Bangalore: Karnataka, which gained notoriety in the past couple of years for the high rate of closure of small-scale industries (SSIs), is seeing a turnaround in this sector, though it is skewed towards urban areas. The rate of closure of small units in urban areas has come down, and this will enable Karnataka to improve its ranking among the States, from its current third position.

There are over seven lakh SSIs, both registered and unregistered, with 58 per cent being in rural areas. In urban areas, a majority of the units are in the industrial clusters of Bangalore, Hubli-Dharwad, Belgaum, Shimoga, Mysore and Mangalore.

The closure of SSIs in rural areas is what is worrying industry associations. The reasons for closure are identifiable, but corrective measures, both by the Government and the entrepreneur concerned are not forthcoming. Lack of power supply, working capital, technology and marketing facilities have hit the SSI sector much more in rural areas than in urban areas.

According to R. Prithvi Raj, president of the Karnataka Small-scale Industries Association (KASSIA), the situation in urban areas has improved. "We are happy with the positive signs of improvement." But in rural areas, the Government has to step in, make available adequate and reliable power, improve marketing facilities and ask bankers to reduce the collateral for loans.

A couple of years ago, the rate of closure among SSIs hovered around 40 per cent, he said. Now nearly 90 to 95 per cent of SSIs in urban areas are operating. In rural areas, the closure rate could be between 25 and 30 per cent, he said.

The power situation in the cities, he said, had improved considerably, thanks to the electricity authorities realising that it is industry that is cross-subsidising nearly 20 to 30 per cent of its various schemes.

As for subsidies due to SSIs from the Government, Mr. Prithvi Raj said the Government had released nearly Rs. 192 crore of the Rs. 430 crore due to various units. "There is a talk that the Government may release another Rs. 29 crore soon, but we are demanding that with robust tax collection, the Government should release a substantial sum of subsidy. This will benefit around 4,000 small-scale units, some of which may still be in need of capital."

Echoing similar views, R.C. Purohit, president of the Federation of Karnataka Chambers of Commerce and Industry (FKCCI), said the increased disbursement of loans was one of the factors for the turnaround of SSIs. Loan disbursement had to be uniform across the State and collateral had to come down if there were be a growth momentum among SSIs. "The good news is that small-scale units are limping back to normality. At one time, Karnataka had the dubious distinction of having the maximum number of sick small-scale units," he said.

The sectors that are thriving include machine tool and components, electronics, pharmaceuticals, processed food products, hosiery and garments, paper products and printing, and rubber and plastic products.

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