Make use of SSI upgradation schemes
By R.Gopalakrishnan
Chennai, June 20, 2004: Small and tiny enterprises are likely to be subject to a new policy regime sooner rather than later, though whatever changes that may be ushered in by the new government at the Centre may not meet fully the traditional expectations of the small sector.
Indications are that a new category of "medium enterprises" will be introduced, while the small and tiny sectors will continue to remain a separate category. In many developed countries, SMEs or small and medium enterprises, are considered as one category, though in the case of some, subdivisions are recognised within this category. An important question that can hardly be ignored by policy-makers any longer is whether the definition of SSIs should continue to be related to investment (in plant and machinery) alone or whether it should be linked wholly or partly to the strength of the workforce and turnover. The demands of scale economies (viz, larger volume production leading to lower unit cost) and technological upgradation make some change in the definition imperative in the competitive conditions in the domestic and export markets.
Technological modernisation is obviously one of the desirable options before SSIs, using the many schemes and windows made available by a range of institutions. Small industry leaders have often expressed opposition to the conditionalities schemes of institutions, including SIDBI (Small Industries Development Bank of India), such as corporate form of ownership (including private limited companies), minimum number of years in operation and default-free record, apart from the interest rates which are higher than rates offered for personal housing (viz, a consumption and not production) loans.
While it is imperative to examine seriously these aspects, entrepreneurs should, on their part, do their best to make their project proposals bankable, particularly by way of openness about income/revenue streams (instead of underestimating revenues for minimising their income-tax liability).
Among SSI modernisation funding schemes is the Technology Development and Modernisation Fund schemes of SIDBI and also its funding for obtaining ISO 9000 certification, which carry interest at the bank's prime lending rate (viz, the rate it offers its best customers). The bank also operates a window separately for textile industry upgradation, whose scope (in terms of different activities under the textile value chain) has been periodically expanded at the instance of the Union government.
The State Bank of India (SBI) operates for the benefit of SSIs a "Project Uptech" under which it offers both technological and managerial consultancy and a financial package. The terms for modernisation loans include liberalised margin money requirement (of 15 to 20 per cent), an interest-free loan of upto Rs 1 lakh to help finance the equity contribution of the promoter (repayable after a holiday of three years) and a term loan with a holiday period of 18 months.
A Technology Bureau for Small Enterprises (TBSE) is operated by the United Nations' Asia-Pacific Centre for Transfer of Technology (APCTT) and SIDBI to offer "synergy of technology and finance". Services of TBSE include a professionally managed technology and collaboration search, handholding during negotiations for acquisition of know-how and preparation of projects and business plans.
Of course, there are many other institutions that operate schemes for technological and managerial upgradation of the SSI sector. What is needed at the present juncture is that such schemes be reviewed objectively so that entrepreneurs are able to take advantage of them instead of getting mired in lobbying for policy changes that may not materialise in the short-to-medium term or ever at all.
SSIs : A review
