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R.Y. Narayanan

COIMBATORE, Jan. 10

THE Small and Medium Enterprises (SMEs) have to be freed from the inspector raj and from the action taken by financial institutions for recovery of advances, if the industry is to perform to its true potential, according to the Southern India Engineering Manufacturers' Association (Siema), Coimbatore.

While the banks seem to have shifted their focus to lending to individuals and housing sector, this should not be done at the cost of the industries, it said.

In a pre-Budget memorandum to the Union Finance Minister, Mr Jaswant Singh, the President of Siema, Mr G. Rajendran, said the banks have initiated punitive action to recover their dues from industries that were already plagued with problems.

He made it clear that the association did not want the banks to support "erring industries which swindle away the funds" meant for industry and wanted them only to support industries that have fallen sick due various factors such as strict pollution control norms, high interest rates etc. He said "while the big ones go scot-free, the SMEs get caught in the process".

He said if the SMEs were protected from the inspector raj and if those units that have fallen sick due to different reasons were not subjected to recovery proceedings by banks, it would help the Indian industry to live up to its true potential, which was on par with others.

Mr Rajendran said with a view to improving the performance by SSIs, the financial institutions should reduce the interest rate and the collateral security required.

The Siema President, in a reference to the reported recommendation of the Dr Kelkar committee on increase in excise duty on items whose rates were below CENVAT (16 per cent), feared that the 4 per cent levy on agricultural pump sets would only `discourage' the farmers from installing new sets due to high costs. He wanted water-lifting pumps to be totally exempt from excise duty.

The organised sector in power driven water-lifting pumps accounted for an annual turnover of nearly Rs 1,200 crore and provided an excise duty revenue of Rs 48 crore.

The status quo of 4 per cent excise duty without CENVAT could be continued with strict enforcement on duty evaders, if the duty could not be removed entirely, he added.

The Siema President was also against lowering excise duty exemption limit for the SSI sector.

He said following the increase in the customs duty on stainless steel items and CR electrical sheet coil to 40 per cent, the local manufacturers have too raised the prices by around Rs 5,000 a tonne. This has put the manufacturers of electric motor, pump and general engineering industries in a spot. They now have to face competition from organised manufacturers and from the unorganised sector that was able to under-cut prices since it did not suffer the burden of taxes.

He said the recommendations of Kelkar Committee to withdraw DEPB licence from the list of benefits to exporters, if accepted, would hit the exporters who were operating on thin margins "with only hope of profit in the form of DEPB licence". Withdrawal of this benefit would make the domestic industries lose their competitive edge in the export markets, he added.

On the direct taxes front, Mr Rajendran wanted Indian companies to be permitted to set off loses incurred in a year against the profit they had earned in previous years as done in some countries.

The limit on turnover for units to have compulsory audit under Sec 44AB should be enhanced from Rs 40 lakh to Rs 1 crore. Depreciation limit should be restored to the earlier level of 33 per cent from the current 25 per cent.

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