KASSIA's Blueprint for Small Industry

Karnataka Small Scale Industries Association (KASSIA) has suggested the following Blueprint for rescuing the ailing small industry in the state:

01. SEPARATE SECRETARIAT FOR SME SECTOR:
An exclusive Secretariat for SME sector should be set up to accelerate the promotion of small industries and also to ensure that the focus on this vital sector is not diffused. 

02. LEVEL PLAYING GROUND IN TAXATION:
The introduction of VAT has led to variation in the taxation levels of the same product in different Southern States. With a view to maintain parity in the tax levied in different States, comprehensive data on product-wise taxation should be collected to streamline the State's taxation policy.

03. TRADE LICENCE AND LOCAL BODIES TAXATION:
KASSIA has made repeated pleas to annul the trade licence fee as it is neither rational nor uniform. It has to be stressed that the SME sector consists of manufacturers, and not traders. The trade licence fee is not related to any purchase or service provided and has only ended up as a tool to harass the small manufacturer. Further it only adds to the revenue of the local bodies, while taking up the time and energy of the harried entrepreneur. 

04.LAND FOR NEW/PRIVATE INDUSTRIAL ESTATES:
The Industrial Policy has referred to the addition of 5000 acres of industrial land every year. Allotment of land for Industrial Estates to be set up by Private agencies like Associations, should be made quicker to encourage availing of Integrated Infrastructure Facility Scheme. 

05.POLICY FOR CAPTIVE POWER GENERATION:
In the context of fluctuations in the quality and availability of power it has become necessary for the small industries to have their own captive power generation. Captive power involves obtaining clearance from the Government, getting consent from the Pollution Control Authorities, apart from provision of inputs at concessional tax, etc. An appropriate policy that addresses all these issues and concerns of the small industry should be declared forthwith. 

06.PROCUREMENT POLICY OF THE STATE:
The Government js the biggest procurement agency at the State level. The Government has to formulate a procurement policy which will be applicable to all departments, autonomous bodies and local bodies up to Panchayat level. The policy will streamline the concept of Government procurement as also enable decentralized supply opportunities.
Every department is having a Purchase Committee to implement its purchase programme. It is suggested that one representative of KASSIA may be inducted as a Member in each departmental Purchase Committee to serve as a spokesmen of the small industries in order to highlight the procurement policy content at the decision making stage and monitor its progress.
The Procurement Policy should explicitly recognize the role of the decentralized small scale sector which is contributing significantly to the share of the State's manufactures, employment and exports. Since the State SSI sector has strong entrepreneurial background and proven credibility of supplies to the Government, a fair share of minimum 30% of the Government's requirement should be reserved for the SSI sector other aspects of quality, cost and delivery being equal. This would ensure purchase preference for SSI. In addition the following ingredients of the Central Policy of Stores Purchase should be incorporated in the policy.
1)Free Supply of Tender documents
2)Waiver of earnest money deposit
3) Price preference upto 15% over large scale units and outside the State quotations.
4) Eligibility criteria based on turnover of previous year should be relaxed for SSI. The turnover limit should be brought down to Rs. 50 lakhs.
5) Basic price excluding the state tax should be considered while finalizing tenders since the tax in Karnataka is high compared to 4% CST.
This coupled with the Transparency Act in force will strengthen the Government Procurement Programme.

07.RAW MATERIAL PROBLEMS:
In the recent past the small industries are experiencing a steeper increase in basic raw materials and also shortage of supply. The formation of cartels by a few raw materials manufacturers/dealers in the country is also among the causes for the raw material scarcity as well as price increase. 
In order to overcome such a difficulty in future, it is suggested that a prescribed percentage of raw material production in major industries be earmarked for the MSMED sector to be distributed through the state level small industries corporations. 
Further the State-level Corporations should be given necessary clearance and support to import raw materials in bulk whenever required and also to build up buffer stocks to prevent wider fluctuation in price.

08.STRENGTHENING OF SINGLE WINDOW AGENCY;
In order to ensure dispersal of industries and solving problems, the Single Window Agency should be strengthened with greater delegation of powers and decision making.

09.IMPROVEMENT OF INFRASTRUCTURE:
The 400-odd clusters that are in Karnataka urgently need connectivity with urban areas, port areas and railway stations. A phased programme for 5 years may be drawn up immediately for improvement of this connectivity.

10.STAMP DUTY:
The stamp duty concession was introduced in the State Industrial Policy with a view to treat small industry on a separate footing and to provide a separate concession to entrepreneurship. In tune with this spirit the rate of stamp duty for units in Zone 3 should be reduced to 5% for small scale industries in their dealings with the Government Departments and Government Agencies. Further the registration value should be at the original purchase price only as in the case of BDA allotted plot.
The concession of Stamp Duty should lay stress on sale deed of land/ building by Government Agencies.
The recently introduced stamp duty for bank loan documentation is a severe blow to the small industries who have to execute loan documents every year. The absence of ceiling makes them liable to pay heavy duty year after year unlike in any of the neighbouring states.

11. EXIT POLICY FOR SSIs:
An Exit Policy for ageing SSIs, those hampered by succession problems, units seeking retirement or sick, is long overdue. 

12.MARKETING INFRASTRUCTURE FOR SSIs:
Funds should be earmarked exclusively for developing marketing infrastructure so that rural industrial production can be promoted in urban centers and urban industry products can be promoted in rural areas to lessen the marketing burden on the part of the small industries.

13.THRUST    FOR    RURAL    DEVELOPMENT    THROUGH    SMALL    SCALE INDUSTRIES:
A few years back in Kerala, the Village Panchayats were made as nodal points for development of micro and small industries in their vicinity. A similar exercise should be undertaken in Karnataka so that at least a few localized industries will emerge in each Panchayat area. To begin with this may be experimented in about 100 Panchayats in Karnataka. KASSIA volunteers to take the lead role in this regard. 

INDUSTRIAL POTENTIAL SURVEY OF NORTH KARNATAKA REGION:
A comprehensive industrial potential survey of entire North Karnataka Region should be conducted by a professional body to develop a blueprint for industrialisation, particularly in the field of Non-Engineering, Chemicals, Horticulture/Floriculture products.