Govt. to encourage SSIs in knowledge-based sectors

Minister of State for Small Scale Industries and rural and agro industries, Smt. Vasundhra Raje on 10.04.2001 said that government would encourage setting up of more small and medium enterprises in the knowledge based industries such as IT and bio-technology as they require less capital and can ramp up faster. 

"Knowledge based industries are likely to acquire greater prominence and SMEs are likely to come up in the industry segments such as pharmaceutical, IT and bio-technology sectors". Smt. Raje said that Government would act as a facilitator for providing support to SMEs in the era of globalisation which includes setting up of venture capital funds. It would also focus its energies towards providing human resource development support alongwith establishing quality certification facilities and disseminate information on world trade organisation (WTO).  

IFC, Exim Bank and WestLB form venture for SMEs

The International Finance Corporation (IFC), the Export Import Bank of India (Exim Bank) and German Bank WestLB have come together to form a company, Global Trade Finance Pvt. Limited to focus on export factoring and small ticket forfaiting for small and medium enterprises (SMEs) in India. 

"The concept is to promote market-driven export financing solutions for Indian SMEs that are operating in an increasingly competitive world trade environment", a statement issued by IFC said. 

The initial equity capital of Global/ Trade Finance will be Rs.45 crore (roughly $ 10 million), of which, 40 percent will be held by WestLB, 35 percent by Exim Bank and the remaining 25 percent by IFC. 

Global Trade Finance will service small and medium domestic exporters with new products such as factoring that will provide credit assessment and protection, financing, bill collection and small item forfaiting that will enable the exporters to offer longer-term financing to importers of machinery and equipments. 

As the demand for open account trading expands globally, the need has arisen for local exporters to offer similar terms to importers to be competitive. Global Trade Finance will step in to service that need. IFC's investment in this project is part of its global strategy to assist SME exporters in developing countries. 

IFC's financing consists of an equity investment of upto $ 2.5 million equivalent and future loan financing of $ 10 million.  

EU assistance for SMEs to improve quality system

The Indian Electrical and Electronic Manufacturers' Association - (IEEMA) would be conducting a quality system implementation project for 15 domestic small and medium enterprises (SMEs) under the aegis of the Asia invest programme of the European Union (EU). 

"The whole idea behind conducting this programme is to improve the quality of SME products and prepare them for competing in the European markets", IEEMA Vice President, Shri U.P. Mahendru said at a press conference in New Delhi in April. 

EU's ambassador Michael Cailouet said, "There has been a 23 percent increase in trade between India and the EU during the last year. SMEs alone accounted for almost 50 percent of total exports. There lies an immense opportunity for SMEs to penetrate European markets. Such a programme would help them to understand the business environment in EU". 

Policy initiatives for SSIs in the Year 2000  

  • Investment limit brought back to Rs.1 crore, from Rs.3 crore except for toys, hosiery, packaging materials, auto components and hard tools. For the latter, the limit was raised from Rs.1 crore to Rs.5 crore. 
  • Excise exemption limit increased from Rs.50 lakh to Rs.1 crore, resulting in a revenue loss of over Rs.500 crore for the exchequer.  
  • Basic customs duties on oiled fabrics, used in the manufacture of soft toys, cut from 35 percent to 15 percent; on components of electronic toys and parts of video games from 35 percent to 5 percent. Electronic calculator parts to attract customs duty of 5 percent against 20 percent.  
  • Ready-made garments dereserved.  
  • 811 items are reserved for the SSI sector. The present stipulation says, any large units can produce these items, provided it exports 50 percent of its production over a period of 3 years.  
  • Units located in special economic zones permitted to make items reserved for the SSI sector without a licence. The exemption is available to units even if they have a foreign equity component of over 24 percent.  
  • Composite loan limit raised from Rs.5 lakh to Rs.25 lakh.     
  • Collateral security waived for loans up to Rs.10 lakh.  
  • Credit-linked capital subsidy for technology upgradation scheme launched. Since the subsidy will be given for loans up to Rs.5,000 crore, in five years, the government's liability will be Rs.600 crore. 
  • The Rs.125 crore Credit Guarantee Funds Scheme launched to provide guarantee for 75 percent of borrowings from banks, subject to the maximum cap of Rs.7.5 lakh. The corpus may be hiked to Rs.2,500 crore, in the next three years. 
  • Shri S.P. Gupta panel proposal, to hike FDI ceiling on equity participation in small units, from 24 percent to 49 percent, rejected. 
  • The US Exim Bank has pledged $ 1 billion to Exim Bank of India, SIDBI and IDBI for SMEs in the IT sector. While a $ 500 million line of credit has been extended to Exim Bank, another $ 500 million to IDBI-SIDBI is in the pipeline. The amount will be disbursed over the next three years, from 2000-01, mostly at zero coupon rate. 
  • National Small Industries Corporation to provide a composite loan of Rs.25 lakh, to meet fixed costs and working capital.  
  • National Innovation Foundation formed, to make plans for "grassroots innovations", with an initial corpus of Rs.20 crore. The Foundation will give shape to the ideas of farmers and artisans.  
  • The designated authority, anti-dumping and countervailing duty, department of commerce, has recommended suo moto provisional anti-dumping duty on dry batteries and sports shoes imported from China. Provisional anti-dumping duties have also been imposed on three more Chinese products - strontium carbonate, grades/types of alloys and non-alloy steel billets, bars and rounds of sizes 70 mm to 250 mm and ferro silicon.