Despite sops, ssis aren't raising a toast yet

Budget â€™04 has lots on reform initiatives for the small-scale industry (SSI), including creation of an alternative trading platform to enable SSIs raise equity and debt from the capital market. FM P Chidambaram has offered to revise the capital subsidy for technology upgradation and de-reserved 85 items from the list exlcusively for the SSI sector. But very few here are raising a toast for him, with some even raising the spectre of large number of units downing shutters following de-reservation. Mr Chidambaram has not paid any attention that this sector feels is the most severe ailment afflicting it â€” shortage of cheap bank credit. With a cap on investment on plant and machinery at Rs 1 crore, which had been fixed in 1996, units are now constrained to pump in further investment for modernisation and expansion. â€œMr Chidambaram failed to touch the crux of the problem, namely credit at cheaper rates. Not only the flow of credit to the sector by public and private sector banks has been declining over years, the sector is often charged higher interest rates compared to big players. Banks are yet to shed their conservative attitude while sanctioning collateral-free loans to SSIs,â€� Ashok Poddar, president, Federation of Associations of Small Industries of India told ET. The ministerâ€™s proposal to create an alternative trading platform for SMEs to raise equity and debt from the capital market has received lukewarm response from the industry. â€œThe sector is interested in having more credit from the banks and FIs as this is a more flexible instrument,â€� said Alok Goswami, president, Federation of Small & Medium Industries. The FM has, however, offered these units opportunity to upgrade technology to compete with large scale industries. He has offered a higher capital subsidy and proposes to raise the ceiling for loans under the Capital Subsidy Scheme from Rs 40 lakh to Rs 1 crore, apart from raising the rate of subsidy from 12% to 15%. A provision of Rs 135.2 crore has been earmarked for this purpose. Under the proposed scheme, SSI units will receive credit of Rs 1 crore for modernisation of their units, against the present limit of Rs 40 lakh. Mr Chidambaram may have identified 85 more items for de-reservation to stimulate the over-all industrial growth, a large chunk of the SSI units will have to face the brunt of intense competition. The FM has also proposed to set-up a Rs 100-crore fund for the re-generation of industries like coir, handloom, handicrafts, sericulture, leather, pottery and other cottage industries. The disbursement of the fund will be worked out in consultation with concerned sectors. It is expected to play a pivotal role in generating employment in the rural sector. Some sops for agro-processing units, also under the SSI sector, have also been announced. It has been proposed that section 80 IB of the I-T Act be amended to allow deduction of 100% of profits for 5 years and 25% of profits for the next 5 years to greenfield agro-processing units.

Despite sops, ssis aren't raising a toast yet

Budget '04 has lots on reform initiatives for the small-scale industry (SSI), including creation of an alternative trading platform to enable SSIs raise equity and debt from the capital market.

More from our Partners

Popular Categories

Hot on Web

In Case you missed it

Top Searched Companies

Latest News

Download ET APP

Follow us on

become a member