “good deal” for the SSIs who have been complaining they have been badly hit by the opening up of the Indian economy to multinationals due to WTO provisions.

The proposed purchase reservation law will be the cornerstone of his bid to protect this sector which is facing closure in most states. It is likely to be one of the showcase items BJP leaders will tout at election meetings to party supporters who mostly come from the small business, urban white collar worker class which has been hit adversely by the creeping sickness which is devouring the sector.

An alarming 14 per cent of the sector is already sick, according to statistics compiled by Thakur’s ministry, while another nearly 8 per cent have been described as “incipient sick units” whose output has been declining every year. West Bengal, Uttar Pradesh and Bihar top the states in number of shut small scale sector units. The BJP rank and file had in fact been demanding measures to protect the SSI sector as it employs 20 million people mostly in urban conglomerates where the party has a strong support base.

The SSI purchase law itself, which will be introduced in the winter session of Parliament, will not mention any reservation percentages but merely set the principle allowing. “We will announce the reservation percentage through notifications in consultation with other ministries,” said top SSI ministry officials.

“Very frankly dereservation (opening up of product lines exclusively reserved for the small sector to big business) is happening. The WTO compact has forced India to open up these very sectors to imports,” he said.

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