The Hindu : Front Page : Small units’ expansion plan hit

Online edition of India's National Newspaper
Wednesday, Aug 08, 2007
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Small units’ expansion plan hit

R. Krishnamoorthy

Tamil Nadu Industrial Investment Corporation insists on collateral security for loans

They seek Government intervention
300 fabrication units affected

TIRUCHI: The Bharat Heavy Electricals Limited Small Scale Industries’ Association (BHELSSIA) is hamstrung by the Tamil Nadu Industrial Investment Corporation’s (TIIC) insistence on collateral security to grant loans for modernisation and capacity expansion of industrial units.

The combined output of the 300 fabrication units that constitute the association averages two lakh tonnes a year, including work orders for 1.5 lakh tonnes from BHEL alone.

With orders streaming in, an infusion of Rs. 250-crore investment for doubling the units’ capacity would enhance the strength of workforce from the present 15,000 to 25,000.

Though TIIC’s interest rates are attractive, its insistence on 50 per cent collateral security is seen as a stumbling block as their assets are already listed as collateral security by the banks which had funded the units.

Unproductive

“Making further investment on unproductive assets just for the sake of complying with the collateral security norms of the TIIC does not hold logic,” said K. G. Muralidharan, BHELSSIA secretary.

There are two ways to tackle the situation.

Onus on Government

The onus is on the Government to ensure that the Tamil Nadu Industrial Investment Corporation reduces the collateral security requirement to 20 or 30 per cent considering the viability of the projects, or scale up the scope of Credit Guarantee Scheme operated through the Small Industries Development Bank of India from Rs. 25 lakh to Rs. 1 crore, according to R.M. Subramaniam, a management consultant.

Special services

Meanwhile, to keep pace with higher productivity demands, the BHELSSIA has urged the Transport Department to operate special services from the city to the units. Only then will the units be able to attract skilled manpower.

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