Group on SSIs favours three-tier categorisation

By Our Special Correspondent

NEW DELHI, MAY 25. The Planning Commission study group on small scale enterprises is in favour of continuing reservation for this sector but on the condition that larger units can take up reserved items production with a 30 per cent export obligation. At present, larger units can take up such production but must export 50 per cent of output within three years.

The group has called for raising the investment ceiling on small scale industries, formulating a comprehensive law for this sector and providing a Rs. 2,000 crore corpus for infrastructure needs of SSIs. It has also proposed creation of an incubation infrastructure development fund with a Rs. 1,000 crore corpus The study group headed by the Planning Commission member, Dr. S. P. Gupta, submitted its report today to the Deputy Chairman of the Planning Commission, Mr. K. C. Pant.

As part of its recommendations, the group has urged laying down a three tier definition of small scale enterprises (SSEs) covering tiny, small and medium sectors. The medium sector definition has been brought in for the first time to help SSI units graduate to medium and then to large scale. Medium scale units - from Rs. 1 to Rs. 10 crores - would not be provided fiscal and other policy support as for SSI units but would be provided credit for technology upgrading and modernisation.

The group has also suggested the need for a single comprehensive law for the sector the small business administration act of the U.S. Besides, it has proposed raising the investment ceiling from Rs. 1 crores to Rs. 5 crores for plant and machinery for export- oriented industries such as leather products, garments, hosiery, hand tools, toys, packaging materials, auto components, pharmaceuticals and food processing.On reservation, it has recommended that it should be continued. But to enhance exports, it feels that larger units can take up production of reserved items with a 30 per cent export obligation over a three year period.

To encourage technocrat entrepreneurs in hightech industries, it has suggested an incubation infrastructure development fund with a corpus of Rs. 1,000 crores. This could set up incubation centres (Ics) in the Tenth Plan. These ICs would provide all facilities and finance as well as technical consultancy to encourage first generation entrepreneurs to take up production based on new technologies.

Other recommendations of the study group include exemption of tiny units from all laws and regulations except those relating to safety and environment as well as introduction of self- certification to obviate need for regular inspections and encouragement to electronic data transmission. It has also proposed single window clearances from Central and State governments to avoid going from pillar to post for setting up new units or modernisation.

On fiscal measures, it has proposed setting up a special venture capital fund of Rs. 500 crores for equity support as well as setting up targets for credit from banks under priority sector lending.

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