Small Scale Industry
Investment in Industry
Develop North East
Estimates for 1998
Assistance to States
Non Plan Expenditure
|Small Scale Industry
16. The SSI sector makes a valuable contribution
of about 40 per cent to our total manufacturing sector production, 35 per cent to exports
and employs over 160 lakh workers. Our commitment to the SSI sector is total. The
commonest complaint of SSI entrepreneurs and associations are the insufficiency of timely
credit and the harassment of the "Inspector Raj".
17. On the credit problems of the SSI sector, I propose the following initiatives: At
present, for SSI units having aggregate working capital requirements up to Rs.2 crore, the
working capital limit is determined by the banks on the basis of a simple calculation of
20 per cent of their annual turnover. This facility is being doubled to Rs.4 crore. This
will ease the flow of bank credit to SSI.
To moderate the cost of credit to SSI units, RBI will advise the banks to accord SSI units
with a good track record, the benefit of lower spreads over the prime lending
rate.Enhanced powers would be delegated to bank managers of specialised SSI branches to
ensure that most credit proposals are decided at the branch level.
At present, Small Industrial Development Bank of India (SIDBI) is a subsidiary of IDBI and
IDBI is the major shareholder in State Finance Corporations (SFCs). To equip SIDBI to play
its apex role in SSI credit provision more effectively, SIDBI will be delinked from IDBI
and IDBI shareholding in SFCs will be transferred to SIDBI.
SSI units are often handicapped by delays in the settlement of their dues from larger
companies. To tackle this problem, I am asking RBI to strengthen the existing mechanisms
available to SSI for discounting of bills. RBI will also modify its guidelines to
commercial banks on credit appraisal to give greater weight to the amount of overdue
outstandings that large units have in respect of SSI supplier. My colleague, the Minister
of Industry is separately bringing amendments in the Interest on Delayed Payments to Small
Scale and Ancillary Industry Undertaking Act,1993 to make the existing legislation more
18. As for the pervasive problem of the "Inspector Raj", I shall be announcing
far reaching changes in the administration of Central Excise which should help SSI units
significantly. I urge all States to review their laws and regulations and make necessary
changes to lighten the burden of the inspector raj problem of SSI units.
19. I shall also be announcing some tax concessions to the SSI sector later in my speech.