Date:08/01/2009 URL: http://www.thehindu.com/2009/01/08/stories/2009010861190300.htm

Karnataka - Bangalore

KASSIA demands relief for small units

Special Correspondent

Bangalore: The Karnataka Small Scale Industries Association (KASSIA) has demanded that the Union and State governments and the Reserve Bank of India (RBI) provide “immediate” relief to small industries in the State.

KASSIA president, Arvind N. Burji, told presspersons here on Wednesday that six lakh micro, small and medium enterprises (MSME) in the State – including 3.5 lakh unregistered units – were in a “deep crisis”.

These industries, distributed in 120 clusters, employ about 40 lakh people. He said the plight of the small units, which had been in decline for over two years, had worsened significantly in the economic slowdown.

The rising prices of raw materials had affected the viability of small units, Mr. Burji said.

The slowdown in the flow of credit to small units had aggravated the situation, he said.

Demand was fluctuating and orders were delayed or cancelled.

The power shortage had worsened matters for small units, he said.

Mr. Burji said: “The hostile economic environment” threatened the very existence of these units. He demanded the banks and financial institutions “not charge interest on all loans to small and medium enterprises for one year.” Moreover, the norms for classifying banks’ non-performing assets (NPA) should be “redefined”.

He demanded that the norm, which resulted in a loan being classified as NPA if interest was not paid by the borrower for 90 days, be “kept in abeyance until normalcy is restored”.

Banks and financial institutions “should reschedule loans” so that they were not classified as NPAs, he added.

‘Defer taxes’

Mr. Burji said in the prevailing “recessionary” conditions small units were unable to sell their output, after paying advance tax payments. “In this situation, it would be appropriate for the State Government to permit us to make quarterly payment of taxes, instead of the current system of monthly payments,” he said.

Mr. Burji demanded that the MSME Act, which was aimed at ensuring that large companies made timely payments to small units, be “implemented effectively.”

Larger units availed 45 days credit when they sourced supplies from small units, he pointed out. “If immediate steps are not taken, the big fish will swallow the smaller ones,” he said.