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A let-down for MSEs

Government package for micro and small enterprises

THE PACKAGE for promotion of Micro and Small Enterprises (MSEs) placed by the government in Parliament last month, is by and large a repetition of past promises without concrete plans of action or fund allocations, though it has also some welcome features, especially in respect of entrepreneurship development among women.

The least the government should have done is to announce tax relief to public sector banks and financial institutions on their contributions for to the Credit Guarantee Corpus of the Small Industries Development Bank of India (SIDBI), instead of merely announcing an intention to study the feasibility of allowing such deduction.

No budget provision

The package talks of raising the corpus of the fund from Rs. 1,189 crore as of April 2006 to Rs. 2,500 crore over a period of five years (with contribution by the government and SIDBI in the existing ratio of 4:1). This sounds hollow in light of the failure to provide any funds for this purpose in the budget.

Similarly, no provision has been made for augmenting SIDBI's Portfolio Risk Fund, though the package talks of covering an additional five million micro enterprises over five years beginning 2006-07.

In the statutory consultative mechanism, with a wide range of advisory functions, at the national level, the 12.3 million MSEs providing employment to 29.5 million persons is grossly under represented with only four representatives from the industry side nationally.

The package talks of improvements made to the Credit Linked Capital Subsidy Scheme (CLCSS) for technology upgradation having led to more units benefiting from it, but has made no commitment to extending the scheme, which is scheduled to expire on March 31, 2007.

It still only talks of effective and expeditious implementation of the MSMED Act 2006 in close collaboration with all stakeholders nearly eight months after it was passed and a full 5-1/2 months after it was actually notified.

It still only talks of action having been initiated to operationalise other elements of the19 months old earlier policy package of August 2005 for stepping up credit to small and medium enterprises (SME). Except for ensuring 20 per cent year-on-year growth in credit to the SMEs, nothing has happened regarding the other aspects of the policy to impact or enhance the competitiveness of the MSEs.

Loan limit

The allusion to the eligible loan limit under the Credit Guarantee Fund Scheme being raised to Rs. 50 lakh will serve no great purpose as the average loan extended under then scheme was just a little over Rs. 2 lakh, which tells us an entirely disturbing story of the non-penetration and non-use of this scheme even under the earlier Rs. 25 lakh loan limit.

What use would the credit guarantee cover being raised from 75 per cent to 80 per cent for micro enterprises for loans up to Rs.5 lakh serve when even otherwise under extant guidelines of RBI all loans under Rs. 5 lakh are to be made available collateral free?

The existing guidelines of the Small Industries Cluster Development Programme (SICDP) to be renamed as "Micro and Small Enterprises Cluster Development Programme," (MSECDP) are to be reviewed during 2006-07 to accelerate holistic development of clusters, including provision of Common Facility Centres, developed sites for new enterprises, upgradation of existing industrial infrastructure and provision of Exhibition Grounds/Halls and also for creation and management of infrastructure-related assets in the public-private partnership. This is nothing but a platitude, as the year 2006-07 is already nearly over.

The only silver lining seems to be the increase in the ceiling on the project cost to Rs. 10 crore.

The National Manufacturing Competitiveness Programme (NMCP) announced in the Budget Speech of 2006-07 including components relating to marketing support to MSE has been a non-starter for inexplicable reasons, this programme being talked about from as early as in the budget speech of 2004-05.

Training support

Support for entrepreneurial and managerial development includes 20 per cent of the entrepreneurship development programmes (EDP) being organised for SC/ST, women and physically challenged persons with a stipend of Rs. 500 per capita per month for the duration of the training and the proposal to train 50,000 entrepreneurs in information technology, catering, agro and food processing, pharmaceuticals and biotechnology through specialised courses run by SISIs, over the period co-terminous with the XI Plan. A new scheme to be formulated to provide financial assistance to select management/business schools and technical institutes, to conduct tailor-made courses for new as well as existing micro and small entrepreneurs and another scheme to be formulated to provide financial assistance to five select universities/ colleges to run 1,200 entrepreneurial clubs are all welcome measures.

Women empowerment

Under the empowerment of women owned enterprises enhancing the guarantee cover under the Credit Guarantee Fund Scheme to 80 per cent for micro and small enterprises operated and/or owned by women and the proposal under the SICDP/MSECDP for financial assistance of up to 90 per cent of the cost, subject to ceiling of Rs. 9 crore, developed exclusively for micro and small enterprises operated and/or owned by women and the proposal for associations of women entrepreneurs to be assisted under the SICDP/MSECDP in establishing exhibition centres at central places for display and sale of products of women- owned micro and small enterprises are welcome measures.

To encourage entrepreneurship among women, 50 per cent concession in fees to be given to women candidates in entrepreneurship/ management development programmes conducted by SISI is another welcome feature. The National Small Industries Corporation Ltd. (NSIC) will assist them to participate in 25 exhibitions over the period co-terminous with the XI Plan is welcome but a trifle meagre. This should be increased to cover at least 50 such exhibitions.

A huge disappointment has been the non-mention, even as a platitude, of anything or a pointed proposal for rehabilitation of the multitude of sick MSEs.

DE RAMAKRISHNAN

The author is President, Industrial and Financial Reconstruction Association for Small and Tiny Enterprises. Contact: deramakrishnan@gmail. com

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