Small
Scale Industry 16. The SSI sector makes a
valuable contribution of about 40 per cent to our total
manufacturing sector production, 35 per cent to exports
and employs over 160 lakh workers. Our commitment to the
SSI sector is total. The commonest complaint of SSI
entrepreneurs and associations are the insufficiency of
timely credit and the harassment of the "Inspector
Raj".
17. On
the credit problems of the SSI sector, I propose the
following initiatives:
At present, for
SSI units having aggregate working capital requirements
up to Rs.2 crore, the working capital limit is determined
by the banks on the basis of a simple calculation of 20
per cent of their annual turnover. This facility is being
doubled to Rs.4 crore. This will ease the flow of bank
credit to SSI.
To moderate the
cost of credit to SSI units, RBI will advise the banks to
accord SSI units with a good track record, the benefit of
lower spreads over the prime lending rate.
Enhanced powers
would be delegated to bank managers of specialised SSI
branches to ensure that most credit proposals are decided
at the branch level.
At present,
Small Industrial Development Bank of India (SIDBI) is a
subsidiary of IDBI and IDBI is the major shareholder in
State Finance Corporations (SFCs). To equip SIDBI to play
its apex role in SSI credit provision more effectively,
SIDBI will be delinked from IDBI and IDBI shareholding in
SFCs will be transferred to SIDBI.
SSI units are
often handicapped by delays in the settlement of their
dues from larger companies. To tackle this problem, I am
asking RBI to strengthen the existing mechanisms
available to SSI for discounting of bills. RBI will also
modify its guidelines to commercial banks on credit
appraisal to give greater weight to the amount of overdue
outstandings that large units have in respect of SSI
supplier. My colleague, the Minister of Industry is
separately bringing amendments in the Interest on Delayed
Payments to Small Scale and Ancillary Industry
Undertaking Act,1993 to make the existing legislation
more effective.
18. As
for the pervasive problem of the "Inspector
Raj", I shall be announcing far reaching changes in
the administration of Central Excise which should help
SSI units significantly. I urge all States to review
their laws and regulations and make necessary changes to
lighten the burden of the inspector raj problem of SSI
units.
19. I
shall also be announcing some tax concessions to the SSI
sector later in my speech.
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