Union Budget 2018: Industrial sector in Gujarat gets bitter pill

MSMEs in Gujarat had asked the Central Government to reduce the rate of interest on loans provided to smaller industrialists. They had wanted the definition of MSMEs to be alerted to incorporate inflation.

Written by Avinash Nair | Ahmedabad | Updated: February 2, 2018 4:26:22 am
Union Budget 2018: Industrial sector in Gujarat gets bitter pill Members of the Federation of Gujarat Industries watch the Union Budget—-being presented in Parliament—in Vadodara on Thursday. (Bhupendra Rana)

Despite the Union Budget not meeting most demands of the Micro, Small and Medium Enterprises (MSME) sector in Gujarat, smaller entrepreneurs felt that the industry had to “cooperate” with the NDA government that had made larger allocations to health, education, agriculture and infrastructure sectors in the “national interest”.

Though, in his speech, Finance Minister Arun Jaitley on Thursday spoke about how the government planned to “announce measures for effectively addressing non-performing assets (NPAs) and stressed accounts of MSMEs” that will enable larger financing of MSMEs and considerably ease cash flow challenges faced by them, the proposals from Gujarat that has one of the highest concentration of small and medium sector players were ignored.

MSMEs in Gujarat had asked the government to reduce the rate of interest on loans provided to smaller industrialists. They had wanted the definition of MSMEs to be alerted to incorporate inflation. “Nothing much has happened on our demand for a reduction in the rate of interest on loans provided to MSMEs. The larger corporates get loans at about seven per cent, but when MSMEs go for loans they have to pay an interest for 11-12 per cent. MSMEs can only compete if the rate of interest is lower,” said Shailesh Patwari, president of Gujarat Chamber of Commerce and Industry (GCCI), that has a sizable representation of entrepreneurs from the MSME sector.

“For helping exports, we had sought a duty drawback because we have to compete against countries like China, Bangladesh and Sri Lanka. This is important to sustain in the wake of the competition from the international market. Nothing has happened here as well because the maximum concentration of this year’s budget was on health, education, agriculture and infrastructure sectors. The industry has been ignored this time. However, we will be cooperating with the government on this budget, the provisions made have been done in the national interest,” Patwari added.

MSMEs from Gujarat had also proposed a change in the definition of MSMEs. “We had also sought for a change in the definition of MSME which was altered way back in 2006. As per the current definition, an enterprise where investment in plant and machinery does not exceed Rs 25 lakh is defined as a micro unit. We had sought the definition to be changed to include costs up to Rs 50 lakh. Similarly, we wanted investments of up to Rs 10 crore (from the current Rs 5 crore) to be redefined as small units and investments up to Rs 50 crore be included as medium enterprises (from the existing Rs 10 crore). This definition has remained unchanged, despite the rise in inflation and costs. For instance, the machinery that used to cost Rs 5 lakh in 2006, currently costs Rs 35 lakh. The prices of steel and metal have also increased,” Jaimin Vasa, senior vice-president of GCCI and owner of Vasa Pharmachem Pvt Ltd, said after the Budget was presented.

“This would have helped more industrial units to take advantage of the provisions made for MSMEs,” Vasa added. The entrepreneurs welcomed Rs 3,794 crore being allocated to MSME sector for credit support, capital and interest subsidy on innovation. They also said the government’s move to extend the relief in corporate tax to companies having a turnover of Rs 250 crore will lower the tax burden and improve cash flow.

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