SMI fund may cut rates

With the proposal to set up a small and medium industries (SMI) fund in the interim-Budget, the interest burden to the SSI sector is expected to be 200 basis points lower than the prime lending rate (PLR).

The SMI fund will be set up with an initial corpus of Rs 10,000 crore to be structured by the Small Industrial Development Bank of India (Sidbi) in the next two years.

"The measures taken by the government would improve the availability of credit and reduce its cost for the SSI sector," said Tapan Sikdar, Union minister of state for small scale industries on Saturday.

Sikdar was in Ahmedabad to participate in a one-day seminar on 'Converting challenges to opportunities for the small scale sector'.

The minister asserted that the government was committed to abolishing the Licence Raj and the process was being speeded up.

Referring to the plethora of laws, Sikdar said, "My ministry had finalised the draft Cabinet note on single unified law for the SSIs, known as small enterprises development Bill. This has already circulated to all the concerned ministers and would be enacted soon.

"The comprehensive policy package declared in August 2000 for the SSI sector had gone a long way in providing better infrastructure and marketing facilities to SSI units and the initiatives for technology upgradation were land mark in the growth, promotion and development of SSIs in the country." the minister added.

As per the recently concluded third all-India Census of SSIs, there are over one crore units providing employment to about 500 lakh individuals.

The SSI sector contributes 39 per cent of the industrial production and 38.5 per cent of the total national exports.

SSIs in India produce over 7,500 items and have developed the core competence in the production and export of many items. The 10th Five Year Plan envisages a greater role for the SSI sector.

It has been assigned a growth rate of 12 per cent as against eight per cent for the overall economy.

In order to improve the flow of credit to SSIs, initiatives taken by the government includes lending to the SSI units within an interest rate band of two per cent below the PLR, to mitigate the problem of collaterals, the Credit Guarantee Scheme provides guarantee cover for loans up to Rs 25 lakh, the limit of the collateral free loans has been raised from Rs 1 lakh to Rs 5 lakh, even up to 25 lakh in deserving cases, the limit of the composit loans has been raised to Rs 50 lakh from 25 lakh.

Under the National Equity Fund Scheme, the limits of projects has been raised from Rs 25 lakh to Rs 50 lakh. Around 417 specialised SSI bank branches are expected to be opened in the country.

In the marketing front, the government is implementing a price and purchase preference scheme. The government has reserved 358 products for exclusive purchase from SSI units by the government departments and PSUs.

The Ministry of Small Scale Industry has launched an exclusive Market Development Assistance Scheme (MDAS) under which financial assistance will be given for exhibiting SSI products in trade fairs, international exhibitions, for conducting market studies and contesting Anti Dumping cases.

While the state will provide infrastructural facilities to the SSIs, the efforts of the state governments are being supplemented through an Integrated Infrastructure Development (IID) Scheme, under which the government gives Rs 2 crore as grant and Sidbi contributes Rs 3 crore as loan for each IID project.