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VII MANUFACTURING
Indian Budget 2006-07- Full Text
Full Text of P. Chidambaram, Minister of Finance, Budget Speech(Feb 28, 2006)
Employment
59. The two sectors which have the potential to create a large number of jobs are manufacturing and services. In manufacturing, we have identified some industries which, with appropriate incentives, can throw up huge job opportunities. These include textiles, food processing, petroleum, chemicals and petro-chemicals, leather, and automobiles. In services, tourism and software can offer a large number of jobs.
Textiles
60. The last two Budgets have created an enabling environment for the growth of the textile industry, especially cotton textiles. There has been an encouraging response to the Technology Upgradation Fund (TUF) scheme. I propose to enhance the allocation from Rs.435 crore to Rs.535 crore next year. The Scheme for Integrated Textiles Parks (SITP) was launched in October 2005 with the intention of creating 25 textile parks. As on date, 7 parks have been sanctioned and 10 parks have been identified for development. I propose to provide Rs.189 crore for this scheme.
61. Government proposes to launch the Jute Technology Mission in 2006-07 to harness the potential of the golden fibre. A National Jute Board will be established. I propose to make a token provision with the assurance that the funds required will be made available once the outlay is finalized.
Handlooms
62. Several schemes, including schemes for life insurance and health insurance, were announced in the last Budget for the handloom sector. They are being implemented. The Cluster Development approach will continue. It is proposed to cover an additional 100 clusters at a cost of Rs.50 crore in 2006-07. Yarn depots will be established in different parts of the country to ensure uninterrupted supply of yarn to weavers. Just as ‘woolmark’ has gained recognition, it is proposed to launch a ‘handloom’ mark. A scheme similar to TUFS will be introduced for the handloom sector to provide interest subsidy on term loans. I propose to increase the provision for the handloom sector from Rs.195 crore to Rs.241 crore next year.
Food Processing Industry
63. Recognizing the enormous benefits that the food processing industry can bring to agriculture and job creation, and to consumers, food processing will be treated as a priority sector for bank credit. NABARD will create a separate window with a corpus of Rs.1,000 crore for refinancing loans to the sector, especially for agro-processing infrastructure and market development. Government will also set up the National Institute of Food Technology Entrepreneurship and Management. The Paddy Processing Research Centre at Thanjavur will be developed into a national-level institute.
Petroleum, Chemicals and Petro-chemicals
64. Petroleum, chemicals and petro-chemicals (PC&P) is a sector with potential for large investment and employment. In order to promote investment in this sector, Government has set up a Task Force to facilitate the development of large PC&P Investment Regions. World class developers and investors are being associated with the Task Force. It is expected that in 2006-07 at least three such Investment Regions will be developed.
Information Technology
65. With the spread of Information Technology (IT) and IT Enabled Services (ITES), the time is ripe to make India a preferred destination for the manufacture of semi-conductors and other high technology IT products including Wafer; Assemble, Test and Manufacture of Semi-conductors; Flat LCD/OLED/Plasma Panel Displays; and Storage Devices. To achieve this goal the Ministry of Information Technology will announce a policy shortly. I propose to use the existing vehicles of viability gap funding and the India Infrastructure Finance Company Limited (IIFCL) to create a window to provide equity participation and/or viability gap funding to the new ventures. The window will be open for three years in order to accelerate investment.
Small and Medium Enterprises
66. The introduction of the Small and Medium Enterprises (Development) Bill and the policy on credit announced on August 10, 2005 have, I believe, triggered a change in the mindset of small and medium entrepreneurs. The new thrust is towards up-scaling the size and technological upgradation. After due consultation with the stakeholders and on the recommendation of the Advisory Committee, the Ministry of Small Scale Industries has identified 180 items for dereservation.
67. In order to give a fresh impetus to lending by the Small Industries Development Bank of India (SIDBI), I propose to:
• Recognize SMEs in the services sector, and treat the small scale enterprises in the services sector on par with the small scale enterprises in the manufacturing sector;
• Raise the corpus of the Credit Guarantee Fund from Rs.1,132 crore at end-March 2006 to Rs.2,500 crore in five years. In 2006-07, I propose to provide a sum of Rs.118 crore;
• Advise Credit Guarantee Trust for Small Industries (CGTSI) to reduce the one time guarantee fee from 2.5 per cent to 1.5 per cent for all loans; and
• Extend insurance cover to approximately 30,000 borrowers, identified as chief promoters, under the CGTSI. The sum assured would be Rs.200,000 per beneficiary and the premium will be paid by CGTSI.
68. The National Manufacturing Competitiveness Council (NMCC) has finalized a five-year National Manufacturing Competitiveness Programme. Ten schemes have been drawn up including schemes for promotion of ICT, mini tool rooms, design clinics and marketing support for SMEs. Implementation will be in the PPP model, and financing will be tied up during the course of the next year.
Cluster Development
69. The Cluster Development model can be usefully adopted not only to promote manufacturing but also to renew industrial towns and build new industrial townships. The model is now being implemented, in one form or other, in nine sectors falling under different Ministries. The sectors include khadi and village industries, handlooms, handicrafts, textiles, agricultural products and medicinal plants. It would be advantageous to empower a group to oversee cluster development and monitor progress. Hence, the Prime Minister has decided to constitute an Empowered Group of Ministers who will lay down the policy for cluster development and oversee the implementation.
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