FDI limit for SSIs to stay at 24 pc

NEW DELHI, AUG 24: Giving in to the demands made by Small Scale Industries Associations, the Centre has decided to maintain the Foreign Di...

NEW DELHI, AUG 24: Giving in to the demands made by Small Scale Industries Associations, the Centre has decided to maintain the Foreign Direct Investment limit for SSI at 24 per cent and retain export obligation for large scale units producing items reserved for SSI at 50 per cent.

The Centre has decided not to increase the FDI limit from 24 per cent to 49 per cent as recommended by the study group for SSI headed by Dr S P Gupta, official sources said here.

The high-powered Group of Ministers under Home Minister L K Advani had been considering a proposal seeking enhancement of the FDI limit to 49 per cent in order to induct better technology in the SSI sector, they said.

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Sources said the proposal seeking to reduce export obligation for large scale units producing items reserved for the SSI sector has also been rejected.

The study group had recommended reduction in the export obligation from 50 per cent to 30 per cent, sources said adding that in the post-WTO environment the large scale units would be required to export more in order to face competition and so there was no question of reducing the export limit.

Sources said the SSI ministry had also approached the Banking Department to finalise a fresh rehabilitation package for the sick SSI units.

The number of sick SSI units is currently estimated at around three lakh numbers of which only around 18,692 units are viable, sources said.

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Rehabilitation of the sick units is a costly proposition as it involves rescheduling of past overdues with concessions on interest amount due, additional credit for modernisation and technology upgradation and provision for fresh working capital, they said.

Sources said at present the state level inter institutional committees (SLIICs) are the only mechanism for rehabilitation of the potentially viable sick SSI units, but in the absence of statutory backing, they have no power to enforce their decisions.

The SSI ministry has recommended that SLIICs should be converted into statutory bodies under a special statute and given adequate statutory and administrative powers to enforce their decisions on banks, financial institutions and other agencies concerned with the rehabilitation of potentially viable sick SSI units, they said.

The proposal is being considered by the finance ministry in conjunction with the banking department and a final decision is expected soon, they added.