Policies should be set keeping in mind everyone is in trouble, says Gadkari

By removing the export turnover, these units will export more and the country will benefit. This will also boost employment, Nitin Gadkari said

The Narendra Modi government has focused on reviving the micro, small, and medium (MSME) sector through its stimulus packages. In an interview with Megha Manchanda & Jyoti Mukul, Union Minister of Road Transport and Highways and MSME Nitin Jairam Gadkari underscores the need for the Indian economy to remain competitive through cost reduction, while admitting that all stakeholders, including state and central governments, are in a problem. Edited excerpts:

How far the change in MSME definition alone will address problems in the sector?

The definition was last changed in 2006 and industry was finding it problematic. Earlier, manufacturing and service were separate and the criteria in plant and machinery used to come separate. For micro, the investment threshold earlier was Rs 25 lakh and the turnover Rs 10 lakh, which means almost nil. This has been raised to Rs 1 crore investment and Rs 5 crore turnover. For small, investment was Rs 5 crore and turnover Rs 2 crore, which we have raised 25 times to Rs 10 crore and Rs 50 crore. Medium is the most important. Investment was Rs 10 crore and turnover Rs 5 crore, but lots of units used to export and so they had a problem. Now, it has been revised to investment of Rs 20 crore and turnover Rs 100 crore. There was a demand to change the medium definition, so we have increased the threshold for investment in plant and machinery to Rs 50 crore and the turnover to Rs 250 crore. Export turnover has been removed from all these calculations. So, exporters will benefit and it will also be practical.

Won’t excluding export turnover put those exporters outside MSME at a disadvantage? How does it help?

The MSMEs include people who make things like footwear, handicraft, handloom, etc. Earlier, people used to open five companies to take benefit, so increasing limit will make it more realistic. At some level, you have to fix a limit. People who export Rs 5,000 crore, or a major industry, have their own strength. We have removed the export turnover so that they also get a chance. It is helpful and across the line has been welcomed. If someone who makes Jodhpuri jutti and the turnover crosses that limit because he exports more, he loses his MSME status. By removing the export turnover, these units will export more and the country will benefit, employment will also increase.

Congress leader Rahul Gandhi during his recent chat with industrialist Rajiv Bajaj said if we promote big industry, MSMEs will themselves bloom because they function in an integrated manner. Do you agree with this view, especially since the government has focused mainly on MSMEs?

Half of Rajiv Bajaj’s Bajaj Scooter volumes are exported. In a recent interaction with him, I asked him if rupee has depreciated, it would have helped you. He did admit that he benefitted because those who export benefit and those who import lose. It is absolutely correct that major industries for their parts are dependent on MSMEs, and the more big industry flourishes the more ancillary units will benefit. The fruits of it will reach the last person in the chain.

The turnover of automobile sector is Rs 4.5 trillion and of that Rs 1.45 trillion is from export, and the country’s employment potential comes maximum from this sector. By bringing in the scrapping policy, I have a dream that our country becomes the world’s foremost automobile hub with copper, steel, rubber, and plastic being recycled and becoming available at lower cost. This will bring down cost of spare parts and the capital cost. We will become profitable and competitive in exports. This will give momentum to the economy. It is, therefore, important that FDI comes in with better technology so that we can export more and MSMEs benefit. Besides, liquidity also increases.

There are a lot of different figures on MSME dues, and the major default in payment is by government entities. How do you plan to resolve it and has SAMADHAN been successful?

SAMADHAN (Scheme of asset management and debt change structure) is toothless without legal status. MSME dues are with the central government and its undertakings, states and their undertakings, and major industries. The amount is estimated at around Rs 5 trillion and the Centre decided that the money owed by it and its undertakings will be paid in 45 days. We also urged the states to clear their dues in 45 days, and I have asked the big companies to prioritise payments to MSMEs. At this moment, we cannot even bring a stringent law as everyone is in trouble. We are contemplating various options to give relief to the MSMEs.

Economists have said the government should immediately give more cash in the hands of people who are in distress. Do you agree, especially since there are job losses that will further impact demand in the economy?

You are absolutely correct. Our government has deposited money in the Jan Dhan accounts of some 350 million people. The Union government has opened godowns and given wheat and rice at Rs 2 a kg. We have so much surplus that we do not have space to keep more. But at the same time, all stakeholders are in problem. There are some states that do not have money to pay salaries next month, and even the Union government does not have comfortable revenue situation. So, it is natural that schemes will be designed in a way that suits the government pocket.

Similarly, MSMEs, banks and industry are in trouble. We all have to survive and move hand in hand. That is the way forward. We have to understand that policies should be set in a way keeping in mind that everyone is in a problem and economy needs to accelerate. We need to understand this because on everything else we can be dramatic but not in matters of money. We need to prioritise. We need PPP and FDI.

How do you see road sector lifting the economic activity?

In two years, Rs 15 trillion worth of road projects will be awarded and we will consult with World Bank, Asian Development Bank, and pension and insurance funds. It will have a trickledown effect and give employment to labour, architects, and engineers. When they earn, it will help the economy. The road sector gives 20 per cent revenue to the government.

In such difficult times, construction equipment manufacturing industry has seen 80 per cent rise.  The reason is we gave out projects in the road sector on a large scale. Road sector uses 40 per cent cement and it also uses steel. Then, there will also be demand for transport. When mining sector opens, even truck manufacturers will gain.

It is important to get foreign investment for liquidity, reduce cost, and become competitive. This is the way to bring momentum into the economy.

How will you revive the toll operate transfer (TOT) mode, which is an important source of getting foreign funding?

TOT is one model and then there is hybrid annuity and BOT toll models. As a Maharashtra minister, I had started PPP projects in highway sector. For instance, if you take Meerut-Delhi expressway and someone is able to commute in 40-45 minutes, instead of 4-4.5 hours, you get toll. And if I monetise this toll with a bank and say the project cost Rs 12,000 crore, I tell them you will get a monthly income and I recover my maintenance cost, simultaneously.

My attempt is to have a total income of Rs 1 trillion from the national highways and with that income, I make bankable projects and then monetise them. State Bank of India and Life Insurance Corporation will give us money. I have told them I will offer you a bundle of projects and you give me 30-year loan and even after including land acquisition cost, it will be good.

How far will the toll collection be impacted this year due to the lockdown and Covid-induced slowdown?

Toll collection will be down by about Rs 4,000-5,000 crore this year. It will be Rs 26,000-28,000 crore though we have set a target of Rs 40,000 crore. The Covid-19 crisis will be over in two to three months. There will be some setback but economy will start growing as the crisis will become routine. We estimate our income from highway sector to be Rs 1 trillion in five years. It is not a commitment but just an estimate of income we will get from 22 expressways and 2,000 petrol pumps that will come up along the highway, logistic parks, and wayside amenities.

How far NHAI’s ability to raise money will be impacted by the downgrading of India’s rating? Will getting dollar or yen loan like what metro gets be a better option?

The NHAI is AAA-rated and can raise money even without government guarantee. The effort is to take it to higher scale. Taking loan in dollar and yen has yet not appealed to us because we will have to return in the same currency and we need to do hedging to take care of fluctuations in forex rates. My ministry is not authorised to do this. It is the domain of the finance ministry and requires permission from the Reserve Bank of India. The Centre has taken guarantee after the PM got the loan for bullet train from JICA. Loan from multinationals comes for 6-6.5 per cent after hedging. We do not have power to hedge. Only if the government gives guarantee that we can avail of dollar- and yen-denominated loan. Otherwise, if it goes well, it will be fine. But if rupee does not do well then it will be counter-productive and media will get after me. I do not want to take any such risk unless the Centre helps us. I am trying that the RBI comes forward on hedging and guarantee.

As transport minister, what do you think about chaos in the National Capital Region, especially since even after economic activity opened up, borders were sealed, and even now there is absence of Delhi Metro, the only unifying factor in the region?

Every state government has a right to seal its borders. In the wake of the Covid-19 crisis, many states have taken such decisions. We are in discussions with the states to iron out the issues. We need to decongest our major cities and shift industrial clusters along the proposed expressways and build townships for workers.