Mahabir preaches Darwinism to the small-scale sector

RUN UP TO THE BUDGET 2004-05

The states which have not been effectively implementing various employment generation schemes in rural areas, may have to go without further funds from the Centre, if Mahabir Prasad, Minister for Small-scale, Agro and Rural Industries, has his way.

Those states, which have a better track record in implementing these schemes, will stand to gain when funds will be diverted from non-performing states.

In his first interaction with the press, the minister noted, "some states have not been successful in utilising funds provided by the Centre for various rural employment generation schemes. We will divert the funds that have been allotted to them to the states which have a better record in implementation of these schemes".

The minister was talking to reporters on the issues of easy availability of credit, lowering of interest rates and sick small scale industries as prospective proposals to the finance ministry in the run up to the Budget.

Speaking about the labour intensive nature of the sector, the minister said that two schemes were being operated by the ministry.

The Prime Minister Rozgar Yojna (PMRY) is in operation since 1993. Nearly 22.63 lakh units have been assigned generating employment for 29 lakh youth during the period 1993-94 to 2003-04. In fact, he said the ministry was open for making structural changes in the scheme to enhance its productivity.

The Rural Employment Generation Programme (REGP) is also in operation for creation of employment opportunities in rural areas. Sources in the ministry said this scheme featured most in the ministry's pre-Budget proposals.

BS Minhas, secretary in the ministry, said that "the review of the performance of the states in implementing schemes like PMRY and REGP, would be done in December-January. Based on the review, the states which have performed well, will be provided more resources so that the funds earmarked for the schemes do not lapse".

Several schemes are expected to be re-implemented by the government in close coordination with the state governments. The minister, however, said that several states are not making optimal use of the schemes like the Integrated Infrastructural Development (IID) scheme and the credit-linked capital subsidy scheme.

He said that there was "enough Budget provision" for these schemes, and had requested the state governments to forward proposals for utilising funds under these schemes. Sources said that those states which had dismal indicators on the infrastructure index, were not proactive about their proposals.

A meeting with the state SSI ministers is scheduled for Friday and would be attended by representatives of the departments of banking, food processing, industrial promotion and the ministry of labour.

A day before the meeting of the small-scale industry ministers, Prasad said he would ask the states to suggest changes in various schemes for the small-scale sector and rural development.

To encourage this, such investments should qualify for exemption from tax of profits similar to the investments in infrastructure under Section 80 (IA).

On direct and indirect taxes, CII recommended that corporate tax rate should be reduced to 30 per cent and remove the surcharge of 2.5 per cent.

Withdrawal of dividend distribution tax, 15 per cent additional depreciation for increasing capacity by 10 per cent and extension of time limit for availing 150 per cent weighted R&D deduction are some of the other suggestions.

On indirect taxation, the chamber suggested the reduction of duty by 5 to 10 percentage points on raw materials, intermediates and components wherever possible so that the duty on these is at least 5% lower than the finished products.

And on value added tax (VAT), CII said that Budget 2004-05 must clearly state the target date by which VAT will come into being, and the date should not be beyond 1st April, 2005.