Call for new bill on SMEs development

Special Correspondent

CHENNAI: The Small and Medium Enterprises Development Bill 2005 should be rejected in toto by the small industry sector and replaced with a new bill framed after wide consultations with the stakeholders, according to Yerram Raju, consultant and former Dean of Studies of the Administrative Staff College of India (ASCI), Hyderabad.

Describing the SME bill as the "worst piece of legislation that independent India has seen", Dr Raju, who had headed a committee that had some years ago provided the first draft of an SME legislation, said vagueness in many crucial provisions, including the definition of small and medium enterprises and SSI/SME associations and creation and use of a special fund, predominant place for rules rather than the law and provisions for continuing the stranglehold of the bureaucracy were among the weaknesses of the bill.

The section relating to provision of credit "makes no sense" and offered no solution to the problem of financing SMEs, while the delivery mechanism and institutional networks for services to the SME sector had not been paid attention to, he said.

Dr Raju, who delivered a lecture under the auspices of the TANSTIA-FNF Service Centre here on Saturday, pointed out how laws for promotion of the small and medium sectors in many countries, like the US, the Philippines, Malaysia, South Korea, Taiwan, Singapore and Hong Kong provided for specific operational mechanisms that ensured the delivery of services and support to small enterprises to boost their competitiveness and overcome constraints. In China, mandatorily created separate credit departments for SMEs in state-owned banks, lower VAT (value added tax rate), forging of strategic alliances across regions and facilitation of overseas investments had been provided for.

He suggested restructuring of delivery instruments like the District Industries Centres (DICs) and commissionerates, provision of marketing support through brand equity initiatives and R&D institutions and facilitation of the availability of business development services (BDS) like NGOs and consultancies in rural areas as part of the strategy for SME development vital for the national economy.

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