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Industry seeks support for small units

By Our Special Correspondent

NEW DELHI, JUNE 27. The Confederation of Indian Industry (CII) has called for speedy enactment of the Small Enterprises Development bill and implementation of the value added tax (VAT) in a bid to make small industry globally competitive and reach a 12 per cent growth rate. In a pre-budget memorandum, it has stressed that the outlook for the small industry has to be more global and its contribution to the economy should cross seven per cent.

Apart from implementing VAT, the CII has recommended easier and cost-effective availability of steel and reforms in the direct and indirect tax structure while calling for a more support-based policy framework to speed up deregulation, decontrol, transparency and streamlining of reforms in this sector.

The CII also strongly advocated enactment and implementation of the Small Enterprises Development bill, which is expected to simplify the day-to-day operations of the enterprise. The slow pace of implementing VAT was a major setback for fiscal reforms and competitiveness. It has suggested that the budget clearly set a target date for VAT introduction which should be beyond April 1, 2005.

On the direct tax front, it has suggested reduction in corporate tax from 35 to 30 per cent and removal of the 2.5 per cent surcharge. It has also proposed a five per cent additional depreciation for increasing capacity by 10 per cent or more and the extension of the time limit and applicability for availing research and development deduction to all sectors.

In the area of indirect taxes, it has suggested that the existing four tariff lines be rationalised into a three-tier structure.

It has also recommended a cut in customs duty on raw materials, intermediates and components so that duty on these is at least five per cent lower than the finished products.

Regarding credit for the small-scale sector, it has stressed the need to create the Rs. 10,000-crore Small Industry Development Fund. The corpus thus created could be immediately made operational through SIDBI to ensure that the benefits percolate to the entire small-scale industry.

The CII also urged commercial banks to extend credit facility to the small industry at a comparatively lower rate of interest than the prime lending rate (PLR).

Other issues raised in the memorandum include newer avenues for financing the small industry, technology bank, credit rating and credit guarantee, promoting micro-financing, restructuring of state financial corporations (SFCs) and securitisation of debts.

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