The government?s plan to help the khadi industry through Asian Development Bank (ADB) funding has failed completely. Of the R717-crore loan agreement that was signed between the government and the multilateral funding agency in December 2009, the khadi units so far have borrowed just R4.95 crore.
According to MSME minister Virbhadra Singh, this is because of the stringent conditions that have been put by the bank on credit disbursement. ?We have got funds from ADB but there are no takers for it. The intended beneficiaries are not able to take the loan because of the strict conditions,? Singh told FE.
Now, the ministry is in talks with the finance ministry to make better use of this fund. ?First, we will try to see if some modifications can be made in the borrowing conditions. If not, then the finance ministry should either return it or divert it for some other sector,? he added.
Under the loan agreement, the funding agency was supposed to release R717 crore for khadi reforms and development programme in four tranches over a period of three years. The first tranche was worth R143 crore. While the MSME ministry was assigned as executing agency, the Khadi Village Industries Commission (KVIC) was given the responsibility of implementing the funding process. However, due to lack of takers, KVIC has taken only R96 crore from ADB.
Khadi has been one of the major businesses of Indian MSMEs. There are around 300 khadi units selling product worth R900 crore every year in the domestic market. The KVIC has now set a sales target of R2,000 crore in the next five years. To achieve this, easy funding is required. The MSME sector as a whole has been complaining about unavailability of easy and low-cost borrowings.
The MSME ministry has asked the finance ministry to write off the loans of Khadi makers and spinners among others as a one-time waiver. It has written to them on bringing down the cost of credit for the sector. ?Funds have to be made available to these units. At present, neither public nor private banks are funding sufficient MSME projects,? he said.
The ministry has also sought a quantum jump in allocation of funds for Khadi in the 12th Five Year Plan. Of the total R64,790 crore that it has asked for the entire MSME sector during next five year plan, it has assigned R14,800 crore for the Khadi and village industries alone.
