Small and Medium Enterprises - Indian Budget 2006 – 2007 (66 - 69)

Small and Medium Enterprises

66. The introduction of the Small and Medium Enterprises (Development) Bill and the policy on credit announced on August 10, 2005 have, I believe, triggered a change in the mindset of small and medium entrepreneurs. The new thrust is towards up-scaling the size and technological upgradation. After due consultation with the stakeholders and on the recommendation of the Advisory Committee, the Ministry of Small Scale Industries has identified 180 items for dereservation.

67. In order to give a fresh impetus to lending by the Small Industries Development Bank of India (SIDBI), I propose to:

• Recognize SMEs in the services sector, and treat the small scale enterprises in the services sector on par with the small scale enterprises in the manufacturing sector;
• Raise the corpus of the Credit Guarantee Fund from Rs.1,132 crore at end-March 2006 to Rs.2,500 crore in five years. In 2006-07, I propose to provide a sum of Rs.118 crore;
• Advise 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; and
• Extend insurance cover to approximately 30,000 borrowers, identified as chief promoters, under the CGTSI. The sum assured would be Rs.200,000 per beneficiary and the premium will be paid by CGTSI.

68. The National Manufacturing Competitiveness Council (NMCC) has finalized a five-year National Manufacturing Competitiveness Programme. Ten schemes have been drawn up including schemes for promotion of ICT, mini tool rooms, design clinics and marketing support for SMEs. Implementation will be in the PPP model, and financing will be tied up during the course of the next year.

Cluster Development

69. The Cluster Development model can be usefully adopted not only to promote manufacturing but also to renew industrial towns and build new industrial townships. The model is now being implemented, in one form or other, in nine sectors falling under different Ministries. The sectors include khadi and village industries, handlooms, handicrafts, textiles, agricultural products and medicinal plants. It would be advantageous to empower a group to oversee cluster development and monitor progress. Hence, the Prime Minister has decided to constitute an Empowered Group of Ministers who will lay down the policy for cluster development and oversee the implementation.