With the Andhra Pradesh government focusing on large and very large industries, there has been a sharp decline in new small and medium enterprises (SMEs) in the state during the past decade.
In 1999-2000, the number of new SMEs accounted for 21.7 per cent of the total new enterprises. This has now come down to 7.19 per cent.
According to the former president of the Federation of Andhra Pradesh Chambers of Commerce and Industry (Fapcci), Mr Sekhar Agarwal, inadequate funding, lack of support from the government, lack of infrastructure (including non-availability of land, power and connectivity), are the key reasons for this decline.
“From the government’s perspective, the SME sector is a neglected department. Of the state’s annual budget of Rs 128,500 crore for 2011-12, the industrial allocation accounted for only Rs 300 crore. There was nothing specific for the SME sector,” he added.
Investments across all industries (small, medium and big) increased nearly three-fold to Rs 41,785 crore during the decade, from Rs 15,957 crore. Around 27 per cent of the total investment goes to large industry (Rs 20-100 crore) and 54 per cent to very large industry (Rs 100 crore and above), Fapcci data pointed out.
On the other hand, only 11 per cent of the total investment of the state government goes to SMEs (with a capital investment of up to Rs 1-10 crore) and 8 per cent to mid-size ones (capex of Rs 10-20 crore).
Of the total funding, 62 per cent goes to traditional industries such as cotton, cement, bulk drugs, power, chemicals, paper and paper products, sugar and steel. Cotton textiles receives the biggest share of investment (14 per cent), followed by the bulk drugs industry (11.18 per cent).
“The state is focusing more on traditional industries than modern ones. This apart, the absence of financial institutions that could provide term loans to SMEs has resulted in their decline,” he added.
While the number of very large units has increased from 19 to 61, large and medium industries have increased to 270 and 189, from 131 and 155 respectively, during the decade.
As SMEs cannot afford quality manpower, people prefer IT and other sectors for better jobs. Lack of promotional activity in this sector is another concern. Moreover, the recent economic reforms in the state have not helped in increasing industrial production. On the other hand, they have led to concentration of investment in large industries.
“The state should have industry land banks in each district and create around 40,000 industrial plots in one or two years, if SMEs are to flourish,” he added.
Fapcci has recommended that of the total credit disbursement in the state, five per cent should be allocated to first-generation entrepreneurs and 50 per cent to SMEs. The AP government should increase the credit limit for micro, small, and medium industries to Rs 5 crore, Rs 10 crore and Rs 50 crore, from the current Rs 1 crore, Rs 5 crore and Rs 10 crore respectively, he added.
