The Hindu : Funds crunch, poor infrastructure dog SSIs

Online edition of India's National Newspaper
Saturday, Sep 13, 2003

Southern States

Southern States - Karnataka-Bangalore

Funds crunch, poor infrastructure dog SSIs

By Nagesh Prabhu

BANGALORE Sept. 12. Small-scale industries (SSIs) all over the country have been facing problems since liberalisation and globalisation, and according to estimates arrived at by the industry, 10 to 30 per cent of all categories of SSIs have closed down or are facing closure in Karnataka.

The Karnataka Small-Scale Industries Association (KASSIA) has expressed apprehensions over the closure of SSIs. It has demanded that the Government clear the obstacles faced by SSIs.

Despite their contribution to the growth of the economy, SSIs have not been able to organise themselves as a unified force to get their demands fulfilled. They have sought simplification of procedures, guidance for revival of sick industries, and financial assistance for modernisation, according to J.R. Bangera, President of the State unit of Laghu Udyog Bharathi (LUB).

The estimated number of SSIs in the country during 2001-02 was 33.64 lakh that employed 1.92 crore people. The total production recorded was worth Rs. 6,90,522 crore. The SSI sector accounted for 95 per cent of the industrial units in the country, 39.07 per cent of the value-added products in the manufacturing sector, 33.97 per cent of exports, and 6.29 per cent of the GDP during 2001-02. Nearly 640 items have been reserved for the SSI sector.

Sources in the KASSIA said in Karnataka, there were 2,86,189 SSIs, and they provided employment to 16,64,819 people. During 2001-02, the investment in SSIs was Rs. 5,75,539 lakh and they exported goods worth Rs. 13,000 crore.

Causes for closure

Mr. Bangera said the SSIs were facing a financial crisis due to poor infrastructure and marketing support. "The State Government has not released a subsidy of Rs. 425 crore to the SSIs for the past four years. Lending from financial institutions has declined from 17 per cent to 11 per cent. Inadequate working capital and the demand by banks for collateral security for loans have affected the growth of SSIs in the State,'' he added.

The Centre had announced a number of policies for the growth of SSIs. But small entrepreneurs believed that mere announcement of policies would not help the growth of SSIs, he said.

M.R. Narayana, economist at the Institute for Social and Economic Change (ISEC), said the cost of infrastructure-related inputs such as power and transport should be reduced or made available at globally competitive prices to accelerate growth in the SSI sector.

Sources in the KASSIA said a large number of SSIs closed down after the country became a signatory to the WTO agreement. According to a sample survey, 24.3 per cent of units closed down in the country during 1991-95 and 32.5 per cent of the units closed down during 1996-2000. High production cost and inadequate technology to produce quality goods in the era of liberalisation were the reasons for the closure of SSIs, they added.

Factors such as reduction in government subsidy, de-reservation of items, removal of quantitative restrictions on imports, and the increase in the number of items on Open General Licence (OGL) had affected the growth of SSIs, Prof. Narayana said.

The Small Enterprises Development Bill, 2003, would provide for a policy framework and create conducive environment for the growth of SSIs, Mr. Bangera said.

Two-day meet

In this context, a two-day annual meeting of Laghu Udyog Bharathi will deliberate on issues related to SSIs such as the bank credit policy, the government's purchase policy, the Small Enterprises Development Bill, 2003, labour laws, and marketing support for products manufactured by SSIs, Mr. Bangera said.

The Union Minister for Small-Scale Industries, C.P. Thakur, will inaugurate the meeting at Vijaya Residency here on Saturday.

The State BJP President, H.N. Ananth Kumar, will be the chief guest. The LUB President, D.S. Aggarwal, will preside over the function.

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