Sick institutions make matters worse. |
The Small and Medium Enterprises (SMEs) in Orissa are a disappointed lot. Contrary to their expectations, the Union Budget for 2008-09 does not have any provision to raise the excise duty exemption limit for the SME units. |
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They expected this level to be raised to at least Rs 2 crore in the context of the increase in the investment limit of Small Scale Industries (SSIs) and the inflation. Currently, the Small Scale Industries (SSIs) are enjoying a duty exemption limit of Rs 1.5 crore. |
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This, they argued is more required for the SMEs in a state like Orissa, who suffer a lot due to non-availability of credit, poor infrastructure and a weak marketing link among others. |
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"The excise duty exemption limit should have been raised to Rs 2 crore in view of the inflation and enhanced investment limit of the SSIs", Niranjan Mohanty, president, Utkal Chamber of Commerce and Industry (UCCI) told Business Standard. |
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Similarly, the budget does not have any proposal for relief to the SMEs exporting products like textile and leather. These units were worst hit due to the appreciation of the rupee. |
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"A package for the sectors hit by the appreciation of rupee was expected in the budget .However, the finance minister has done nothing to help these units to recover from this shock", he added. |
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Stating that the State Finance Corporations (SFCs) were playing a significant role in the credit flow to the small industrial units, he said, the budget does not have any proposal to revive the State Financial Corporations (SFCs) whose net worth has turned negative. As many of the SFCs have negative net worth, the SMEs have lost a major line of credit. |
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The Union government should have announced a revival package for the State Financial Corporations in line with what it executed for other financial institutions like the IDBI earlier, he suggested. |
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"The Union government should have restructured these SFCs by pumping some more money", Mohanty said adding that it would have enabled them to start the lending process. |
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Mohanty appreciated the budget proposal for raising the income tax exemption limit to Rs 1.5 lakh stating that the measure will encourage consumption and help in the growth of the manufacturing sector in general. |
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It may be noted, by the end of 2006-07, there were about 92,417 units in Orissa with an investment of Rs 2825.18 crore and employing about 5,57,000 people. |
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According to the figures of the State Level Bankers' Committee (SLBC), the total assistance given by banks to the SME sector was Rs 4,655 crore by end of September 2007. |
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It was 13.02 per cent of the total advance provided by all the banks in the state. This falls far short of the Union government's target for the banks to allocate 20 per cent of the gross credit to the SME sector. |
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To make matters worse, the Orissa State Financial Corporation (OSFC), which used to play a key role in financing the SME sector in the past, has stopped lending to the segment as it has become sick. |
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Besides, the working capital availability to SMEs is only 5 to 6 per cent of the turnover as against 20 percent stipulated by the Reserve Bank of India (RBI). |
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