Stakeholders in the industrial sector want the interest subsidy given to Small Scale Industries (SSI) with a capital investment of Rs. 1 crore to be extended to units with an investment of up to Rs. 5 crore.
Micro and small scale industries in Karnataka are getting an interest subsidy of 6 per cent for loans taken from the Karnataka State Financial Corporation (KSFC) from March 10, 2015. However, the scheme is restricted to industries with a capital investment of Rs. 1 crore and this renders a majority of the SSIs ineligible.
P. Vishwanath, president, Mysore Industries Association (MIA), said the decision to provide 6 per cent subsidy on loan is welcome and is one of the State government’s budget proposals that is being implemented. “This issue was taken up during the pre-budget consultations and the MIA pursued it with the government and ensured that subsidy akin to 4 per cent subsidy being provided to SC/ST entrepreneurs’’, he said. However, the MIA wants the capital investment limit be extended to Rs.5 crore to enable more number of entrepreneurs to avail the benefits of the scheme.
Suresh Kumar Jain, general secretary of the MIA, told The Hindu that the investment limit as stipulated under the Micro, Small and Medium Enterprises Development Act (MSMED Act) was Rs. 5 crore. But the State government has limited this interest subsidy facility for projects or investments up to Rs.1 crore only. “We want this limit to be enhanced to Rs. 5 crore as per the MSMED Act”, he added.
Apart from limiting the investment limit to Rs. 1crore, the government has offered subsidy on interest instead of lowering the interest rate. Hence the MIA has urged the SSI Minister Satish Jarkhiholi to not only enhance the investment limit to Rs. 5 crore but fix interest rate at 6 per cent instead of offering subsidy on interest.
Given the current purchasing power of rupee, it is impossible for most entrepreneurs to limit their investment to below Rs. 1 crore, according to Mr. Jain who pointed out that the cost of land allotted by KIADB was almost equivalent to the prevailing market rate.
“An acre of land in KIADB areas costs Rs. 70 lakh and an entrepreneur will have to invest nearly Rs. 20 lakh for quarter of an acre. Besides land cost, the building cost will be around Rs. 50 lakh, including cost of power and water supply, and that leaves nothing in balance for acquiring machinery”, said Mr. Jain.
Though the scheme has been rolled out to help SSI entrepreneurs it will not acquire traction if the investment limit is restricted to Rs. 1 crore, according to MIA. There are nearly 20,000 MSMEs registered in the district besides about the same number of unregistered units. Though MSMEs and SSIs generate employment, almost 40 per cent to 50 per cent of them are on the brink of closure and a low interest rate coupled with higher investment norms is expected to give them a new lease of life.
Though MSMEs and SSIs generate employment, almost 40 per cent to 50 per cent of them are on the brink of closure and a low interest rate coupled with higher investment norms is expected to give them a new lease of life
