Haryana wakes up to WTO impact on SSI, and tiny units

C R Rathee

In their anxiety to avert the adverse impact of the World Trade Organisation (WTO) regime on the agriculture sector, policy makers in Haryana did not pay desired attention to the small-scale industry (SSI) and tiny sectors. As a result, the very survival of one lakh-odd SSIs and tiny sector units, employing a workforce of around five lakh, is in question.

A note prepared by the industry department for chief minister O P Chautala clearly points out that even senior bureaucrats, who are supposed to attune various sectors of Haryana’s economy to convert the WTO challenge into an opportunity, could not visualise the fallout of the WTO regime on the SSI and tiny sectors. These sectors, till now operating under the “protectionist umbrella of reliefs and rebates “ face a wipe out if adequate steps are not taken, the note says.

Though belatedly, some senior aides of Mr Chautala have now started showing concern over the inadequacy of the Small and Medium Enterprises Renewal Fund or the Infrastructure Development Board to bolster the SSI and tiny sector units against the onslaught of cash-rich multinationals.

From some odd corner of the state’s department of industries, the chief minister’s aides have now dug up some papers that indicate that long back, the department had made ominous predictions about the “fate of SSIs and tiny sectors in the WTO era.” After perusal of these papers, now structured in the shape of a brief for the chief minister, it appears that some conscientious officials of the industry department had warned that 817 items reserved for these two sectors, if dereserved in one go, would find it rather impossible to compete with similar products manufactured by MNCs abroad and imported freely in compliance with WTO stipulations.

This brief has reportedly “convinced” Mr Chautala that even low-end products of Haryana’s SSI and tiny sector units, particularly those manufacturing consumer goods like electrical appliances, machine tools, scientific apparatus and cheaply-priced paper-made corrugated boxes (to name only a few), would not be able to face global competition from export-oriented units of the same size located even in developing countries.

Mr Chautala’s advisors have now begun an exercise to prepare an “action plan”. The services of a reputed consultancy agency is understood to have been hired to help the state government prepare an action plan to minimise, if not wholly avert, the impact of WTO on the state’s SSI and tiny segment.

The rough draft of the action plan highlights the problem of finances, both in the shape of term loans and working capital. The finance is not only inexplicably costly, but is also grossly inadequate. Added to this is the misuse of “muscle” by “mother units” who do not retire the bills of the SSI and tiny sector spare suppliers for months. The incidence of bouncing of cheques of the “mother units” is increasing. There is a statutory provision which makes these malpractices a penal offence.

However, the legal process is so complicated, cumbersome and costly that not even 1 per cent of victims of these malpractices “take recourse to this unsavoury business route,” the consultancy agency findings are said to have disclosed.

Meanwhile, observers point out that barely 7 per cent of the total capital of commercial banks in Haryana per annum goes to the SSI and tiny sectors. The Haryana Financial Corporation (HFC), too, has not cared to rationalise its interest structure. There are stated to be standing instructions to HFC and other institutional financing/re-financing agencies not to spare any effort to revive these two sectors which default, due to reasons beyond their control, in timely re-payment of loans. But this is not being done.

If all these bottlenecks are not removed soon, and the tiny and small units are not enabled to upgrade their technology and managerial skills, experts doubt if these units can even pay for basic services like electricity, telephones, etc.