Sushma Ramchandran

This will ensure better technology transfer and large investments, it says

Raising general SSI excise exemption limit from Rs. 1 crore to Rs. 1.25 crore mooted Panel for increasing SSI turnover eligibility limit from Rs. 4 crore to Rs. 5 croreMake Indian products more competitive to combat "Chinese challenge"

New Delhi: A parliamentary panel has urged the Government to consider raising the foreign direct investment (FDI) ceiling for the small-scale sector from 24 to 49 per cent. It said this will ensure better technology transfer and large investments, leading to higher growth of small-scale industries (SSIs).

It has also proposed a package of measures to give a boost to the growth of the small enterprises to generate employment at a faster rate.

These include raising the general SSI excise exemption limit from Rs. 1 crore to Rs. 1.25 crore, increasing the SSI turnover eligibility limit from Rs. 4 crore to Rs. 5 crore and allowing excise exemption to SSI units manufacturing branded goods in urban areas similar to that allowed for units in rural areas.

Service tax

In its report, the parliamentary standing committee on industry has also proposed capital gains exemption to sick small units selling off fixed assets to repay their bank loans and granting exemption to small companies providing business auxiliary services from service tax.

It has also suggested that the limit of 15 days for payment of excise duty be increased to 45 days.

On the proposal to raise the FDI ceiling for investment in small units, the panel has pointed out that a steering committee on FDI, set up by the Planning Commission, has recommended in 2002 enhancement of equity participation to 49 per cent in the small-scale sector.

The Industry Ministry had also then said it had no objection to the raising the of the FDI cap for small-scale sector items where the investment limit has been enhanced to Rs. 5 crore.

It felt the FDI could be routed through an agency such as the Foreign Investment Promotion Board (FIPB) with representation from stakeholders.

Making a mention of the influx of products from China made by small-scale units, the committee said there was "urgent need" to take corrective steps to improve the quality of Indian goods. It said there was need to ensure cost reduction, design and process modification as well as product diversification to make Indian products more competitive to combat the "Chinese challenge."

Revival of sick units

Referring to the efforts to revive sick small-scale units, the committee has observed that "very little" has been achieved in the rehabilitation process and concrete steps are required to be taken in this direction. In this context, it took note of the Reserve Bank of India data, which said sick units had declined marginally from 1,38,811 in 2004 to 1,38,041 in 2005. It also felt that banks should carry out specialised studies to find out reasons for sickness so that suitable rehabilitation measures can be drawn up for small units.