Credit fund approves Rs.35 cr guarantee cover for 3,247 SSIs

In order to address the problem of collateral security for the small scale sector, the Credit Guarantee Fund Trust for Small Industries (CGTSI) has approved guarantee cover for an aggregate loan amount of Rs.35.5 crore for the benefit of 3,247 SSIs.

The CGTSI, a trust set up by the ministry of SSIs and the SIDBI in July 2000, is operating the credit guarantee scheme. The scheme was modified in September, 2000, hiking the ceiling on the eligible credit from Rs.10 lakh to Rs.25 lakh. According to official sources, the fund has enlisted the support of 28 lending institutions, including 19 public sector banks and four private banks, as its member lending institutions. So far, the number of 3,247 beneficiary SSIs are located in 28 states.

According to official sources, the credit facilitated by the fund is likely to generate more than 9,000 jobs and a turnover of Rs.208 crore. Of the beneficiaries, more than one-third SSIs have availed of credit below Rs.25,000 while about 1,650 units availed of credit ranging between Rs.25,000 and Rs.1 lakh. Regionwise, Uttar Pradesh has accounted for the highest number of units covered under the guarantee scheme, followed by Kerala, MP, Karnataka, Tamil Nadu, Punjab and Himachal Pradesh.

The SSI beneficiaries are in a variety of sectors, including basic metal, beverages, chemicals, electrical machinery, food products, IT jute textiles, leather and fur products, non-metallic products, paper and printing, textiles, wood furniture, wool and silk.

Watershed development fund created in Nabard

A Rs.200 crore watershed development fund has been created in the National Bank for Agriculture and Rural Development (NABARD) according to Shri Ajit Singh, Union Agriculture Minister. 

The fund would be utilised to create necessary framework condition to replicate and consolidate the isolated successful initiatives under different programmes in the government, semi-government and NGO sectors. A number of externally aided projects funded by the World Bank and through bilateral assistance were also operational in various parts of the country.

About 9.60 million hectare area in the country has been treated through watershed development programmes of the ministry in VIII and IX Plan period involving an expenditure of about Rs.2,990 crore. The watershed programmes have now been subsumed under macro-management mode, under which the states have the freedom to develop and pursue activities on the basis of their regional priorities. 

SSI growth beats IIP in first quarter

The SSIs outperformed the general index of industrial production (IIP) during the first quarter of this financial year. The SSIs registered a growth of 7.13 percent during April-June, much higher than the 4 percent increase in the IIP during the same period. 

Since 1991-92, when economic reforms started, SSIs have done better than the rest of the industry in each of the 11 financial years but once during 1995-96.

But even that `lower' small industry growth was 11.4 percent, against 12.1 percent of the IIP. Incidentially, 12.1 percent growth was the highest of the IIP in more than a decade. 

During the past fiscal, the IIP was estimated to have grown by a meagre 2.3 percent, which was considerably below the 5.95 percent rate registered by SSIs. Similarly, during 2000-01, the IIP growth was at 5 percent, compared to the 8.23 percent cornered by the SSI Sector. Below is given the comparative growth rate of SSIs & IIP :
Year SSIs(%)  IIP%
1991-1992  3.1 0.6
1992-1993  5.6  2.3
1993-1994  7.1  6.0
1994-1995  10.1  9.4
1995-1996  11.4  12.1
1996-1997  11.3  7.1
1997-1998  8.43  6.7
1998-1999  7.7  4.1
1999-2000  8.16  6.5
2000-2001  8.23  5.0
2001-2002 (E)  5.95  2.3

(E) - Estimate

Small sector may get more loans at PLR

Keeping in view the importance of SSIs in employment generation and growth, the government and the RBI are considering a series of measures to enhance credit flow to the sector.

The measures lined up include hiking the loan limit at prime lending rates (PLRs) and on collateral security. Legislation for handling delayed payments to SSI and on factoring services are also being considered. 

The RBI has been asked to look into the issues of reduction of net bank credit to the SSI sector, increasing cost of credit and requirement of collateral payments; and come up with concrete suggestions by January, 2003, Planning Commission, Dy. Chairman Shri K.C. Pant said after a meeting with officials from the ministries of finance, rural development, SSIs, RBI and heads of several banks and financial institutions.

Shri Vepa Kamesam, Dy. Governor, RBI said since there was a soft interest rate regime in place, there was a case for cut in interest rates for the SSI sector. 

To speed up credit disbursal to the SSIs, Shri Kamesam said the RBI has directed banks to clear loans upto Rs.25,000 within two weeks and upto Rs.25 lakh within four weeks. Rejection of loan proposals would have to be referred to higher authorities in the bank and the unit would have to be informed about the reasons for rejection. 

Shri Pant said a Delayed Payment Act was also under consideration. The Act seeks to penalise large units that delay payments to small scale units. Since the working capital availability of small units is limited, delayed payments make these units sick and result in loan defaults. Another legislation on factoring services is also under consideration to facilitate payment of loans by SSIs.

At present 6.3 million of the 7.3 million defaulters in the country are from the SSI sector. However, in value terms, only 19 percent of the loan defaults are from this sector. 

40,000 small-scale units go sick in Rajasthan

Around 40,000 small scale firms in Rajasthan have become sick and more are on the verge of downing shutters. "While industrial sickness is spreading, the state has not been able to attract much investment. The situation is bad", said Shri Sitaram Agarwal, President, of the Federation of Rajasthan Trade and Industry.

High power tariffs and the general economic recession were mainly responsible for the rising sickness. He urged the state government to take steps to give a boost to industrialisation. He also urged the state government to restructure power tariffs so as to foster industrialisation, and put an end to undue subsidies for the farm sector. 

Reduced power tariffs and steady supply would go a long way in reviving the 40,000 small scale units in the state. Dual power tariffs were also mooted whereby the night charges should be lower than the day charges. This way, the power going waste in the night could be put to productive use.

Footwear among plastic items not to be SSI reserve

Government is planing to take out some plastic products from the reservation list for the SSIs. Currently, 15 categories of plastic products are among 749 items reserved for SSI. 

The list may include full PVC footwear, sandals and shoes, acrylic sheets and polythene films. Under the Industrial Development and Regulation (IDR) Act, de-reservation of a product for the SSI sector requires the assent of Parliament. 

Plastic items currently reserved for the SSI sector include certain fibre-glass reinforced plastic products and polypropylene mono filaments. 

Even as progressive de-reservation is on, sectors that continue to have large number of products under the reserved category include food and allied industries and leather, including footwear, wood products, electronic equipment and mechanical engineering products.

The objective has always been to provide more and more service to the community of which the customer is an inseperable part. The customer has, therefore, been put in a social perspective, a significant departure from the conventional market oriented view taken by businesses. The main problem, therefore, is how to educate our bureaucracy to be truly public servants, servants of the people rather than bosses. - Dr. Verghese Kurien