PD Sharma seeks separate definite share of MSME in bank credit

Ludhiana, August 29, 2013: In order to increase exports from MSME sector government of India had set up an inter-ministerial committee headed by R.S. Gujral finance secretary. The then Chief economic advisor Ragu Ram Rajan, Commerce Secretary R.S.Rao, Revenue Secretary Sumit Boss, MSME secretary Madav Lal & Rajeev Takru secretary financial services were the members of this Committee.

The committee has submitted its report to the government Apex Chamber of Commerce & Industry (Punjab) was also invited for giving suggestion. It is heartening to note that Apex Chamber gave some unusual suggestion to help exports from MSME. P.D. Sharma, president of the Chamber had undersigned the importance of MSME sector for boosting the exports. For this purpose two basic things were emphasised.

This sector must get credit at competitive rates. Banks charge the highest rate from this sector by adding risk weightage- Sharma pleaded with the committee that interest rate from MSME should be drastically reduced. The committee has expected this factor and recommended that cost of credit should be internationality competitive. Committee has also recommended that collateral requirement should not be insisted on because this sector has limited access to equity capital. Sharma had belated with the committee that defence offset scheme should be encouraged for MSME sectors. This has been accepted by the committee.

Due to global economic recession exports in some products is decreasing. In the year 2012-2013 Gems & jewelry exports decreased by 3.5%, in electronic by 9.27%, readymade garments 5.7% & Engineering goods by 3.1%. So defence off- set scheme will boost exports.

The committee has recommended additional interest subvention of 2% for exporters.  Who repay on a timely basis committee has also recommended automatic increase in foreign currencies limits due to the depreciation of rupees.

Committee has strongly recommended that export credit must comprise at least 40% of overall bank credit to MSME sector. Banks must increase the number of their MSME Borrower by 10% annually up till year 2007.

Committee has also recommended some concessions in labour laws. Which includes facility of more over time hours & employment of women in night shift with necessary safety measures?

The committee has recommended setting up around the clock facilities for export consignment at major air cargo & sea port complexes. . Committee has also recommended enhancement in the assistance to states for development of export infrastructure. It includes development of MSME clusters near highways & rail corridors.

Committee has recommended separate E.C.G.C policy for MSME to reduce cost. It has recommended removing the service tax on conversion of export proceeds remittances. These will reduce traction cost in exports.

Committee has recommended a cess of 0.1% on the production of chemicals & plastics to create technological upgradation of fund for these two sectors.

Committee has recommended some tax related incentives to boost exports.

P.D. Sharma has written to finance secretary that at present there is no definite percentage of bank credit to MSME sector within the priority sectors of 40% bank credit there are several components including agriculture, poverty related credit housing loan & Auto loan. Agriculture gets 18% share & share of MSME is not defined. In the absence of this the recommendation of the committee will look hallow so for as bank credit is concerned.

Sharma has emphasised that there should be a separate definite share of MSME in the bank credit & it should be around 20%.