The Telegraph
Since 1st March, 1999
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Grow-up nudge to small units

New Delhi, Feb. 25: The Centre, in its effort to power the small scale industry (SSI), will deregulate around 30-40 reserved sectors even as it tries to reserve up to 24 per cent of government department purchases for these firms.

Sources said the government would also simplify the current rules and regulations required to set-up a SSI unit as well as earmark Rs 100 crore to set up an Infrastructure Development Fund for the sector.

A top finance ministry official said, “De-reservation would be done in a gradual manner so that it suits the SSI sector.”

The SSI sector has around 40 lakh units that constitute around 95 per cent of the nation’s industrial units. But it has been facing problems due to higher cost of funds, multiplicity of licences and permissions and availability of loan without collaterals.

Industry experts said the total cumulative 76 permissions required from the central government, state government and the local government to set up an unit under SSI sector stunts its growth.

“This has hindered the growth prospect of SSI sector to an extent of 40 per cent of the country’s gross development product (GDP),” Vijay Kalantri, an expert on the SSI sector told The Telegraph.

Sources said to reduce the multiplicity of licences and abolish beauracratic hold there will be single window clearances from the central/state governments and local authorities.

The official also said the government has formulated a strategic plan for a national level policy for developing exports from the SSI sector, including identification of sub-sectors with high export potential.

“There will be a separate comprehensive law for SSI units on the lines of the United States’ single law policy for small and medium enterprises (SMEs) by Small Business Administration,” he said.

The official said the government will strictly enforce the Interest on Delayed Payments Act to ensure higher inflow of bank credit.

“There will also be provisions like setting up of an Industry Facilitation Councils (IFCs) to deny Modvat credit to buyers of SSI products, components etc,” said the official. “The Income Tax Act will be amended to disallow unpaid bills of SSIs being treated as business expenditure.”

Net bank credit (NBC) of state-run banks to the SSI sector has slipped to 12.5 per cent in the financial year 2001-02 from the earlier 14.2 per cent of NBC (2000-01). But, the overall NBC registered a growth of around 10 per cent to Rs 3.96,954 crore in 2001-02 from Rs 3,40,888 crore in the year ago period.

As per the RBI guidelines the banks should have priority sector lending of 40 per cent of NBC with sub-targets of 16 per cent of NBC for SSI. But, currently the banks have only 8 per cent of NBC for SSI. For the financial year 2002-03, net non-performing asset level due to the SSI sector stood at Rs 4,500 crore.

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