A delegation of the Confederation of Indian Industry micro, small and medium enterprise (CII MSME) division met Micro, Small and Medium Enterprises Ministry officials recently to highlight the problems faced by the SME sector. CII MSME Council Chairman Ramesh Datla tells Indivjal Dhasmana that the delegation urged the ministry to simplify procedures for the SME sector and expeditiously implement the draft policy for reservation of 20 per cent for this sector in government procurement. Edited excerpts:
What was the trigger for meeting MSME ministry officials?
The trigger was to ask the ministry to expeditiously implement the draft government policy for the mandatory purchase of 20 per cent from SMEs. The government released a draft policy last year and the policy has now been circulated to the ministries. Our issue is how fast it can be implemented. Right now, there is no reservation. The policy will come through the Cabinet Committee on Economic Affairs (CCEA). This is an important aspect that the industry requires.
What else do you want the ministry to do for SMEs?
Last year, the government came out with the National Manufacturing Competitiveness Programme for the SME sector. There were different schemes under the programme for basic software, low-cost automation, promoting clusters, direct patenting, market development and entrepreneurship training. The policy came last year. But it has not gathered pace, since it is to be implemented by state governments.
We want the ministry to take up the matter with state governments to implement the scheme expeditiously.
Did you discuss the issue of labour laws as well?
A task force constituted by Prime Minister Manmohan Singh last year recommended that labour laws be made applicable wherever more than 50 people are employed. This recommendation is yet to be put into effect. We want speedy implementation of this recommendation as well.
What is the problem with procedures in the SME sector?
Today, small industry has to go through lots of procedures from the registration point of view. If I have to register a small unit, I have to register it with the District Industries Centre, then the sales tax department if it is slightly bigger, then with the Central excise department, etc. We are saying, ‘give us single-window registration — one form, single paper work’. In this competitive environment, multiple registration causes lots of delays.
Banks have been raising interest rates due to RBI’s tight monetary policy. How is it hampering the working of SMEs?
Banks raising interest rates is a huge issue. Historically, finance has always been a key issue with SMEs. Now, there is a concessional rate scheme for micro enterprises for loans below Rs 10 lakh. The concession is 2-3 per cent compared to the normal rates of interest. Small enterprises are now getting loans at 15-17 per cent. What happens is that competitiveness is completely lost. We want banks to come out with a concessional scheme for small industry on the lines of micro enterprises. (A micro enterprise is one where investment in plant and machinery is below Rs 25 lakh; a small enterprise is one where investment in plant and machinery is Rs 25 lakh to Rs 5 crore.)
