The industry ministry is considering a proposal to restrict concessions to small-scale industries (SSIs) to units with investment of up to Rs 1 crore while leaving the qualifying limit for SSIs at Rs 3 crore.
The proposal has been submitted to the industry minister Sikander Bakht by the department of small-scale industries. It is awaiting the minister's clearance before it is sent to cabinet for approval.
If finalised, the proposal will effectively lower the qualifying investment for SSIs to Rs 1 crore from the present ceiling of Rs 3 crore.
With this, the ministry hopes to fulfil Prime Minister Atal Bihari Vajpayee's promise of lowering the qualifying investment limit to protect smaller SSIs while avoiding the problem of dealing with SSIs that have investments greater than Rs 1 crore.
Questions had been raised about the status of such SSIs following Vajpayee's announcement on lowering the limit.
"Although the move will more or less have the same effect as changing the definition of SSIs, it will not have the attendant problems and confusion that a formal move lowering the limit would have caused," a ministry official said.
Officials said 95 per cent of SSIs have investments below Rs 5 lakh. Larger units with investment of over Rs 1 crore were a few thousand only. The move to restrict concessions to units with investment below Rs 1 crore, thus, would not adversely affect the sector, they maintained.
The investment limit for SSIs was raised to Rs 3 crore from the earlier Rs 60 lakh by the United Front government. The Federation of Small Scale Industries has been lobbying with the BJP government for lowering of the limit. According to the body, raising the limit threatened the future of SSIs as it created an opportunity for bigger players to enter the sector.
The BJP government has been sympathetic to the cause of SSIs. In its manifesto, it stated that it would undertake a review of the investment limit. Vajpayee also announced the government's intention to lower the limit to Rs 1 crore.
But there was concern that a lower investment limit would adversely affect modernisation of SSIs. "The proposed move is the golden mean between the two options," an official said.
