Finance minister Yashwant Sinha today assured Parliament that the issue of recapitalising the State Finance Corporations (SFCs) at a cost of Rs 3500 crore is still open.
Replying to questions in the Rajya Sabha on the state of the small scale sector, Sinha said: "Suggestions have been made for recapitalisation to revive the SFCs. We are discussing this with the state governments and hope to resolve this problem very soon."
The minister's observation is significant as the finance ministry had apparently rejected the proposal earlier this year. Sinha refuted charges that the government had taken only cosmetic steps for development of the small scale sector. He said: "The measures announced by the government including the package unveiled by the Prime Minister in August 2000 are not cosmetic".
He said the measures included raising the excise duty exemption for small scale industries to Rs one crore from Rs 30 lakh despite the additional burden on the exchequer.
The minister added that small scale units had done well on the export front and were the main contributors to the export basket but added that they also contributed to the bulk of the high level of non performing assets of banks estimated at around Rs 55,000 crore.
In reply to another question, Sinha said there is no question of reverting back to the regulated interest rate regime to provide concessions to certain segments of industry.
He said: "Interest rate has been de-regulated and there is no intention to bring back regulation as far as interest rate are concerned."
He pointed out that potentially viable but sick industries are provided loans at below the prime lending rate by banks and financial institutions.
