DARE - Because Entrepreneurs Do

Representing eight per cent of the nation’s ballooning GDP, the micro, small and medium enterprises (MSME) sector forms an important chapter in the “Great Indian Growth Story,” a compelling page-turner that’s selling fast around the world. The sector, therefore, hogs a great deal of attention. There are multiple schemes and programmes fashioned by various organizations to optimize its efficiency and to give it a global outlook.

In the north-eastern region (NER), in particular, such schemes are not only bringing about social and economic development, they are also encouraging creativity and innovation on a large scale. Prime Minister Dr Manmohan Singh’s Look East policy placed special emphasis on speedy development in the north-eastern states of Assam, Meghalaya, Mizoram, Manipur, Nagaland, Tripura, Arunachal Pradesh and Sikkim. Dr Singh is himself a Rajya Sabha member from Assam and has always taken keen interest in the economic and social development of the region.

In February 2010, an MSME meet with a special focus on NER was organised in Guwahati by the Chamber of Small Industry Associations (COSIA), with support from the central Ministry of Micro, Small and Medium Enterprises and in association with North Eastern Small Scale Industries Association (NESSIA). The purpose of the meet was to discuss how various government policy provisions, including those of the Look East policy, could be dovetailed into an effective strategy to make enterprises in NER globally competitive.

At the Guwahati meet, President of COSIA M.R. Khambete put forth the idea of forming a COSIA taskforce to assist the MSME community in the region. The handicaps the community faces are unavailability of finance and infrastructural facilities. A more worrying problem is that some 85 per cent of the units in the region are not registered, which makes it difficult to frame and implement schemes for them. All these issues were discussed at the meet.

A specific taskforce was set up in September 2009, under the chairmanship of the principal secretary to the Prime Minister to address the issues of the MSME sector such as lack of credit, high cost of credit, procurement of raw materials, inadequate infrastructure and lack of technology. The taskforce has created a subsidiary group to look into the development of MSMEs in the Northeast in particular. The issues the sub-group is taking up on an immediate basis are: getting the government to make available the components of the stimulus package specific to MSMEs by another year as of 31 March 2010; getting all scheduled commercial banks to achieve a 20 per cent year-on-year growth in credit to micro and small enterprises to ensure enhanced credit flow; and, utilising the Small Industries Development Bank of India’s (SIDBI) Special Fund for Micro Enterprises for loans to micro enterprises.

“Institutions established by the government are helping the MSMEs,” says Ravi Capoor, Commissioner & Secretary, Industries and Commerce, Assam. Capoor reveals that they are in the process of announcing a price preference policy under the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006. He says small and medium enterprises will get 10 per cent and 5 per cent protection, respectively. And if a micro enterprise expands its business and becomes big, it will receive 15 per cent price protection.

“The Northeast received its main thrust after 1997 with the North-east Industrial Policy (NEIP), through which we got sale taxes exemptions, central or excise exemptions, and many other such incentives,” says Santosh Jaiswal, an entrepreneur in the steel sector.

The Federation of Industries and Commerce of North East Region (FINER), an apex industry association for trade, commerce and industry, played a huge role in shaping the Northeast Industrial Policy (NEIP) 1997. FINER Chairman R S Joshi says, “The government of India looked into the concerns raised by us and a new policy — the Northeast Industrial and Investment Promotion Policy (NEIPP) — was announced because we had been constantly pressing the Central government. Earlier, we had NEIP 1997. Now we have the NEIIPP 2007, which has been extended for a period of ten years.”

The NEIIPP 2007 offered various benefits to the MSME sector. Some of these are:

• All units that would go into expansion/commercial production within the ten year period from the date of notification of the policy were eligible for incentives for a period of ten years.
• The distinction between 'thrust' and 'non-thrust' industries made in the NEIP 1997 was
• discontinued.
• 100 per cent income tax exemption was to be provided
• Capital investment subsidy was enhanced from 15 per cent of the investment in plant and machinery to 30 per cent.
• Sikkim was included under the policy.

Abhijit Barooah, former Chairman of Confederation of Indian Industry (CII), which plays a big role in bringing about MSME development in the region, says, “The NEIIPP offers very good incentives for entrepreneurs to set up industries.” As a result, the sector has seen a good number of investments in the last two years. The NEIIPP 2007 has made it attractive for entrepreneurs to set up manufacturing industries to cater to the local market.

Another entrepreneur, Bidhan Deb, who has set up a printing and binding business in Guwahati, says government policies have become more transparent and this has helped industries from other parts of the country to divert their attention to the Northeast. “Business organizations have established their businesses here which need to print stationery. That way, we are able to procure our raw material from source,” he explains. Till ten years ago, the market for multicolour printing was small, so the process of acquiring raw material was an expensive affair.

In all this euphoria, B L Agrawala , President, All Assam Small Industries Associations (AASIA) strikes a note of discord: “The NEIIPP is not relevant to the Northeast. Micro units should not have been clubbed with small and medium enterprises in the MSMED Act,” he asserts. In his view, it is necessary for governments to craft policies customized for the very unique needs of micro outfits, starting with simplified procedures. AASIA is a non-governmental organization, which aims to create clusters in the Northeast and involve the government both for providing financial support and region specific technology.

Referring to the NEIIPP 2007, FINER Chairman Joshi adds, “See, in the case of the Northeast, people are always apprehensive about whether they will receive the committed benefits of a ten-year policy all through the ten years.”
Mr Barooah says, “Right now, I think the policies are okay and we have whatever support is required. Of course, there is always scope for improvement on the implementation front.”

Implementation remains the Achilles Heel in the region—the main reason why the benefits of the Look East policy are not percolating through. Special attention still needs to be paid to getting transport subsidies, tax exemption and financial assistance to micro and small enterprises in a simple and transparent manner. The MSME associations of the area need to be made aware of the implementation process and periodic meetings ought to be held with these associations to ensure proper delivery of concessions and incentives.

An Act of Enterprise
The MSMED Act, 2006, helped to bring about a clear distinction between an ‘industry’ and an ‘enterprise’. Before this Act was passed, an entrepreneur had to go through the Small Scale Industry Registration process for his enterprise. But now, all he has to do is file an Entrepreneur Memorandum and get an acknowledgment.