Steps to Revive Sick Industries in Andhra Pradesh _ APPSC G1 Mains _ paper 3_ section3_ Unit 1

1.Introduction Andhra Pradesh has embarked upon a Mission, which is, to be at the forefront of industrial development in the country by the year 2020. The Government is conscious that fulfillin this Mission needs not only ideas and dreams but also a lot of hard, realistic plannin uided by well spelt out policy directions. !n "##$, the Government enunciated its !ndustrial Policy %Tar et 2000% which set the tone for adoptin a new approach to industrial development in the liberali&ed economy. 'ne of the ob(ectives of this )ew !ndustrial Policy has been to promote the rowth of small scale and cotta e industries to help the small entrepreneurs. The *tate today has nearly 2,+0,000 *mall and Tiny industries established in the *tate. The contribution of the *mall *cale *ector to the *tate%s economy cannot be overestimated. ,mployin a work force of over 22 lakh, the sector contributes about -s../00 0r to the )*1P and accounts for rou hly +$2.03 of the *tate%s e4port. The potential of the sector to utilise locally available resources, skills and entrepreneurial ability is of enormous importance for a *tate faced with the dauntin task of removin re ional imbalances throu h dispersal of economic activity and of providin employment opportunities. Added to this, the low operational costs and fle4ibility of adoptin production processes suited to differin re5uirements, make the sector well suited to the capabilities of small entrepreneurs.

The sector has, however, been beset with several difficulties. 6hile infrastructural and resource centered bottlenecks are common with lar e and medium industries, the **! sector today faces certain peculiar problems which are innate to it vi&. lack of access to credit, marketin problems, complyin with cumbersome procedures, harassment by inspectin Governmental functionaries, technolo ical obsolescence, ri id labour laws impedin operational fle4ibility etc. These uni5ue problems re5uire special solutions. They therefore call for adoption of specific and well thou ht out strate ies to meet the needs of the *mall *cale *ector. 7urther, amidst the eneral euphoria created by the liberali&ation policies of Government of !ndia initiated in "##", there lurks amon st the small entrepreneurs considerable fear that the decontrol of industry, increased competition, market2 oriented reforms and lobali&ation of the economy are likely to adversely affect the small scale sector in the country. !n order to develop the small scale sector, Government feels that it is imperative to spell out a specific policy framework which would set the tone and direction of the Governmental effort to help this sector achieve its full potential. !n order to make the policy more realistic, Government have one throu h an elaborate process of consultations with **! Associations, officials of related Government 1epartments and individual entrepreneurs.

2. O !ectives o" the S.S.I. Po#ic$ The Policy for *mall ,nterprises aims to create a con enial atmosphere conducive to the healthy rowth of the *mall *cale *ector in the *tate. The broad policy ob(ectives are enumerated below8

To achieve an annual rowth rate of "$3. To assist the small scale industries in the *tate to become competitive, domestically as well as internationally. To increase employment eneration 2 particularly by promotin the labour intensive se ments. To improve the e4port performance of the **! sector by providin ade5uate support services. To create a more con enial and hassle2free environment for the functionin of the **! sector. To help the **! sector ac5uire new technolo ies and skills so as to compete effectively in the market place. To promote appropriate linka es between the lar e and small scale sectors in the interest of harmonious industrial development To strive to promote an appropriate institutional mechanism to revive sick industries

To encoura e **! units to row vertically and raduate, in the course of time, from small scale to medium and lar e scale units.

3. Strate%$ "or achievin% the po#ic$ o !ectives

6ork towards phased de2reservation of items reserved for e4clusive manufacture in *mall *cale *ector. -ecommend revision of investment limits for *mall *cale, Ancillary and Tiny !ndustries. -ationali&e fiscal concessions. *trive to put in place appropriate arran ement for timely and ade5uate flow of credit. Assist the *mall *cale *ector in their marketin efforts by providin support services. Provide ade5uate, ood 5uality infrastructure support at a reasonable cost for more efficient functionin of the **! sector. Provide technical support for moderni&ation and access to -91 facilities.

Give a thrust to :uman -esource 1evelopment by settin up new technical trainin institutions and by associatin small scale entrepreneurs in the Advisory ;oards of these institutions. *implify -ules, -e ulations and Procedures to remove the fetters on the smooth functionin of the sector. ;rin about revision in <abour <aws. !mprove the 5uality of services to entrepreneurs belon in to *0 = *T cate ories and women to encoura e them to participate effectively in the developmental process. Put in place appropriate or ani&ational mechanism for reater interaction between the Government a encies and the **! Associations. 1ia nose incipient sickness and initiate timely measures for the revival of sick industries. !ntroduce a scientific data collection system to make the plannin process more realistic.

&. Revision o" the de"initions o" SSI' Anci##ar$ and (in$ Industries The Government of !ndia has recently revised the limits of investment for the **! sector from -s. >0 lakh to -s. +00 lakh. 6hile it is (ustified to ar ue that the investment level needs to be revised periodically, say every $ years, keepin in view the inflation rates, the ar ument that the levels need to be enhanced to encoura e **! units to o in for moderni&ation is not (ustified . The introduction of new technolo ies is an aspect of rowth and the small scale units must be encoura ed to row and be ready to face the competition of lar e and medium entrepreneurs rather than to seek protection indefinitely and en a e in unfair competition with the smaller of the **! units. The *tate Government will therefore recommend to Government of !ndia to revise the investment level to -s."00 lakhs for small scale industry, to -s."2$ lakhs for ancillaries and e4port2oriented units and to -s."0 lakhs for tiny units.

). Reservation o" ite*s "or the e+c#usive *anu"acture in the s*a## sca#e sector 'ut of the /2" items reserved for the **! *ector, appro4imately +03 are not produced in the **! sector at all. 6hile the domestic lar e industry is not allowed to manufacture these items, many of the items can be freely imported. The instrument to implement the policy of reservation was to free&e the capacity of the e4istin lar e and medium units manufacturin the reserved items and to deny new licences to lar e and medium units for the manufacture of these items. :owever, with the decontrol of a lar e number of industries, the instrument of licencin is no lon er available to Government to implement the policy of reservation. Moreover, the policy of reservation of items for e4clusive production by the *mall *cale *ector is not in line with the philosophy behind the decontrol of industry. The policy of reservation has encoura ed the lar er of the small scale units to row hori&ontally rather than vertically merely to stay within the

definition of small scale, thus sacrificin the efficiency that could have arisen from economies of scale for the sake of the concessions offered by Government. Moreover, in a market2oriented economy it would be in the interest of industrial efficiency to let the market decide what should be the appropriate scale of production for a particular item. This is likely to vary from one part of the country to another dependin on markets, raw materials and mana erial skills. !n the li ht of the above the *tate Government will recommend to the ?nion Government for adoption of a rational policy of de2reservation as follows8 i. !tems which are not produced at present in the small scale sector at all or which cannot be produced in the small scale sector in the future because of the compulsions of moderni&ation and which entails substantial investments beyond the limits prescribed for **! *ector, could be de2reserved immediately. :owever, the **! Associations must be consulted before any item is de2reserved. Those items, which can be produced either by lar e= medium or by *mall *cale !ndustries, could be de2reserved in a phased manner. !n the transition period assistance should be iven to the **! units for up radin technolo y, e4pandin production, trainin staff and improvin mana erial efficiencies so that they are in a position to face the competition after dereservation. Manufacture of traditional items usin low technolo y and those activities which provide employment to weaker sections should continue to be reserved for the **! sector.

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,. -isca# concessions Government of !ndia has been ivin e4cise duty e4emption to small scale industries with turnover upto -s.$0 lakhs and concessional rate of ta4 for turnover upto -s " crores. The *tate Government has also introduced, in the year "##$, a liberal scheme of fiscal concessions to all new industries, which includes @ years of sales ta4 e4emption or ". years of sales ta4 deferment limited to "+$3 of fi4ed capital investment and an investment subsidy of 203 of the fi4ed capital investment limited to a ceilin of -s.20 lakhs. A power rebate of 2$3 is also iven for a period of + years restricted to a limit of -s.+0 lakh in respect of small scale industries. !t is observed that there is a certain amount of mis2use of the scheme by industries thou h it is difficult to 5uantity it. !nstances have been reported where the entrepreneurs have closed down the e4istin units at the end of the concession period and have set2up new units in order to draw the benefits once a ain. The **! Associations have pointed out that many small scale units are not ettin much benefit out of this scheme since a lar e ma(ority of the small scale units are in the service activity and are thus not covered by the scheme. 7urther, ta4 concessions create a discriminatory situation for the older units which have to pay hi her levels of ta4es and are thus forced out of competition, especially when the incidence of ta4 is hi h.

The policy has fostered a spirit of unhealthy competition amon st the *tate Governments in e4tendin ta4 concessions, whether (ustified or not, to attract industries to their *tate. *uch a policy leads to allocative inefficiency in respect of investible resources. !n view of the above, the Government proposes to review the sales ta4 rates in the *tate to brin about rationali&ation and harmoni&ation keepin in view the ta4 rates in the nei hbourin *tates. This will improve the competitiveness of the industries located in the *tate and at the same time ensure better ta4 collection throu h hi her compliance. AAT will be introduced in a phased manner and the ta4 collection system simplified. A dialo ue will be initiated with the nei hbourin *tates to adopt a uniform policy as re ards fiscal incentives so that, henceforth, investments are made on the basis of economic rather than fiscal considerations and the unhealthy competition amon st *tates to attract industries throu h fiscal incentives is curbed. The Government will adopt a strate y to provide non2fiscal rather than fiscal incentives to new industries, particularly by way of improved infrastructure in industrial estates at reasonable cost. Towards this oal, the Government will henceforth release investment subsidies under the e4istin *tate !ncentive *cheme in respect of **! units, which are set up in AP!!0%s industrial estates, directly to AP!!0 towards ad(ustment a ainst the payments due from the **! unit owners for the cost of the developed plots. /03 of the subsidy will be released on the basis of the pro(ect cost to AP!!0 in advance without waitin for the unit to o into commercial production. Priority will be iven for the release of such amounts to AP!!0 out of the bud etary outlay available each year with !ndustries 1epartment. After the unit oes into commercial production, 0ommissioner !ndustries will scrutini&e the incentive proposals as usual and release the balance 203 subsidy to AP!!0. The AP!!0 will transfer the title of the plot to the entrepreneur only after five years from the date the unit oes into commercial production. !n case the unit does not o into commercial production, the AP!!0 will return the subsidy amount to 0ommissioner, !ndustries. This procedure for releasin subsidies will be e4tended to private industrial estates also. .. Credit A ma(or complaint of the **! units has been the lack of access to institutional credit, particularly for workin capital, delays in the sanction of loans and inade5uate 5uantum of credit. The **! Associations state that thou h the Government of !ndia has directed the commercial banks to advance at least .03 of the total credit to the priority sector, which includes lendin to **!s, the commercial banks are fi htin shy of advancin loans to **!s because of the perceived hi her risks in lendin to this class of industry especially in the conte4t of ti hter capital ade5uacy norms for the banks and the pressure to improve their profitability. The 0ommercial banks= *70 often try to hed e their risks by insistin on collateral securities to fully cover the loans even thou h these are not to be taken as per -;! norms for loans upto -s.$0,000. As re ards workin capital, they point out that for some industries, seasonal re5uirements of workin capital vary considerably but the bank norms for assessin such seasonal re5uirements are not fle4ible. Adhoc limits to meet such seasonal re5uirements should be considered.

The *70 is of the view that the 5uantum of security is not unusually hi h and varies from 2$2 @$3 based on the risk perception in respect of different types of ventures. 7urther, the **! Associations have e4pressed dissatisfaction with the interest rates applicable to the **! borrowers which they find to be e4cessively hi h. They are especially a rieved about the *!1;! refinance scheme wherein the banks have been char in a minimum of "/3 for term loans, upfront fees and penal interest of $3 even for a temporary period of default from the **! borrowers. Thou h the prime lendin rate of the banks was reduced by -;!, the banks and *!1;! did not reduce the interest rate char ed to the **! borrowers. The *tate Government supports the followin measures to increase the flow of credit to **!s and to remove some of the present constraints on such flow. The matter will be taken up with Government of !ndia and the -eserve ;ank of !ndia wherever necessary. i. The share of tiny and cotta e industries of the overall advances to **! units by the commercial banks should be increased from the present level of 2.>3 Bas per survey of Canuary, "##/ of -;! in Andhra PradeshD to atleast .03 throu h simplification of procedures, lowerin of interest rates, more fle4ible norms for assessment of their credit re5uirements and repayment schedules, and for advancin composite loans upto -s."0 lakhs.Bcoverin tiny and cotta e industriesD. A 0ollateral -eserve 7und should be created and administered by *!1;! to provide support to first eneration entrepreneurs who do not have collateral securities to offer. 0ollateral for loans should not be insisted for loans upto -s." lakh as a ainst the present limit of -s.$0,000. *!1;! should be iven access to low cost funds so as to lower interest rates on refinance to banks for loanin to tiny and cotta e industries, for infrastructure schemes for **! clusters, and for moderni&ation schemes for **! units. More **! bank2branches should be set up with staff specially trained in and motivated for **! lendin so as to cover every district and more than one branch in those districts where the number of **! units e4ceeds "000. The -;! should set up independent Grievances -edressal Tribunals in each *tate which will hear rievances of the **! entrepreneurs a ainst *70 and commercial banks and issue directions to resolve the problems after ivin a hearin to all the parties concerned. 1ebt -ecovery Tribunals should be set up in each *tate. The small scale entrepreneurs, who have defaulted to a bank, should be iven ade5uate opportunity to e4plain their case before the Tribunals. A credit ratin scheme for **!s should be introduced by banks with special benefits for **! units who have ood track record in repayment of loans by way of lower interest rates, ad hoc credit limits, lower mar ins etc. !n order to ensure the continuous flow of institutional credit to the small industries% sector, effective monitorin will be done of recoveries of loans advanced by commercial

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banks under any welfare scheme or pro ramme such as PM-E and the like which are sponsored by the *tate or 0entral Government, applyin the -evenue -ecovery Act where necessary. 4. The 0redit Guarantee *cheme of 1!0G0 needs to be revised to make it more effective.

/. Support "or *arketin% The AP**!10 was set up in "#>" to assist the **! units in the procurement of controlled items like steel, paraffin wa4 and pi iron and in the marketin of their products mainly to *tate Government departments and undertakin s under the Marketin Assistance *cheme BMA*D and investin capital in new **! units 6ith the decontrol of items such as steel and pi iron the -aw Materials *upply *cheme does not have much relevance. **! Associations can also buy bulk 5uantities of steel, pi iron etc., from the manufacturers and sell to their members. The Government departments have been fre5uently complainin a ainst the 5uality of the products supplied under the Marketin Assistance *cheme and have also ob(ected to the char in of a hi h commission of +3 by AP**!10. The overhead costs of the AP**!10 have been increasin every year and the AP**!10 is forced to increase its service char es for the scheme. Most of the Govt. departments have e4pressed their preference to buy from the open market. !t is also observed that there are defects in the implementation of the scheme such as the formation of syndicates by a few influential manufacturers who have tried to corner a lar e portion of the orders. !t is also found that some of the re istered suppliers are not actual manufacturers but are traders. <astly, the AP**!10 does not have funds to invest in (oint ventures. Most of the (oint ventures promoted by AP**!10 earlier have become sick. The AP*70 is at present the only nodal a ency to promote **! units throu h term loans. !n the li ht of the above, Government will restructure the AP**!10. The Marketin Assistance *cheme will be modified to a rate contract system. The departments will be free to place orders directly on any of the units particularly in the rate contract. The department will pay the amount directly to the supplier unit on delivery of the item, after payin the necessary sales ta4 to the 0ommercial Ta4 1epartment. The implementation of the scheme will be monitored by the Andhra Pradesh *mall *cale !ndustries% 1evelopment Authority. !n order to encoura e ancillari&ation by the lar e private and public manufacturin units, the *tate Government will or ani&e Aendor 1evelopment Pro rammes in the ma(or cities of the *tate. The *tate Government will also brin lar e, medium and small companies to ether on a common platform throu h the F<inka eF pro ramme to identify areas of common interest and to for e linka es throu h sub2contractin and ancillari&ation, so that the advanta es en(oyed by the small units in production such as lower overheads, fle4ibility in production, ability to take small

orders etc. can be combined with the marketin stren ths of the lar e units with their adherence to 5uality standards, capacity to take lar e orders etc. for mutual benefit of both. The *tate Government will also persuade the !ndustry Associations to set up sub2contractin e4chan es. The Government will encoura e development of **!s throu h a cluster approach so as to facilitate implementation of development pro rammes and make marketin of the products of these clusters easier The *tate Government will set2up an !nternational Trade 7air2cum20onvention 0entre in :yderabad, which will or ani&e international e4hibitions, fairs and conferences to assist the local industries to market their products in the international markets. !t will also assist the **! units in participatin in forei n e4hibitions and will or ani&e visits of forei n trade and industry dele ations to Andhra Pradesh and from Andhra Pradesh to other countries. The *tate Government will address the Municipal 0orporations and Municipalities to set up permanent ,4hibition2cum20onvention 0entres in district head5uarters and lar e industrial towns. 6hile the local bodies will invest in the construction of such 0entres, the mana ement of these 0entres will be handed over to Associations of **! units or to professional a encies. 7ees will be collected from the **! units for utili&in the facilities and this revenue will be used for the maintenance and up2keep of these 0entres. 0. 1e#a$ed Pa$*ents Pro #e* The **! units complain of delayed payments by the lar e and medium units and by Government a encies. This problem ets particularly acute when there is a credit s5uee&e. Thou h Government of !ndia has passed le islation to provide for compulsory payment of interest on such delayed payments, the settlement of disputes in cases of default in payment of interest is difficult since the e4istin le al procedures throu h civil courts are cumbersome and e4pensive. The *tate Government in consultation with the :i h 0ourt, will authori&e some of the e4istin special tribunals to take up such cases in areas where there is a concentration of **! units. Thou h it has been made mandatory bylaw for the lar e and medium units to declare the dues to **! units in their audited balance sheets, it is observed that in practice this is not bein done by several lar e and medium companies. A mechanism must be evolved to ensure that this law is enforced. A separate schedule should be included in the audited balance sheets of the lar e and medium companies for declarin the dues to the **! units and the interest accrued thereon under the 1elayed Payment Act. The inclusion of such a schedule in the audited balance sheet may be made mandatory on the auditors throu h the 0ode of Accountin Practices. The banks must be authori&ed by law to automatically deduct the dues to the **! suppliers from the cash credit of the concerned defaultin lar e and medium unit. The Public *ector units and the local bodies must accept bills of e4chan e or must a ree to payment to **! units only throu h banks. 7actor services should be made widely available throu h speciali&ed a encies by removal throu h suitable le islation of le al impediments relatin to stamp duty, re istration fee, assi nment of contracts etc.

12. In"rastructure support

The Andhra Pradesh !ndustrial !nfrastructure 0orporation has been entrusted with the responsibility of settin 2up industrial estates throu hout the *tate, providin basic infrastructure such as sheds, internal roads, power, draina e etc. A common complaint of the **! entrepreneurs is that the cost of developed plots sold by AP!!0 is hi h compared to the cost of similar property and facilities that can be privately ac5uired. Moreover, there is widespread criticism that the infrastructure in the industrial estates is not properly maintained by the AP!!0. The Government will introduce a scheme to be called the F0ritical !nfrastructure ;alancin *chemeF under which funds will be made available to industrial estates or to **! clusters identified under the **! 0luster 1evelopment Pro ramme for the establishment of some critical infrastructure which is considered essential to establish the viability of the infrastructure pro(ect and for the up radation of the infrastructures in the e4istin industrial estates. The policy to provide infrastructure support to **!s throu h industrial estates will be continued and stren thened. Theme Parks such as *oftware Park, Apparel ,4port Park, ;iotech Park, <eather Park etc. will be set up on priority so that speciali&ed infrastructure, technolo y back2up and escort services can be provided more easily. 0aptive mini2power plants and special industrial water supply schemes for the new industrial estates, besides the normal infrastructure such as roads, sanitation, street li htin etc., will be made inte ral parts of the pro(ects wherever found necessary. The Andhra Pradesh !ndustrial !nfrastructure 0orporation will be encoura ed to run on more commercial lines and to reduce its overheads and improve its marketin techni5ues. The Government will also encoura e the settin up of private industrial estates so that there is an element of competition in providin industrial infrastructure services. *pecial facilities such as clearances from the Pollution 0ontrol ;oard, <ocal ;odies, AP*,; etc. will be e4tended to private industrial estates also. As re ards the problem of maintenance of e4istin industrial estates, the AP!!0 will henceforth handover fully developed industrial estates to associations of the entrepreneurs who have set up their units in the industrial estates. Part of the revenues collected from the units will be iven back to these Associations for the maintenance of the infrastructure. An appropriate le al frame work for the handin over of the industrial estates to local industry associations will be worked out. A *tate level or ani&ation to be called the Andhra Pradesh *mall *cale !ndustries 1evelopment Authority will be set up to promote the development of small scale industries in the *tate . 'ne of the important tasks of the Authority will be to coordinate the activities of all the a encies involved in the development of infrastructure for industries. The task of this Authority in the area of infrastructure will be to8 i. ii. iii. ,nsure that all essential facilities are provided in an inte rated manner to the industrial estates. 0heck if the cost of the developed land and services is reasonable. :ear complaints a ainst the various a encies for violatin rules and re ulations or for providin sub2standard services or for char in e4orbitant rates. The Andhra Pradesh

*mall *cale !ndustries% 1evelopment Authority will be chaired by the 0hief *ecretary and will have as members Principal *ecretaries=*ecretaries and :eads of 1epartments and 0hief ,4ecutive 'fficers of overnment or semi2 overnment a encies involved in the development of small scale industries and in providin infrastructure to industry. -epresentatives of Government of !ndia departments and a encies such as -ailways, Postal *ervices, Telecommunications etc. will be invited whenever necessary. -epresentatives of small scale industry will be made members of the Authority. *imilar Authorities to be called 1istrict *mall *cale !ndustries% 1evelopment Authority will be set up at the 1istrict level with the 0ollector as the 0hairman and the General Mana er, 1istrict !ndustries 0entre as the member2convenor. As re ards electricity supply, the AP*,; will supply electricity to such of those **! units which have connected load between @$ :P and "$0 :P under <T industrial cate ory tariff duly providin meterin on "" GA side on condition that the unit sets up a separate transformer at its own cost. The minimum consumption demand will be that which is applicable to <T cate ory only. AP*,; will reduce the service line char es = development char es where the **! unit is willin to fore o tariff rebate under the FTar et 2000F *cheme, put in place a rievance redressal system by holdin meetin s with **! consumers once a week at the field level and allow "$ days additional time beyond the ". days period allowed at present for payment of bills. As re ards industrial water supply, the tariffs for the minimum char es for industries have been revised down2wards in 7ebruary, "##@. !n view of the shorta e of drinkin and industrial water, especially in industrial estates around :yderabad, the :yderabad 6ater and *ewera e ;oard will undertake a survey, in consultation with the industry associations, of the present demand, make a pro(ection of the further rowth of demand and thereafter prepare plans for au mentin the water supply to the industrial estates within a reasonable time frame. To solve day to day problems re ardin water supply in industrial estates, local teams will be formed of local small scale industry associations and :66*; officials. To encoura e e4ports, the *tate Government will stren then infrastructure such as international airports, sea ports, warehouses, cold stora e chains, modern car o handlin facilities and container services. 6hile identifyin the re5uirements of the industry and preparin feasibility reports, the *tate Government will encoura e private investment in this sector to the e4tent possible apart from steppin up its own investments. 11. (echnica# support "or *oderni3ation and access to R41 "aci#ities The *tate Government needs to take an active role in promotin technolo ical development in the small scale sector. The small scale units can aim at lobal competitive ness by ac5uirin !*' #000 certification. The cost of ac5uirin such certification is about -s.2 to + lakhs at present. The Government of !ndia ives @$3 of the cost of ac5uirin the certificate as a subsidy, limited to a ceilin of -s.@$,000 for the first "00 units throu hout the country. The *tate Government has introduced a scheme to subsidi&e an additional 2$3 of such cost, limited to a ceilin of -s.

2$,000 per unit for all those units which are located in Andhra Pradesh. !n order to encoura e the small scale industry to improve productivity levels, annual awards have been instituted by the *tate Government for **! units which achieve hi h levels of productivity, 5uality in products, innovative technolo y and hi h safety standards. The *tate Government will actively promote a close interaction between the -esearch !nstitutes located in Andhra Pradesh such as the !ndian !nstitute of 0hemical Technolo y, 0entre for 0ellular and Molecular ;iolo y, !nstitute of Tool 1esi n etc., with the concerned se ment of the industry by arran in !ndustry2!nstitute !nterface meetin s for promotin transfer of new technolo ies from the laboratories to small industries. The *tate Government has supported the 0!! initiative to set up the Andhra Pradesh Technolo y 1evelopment 0entre which will assist industries, particularly the small scale units, in ettin access to new technolo ies, in ne otiatin a reements of transfer of technolo y, in over comin problems in implementin new technolo ies and in takin up research in specific areas of interest to small scale industry. A Technolo y ,4chan e will be set2up by the Andhra Pradesh Technolo y 1evelopment 0entre to make available information to the small entrepreneurs about the latest technolo ical developments world2wide and about the scope for transfer of technolo y. !ndustry Associations such as 0!!, 7AP00!, 7AP*!A etc. and private consultants and international or ani&ations such as the 6orld Assembly of *mall and Medium ,nterprises B6A*M,D will be associated with the Technolo y ,4chan e. A Technolo y 1evelopment and Moderni&ation 7und has been set up by the *mall !ndustries 1evelopment ;ank of !ndia B*!1;!D in "##$. 6ide publicity will be iven to this scheme to encoura e **!s to avail of the benefit under the scheme. Assistance will be iven to **! units to take up ener y conservation measures, to implement pro(ects for utili&in non2convential ener y and to introduce pollution control measures. 6hile doin so, the *tate Government will be supplementin the efforts bein made already by *!1;!, !1;!, Government of !ndia etc. in this area. **! units will be assisted throu h suitable software packa es to adopt !nformation Technolo y to enhance their competitiveness.

12. 5u*an Resource 1eve#op*ent Government has been investin in man2power development for the small scale industry by settin 2up technical institute such as !T!s, Polytechnics, ,n ineerin 0olle es etc. 6hile this has helped in creatin a pool of technically 5ualified persons, it is found that the 5uality of trainin has not been upto the mark and that the institutes are not able to meet the chan in needs of the industry. The e5uipment used in the trainin institutes is also often obsolete. The **! entrepreneurs point out that ine4perienced technical staff (oin their units to ain e4perience and

after some time they move on to et (obs in lar e industries where salaries and per5uisites are more attractive. The **! units thus suffer from hi h turn over of employees. The *tate Government will step up investments in !T!s, Polytechnics and en ineerin colle es, both in the public and in the private sector to meet the rowin need of the !ndustry for skilled manpower. The *tate Government will try to make these institutes more oriented towards meetin the needs of the industry. Advisory 0ommittees will be set up for these institutes, with representatives of the concerned industry to advise on the course curriculum, e5uipment purchases, on2the2(ob trainin and to provide campus recruitment. *tudents of !T!s and Polytechnics will be imparted practical trainin in local industries. TA=1A will be iven to *0, *T, ;0 and women candidates by the Government. Practicin **! entrepreneurs will be invited to teach or to take some classes in the trainin institutes. <and will be allotted in every industrial estate for trainin institutes for trainin of workers and for up radation of their skills and for trainin of **! entrepreneurs. **! Associations=)G's will be actively associated in this trainin . Government of !ndia will be addressed to amend the Apprenticeship Act to make the apprenticeship trainin concurrent with the formal trainin at the !ndustrial Trainin !nstitute and provide for (oint evaluation of the performance of the candidate both at the !nstitute and in the factory by the :ead of the Trainin !nstitute and of the factory to which he is attached for apprenticeship. This will make the candidate take the apprenticeship trainin seriously and also make the trainin more practical oriented. The vocational trainin methods adopted in Germany will be e4amined and adopted in the *tate if found suitable. Government will take up pro rammes in collaboration with the A.P. Productivity 0ouncil, the )ational Productivity 0ouncil and the **! Associations to improve labour productivity in the *tate. The *tate Government is supportin the initiative of the Association of <ady ,ntrepreneurs of Andhra Pradesh to set up a premier institute for entrepreneurial development in :yderabad, particularly for small entrepreneurs, in collaboration with the ,ntrepreneurship 1evelopment !nstitute of !ndia, Ahmedabad. Technolo y incubators, where hands2on e4perience can be obtained by entrepreneurs in new technolo ies, will be a part of the ,1! pro(ect. The FMentor 0onceptF in entrepreneurial trainin will be adopted under which new **! entrepreneurs will be uided by successful, e4perienced entrepreneurs.

13. Si*p#i"ication o" Govern*ent Procedures A fre5uent complaint heard from small scale entrepreneurs is that they face considerable harassment from Government officials who inspect their units without any prior intimation, thus

disruptin production. There are complaints that durin inspections, frivolous ob(ections are made and petty lapses hi hli hted merely to e4tract ille al ratification. The *tate Government set2up a 'ne Man 0ommission to review all the e4istin industrial laws and advise Government on the simplification, rationali&ation and consolidation of such laws. The Associations of !ndustries in the *tate set up a Coint -eview 0ommittee to review the e4istin rules enacted by the *tate Government. ,4peditious action will be taken to simplify the laws and rules in the li ht of the recommendation of the 'ne Man 0ommission and in the li ht of the recommendations of the Coint -eview 0ommittee, set up by the Associations of !ndustries. The recommendations re ardin the 0entral laws will be communicated to Government of !ndia. A system of accredited a encies will be introduced selectively, in specific technical areas, under which private a encies with credible track record will be authorised to undertake statutory inspections and issue certificates on payment of fi4ed fees. The various annual reports that have to be submitted by industries to the <abour and 7actories 1epartments under different laws have been combined into a sin le 0ommon Annual -eturn. The format of the 0ommon Annual -eturn will be revised to make it more simple, yet comprehensive. The 1istrict !ndustries 0entres will be computeri&ed in the ne4t 2 years so that the data can be accessed by other departments. A similar e4ercise for consolidation of re isters to be maintained under various laws will be made. The 0entral 1ocumentation and 0learance 0entre B0100D operatin in the 0ommissionerate of !ndustries will continue to offer its services to the entrepreneurs to et all necessary Government clearances within a time bound period and to attach an escort officer to every pro(ect to follow up with the Government departments. The *tate Government has issued an order e4emptin small units consumin less than +0:P power and employin less than +0 persons from takin prior clearances from certain Government 1epartments, such as <ocal ;odies, Town and 0ountry Plannin and 7actories 1epartment before the units are set2up. A self2certification system has been introduced which permits the entrepreneur to declare on a stamp paper at the time of re istration with the 1istrict !ndustries 0entre that he has not violated any of the e4istin rules and re ulations relatin to &onin , workers% health and safety etc. The **! Associations will be e4pected to ensure that violations of rules and re ulations do not take place under this liberali&ed procedure by takin up awareness campai ns amon st small scale units of the need for self2re ulation by industry. ?nder !ndian Partnership Act, powers for re istration were iven only to the -e istrar of *tamps and 1uties. !n order to make it easier for entrepreneurs to re ister their firms outside :yderabad, the AP Partnership B-e istration of 7irmsD -ules have been amended to authori&e the 1istrict -e istrars in the 1istricts to also re ister partnership firms. -e istration with 1istrict !ndustries 0entre will be made compulsory for all **! units en a ed in manufacturin activity. 'nly re istered units will et the benefit of Government%s ta4 concessions, subsidies, electricity and water connections, land allotments by AP!!0, credit by banks etc. 0ompulsory re istration by tiny and cotta e industries will be considered at a later

sta e, if found feasible. The procedure for re istration of an **! unit will be simplified. A sin le point re istration and a common re istration number to be adopted by all concerned departments for a unit will be instituted. <icences will be iven on a permanent basis. They will be cancelled for violation of the law, or of any of the terms and conditions of the licence includin non2payment of the fees, after issuin a notice to the licensee. The 0ommon Annual -eturn will be treated as a voluntary declaration, on the part of the entrepreneur, of information statutorily re5uired to be declared by him. The penalty for false declarations, if detected, will be made very stiff so as to act as a deterrent to these entrepreneurs from ivin false information. Government will take measures to eliminate harassment of small scale entrepreneurs due to fre5uent and un2scheduled inspections by Government officials. *tatutory inspections will be carried out henceforth only once in a year as per a schedule of inspections to be fi4ed and announced in advance by the inspectin department. !nspections, other than such annual statutory inspections will be permitted only in the case of written, si ned and verifiable complaints of violation of any rule or re ulation by a unit. *uch inspections will have to be authori&ed by an officer not below the rank of an Assistant 1irector or e5uivalent post of a 1epartment. A copy of the complaint will have to be iven to the mana ement of the unit at the time of the inspection and the observations relatin to the written si ned complaint of the inspectin officer will have to be written in a re ister to be maintained by the unit immediately after the inspection. !f the entrepreneur=mana er does not produce such a re ister or refuses to accept a copy of the inspection report, the inspection report shall be sent by the inspectin officer by re istered post to the entrepreneur. *urprise inspections will be permitted only by an officer not below the rank of an Assistant 1irector or an officer of e5uivalent post with the prior authori&ation of either the :ead of the 1epartment or the -e ional or Honal 'fficer in case there is sufficient reason to believe that the unit has violated any rule or re ulation and the reasons are recorded in writin by such authori&in a encies. !n e4ceptional cases surprise inspections may be carried out by an officer not below the rank of an Assistant 1irector or e5uivalent post without the prior approval of the :ead of the 1epartment or -e ional or Honal 'fficer. :owever in such cases, the inspectin officer shall, within two days of conductin the inspection, send a report to the :ead of the 1epartment or to the -e ional or Honal 'fficer as to the reasons for conductin the inspection, the reason why prior permission could not be taken and the findin s of the inspection. 6ith a view to ensure that the welfare of labour is achieved, in respect of <abour 1epartment, surprise inspections will be conducted by all Ga&etted !nspector%s under 0hild <abour BP and -D Act, "#/> and Minimum 6a es Act "#./ with the written permission of the immediate superior officer. The inspectin officer shall report immediately after conductin the inspection to the immediate superior officer, the findin s of the inspection. The :eads of 1epartment will monitor the conduct of the surprise inspections by the departmental staff and shall ensure that there is no harassment.

A complaint cell will be set up in the office of the 0hief Minister and of Minister B**!D, to receive complaints from office bearers of re istered **! Associations a ainst any overnment official indul in in unwarranted harassment of an **! entrepreneur. At the same time, the need for the industrial units in the *tate to implement effectively the laws relatin to labour welfare and environment protection is underlined . The industry should aim at evolvin a self2re ulatory mechanism to achieve the ob(ectives of these laws.

1&. Revie6 o" 7a our 7a6s The stren th of the small scale units lies in their fle4ibility in production. :owever, the e4istin labour laws restrict such fle4ibility. There is a multiplicity of labour laws enacted by the 0entral and *tate Governments which need to be reviewed and combined into one sin le piece of le islation. The 'ne Man 0ommission has e4amined this issue. The recommendations will be e4amined and action will be taken to simply the laws and, wherever necessary, communicated to Government of !ndia. 1). Assistance to Specia# Cate%ories o" 8ntrepreneurs 9:o*en' ;Cs' SCs and S(s< *pecial fiscal concessions have been offered to *0 and *T entrepreneurs, vide G.'.Ms.)o."0/,!ndustries and 0ommerce B!PD 1epartment,dt.202$2#>,such as, an investment subsidy of 2$3 of the fi4ed capital cost not e4ceedin -s.$0 lakhs, an interest subsidy of >3 on total credit Bi.e. term loan and workin capitalD for a period of $ years upto a ma4imum of -s.$ lakhs per year and an enhanced limit for sales ta4 concession. !n keepin with the eneral policy towards the development of the **! sector, entrepreneurship amon st women, ;0s, *0s and *Ts will be encoura ed throu h the trainin of prospective entrepreneurs in technical and mana erial skills, throu h assistance in preparin pro(ect reports, throu h the settin up of e4clusive industrial estates for them and throu h the provision of escort services by 1!0s, AP!T0', AP *chedule 0aste 7inance 0orporation till the time the units are run on sound commercial lines. Marketin comple4es will be set up for them and such comple4es will be handed over to an Association of the entrepreneurs or to professional a encies. The comple4es will be run on commercial lines. The AP!!0 will offer "03 price reduction on the developed plots to *0=*T beneficiaries. !n *cheduled Areas, ade5uate thrust will be iven for the identification of industrial activities suitable to *cheduled Areas, creation of infrastructure, au mentation of credit flow and capacity buildin in the community The *0=*T 1evelopment 0orporations will set up sin le windows to assist *0=*T beneficiaries to et bank loans and complete all formalities. Government will encoura e the settin up of <ocal Area ;anks and an e4clusive ;ank for 6omen.

The 0ommercial banks will be asked to provide credit on priority for viable pro(ects proposed by *0=*T and women beneficiaries and to evolve special schemes to meet their specific re5uirements. 1,. I*p#e*entation o" Pri*e Minister=s Ro3%ar >o!ana and other Se#" 8*p#o$*ent Sche*es Ai orous efforts will be made to improve the performance of self2employment pro rammes coverin trainin , identification of vocations, provision of counselin services and tyin up proposals with banks and other local a encies. The implementin a ency at the district level2 1!0, in consultation with the banks and associations of **!s, will develop counselin services to the beneficiaries. Mass awareness and motivational campai ns will be or ani&ed to make the opportunities known widely to prospective beneficiaries, as was done by the *cheduled 0aste 0orporation in Cune 2 'ctober, "##.. As part of this effort, e4periences of successful self2 employed persons, who had set up enterprises earlier will be pro(ected for demonstration. 1.. (in$ and Cotta%e Industries -ural artisan comple4es need to be stren thened and e4panded. The focus will be on developin the artisans throu h a cluster approach to ensure ade5uate infrastructure and linka es providin improved tools, credit, marketin facilities, skill development etc. The *tate Government will encoura e a consortium approach for bulk marketin domestically and internationally by the tiny units. Marketin fairs in rowth centres in the districts will be encoura ed.

1/. State Advisor$ ;oard "or SSIs The *tate Government has constituted a *tate Advisory ;oard for **!s with the 0hief Minister as the 0hairman. This ;oard will be used as a forum for reater interaction between the Government a encies and the **! Associations. The ;oard should meet atleast twice in a year. A *ub20ommittee of the Advisory ;oard consistin of the Minister B**!D as 0hairman, *ecretary !ndustries as Member20onvenor and the representatives of the **! Associations will be constituted. This *ub20ommittee will meet atleast once every two months. The meetin s will be held in different parts of the *tate to ive an opportunity to local **! units to submit their representations to the *ub20ommittee. -e ional meetin s will also be or ani&ed with local !ndustry Associations which will be attended by senior Government officials from departments such as !ndustry, 0ommercial Ta4es, <abour, Pollution 0ontrol ;oard etc. so as to understand and solve local problems of **!. 10. Sickness in SSI units

The level of sickness in Andhra Pradesh is reported to be as hi h as 2@3 compared to the all2 !ndia fi ure of 2"3 :owever, as per the -;! -eport on 0urrency and 7inance, "##+2#., the total number of sick units and the amounts outstandin with the sick units has been declinin since "##2. The Government had re5uested the Administrative *taff 0olle e of !ndia to conduct a study on the causes of sickness amon **! units in the *tate. The reasons for the sickness, identified by the study, are poor 5uality infrastructure, particularly power, lack of technolo ical up radation, hi h ta4es, ri id labour laws and inade5uate flow of credit 2 especially workin capital, insistence on collateral securities by banks and *70, inade5uate marketin efforts and facilities, mana erial inefficiencies, delay in settlement of receivables, poor pro(ect appraisal, unreasonably short moratorium periods to cover estation, compoundin of interest, hi h interest rates, poor supervision and monitorin by bank officials, inade5uate support and uidance from 1!0 officials. 6hile Government will take action to ensure that these problems are solved at the root so that sickness can be prevented, the *tate Government will also try to help viable sick units to be revived. *tatutory provisions for the revival of sick units on the lines of ;!7- may not be suitable for the small scale sector in view of the much lar er number of units involved, as also the need for much reater fle4ibility in dealin with the small scale sector. Government is of the view that the *tate <evel !nter2!nstitutional 0ommittee B*<!!0D has also not been very effective in revivin sick **! units since it has no statutory powers. There is an ur ent need to set up an institutional framework to e4amine the cases of sick units and to revive such of those units which can be made viable. A further dialo ue will be held with financial institutions, commercial banks, Government of !ndia, -;! and !ndustry Associations to evolve such an institutional framework e4peditiously. A packa e of concessions for sick **! units should be evolved by the a ency identified for the revival of sick **! units on a case by case basis. 0ommitments will have to be made by the mana ement of the sick units or new promoters, by the 0entral and *tate Governments and by the financin institutions for the revival of the sick **! units. The concessions could include soft loans, write2off of previous bank loans, ta4 deferrals, reschedulements of other dues like electricity, water etc. A F-ehabilitationF or F-econstruction 7undF should be setup to assist the sick units with contributions by *!1;!, 0ommercial banks, 0entral and *tate Governments. !t should be operated at the *tate <evel by *!1;! The **! Associations have represented that the 1ebt -ecovery Tribunals set up for facilitatin the recovery of the dues of the 0ommercial ;anks and 7inancial !nstitutions by Government of !ndia should ive a fair hearin to the **! units whose cases are brou ht before the Tribunals, so that the rievances of the **! units are kept in view when final orders are passed by the Tribunals. The matter will be taken up with Government of !ndia. 22. Ro#e o" SSI Associations

*o far the role of **! Associations has been lar ely that of representin the rievances of their members to the Government and seekin more concessions. !n future the Associations would be encoura ed to take on developmental activities to a reater e4tent such as or ani&in e4hibitions, trainin pro rammes, workshops for transfer of technolo y, creatin awareness amon members about social responsibilities in areas such as environment protection, safety of workers etc. and takin 2up maintenance of industrial estates, marketin comple4es, common effluent treatment plants etc. **! Associations will be iven due representation on the ;oards of or ani&ations such as AP*70, AP!!0. 21.I*provin% 1ata ;ase There is no system of re ular collection of data relatin to **! units in the *tate re ardin important indicators such as new investment, production, e4ports, employment creation, sickness etc., This data is essential for monitorin the development of the sector and to analy&e the impact of overnment policies. ,fforts will be made to introduce a scientific data collection system in the office of the 0ommissioner of !ndustries which will be computeri&ed so that it is easily available to any one interested in it.