Death knell for SSIs!

There has been a great deal of discussion and debate, both in policy and academic circles, on whether the government should jettison its gradualist approach towards reservation of SSI and move towards complete elimination of the reserved list as a crucial measure of industry policy reform.
The issue assumed significance in the context of liberalisation and opening up of product lines under OGL, wherein the opportunity cost of continuing with the SSI reservation is very high, especially as small units are unable to respond to the rapidity of technological changes due to limitations on investment and capacity prescribed in the policy. Despite this, the long-standing SSI reservation policy, though now considerably diluted, continued to retain certain critical items in the preferred list. Is there a rationale to continue with the present phased approach towards de-reservation?
Preliminary investigations indicate that since the beginning of the new millennium and especially in the aftermath of the lifting of quantitative restrictions on imports of reserved items in 2001, the government had been steadily ticking off products from the reserved list. Latest data showed the list of items meant for exclusive production by SSI has come down from 836 items in 2001 to 114 and just 20 — indicating that almost 99.9% of items from the reserved category can now be domestically manufactured by the large, medium or the small industry.
Complete de-reservation may neither be feasible nor desirable as reservation may still be meaningful for items such as agarbattis produced in the cottage industry. Hence, it would be beneficial to ascertain and evaluate the worth of each item and assess its likely impact before going in for de-reservation. And this should be completed within a certain time frame. This would help small-scale capital, labour and entrepreneurship to rearrange, amalgamate and build economies of scale as also develop the requisite strength to compete.
The process of de-reservation should be accompanied by provision of requisite infrastructure and institutional support which will help SSIs to effect vertical integration with larger units. Its problems of technology, skills, marketing and finance deserve special consideration.
An Advisory Committee constituted under Section 29B(2C) of the Industries (Development & Regulation) Act, 1951 on de-reservation periodically evaluates products /items reserved for exclusive production by Micro and Small Enterprises. India has opened up its economy since 1991 through a forward looking Policy which led to de-licensing of items. Over the years list of items reserved for manufacture by MSE Sector has been reduced from over 800 to 20.
The Advisory Committee in its meeting, held on 20.10.2014, noted that with the import liberalization, all remaining items are allowed for imports. Thus, there is no prima facie justification for continuation of reservation of manufacturing in the MSE Sector since such reservation may inhibit the possibilities based on technologies, economy of scale, etc. vis-à-vis the imported items.
On the recommendation of Advisory Committee, Government of India vide Notification S.O. 998 (E) dated 10.04.2015 have decided to deserve remaining 20 (Twenty) items presently reserved for exclusive manufacture by MSE Sector. Accordingly following items are de-reserved:-
(i)Pickles and Chutneys, (ii) Bread, (iii) Mustard Oil (except solvent extracted), (iv) Ground Nut Oil (except solvent extracted), (v) Wooden furniture and Fixtures, (vi) Exercise Books and Registers, (vii) Wax Candles, (viii) Laundry Soap, (ix) Safety Matches, (x) Fire works, (xi) Agarbatties, (xii) Glass Bangles, (xiii) Steel Almirah, (xiv) Rolling shutters, (xv) Steel chairs – all types, (xvi) Steel tables – all other types, (xvii) Steel Furniture – all other types, (xviii) Padlocks, (xix) Stainless steel utensils, (xx) Domestic utensils – Aluminium.
“The above policy initiatives have been taken to encourage greater investment, including the existing MSME units, to incorporate better Technologies, Standard and Branch Building to enhance Competition in Indian and Global markets for these products” the notification added.
The officials maintained that for long the practice had been for larger industrial units procuring materials illegally from SSI units and selling them in their brand names. They also contended that the concept reservation for SSIs itself was left over of license raj and hence they had to be removed.
This order of the Centre is a death knell for small and micro industries which could not compete with large industries and perish. Already they were reeling under extremely difficult conditions of power cut and raw material non-availability and exorbitant cost.
After all, SSIs offers huge employment and export potential, which could be ignored only at our own peril. The BJP government which advanced ‘Make in India’ slogan is now pushing local small and micro industries to the laps of multinational corporations! Is this their Swadeshi?

 (26-04-15)