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CII advocates SME exchange proposal

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CIOL Bureau
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DELHI, INDIA: The Confederation of Indian Industry (CII), today announced that at a meeting of the representatives of industry associations with Dr Manmohan Singh, Hon’ble Prime Minister of India, in New Delhi, CII made few recommendations for the SME sector in India.

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It highlighted the need for providing procurement incentives, enhanced depreciation on IT products, establishment of SME exchange, simplification of labour laws and creation of a uniform credit rating format and processes to facilitate credit availability for the MSMEs.

The meeting was held in the presence of  Dinesh Rai, Secretary, Ministry of MSME and Ashok Chawla, Finance Secretary, Ministry of Finance.

Commenting on the significant contribution of MSMEs to the Indian economy, the CII director general, Chandrajit Banerjee said, “2008-09 has been a difficult year for Indian MSMEs. The primary reason being the domestic economic slowdown as a result of the global financial crisis and the other being the subdued export demand.”

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He mentioned that, in spite of the difficult conditions the MSME sector has demonstrated its resilience. The sector has, however, been hugely benefitted from the various measures that have been announced in the last nine months as part of the Government’s stimulus packages.

According to the CII release, there is a need to provide tax benefits to companies to source from MSMEs and adhere to the payment schedule, as per the terms of the contract, agreed upon with their vendors.

This would ensure the growth progression and upgradation of the vendors, in line with the requirements of the vendors and also help to address the issue of payments (delayed), through out the supply chain.

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To improve IT consumption in the SMEs CII has recommended that the Government considers according 100 per cent depreciation, once in a block of three financial years, for an annual investment in IT equipment and software up to a limit of Rupees Twenty Five Lakhs, to the MSMEs.

This will significantly lower the tax burden on high-tech investment, induce large scale corporate buying of computers, which will raise labor productivity, increase economic growth and give a big boost to the MSMEs.

Facilitating the establishment of SME Exchange while ensuring product innovation and without compromising on risk management would reduce credit requirements on one hand, and broad base equity funding on the other, added the CII release.

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Towards this SEBI will have to devise separate standards of disclosure and compliance requirements to minimize the cost of listing and compliance, for facilitating the MSME listings.

In an attempt to facilitate and streamline the availability of credit/finance for the MSMEs, CII has recommended that RBI may constitute a group along with the Indian Banks Association and the credit rating agencies to work out a uniform credit rating format and processes to bring about transparency and speed to the credit appraisal procedure.

At present while certain credit rating companies do undertake this activity, the problem does not get resolved because individual Bankers undertake the credit rating based on their own formats and internal risk assessment processes. 

Salil Singhal, Chairman, CII National MSME Council observed that though it appears that the worst of the crisis period is over, a complete turnaround is not within sight yet for most of the industry. The difficulty is particularly acute for companies and units which have large export dependence.

He added that the CII recommendations for MSMEs regarding the procurement incentives, enhanced depreciation on IT products, establishment of SME exchange, simplification of labour laws and creation of a uniform credit rating format, have been tailor made, keeping in view the nascent stage in the economic recovery and the recent drought conditions in a large number of districts across the country.