Date:02/03/2006 URL: http://www.thehindubusinessline.com/2006/03/02/stories/2006030202210500.htm

Back SME credit fund corpus to be raised

Our Bureau

New Delhi , March 1

To provide an impetus to the small and medium enterprises (SMEs), the Finance Minister, Mr P. Chidambaram, has proposed to raise the corpus of Credit Guarantee Fund from Rs 1,132 crore to Rs 2,500 crore in five years. In 2006-2007, he proposed to provide Rs 118 crore.

He also advised the Credit Guarantee Trust for Small Industries (CGTSI) to reduce the one-time guarantee fee from 2.5 per cent to 1.5 per cent for all loans.

He also asked Small Industries Development Bank of India (SIDBI) to recognise SMEs in the service sector and treat them on par with those in the manufacturing sector.

SIDBI should extend insurance cover to approximately 30,000 borrowers identified as chief promoters, under the CGTSI. The sum assured would be Rs 2 lakh per beneficiary and the premium would be paid by CGTSI.

The Government has also identified 180 items for de-reservation for the small-scale industries. This is to provide a thrust towards their up-scaling the size and technological up gradation.

Mixed response

Meanwhile, the proposals have met with mixed reactions from the industry. The All India Confederation of Small and Micro Industries Associations has welcomed the incentives given to agro food processing and textiles sector. However, it said no reduction on interest on loans taken by small-scale industry has been a disappointment.

The Federation of Associations of Small Industries of India too welcomed slashing of custom duty on alloy steel and plastics. But it said it was disappointed because the upper excise exemption limit for the sector has not been raised to Rs 5 crore from the present Rs 4 crore.

Mr Amit Goradia, Chairman, Jewel Brushes Pvt Ltd, said, "There are some good moves for the small and medium sector. The Finance Minister has knocked off 180 items. Slowly the reservation for the sector is disappearing which is a good idea, but I know that, for political reasons, the entire reservation cannot go. The Government needs to support the sector and there are measures in today's budget that are in the right direction."