Reservation policy for SSIs to be dismantled

ECONOMIC SURVEY 2003-04/ PUBLIC SECTOR POLICY

Dereservation of more items to take industrial growth rate beyond 10%.

"Small and medium scale enterprises are critical for industrial development, for they provide the cradle that nurtures the big businesses of tomorrow. They choose the appropriate product design and techniques, be it labour or capital intensive, and they have the flexible management capacities to respond to fast-changing market conditions. The progress in gradually dismantling the reservation policy observed over recent years should continue and the policy of protection through reservation should be replaced by promotion as the cornerstone of future policy," the Economic Survey, tabled in Parliament yesterday, said.

It also recommended adequate credit supply, technological assistance, better infrastructure and low transaction costs to boost the sector.

Under the present policy, 675 items are reserved for manufacturing by units employing capital of up to Rs 1 crore. For certain product segments like hosiery and pharmaceuticals, the investment limit was raised to Rs 5 crore.

In 1967, when the reservation policy was introduced only 47 items were included, but over the years the list was expanded and the number increased to 873 in 1984, when legislative backing was provided through the Industries (Development & Regulation) Act, 1951.

The policy does not restrict the entry of large entities, but an export obligation on 50 per cent of their production has been specified.

A large number of big companies have been using small-scale industrial (SSI) units for sourcing products like toothbrushes, which are then branded and sold under their trademark.

According to the latest SSI Census, there were 10.52 million SSI units and their total production was estimated at Rs 311,993 crore in 2001-02, which was projected to increase 11.6 per cent to Rs 348,059 crore at the end of 2003-04.