REPORT NO. 280
PARLIAMENT OF INDIA RAJYA SABHA
DEPARTMENT-RELATED PARLIAMENTARY STANDING COMMITTEE ON INDUSTRY
TWO HUNDRED AND EIGHTIETH REPORT
Demands for Grants (2017-18)
Pertaining to the Ministry of Micro, Small and Medium Enterprises
(Presented to the Rajya Sabha on 16th March, 2017) (Laid on the Table of Lok Sabha on 16th March, 2017)
Rajya Sabha Secretariat, New Delhi March, 2017/Phalguna, 1938 (Saka) Website : http://rajyasabha. nic. in E-mail : [email protected]. in Hindi version of this publication is also available
PARLIAMENT OF INDIA RAJYA SABHA
DEPARTMENT-RELATED PARLIAMENTARY STANDING COMMITTEE ON INDUSTRY
TWO HUNDRED AND EIGHTIETH REPORT
Demands for Grants (2017-18)
Pertaining to the Ministry of Micro, Small and Medium Enterprises
(Presented to the Rajya Sabha on 16th March, 2017) (Laid on the Table of Lok Sabha on 16th March, 2017)
Rajya Sabha Secretariat, New Delhi March, 2017/Phalguna, 1938 (Saka)
CONTENTS
PAGES
1. COMPOSITION OF THE COMMITTEE...... (i)-(ii)
2. INTRODUCTION...... (iii)
3. ACRONYMS...... (iv)-(v)
4. REPORT...... 1-54
5. RECOMMENDATIONS/OBSERVATIONS — AT A GLANCE...... 55-71
6. MINUTES...... 73-76
COMPOSITION OF THE COMMITTEE
1. Shri Sharad Yadav — Chairman
RAJYA SABHA 2. Shri Narendra Budania 3. Shri Ram Narain Dudi 4. Shri Vivek Gupta 5. Shri Shwait Malik 6. Shri K. K. Ragesh 7. Shri Vivek K. Tankha 8. Shri Pramod Tiwari 9. Shri T. G. Venkatesh 10. Dr. Chandrapal Singh Yadav LOK SABHA 11. Shrimati Ranjanben Bhatt 12. Shri Birendra Kumar Choudhary 13. Shri S. P. Muddahanume Gowda 14. Shri Mohammad Asrarul Haque 15. Shrimati Darshana Vikram Jardosh 16. Shrimati Poonamben Hematbhai Maadam 17. Shri Bidyut Baran Mahato 18. Dr. (Prof.) Prasanna Kumar Patasani 19. Shri Tapas Paul 20. Shri Mutthamsetti Srinivasa Rao 21. Shri Ramsinh Rathwa 22. Shri Konda Vishweshwar Reddy 23. Shri Raj Kumar Saini 24. Shri G. Hari 25. Shri Rajveer Singh (Raju Bhaiya) 26. Shri Y. V. Subbareddy
(i) 27. Shri Rameshwar Teli 28. Shrimati Savitri Thakur 29. Shrimati Dev Varma (Moon Moon Sen) 30. Shri Rajan Baburao Vichare 31. Shri Rabindra Kumar Jena SECRETARIAT Shri A.K. Singh, Joint Secretary Shrimati Sasilekha Nair, Director Shri Jayanta Kumar Mallick, Joint Director Shri Ranjan Chaturvedi, Deputy Director Shrimati Renu Sreekanth, Committee Officer
Shri Devinder Singh Bisht, Committee Officer
(ii) INTRODUCTION
I, the Chairman of the Department-related Parliamentary Standing Committee on Industry, having been authorized by the Committee, hereby present this Two Hundred and Eightieth Report on Demands for Grants (2017-18) pertaining to Ministry of Micro, Small and Medium Enterprises.
2. The Committee heard the representatives of MSME Associations on 20th February, 2017 and Officers of the Ministry of Micro, Small and Medium Enterprises and organizations under the administrative control of Ministry of MSME on 22nd February, 2017. The Report is based on the replies provided by the Ministry to questionnaire, Annual Report, Notes on Demands, Economic Survey and other background papers of the Ministry.
3. The Committee in its meeting held on 15th March, 2017 considered and adopted the report.
NEW DELHI; SHARAD YADAV 15th March, 2017 Chairman, Phalguna 24, 1938 (Saka) Department-related Parliamentary Standing Committee on Industry Rajya Sabha.
(iii) ACRONYMS
ARI : Agro-rural Industries
ASPIRE : A Scheme for Promoting Innovation, Rural Industry and Entrepreneurship AIFs : Alternative Investment funds ASI : Annual Survey of Industries ATIs : Assistance to Training Institutions B.E. : Budget Estimate CCRI : Central Coir Research Institute CGTMSE : Credit Guarantee Fund Trust for Micro and Small Enterprises CLCSS : Credit Linked Capital Subsidy CSO : Central Statistics Office CUY : Coir Udyami Yojana DLTFCs : District Level Task Force Committees EDPs : Entrepreneurship Development Programmes GVA : Gross Value Added IIIF : India Inclusive Innovation Fund IEBR : Internal and Extra Budgetary Resources LBIs : Livelihood Business Incubators KVIC : Khadi and Village Industries Commission KRDP : Khadi Reform & Development Programme MSMEs : Micro, Small and Medium Enterprises MSEs : Micro and Small Enterprises MSMED Act : Micro, Small and Medium Enterprises Development Act MSME-DO : Micro, Small and Medium Enterprises Development Organization MGIRI : Mahatma Gandhi Institute of Rural Industrialization MSEFCs : Micro, Small Enterprises Facilitation Councils MDPs : Management Development Programmes MDAP : Marketing Development Assistance Programme MLIs : Member Lending Institutions
(iv) MATU : Marketing Assistance & Technology Upgradation NSIC : National Small Industries Corporation Limited NSS : National Sample Survey NSQF : National Skills Qualification Framework NIESBUD : National Institute for Entrepreneurship and Small Business Development NI-MSME : National Institute for Micro, Small and Medium Enterprises NCSB : Non-Corporate Small Business NMCP : National Manufacturing Competitiveness Programme PMEGP : Prime Minister's Employment Generation Programme PPR : Preliminary Project Report QMSs : Quality Management Standards QTTs : Quality Technology Tools R.E. : Revised Estimate RGUMY : Rajiv Gandhi Udymi Mitra Yojna SSI : Small Scale Industries SIDBI : Small Industries Development Bank of India SDPs : Skill Development Programmes SFURTI : Scheme of Fund for Regeneration of Traditional Industries TBIs : Technology Business Incubators TCSP : Technology Centre System Programme TUF : Technology Upgradation Fund TReD : Trade Receivable Discounting Scheme UAM : Udyog Aadhar Memorandum VDP : Vendor Development Programme
ZED : Zero Defect Zero Effect
(v) REPORT
The MSME sector has been contributing to expansion of entrepreneurial culture through business innovations. The MSMEs are widely dispersed across various sectors of the economy, producing diverse range of products and services to meet demands of local as well as global markets. As per the data available with Central Statistics Office (CSO), Ministry of Statistics & Programme Implementation, Government of India, the Ministry of MSME gave an approximation, based on the results of Annual Survey of Industries (ASI) and surveys on unorganized sector, which indicates the estimated contribution of the MSME sector to Gross Value Added (GVA), GDP and Manufacturing Output, during 2011-12 to 2015-16. The details are as under:-
Share of MSME sector in GDP and total Manufacturing GVO
Manufacturing Output at current price Share of MSME GVA to GVA/GDP at constant price for base year 2011-12 (%)
Year MSME Share of MSME MSME MSME Total Manufacturing Manufacturing Manufacturing Services GVO GVO in total Sector Sector (Rs. in crore) Manufacturing Output (%)
In GVA In GDP In GVA In GDP In GVA In GDP
2011-12 2167110 33.12 6.64 6.16 25.66 23.81 32.29 29.97
2012-13 2385031 33.22 6.77 6.27 26.05 24.13 32.82 30.40
2013-14 2651878 33.28 6.79 6.27 26.40 24.37 33.19 30.64
2014-15 2819195 33.12 6.63 6.11 26.72 24.63 33.34 30.74
2015-16 2834827 33.29 ------
1 Gross Value Added (GVA): It may be noted that estimates of GVA had been prepared at factor cost in the earlier series (base year 2004-05), while these are being prepared at basic prices in the new series (2011-12). GVA estimated by production approach: (GVA = Output - Material Inputs) and GVA estimated by income approach: (GVA = Compensation of Employees + Operating Surplus + CFC). 2 Gross Domestic Product (GDP): GDP is derived by adding taxes on products, net of subsidies on products, to GVA at basic prices. 3 Manufacturing GVO: Manufacturing GVO is defined to include the ex-factory value, (i.e., exclusive of taxes, duties, etc. on sale and inclusive of subsidies etc., if any) of products and by-products manufactured during the accounting year, and the net value of the semi-finished goods, work-in-process, and also the receipts for industrial and non- industrial services rendered to others, value of semi-finished goods of last year sold in the current year, sale value of goods sold in the same condition as purchased and value of electricity generated and sold. 2
2. The Committee notes that contribution of MSMEs in manufacturing sector is almost stagnant but has been steadily increasing in Service sector.
3. In view of the size of the MSME sector in the country, a Budget allocation of ` 6482 crores for Financial Year 2017-18, is just meager and needs to be utilized efficiently and judiciously.
4. It was informed that there were about 25.27 lakh MSMEs registered under Udyog Adhaar Memorandum (UAM) till 31.1.2017 of which 22 lakh were micro units. The Committee also noted the submission made by the Secretary of the Ministry that there was no realistic estimation of number and scope of MSME units in the country. The Secretary had submitted that the Ministry is in the process of developing an online census of statistical data of MSMEs. The Committee believes that without realistic and updated information regarding scope and extent of MSMEs in the country, no worthwhile policy or budgetary intervention can be made.
5. However, the Committee also noted that ever since 4th Census of MSMEs, the Government has not conducted the 5th census which is due. Instead, it has been decided to discontinue the process of census and look for other sources of collecting reliable data on MSMEs. The Committee feels that Census figures are an important reference point for any future policy formulation initiative as it provides baseline data to measure prospective trends. Every year, in DFG, a separate allocation is made to strengthen the database, survey and research. The Ministry may consider using this allocation for conducting 5th decennial census of MSMEs. Also, like annual Public Enterprises Survey, Ministry of MSME too should present an annual MSME Survey on the basis of NSS Rounds.
ECONOMIC SURVEY ON PROSPECTS AND CHALLENGES OF MSME SECTOR
6. The Committee was informed that the Economic Survey expressed concerns regarding the rise in NPA's in the second half of 2016, which came from mid-size corporate and MSMEs, as companies that had been suffering from poor sales and profitability for a number of years struggled and remained indebted. This trend is likely to continue into 2017. Real loan growth to MSMEs slowed significantly in 2014-15, and actually turned negative during the past two fiscal years.
7. The Committee feels that an assessment should be made of the impact if any, of demonetisation, on the credit-worthiness of MSMEs and whether it has led to greater NPAs in MSME sector. The Committee takes note of demands put forth by certain industry associations that in view of possible adverse impact of demonetization on the business and overall lack of liquidity in the economy, the time limit for NPA should be extended from present 90 days to 180 days. The Committee views this demand favourably and recommends the Ministry to take up the issue with Ministry of Finance and RBI and report to the Committee of its outcome.
EVOLUTION AND MANDATE OF THE MINISTRY
8. The Government of India established the Ministry of Small Scale Industries and Agro & Rural Industries (SSI & ARI) in October, 1999 as the nodal Ministry for formulation of policies and Central 3 sector programmes/schemes, their implementation and related coordination and for supplementing the efforts of the States/Union Territories for promotion and development of small scale, agro and rural industries in the country. Subsequently, in September, 2001 the Ministry of SSI and ARI was bifurcated into two separate Ministries, namely, Ministry of Small Scale Industries and Ministry of Agro and Rural Industries. In 2006, "Micro, Small and Medium Enterprises Development Act (MSMED), 2006" was enacted by the Parliament. Pursuant to this enactment on 9 May, 2007, the Ministry of Agro and Rural Industries and the Small Scale Industries were merged into a single Ministry, namely, Ministry of Micro, Small and Medium Enterprises.
COMPOSITION OF THE MINISTRY
9. The Ministry of Micro Small & Medium Enterprises is having two divisions called Small & Medium Enterprises (SME) Wing and Agro & Rural Industry (ARI) Wing, besides office of the Development Commissioner (MSME) and other organisations. The SME Wing is allocated the work, inter-alia, of administration, vigilance and administrative supervision of the National Small Industries Corporation (NSIC) Ltd., a public sector enterprise and National Institution of Micro, Small & Medium Enterprises (NIMESE) an autonomous national level entrepreneurship development/training organization. The Wing is also responsible for implementation of the schemes relating to Performance and Credit Rating, Assistance to Training Institutions and preparation and monitoring of "Make in India" initiative among others.
10. The ARI Wing looks after the administration of two statutory bodies viz. the Khadi and Village Industries Commission (KVIC), Coir Board and a society called Mahatma Gandhi Institute of Rural Industrialization (MGIRI). It also supervises the implementation of the Prime Minister's Employment Generation Programme (PMEGP). Scheme of Fund for Regeneration of Traditional Industries (SFURTI) and A Scheme for Promoting Innovation, Rural Industry and Entrepreneurship (ASPIRE).
11. The implementation of policies and various programmes/schemes for providing infrastructure and support services to MSMEs is undertaken through its attached office, namely the Office of the Development Commissioner (O/o DC (MSME), National Small Industries Corporation (NSIC), Khadi and Village Industries Commission (KVIC), the Coir Board and training institutes viz., National Institute for Micro, Small and Medium Enterprises (NI-MSME), Hyderabad and Mahatma Gandhi Institute for Rural Industrialization (MGIRI), Wardha.
12. The Committee notes that unlike KVIC and Coir Board, whose allocation is made under ARI Division, the Office of DC-MSME though has same mandate and implements the same Schemes as SME Division, get separate allocation in the annual Demands. The Committee has been raising the issues of overlapping and duplication of multiple Schemes of the Ministry. Considering that SME Division and DC-MSME both have not been able to utilize their allocated funds during previous years, the Committee is inclined to recommend that two allocations may be merged so that the Schemes are also consolidated with more money available for their implementation. The Committee recommends that like KVIC and Coir Board, the allocation for DC-MSME too should be brought under SME Division for the efficient and economic utilization of available resources. 4
Twelfth Plan
13. The Committee sought to know the Twelfth Plan outlay for numerous Schemes of the Ministry. As submitted by the Ministry, the details are as under:-
(` in crore)
Sl. No. Name of Schemes Twelfth Plan outlay (2012-2017)
SME Division 1. Performance & Credit Rating Scheme 635.00
2. Marketing Assistance Scheme 101.00
3. Equity Investment in NSIC 145.00
4. International Cooperation Scheme 54.00
5. Assistance to Training Institutions 561.00
6. Survey, Studies & Policy Research 13.00
7. Rajiv Gandhi Udyami Mitra Yojana 26.00
TOTAL SME DIVISION 1535.00
Office of (DC (MSME), M/o MSME
1. Quality of Technology Support Institutions and Programmes. 3375.33
2. Promotional Services Institutions and Programmes 616.72
3. Infrastructure Development and Capacity Building (erstwhile MSME 4104.00 Clusters Development Programmes and MSME Growth Poles)
4. Capital Outlay on Public Works 300.00
5. Credit Support Programme 1258.00
6. MDA Programme 351.45
7. Upgradation of Data Base 370.50 8. Special Scheme for MSME (New Initiative) 1.00
9. India Inclusive Innovation Fund 500.00
10. Others 7.00
TOTAL OF DC (MSME) 10884.00
ARI Division
TOTAL ARI DIVISION 11705.00
GRAND TOTAL OF M/OMSME 24124.00 5
14. Total projection for the Ministry of Micro, Small and Medium Enterprises in XIIth Plan was ` 24,124 crore, comprising of ` 11,705 crore, ` 1,535 crore, and ` 10,884 crore for ARI Division, SME Division, and O/o DC(MSME), respectively.
15. Year wise allocation vis-a-vis Plan Outlay for the M/o MSME is as following:
2012-13 2013-14 2014-15 2015-16 2016-17 Total Balance Total of XII Five Yrs. Plan
Outlay by 24124.000 Planning Commission
BF (Revised 2835.00 2977.00 3327.00 2612.51 3000.00 14751.51 9372.49 24124.00 Estimates) (61.14%)
RE (Revised 2542.00 2600.00 2500.00 2620.00 5446.00 - - - Estimates)
Actual 2229.52 2272.04 2385.70 2826.00 Not - - - Expenditure available
Percentage of 78.62 76.32 71.72 95.70% - - - - Expenditure w.e.f BE
16. The Division-wise utilization of 12th Plan outlay is as under:- (` in crore) Division 12th Plan B.E. during RE during Actual expenditure Outlay 12th Plan 12thPlan during 12th Plan SME 1535.00 1190.27 986.21 885.82 ARI 11705.00 9060.22 6458.82 7239.68 Office of DC (MSME) 10884.00 4494.01 6195.91 3282.12 17. Scheme-wise Plan Outlay for 12th Plan and actual utilization year-wise in major Schemes are as under:- ARI Division (` in crore) Sl. No. Name of the Scheme XIIth Plan B.E. R.E. Actual Outlay Expenditure 1. Khadi Grant including rebate & 992.72 507.06 669.21 632.85 MDA for Khadi
2. Prime Minister's Employment 8060.00 6301.84 5956.14 5501.65 Generation Programme (PMEGP) 6
SME Division
Sl. No. Name of the Scheme XIIth Plan B.E. R.E. Actual Outlay Expenditure
1. Assistance to Training Institution 561.00 533.01 411.36 361.19
Office of the Development Commissioner (MSME)
(` in crore)
Sl. No. Name of the Scheme XIIth Plan B.E. R.E. Actual Outlay Expenditure
I. Quality of Technology Support Institutions Programmes a. Lean Manufacturing Competitiveness 205.00 71.00 48.20 46.08 Support to MSMEs b. Technology Upgradation and Quality 141.80 107.00 56.80 41.81 Certification support to MSMEs c. Support for Entrepreneurial and 92.00 50.00 21.00 16.85 Managerial Development of SMEs through incubators d. Design Clinics Scheme for MSME 120.00 62.00 43.28 30.99 Sector e. Credit Limited Capital Subsidy 2561.00 1732.50 2038.93 1618.99 Scheme
II. MSME Cluster Development Programme & MSME Growth poles a. Tool Rooms & Tech. Institutions 2438.00 633.80 504.28 466.00
III. Credit Support Programme a. Credit Guarantee Scheme 1253.00 259.72 2273.75 273.75
IV. MDA Programme a. Vendor Development Programme 111.00 25.00 22.45 15.71 for ancillarisation 7
18. The Committee notes that against the Plan Outlay of ` 24124 crores for 12th Plan, total annual Budget allocation for the Plan period was ` 1475 crores which is only about 61% of the Plan Outlay. The Committee finds it paradoxical that a Plan outlay of such magnitude is not supported by Budget allocation. The Committee may be informed about the rationale given by Ministry of Finance on lower Budget allocation compared to Plan outlay.
19. The Committee also notes that despite low Budget allocation, the actual utilization of funds under major Schemes of SME Division and DC-MSME has been very low, thereby denying the Ministry any ground to seek high allocation in BE. The Ministry has often justified poor utilization on the ground that Schemes are demand driven. If the Ministry is not sure of demand for such Schemes then rationale for seeking higher allocation every successive year may be explained. The Committee may be informed that beyond routine awareness programmes, of the steps taken to generate demand in a sector that seeks policy intervention.
BUDGET PROPOSALS
20. The Committee sought Ministry's comments on the impact of Budget declaration and tax proposals on MSME sector.
21. It was informed that in order to make MSMEs more viable and also to encourage firms to migrate to company format, Union Budget 2017-18 proposes to reduce the income tax for smaller companies with annual turnover upto ` 50 crore to 25%. As per data of Assessment Year 2015-16, there were 6.94 lakh companies filing returns of which 6.67 lakh companies' fall in this category and, therefore, percentage- wise, 96% of companies will get the benefit of lower taxation. This will make the MSME sector more competitive as compared to large companies.
22. The Committee is not sure that reduction in income tax rate as proposed in the Budget will make the MSME more competitive.
23. The Committee further asked if these concessions were available only to Companies and not to proprietorship/partnership firms which constitute the majority of Companies in MSME sector.
24. It was informed that the MSME classification was based on the investment criteria and not on the ownership of the firms. So all the MSMEs whether they are Private Ltd. Companies or proprietorship/ partnership companies are eligible for this benefit.
25. However, a closer reading of Budget speech suggests that this initiative is essentially to encourage MSME firms to migrate to company format. The Finance Minister had announced in Budget Speech "In order to make MSME companies more viable and also to encourage firms to migrate to company format, I propose to reduce the income tax for smaller companies with annual turnover upto Rs. 50 crore to 25%.
26. The Committee notes the demand expressed by one of the industry associations to widen the scope of this concession to proprietorship/partnership firms which constitute the majority in 8
MSME sector. The Ministry must take up the issue with Ministry of Finance and inform the Committee of the response.
27. The Committee noted the Finance Minister's Budget Speech which stated "As against 5.6 crore informal sector individual enterprises and firms doing small business in India, the numbers of returns filed by this category are only 1.81 crore....." The Committee accordingly sought from the Ministry the suggestions to address the situation.
28. It was informed that demonetisation is expected and designed to bring their actual income and expenses in digital mode and thus, the taxable income would come to the fore, making the taxnet wider. During the presentation of DFG, the Ministry informed the Committee that it has been imparting training in digital transactions to MSME entrepreneurs.
29. The Committee expresses concern over narrow tax base among informal sector individual enterprises. On the one hand MSME proprietorship/partnership firms demand their inclusion into proposed tax concession to small enterprises, on the other hand they do not even file tax returns. This is an unacceptable situation and the Committee recommends that the Ministry of MSME must take corrective but non-intrusive action in consultation with Ministry of Finance. The Committee suggests that Ministry must seek PAN and TIN/ GST details of the proprietors/ partners in the UAM and, in association with the Ministry of Finance, link these references for better tax monitoring through data networking of direct and indirect taxes.
NEW INITIATIVES BY THE MINISTRY DURING 2016-17
30. It was informed that Ministry of MSME has taken the following various initiatives for strengthening and enhancing the contribution of the MSMEs in the National Economy:-
(i) National Scheduled Caste / Scheduled Tribe Hub : The Ministry of Micro, Small and Medium Enterprises was given the work of operationalization of National SC / ST Hub to ensure 4% procurement from SC/ ST entrepreneurs in all Central Government Ministries and Central Public Sector Enterprises (CPSEs). The High Powered Monitoring Committee on SC/ ST Hub has already met twice, which has resulted into more than 5000 SC / ST enterprises getting registered on the MSME portal, namely msmedatabank.in.
(ii) Udyog Aadhaar Memorandum : In the ease-of-doing business, the registration of MSMEs was simplified by launching of a one-page online Registration methodology. Udyog Aadhaar Memorandum (UAM) was notified and launched on 18.9.2015 and more than 25.27 lakh Udyog Aadhaar Memorandums have been registered till 31.1.2017.
(iii) MSME Databank : An online Census of MSMEs has started with the launch of MSME Databank and Micro, Small and Medium Enterprises Development (Furnishing of Information) Rules, 2016 have been notified to make it compulsory for MSMEs to give information on MSME Databank. More than 70,590 units have already given information on MSME Databank till 31.1.2017. 9
(iv) Web portal for Micro and Small Enterprises Facilitation Councils (MSE-FCs) : The Ministry of MSME has developed a web portal which will enable the States to keep track of the cases filed in Micro and Small Enterprises Facilitation Councils (MSE-FCs) under the provisions of the Micro, Small and Medium Enterprises Development Act, 2006. Ministry has also circulated Draft Model MSE-FC Rules for consideration to revise their MSE-FC Rules.
(v) MSME Fund : In exercise of the powers conferred by section 12 of the Micro, Small and Medium Enterprises Development Act, 2006 (27 of 2006), the Government has established a fund vide Notification dated 28.10.2016 to be called the Micro Small and Medium Enterprises Fund. The objective of the Fund shall be promotion, development and enhancing the competitiveness of micro, small and medium enterprises, particularly of the micro and small enterprises.
(vi) Credit Guarantee Fund Scheme for Micro and Small Enterprises (CGTMSE) : The Scheme is implemented by Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) set up jointly by the Government of India and SIDBI and covers collateral free credit facility (term loan and/or working capital) extended by eligible lending institutions to new and existing Micro and Small Enterprises up to ` 200 lakh per borrowing unit. The guarantee cover provided is up to 75% of the credit facility up to ` 50 lakh (85% for loans up to ` 5 lakh provided to Micro Enterprises, 80% for MSEs owned/operated by women and all loans to NER), and uniform guarantee of 50% of the credit exposure above ` 50 lakh and up to ` 200 lakh. A composite all in Annual Guarantee fee of 1.0% p.a. of the credit facility sanctioned is now being charged.
The Government has augmented the corpus of the Trust of CGTMSE from the present level of ` 2500 crore to ` 7500 crore. The increase of corpus by ` 5000 crore would be entirely contributed by Government of India. Government has increased the coverage of the loans covered under CGTMSE from ` 1 crore to ` 2 crore for the loans to be disbursed w.e.f. 1.1.2017. The loans which are being extended to Micro and Small Enterprises by National Banking Finance Corporations (NBFCs) have also been taken into the ambit of the Scheme.
(vii) ZED (Zero Defect Zero Effect) : The ZED (Zero Defect Zero Effect) Scheme was launched in October, 2016 under which the Ministry plans to assess 22,000 units to get themselves rated for Zero Defect Zero Effect. ZED certification will be in five categories viz., Bronze, Silver, Gold, Diamond and Platinum. The rated SMEs will get better business opportunities.
The scheme envisages promotion of Zero Defects and Zero Effect (ZED) manufacturing amongst MSMEs and ZED Assessment for their certification with the following objectives of:
• Developing an Ecosystem for Zero Defects Manufacturing in MSMEs.
• To promote adaptation of Quality tool/system and Energy Efficient manufacturing. 10
• To enable MSMEs for manufacture of quality products.
• To encourage MSMEs to constantly upgrade their quality standards in products and processes.
• To drive manufacturing with adoption of Zero Defect production processes and without impacting the environment.
• To support 'Make in India' campaign.
• To develop professionals in the area of ZED manufacturing and certification.
(viii) Technology Centre System Programme (TCSP) : The Ministry is presently running 18 Technology Centres (10 Tool Rooms and 8 Technology Development Centres) to provide technological support to the micro, small and medium industries in the Country. Technology Centres cater to the needs of industries located at those places.
To expand and upgrade the network of Technology Centres in the country, the Government is implementing Technology Centre Systems Program (TCSP) at an estimated Projected Cost of Rs. 2200/- crore including World Bank Loan assistance of USD 200 million to establish 15 new Technology Centres (TCs) identified across the country.
13 new Technology Centres at Bhiwadi, Baddi, Rohtak, Bhopal, Durg, Kanpur, Greater Noida, Imphal, Vishakhapatnam, Ernakulam, Bangalore, Sitarganj and Pudducherry are coming up with the assistance of the World Bank scheme. More than Rs.2000 crores is being spent on the same, besides, the Government is also upgrading the Technology Centres at Dimapur (Nagaland) and is coming up with new Technology Centres at Shillong and Agartala.
(ix) Finance Facilitation Centres : To ensure availability of credit to the MSMEs, National Small Industries Corporation (NSIC) has already established seven Finance Facilitation Centres at Ludhiana, Jalandhar, Guwahati, Bangalore, Hyderabad, Chennai and Jaipur. Applicants could file online application for loan to a financial institution through Finance Facilitation Portal. FFC facilitates obtaining credit from financial institutions. The NSIC has also reduced the lending rates on raw material assistance by 1% on micro units and by 0.5% on small industries. It has also reduced its rate of Single Point Registration Scheme by 40% in case of micro entrepreneurs
(x) My MSME : My MSME mobile application is for all Micro, Small & Medium Enterprises (MSME) in India and other stakeholders. This application acts as a source of all information related to MSME's Policies, Registration, Services, Schemes, etc.
Some of the features of My MSME mobile application are:
(i) Aadhaar Memorandam (UAM) for Registration of MSMEs.
(ii) Apply for MSME schemes benefits (Credit, Technology, Marketing, Infrastructure, Skill or Policy related) 11
(iii) Lodge Grievances.
(iv) MSME Schemes guidelines and Project Profiles.
(v) Web links for offices and organizations under Ministry of MSME.
(vi) MSME Facebook Page.
(vii) MSME Twitter Page.
31. There were demands to make Facilitation Councils (FCs) more effective by making their decisions enforceable. The Committee observes whether the proposed Draft Model MSE- FC Rules would address this issue and whether MSE associations were consulted while drafting the new Model Rules. The Committee would like to know the pendency of cases by the end of Financial Year 2016-17 and number of cases resolved during 2016-17.
32. The Committee notes that for the last two years a meagre ` 1 lakh is being allocated each year for MSME Fund that was notified in October, 2016 and which has been vested with vast mandate to promote, develop and enhance competitiveness of MSEs. The Committee wonders that despite notification the allocation has not been raised. The Committee may be informed whether the Ministry proposes to seek enhancement at RE stage and also how the Ministry propose to implement the mandate of MSME Fund.
33. The Committee having observed the indifferent performance of other components on NMCP over last 5 years of 12th Plan seeks to know Ministry's roadmap for implementing ZED Scheme? Whether, the Ministry has any sector wise database of such technologies and its suppliers. The Committee finds sweeping generalisation in broad objectives without much detail about availability of technological resources, institutional architecture and financial resources that will be required for implementation. The Committee would like to know the parameters fixed for selection of the intended beneficiaries.
34. The NSIC has established seven Finance Facilitation Centres to ensure availability of credit to MSMEs. The Ministry may provide details of structure of the Scheme. The Committee may be informed about the centre-wise details of how many MSMEs have applied for loans and successfully availed. Also give details of the volume of credit availed and efforts made to expand the outreach of the Scheme.
35. The Committee noted that Non Banking Finance Companies (NBFCs), who together are significant lenders to MSME sector, have been covered under CGTMSE scheme. The Committee raised the issue of high rate of interest being charged by the NBFCs on the MSME loans. The Committee may be informed if the CGTMSE has designed separate guidelines and conditions for the NBFCs to become partners in the scheme. 12
HIGHER REVENUE ALLOCATION
36. The Committee observed that for the past several years, the Revenue allocation has always been higher than the Capital allocation and sought the rationale of this persistent trend.
37. The Ministry submitted that the objective of M/o MSME was to promote MSME sector and not to build infrastructure with capital assets. M/o MSME administers a number of schemes for promotion and development of MSMEs which are not infrastructure oriented and, hence, Revenue allocation has always been higher than the Capital allocation.
38. It was further informed that under Capital allocation, there was only one Plan scheme i.e. Capital Outlay on Public Works, for the construction of office accommodation of MSME-DIs across the country and only one Non-Plan scheme i.e. Loans & Advances to KVIC, which was establishment related expenditure. All other schemes of the Ministry are covered under the Revenue allocation. It was informed that under previous format the entire Plan allocation was essential. The Committee feels that as the outcome of revenue expenditure is intangible in short term and results are visible only in longer term, it is essential that regular protocol of monitoring and statutory auditing must be followed.
39. The Committee noted that Revenue allocation in 2016-17 has been increased from ` 3454 crores in BE to ` 5462 crores in RE. It sought to know which were the Schemes where money was reduced and where was allocation enhanced at RE stage.
40. The Committee was informed that the allocation was reduced in schemes like ASPIRE, PMEGP, Performance & Credit Rating Scheme, ATI, etc. while the allocation was enhanced in schemes like Credit Guarantee Scheme, CLCSS, etc.
41. The Committee further asked as to how have such Schemes where allocation was enhanced in RE, performed in utilization of funds in previous years and in 2016-17.
42. The following details were given in respect of CLCSS and Credit Guarantee Schemes where sizable enhancement was made in RE 2016-17:-
BE 2016-17 RE 2016-17 Actual (as on BE 2017-18 31.12.16)
CLCSS 298.00 565.52 216.64 441
Credit Guarantee 50.00 2017.78 17.78 3002 Scheme
43. The Committee notes with concern that RE allocations were substantially increased despite low utilization of available money of BE. The Committee may be informed of rationale behind increasing RE allocation for CLCSS and Credit Guarantee Scheme despite low utilization. 13
44. The Committee observed that there is a further steep rise in Revenue allocation from ` 5446 crores in RE 2016-17 to ` 6471 crores in BE 2017-18. The Committee sought to know which were the Schemes where allocation has been increased vis-a-vis RE 2016-17 and what was the actual utilization of RE allocation?
45. The Ministry informed that there is a steep increase in schemes of Credit Guarantee Scheme, National SC/ST Hub, etc. The Committee has been expressing reservation over last quarter rush in expenditure. The Committee sought to know Quarter-wise expenditure of the three divisions of the Ministry. It informed the actual utilization (till 31.12.2016) vis-a-vis Planned BE (2016-17) and RE (2016- 17) of ARI Division, SME Division and O/o DC (MSME) as following:
Plan
(` in crore) Name of BE RE Exp. Exp. Exp. Total Division 2016-17 2016-17 for Qr.1 for Qr.2 for Qr.3 SME Division 311.00 145.57 10.70 20.87 62.40 93.97 DC (MSME) 864.00 3107.93 303.57 121.46 122.86 547.89 ARI Division 1825.00 1720.90 491.02 564.50 317.95 1373.47 Grand Total 3000.00 4974.40 805.29 706.83 503.21 2015.33
46. The Committee noted that Ministry was allocated Rs 3000 crores in BE 2016-17. Considering that the MSME sector contributes about 35% in the country's GDP, it was a rather modest allocation which was enhanced to ` 4974 crores in RE 2016-17, mainly on account of enhanced allocation to CLCSS and Credit Guarantee Schemes under the DC-MSME. However after passage of three quarters only ` 2000 crores could be spent. Expenditure by the SME Division and DC- MSME continues to be tardy, despite demanding more allocation in the Budget. Despite better utilization by ARI Division, the RE has been reduced. The Committee wonders if the Ministry will again crowd its expenditure in the last Quarter of the Financial Year 2016-17 or will carry over for next Financial year, as has been the case with PMEGP.
47. The Committee sought to know Scheme-wise details of allocation demanded and actual allocation in the BE 2017-18.
48. The Ministry gave Scheme-wise details of allocation demanded and actual allocation as under:
(` in crore)
Sl. No. Name of Scheme Proposed Outlay BE 2017-18 2017-18
12 3 4
SME Division
1. Performance and Credit rating Scheme 108.00 10.00
2. Marketing Assistance scheme 21.50 15.00 14
12 3 4
3. Surveys, Studies and Policy Research 2.00 1.00
4. Assistance to Training Institutions 86.00 30.00
5. International Cooperation Scheme 8.60 5.00
6. MSME Fund 0.01 0.01
TOTAL OF SME 226.11 138.22
DC (MSME), M/o MSME
1. Technology Upgradation and Quality Certification (NMCP). 709.50 506.00
2. Credit Support Programme 500.00 3002.00
3. MDA 17.10 15.00
4. Promotional Services Institutions and Programmes 36.30 160.00
5.(i) Infrastructure Development and Capacity Building - EAP 700.00 250.00
(ii) Infrastructure Development and Capacity Building 294.10 295.00
(iii) Promotion of MSMEs in NER & Sikkim 20.00 5.00
6. Capital Outlay on Public Works 15.00 10.00
7. Upgradation of Data Base 33.48 9.00
8. Establishment (H.Qtr and Field Institutes) 144.00 26.26
TOTAL OF DC (MSME) 2469.48 4278.26
ARI Division, M/o MSME
I KVIC
1. Khadi Grant 32.40 315.00
2. Khadi, VI & (S&T) 9.70 5.00
3. Village Industries Grants 37.10 34.00
4. KRDP (ADB Assistance) 345.00 101.39
5. Prime Minister's Employment Generation 1300.00 1024.49 Programme (PMEGP) 15
12 3 4
6. Market Promotion & Development Assistance (MPDA) 340.00 340.00
7. Interest Subsidy Eligibility Certificate for Khadi and 53.45 50.00 Polyvastra
II A Scheme for Promotion of Innovation, Rural Industry 150.00 50.00 and Entrepreneurship (ASPIRE)
III Mahatama Gandhi Institute for Rural Industrialization (MGIRI) 7.00 10.00
IV Coir Board
1. Coir Vikas Yojana 41.20 50.00
2. Coir Udyami Yojana 21.60 10.00
V SFURTI 200.00 75.00
TOTAL OF ARI 2537.45 2065.48
GRAND TOTAL OF MINISTRY OF MSME (PLAN) 5233.04 6481.96
49. The Committee observes that despite repeated underutilization, the SME Division and DC- MSME inflated the demands. Though the allocation for SME Division has been reduced vis-a-vis RE 2016-17, the allocation for DC-MSME has been steeply increased mainly on account of enhanced allocations for Credit Support Programme which includes Credit Guarantee Scheme and the Technology Upgradation and Quality Certification Programme that includes CLCSS. There is a significant increase in allocation for Promotional Services institutions and programmes under which several schemes of entrepreneurship/skill development, MSME-DIs and MSME Testing Centers are being run. Under this Scheme the utilisation has been low. Of the total Plan outlay of ` 616 crores for 12th Plan, ` 216 crores were allocated as BE during the Plan period but actual expenditure was only about ` 162 crores, yet there is enhancement. Allocation to ARI Division though less than what was demanded, is also increased from RE of 1720.90 crores in 2016-17 mainly on account of Khadi Grant. In almost all other schemes, the allocation has been less than what was demanded. The Committee takes cognisance of the submission made by the Secretary, M/o MSME to enhance allocation for Technology Centers System Programme (TCSP) and Khadi Reform Development Programme (KRDP). Both these programmes have external assistance component which needs to be used as per the agreed conditions. The Committee recommends that Ministry should take up the issue of higher allocation for these programmes with the Ministry of Finance.
50. Also the Committee takes cognizance of the fact that allocation for flagship employment generation scheme PMEGP has been reduced despite encouraging response to the Scheme. It was informed that only 1/3 applications for Margin Money under PMEGP are actually honoured and 16 remaining 2/3 are rejected for the want of adequate fund. While the Committee also notes that the Scheme is not able to utilise its allocations till the last quarter of a Financial Year and that remaining allocated money has to be carried over to next Financial Year in violation of Financial rules, and that in 2016-17 too, ` 413 crores were carried forward from previous FY 2015-16, the Committee is inclined to recommend enhanced allocation for PMEGP on condition that it improves the utilisation of allocation evenly throughout the year.
51. In its previous year's Reports, the Committee had made observations that there is a proliferation of Schemes under the Ministry which are implemented largely through State agencies. However, the cost of implementing these Schemes is not realistically reflected in the Budget. It was suggested that Ministry must reflect the cost of implementing and monitoring a Scheme considering indifferent performance of most of its Schemes. The Ministry in its reply had noted Committee's observation. Yet in this year's Budget too, Schemes-wise assessment of cost of publicizing, implementing and monitoring a Scheme in remote grass-root levels, has not been done by the Ministry.
52. The M/o MSME informed that it has been continuously making efforts to rationalize the schemes. The Ministry however, accepted that it had not done any assessment of cost of publicizing, implementing etc. of Schemes in remote grass root levels, etc.
53. The Ministry further stated that with the doing away of distinction of Plan and Non Plan expenditure from the year 2017-18, the cost for implementation of schemes, which is mainly establishment and awareness expenses, will be included in the scheme-wise allocation itself. Also, the schemes of this Ministry are being implemented by various implementing agencies of the Ministry itself, like MSME-DIs and such agencies outside the Ministry's control, like State DICs, and Banks, etc., and hence to work out the scheme-wise actual cost of implementation is not possible.
54. The Committee takes note that Scheme-wise cost of implementation has not been indicated despite Ministry's agreement with Committee's earlier recommendation to this effect. In this regard the Committee takes note of CAG's earlier Report (1 of 2015) wherein the national auditor has commented on lax monitoring of utilization of Grants-in -Aids which constitute more than 90% of the Ministry's expenditure. The Ministry depends on these agencies outside the Ministry's control for outreach and delivery of most of its schemes at ground level. The Committee may be informed about the institutional, administrative and financial linkage between the Ministry and the State agencies to implement Ministry's schemes considering that most of States have parallel schemes that are primarily the responsibility of the State agencies. The Committee therefore finds it imperative that the Ministry should run only those Schemes that it can monitor effectively on regular basis through the institutions directly under its control or have an institutional MoU with the State agencies to implement its Schemes. The Committee recommends that the Ministry must consolidate its Schemes which is essential for better implementation and monitoring which is essential for efficient implementation of Schemes. 17
PERFORMANCE OF MINISTRY'S SCHEMES IN 2016-17 AND TARGETS FOR 2017-18
UNDER UTILIZATION OF FUNDS FOR SC/ST AND NER
55. During the presentation by the Secretary, the Committee was informed that while Ministry has been able to improve its utilization of allocation, the SC/ST components could not be utilized due to lack of demand. The Secretary submitted that due to historical and social reasons, the SC/ST artisans and craftsmen are not able to evolve into entrepreneurs to avail the benefits of enabling Schemes of the Ministry. Therefore, the SC, ST components of the allocation remain largely under-utilised inter-alia the overall utilization of allocation remains poor.
56. Amount allocated and actual expenditure under SCSP, TSP and NER in FY 2016-17 is as under:
(` in crore)
Division SC Sub Plan (SCSP) Tribal Sub Plan (TSP) NER
Allocation Actual* Allocation Actual* Allocation Actual*
BE RE BE RE BE RE
SME 37.32 22.00 0.49 25.50 10.64 0.01 31.10 10.64 0.00
ARI 219.00 207.30 152.86 149.66 141.22 109.23 182.50 155.50 113.51
DC 103.68 372.95 62.76 70.85 254.85 23.15 86.40 310.79 20.51 (MSME)
Total 360.00 602.25 222.41 246.01 409.52 139.69 300.00 476.93 134.02
*as on 31.12.2016
57. The Committee is alarmed at serious under-utilization of allocated funds for the marginalized communities of national life. It observes that while there is under-utilization of Funds for SC/ ST and NER, the performance of ARI division is comparatively better than the other two divisions, i.e., SME Division and the DC-MSME. These sections have traditional skills that can be scaled up into commercial enterprise. The Committee recommends that special efforts need to be made to improve the situation. The Committee recommends that the Ministry must set up a dedicated monitoring cell for SCSP, TSP and NER. Ministry may coordinate with DONER in this regard to utilize allocations for NER.
58. The Ministry may also consider putting the SCSP at the disposal of SC/ST Hub which has elaborate implementing and monitoring infrastructure under the Chairmanship of the Minister.
59. The Committee was informed that, special fund is given for SCP/TSP/NER by identifying and setting up of Incubation Centre/cluster under ASPIRE/SFURTI/PMEGP. LBI Centres are set up under these categories and SFURTI clusters are also developed under these categories. Special drive was 18 undertaken to mobilize and sponsor applications under SC/ST categories for PMEGP and as a result 41106 number of SC/ST applications were sponsored to the banks (between 01.07.2016 to 31.01.2017).
60. The Committee noted that in 2016-17, the allocation for NE Region was raised from ` 300 crores (BE) to ` 476 crores (RE) including ` 3.50 crores as Capital expenditure. It sought reasons for such steep increase in revenue allocation in RE. Also despite low utilization, this year in 2017-18, the allocation for NER has been further raised to ` 643.85 crores.
61. It was informed that as per the instructions of Government of India, earmarked fund for M/o MSME for NE Region is 10% of the budget allocation. The Plan budget allocation of the M/o MSME has been increased from ` 3000 crore (BE 2016-17) to ` 4974.40 crore (RE 2016-17) which was mainly due to increase in allocation under Credit Guarantee Scheme, CLCSS, etc. As a result allocation for NER too was raised. Capital allocation was increased to meet the requirement of Br. MSME Dimapur as the proposal was received for the construction of their own building.
62. The Committee notes that the increase in allocations to NER are only incidental to overall increase in Budget allocations regardless of actual utilization of funds. The Committee finds it ironical that scarce funds meant for NER region are enhanced incidentally just to remain idle.
63. This year the Planned and Non Planned Division has been done away with. It was enquired that in absence of such categorization from this year, how will the SCSP, TSP and NER allocations be determined.
64. The Ministry informed that as per the instructions of Government of India, allocation earmarked for SCSP, TSP and NER is 12.0%, 8.2% and 10.0% respectively of the total budget allocation for this Ministry and for the BE (2017-18), allocation has been done according to the prescribed guidelines.
65. The Committee noted that Rs 500 crore allocation has been made for SC/ST Hub, of which ` 60 crores have been allocated in BE 2017-18. The Committee sought to know how does the Ministry propose to use allocation this year for achieving overall objective of the Hub.
66. It was informed by the Ministry that the Hub has been set up to provide professional support to SC/ST entrepreneurs to fulfill the obligations under the Central Government Public Procurement Policy for Micro and Small Enterprises Order 2012, adopt applicable business practices and leverage the Stand up India initiatives. The functions of Hub include collection, collation and dissemination of information regarding SC/ST enterprises and entrepreneurs, capacity building among existing and prospective SC/ST entrepreneurs through skill training and EDPs, vendor development, promoting participation of SC/ST entrepreneurs in exhibitions and organizing special exhibitions for this purpose, facilitating SC/ST entrepreneurs participating in public procurement and monitoring the progress, etc. In FY 2017-18, it is proposed to organize 60 special Vendor Development Programme for SC/ST entrepreneurs. It is also proposed to facilitate capacity building for around 10000 SC/ST beneficiaries during the year. 19
67. It was informed that as per the guidelines of National Scheduled Caste and Scheduled Tribe Hub, following was the governing and monitoring structure created under the Hub:
(i) High Powered Monitoring Committee (HPMC) under the chairmanship of Hon'ble Minister (MSME) to monitor the work being done by the Hub and to guide the National SC/ST Hub. The committee has representatives of various stakeholders including States, various Ministries, Industry Associations and SC-ST entrepreneurs. This committee would monitor the overall activities of the Hub at the highest. The HPMC has met twice since its constitution on 22.09.2016 and 14.12.2016;
(ii) Advisory Committee with Shri Milind Kamble, Chairman, Dalit Indian Chamber of Commerce & Industry (DICCI) as its Chairman to bring the industry and SC-ST entrepreneurs' perspective to the Hub and will work under HPMC. The Advisory Committee has met twice since its constitution on 09.09.2016 and 14.12.2016;
(iii) Empowered Project Approval Committee (EPAC) headed by Secretary, MSME for examining/ approval of proposal seeking financial assistance under the scheme. EPAC has met thrice since its constitution on 16.08.2016, 14.12.2016 and 30.01.2017.
68. These Committees have taken various decisions for implementation of the Hub scheme like (i) Subsidy for NSIC Single Point Registration Scheme (SPRS) (ii) Special subsidy for Marketing Assistance Scheme (iii) Special Subsidy for Performance and Credit Rating Scheme for SC/ST beneficiaries and (iv) Special Credit Linked Capital Subsidy Scheme for new as well as existing SC/ST MSEs in Manufacturing activity through the existing channels of approval/implementation established for the existing & ongoing scheme of Credit Linked Capital Subsidy Scheme (CLCSS).
69. The Committee observed that this Scheme includes the same training, marketing and financial support programmes whose performance has been indifferent. The Committee noted that under Stand Up India Scheme out of 1.29 lakh Bank Branches, only some 1000 branches have met their target of lending to one SC/ST and one woman entrepreneur, fully. Some 11000 branches have met the target partially. During the submission before the Committee one of the industry associations informed the Committee that most of the Bank branches were lending to women entrepreneurs only under the Stand Up India scheme. The Committee may also be informed about the credit limit and interest rate charged under this Scheme.
70. During the interaction with the PSEs on the Central Government Public Procurement Policy for Micro and Small Enterprises Order 2012, most of the PSEs stated their difficulty in finding SC/ST entrepreneurs. These marginalized groups of society possess traditional and inherent entrepreneurial skills, which need to be tapped in alignment with market requirements. The Committee recommends that the Hub should create an All India Database of SC/ST entrepreneurs location and vocation wise and share the same with PSEs. Also, the SC/ST Hub should run NSQF compliant skill development programmes for SC/ST technicians who could take contract jobs and services that PSEs outsource. 20
A SCHEME FOR PROMOTION OF INNOVATION, RURAL INDUSTRY & ENTREPRENEURSHIP (ASPIRE).
71. The Ministry of Micro, Small & Medium Enterprises launched a new scheme namely, ASPIRE (A Scheme for Promoting Innovation, Rural Industry and Entrepreneurship) on 18.3.2015 to accelerate entrepreneurship and to promote start-ups for innovation and entrepreneurship in agro-industry.
72. The Committee was informed that the target under ASPIRE was to set up 80 LBIs and 30 TBIs upto March, 2017. As on 14.2.2017, 50 LBIs and 5 TBIs have been sanctioned by the Ministry. Out of these, 24 LBIs have been operationalized and three TBIs have also initiated on idea incubation. For remaining 26 LBIs funds have already been released and they are under different stages of operationalization, like tendering for plant & machinery, etc.
73. In the case of LBI, 1st installment of 50% of the approved amount after approval of the incubation centre by the Scheme Steering Committee and signing of bond is released. 2nd installment of 30% of the approved amount is released after installation of plant & machinery at the centre and 3rd/last installment of 20% of the approved amount is released after commencement of training.
74. In the case of TBI, 1st installment of 50% of the approved amount after approval of the incubation centre by the Scheme Steering Committee and signing of bond is released. 2nd/last installment of 50% of the approved amount is released after installation of plant & machinery at the centre.
75. Rs. 20 crore was the RE for 2016-17. Out of this, funds of Rs. 11 crore have been released to various LBIs/TBIs upto 31.1.2017.
76. Regarding underachievement of TBI target, it was informed that two other similar schemes viz., Atal Innovation scheme and Start-Up India being implemented by NITI Aayog and DIPP which provides financial assistance of ` 10 crore and ` 5 crore respectively for TBI whereas ASPIRE scheme of M/o MSME provides assistance of ` 1 crore only. Since NITI Aayog and DIPP are providing relatively more funding than M/o MSME, the stake holders appear to be reluctant to avail ASPIRE scheme. Hence, the target of TBI could not have been achieved as of now.
77. The Committee expresses its concern that the Ministry sets ambitious targets only to be missed significantly. The Committee had repeatedly cautioned against parallel Government schemes like ASPIRE and Atal Innovation Scheme to incubate entrepreneurship. The Committee's apprehensions seem to be realistic as the Ministry has admitted that stakeholders find the AIS and Start Up India more favourable than ASPIRE and are reluctant to avail this Scheme, Therefore there is under achievement of target.
78. It was informed that as on 31.01.2017, 2865 candidates have completed the training and 2217 are undergoing training. Out of 2865, those who have completed the training, 178 are employed, 334 are self-employed and 89 have only applied under PMEGP for support. The number is going to increase along with the new skill sets and new centres getting opened across the country.
79. The Committee asked about the sustainable revenue model of these LBIs and TBIs. It was informed that under ASPIRE, it is necessary for applicant organization to give a sustainable revenue 21 model for the proposed LBI. Screening Committee of ASPIRE examines the proposals with a view that fee from incubates is charged and that LBI is using its resources for production and sale of finished products for revenue generation. Dovetailing of funds for running the centres from other schemes of Ministries and even State Governments are also encouraged.
80. The Committee noted that despite ambitious target of setting up of 80 LBIs and 30 TBIs by March 2017, the allocation for ASPIRE was reduced from ` 100 crores (BE 2016-17) to ` 20 crores in RE. Yet, the allocation has been raised to ` 50 crores in BE 2017-18 vis a vis ` 20 crore in RE 2016-17.
81. The Ministry informed that owing to non-receipt of viable proposals, the progress of expenditure has been slow, hence the reason for reduction in RE from ` 100 crore to ` 20 crore. The savings of ` 80 crore were transferred to Infrastructure and Capacity Building - EAP scheme of the Ministry.
82. The Ministry further submitted that the allocation is proposed to be increased as it is expected that more and more proposals for setting up LBIs will be forth coming in next year. There is already a demand from State Governments of Rajasthan and Uttar Pradesh for setting up LBIs in each of their districts. Viable proposals from State Government have been sought.
84. As per the information provided, the Committee noted that of the 2900 trainees incubates at LBIs, only 450 have been Self/wage/PMEGP employed. The Committee has always suspected the employability of Ministry's Skill Training programmes. It reiterates its earlier observations that the Skill Development Programmes be made more employability focused.
85. The Committee observed that the Incubates at LBIs or TBIs did not avail the Schemes like ASPIRE Fund of Rs 60 crores or MUDRA or Start Up that are essentially meant for Start Ups and Low investment projects. It sought the reasons for not availing the benefits of these Schemes by Incubates and steps to be taken to encourage the Incubates to avail these Schemes.
86. It was informed that ASPIRE Fund of Fund is managed by SIDBI. It is used by SIDBI for funding /promoting startups in Agro-Rural space. Till date 4 proposals of startups worth ` 39.50 crore have been approved by SIDBI. Under the Fund of Funds (FoF) operation, the incubates or even the startups are not funded directly, but through the Alternate Investment Funds (AIFs), who after obtaining funds from the FOF, further invest in ventures/startups.
87. The Committee cautions that Ministry will have to improve employability of incubates if the schemes were to succeed. It has been stated that 334 have been self employed. As the concept of incubation involves post training, hand holding and guidance, the Ministry and the respective LBIs must track the survivability of these enterprises.
88. The Committee also recommends that ASPIRE must be closely linked up with MUDRA, Stand Up and Start Up schemes to provide financial assistance to the entrepreneurs. The LBIs should tie up with SHGs and women organizations, ITIs and skill development institutions. 22
89. The Committee is surprised to note that same organisation SIDBI is operating numerous Fund of Funds meant for Start Ups which are to be funded through AIFs. The Committee wonders if it would be desirable to merge these numerous Funds of Funds to create a bigger corpus, which will also facilitate monitoring of AIFs.
90. The Committee may be informed about the templates and benchmarks on which the success of ASPIRE Fund will be judged as the start ups are not funded directly but through Alternative Investment Funds. The Committee feels that mere allocation of Funds from ASPIRE Fund to AIFs cannot be a measure of success of this mechanism. It needs to be ensured that start up actually avail the affordable finance from these AIFs and are able to survive.
91. The Committee may also be informed how the operations and accounts of this Fund are audited.
NMCP
92. Previously too, the Committee had raised concern over indifferent performance of such an important scheme. At the conclusion of 12th Plan, the Committee sought details of year-wise BE, Actual Expenditure and Achievement in all six components of NMCP.
93. The Ministry provided the details of year-wise BE, Actual Expenditure and Achievement (No. of MSMEs benefitted) in all six components of NMCP are as under:
1. Design Clinic Scheme
2012-13 2013-14 2014-15 2015-16 2016-17 (as on 31.12.2016)
BE Act. Ach. BE Act. Ach. BE Act. Ach. BE Act. Ach. BE Act Ach. Exp. Exp. Exp. Exp. Exp.
14.00 6.70 2077 14.00 7.51 7863 14.00 9.60 5406 10.00 0.00 867 10.00 7.18 764 Units Units Units Units Units
2. Lean Manufacturing Competitiveness Scheme
2012-13 2013-14 2014-15 2015-16 2016-17 (as on 31.12.2016)
BE Act. Ach. BE Act. Ach. BE Act. Ach. BE Act. Ach. BE Act Ach. Exp. Exp. Exp. Exp. Exp.
15.00 2.75 18 15.00 4.11 140 15.0 0 14.64 1326 12.00 11.46 1107 14.00 13.01 593 Units Units Units Units Units 23
3. Technology Upgradation and Quality Certification (TEQUP) to MSME
2012-13 2013-14 2014-15 2015-16 2016-17 (as on 31.12.2016)
BE Act. Ach. BE Act. Ach. BE Act. Ach. BE Act. Ach. BE Act Ach. Exp. Exp. Exp. Exp. Exp.
26.00 6.14 MSME 20.50 1.59 Product 20.50 2.89 AP on 20.00 14.27 AP on 20.00 10.83 EET assisted Certifica PC-46 PC-56 cases for EET tion - Nos. PC Nos. Reim- : 48 Nos. 194 Nos. reim- MSME 143 PC PC 186 assisted units- Reim:- AP on for EET- 87 Ap- 201 EET-43 186 PC 50 AP on Nos. reim-133 PC-39 No AP Nos. on EET- 53 Nos.
4. Promotion of ICT Tools in MSME Sector
2012-13 2013-14 2014-15 2015-16 2016-17 (as on 31.12.2016)*
BE Act. Ach. BE Act. Ach. BE Act. Ach. BE Act. Ach. BE Act Ach. Exp. Exp. Exp. Exp. Exp.
20.00 0.10 - 18.00 0.09 - 18.00 0.63 - 5.50 0.04 - 5.00 0.13 -
*ICT Scheme is under revision.
5. Support for Entrepreneurial and Managerial development of SMEs through Incubators
2012-13 2013-14 2014-15 2015-16 2016-17 (as on 31.12.2016)
BE Act. Ach. BE Act. Ach. BE Act. Ach. BE Act. Ach. BE Act Ach.$ Exp. Exp. Exp. Exp. Exp.
12.00 2.30 29 10.50 2.44 53 10.50 1.87 143 7.00 6.22 145 10.00 4.08 70
$: No. of Innovative Ideas approved.
6. Intellectual Property Facilitation Centre (IPFC)
2012-13 2013-14 2014-15 2015-16 2016-17 (as on 31.12.2016)
BE Act. Ach. BE Act. Ach. BE Act. Ach. BE Act. Ach. BE Act Ach. Exp. Exp. Exp. Exp. Exp.
5.00 1.88 1990 3.00 1.61 2340 3.00 0.83 1072 3.00 1.74 4938 3.00 2.16 7021 MSME MSME MSME MSME MSME Units Units Units Units Units benefited benefited benefited benefited benefited 24
94. NMCP consists of six components. Last year in the RE (2016-17) the allocation for NMCP was enhanced despite low utilization of allocation and under achievement of targets under all the components in previous years. This year, the allocation for NMCP has been reduced to ` 506 crores vis-a-vis RE(2016-17), of ` 630 crores. The Committee sought the reasons for such vacillating trend in allocation.
95. The Ministry submitted that initially NMCP had ten components. Out of these 10 components, Marketing Assistance and Technology Upgradation Scheme (MATU) and Marketing Support / Assistance to SMEs (Bar Code) have been taken off from NMCP. Moreover, QMS/QTT has been merged / subsumed under a new scheme announced by the Prime Minister viz., "Financial Support to MSMEs in ZED Certification" (ZED). Consequently, the number of schemes under NMCP has come down to six (excluding ZED) and also ZED scheme has been launched recently. ZED scheme will also take some time to take off.
96. The Committee noted that under the ICT Tools component (NMCP) after 5 years, only an MoU with TCIL to empanel Cloud Service providers could be signed. After 2015-16 modification, Scheme is under revision though without any achievement so far.
97. The Committee was informed that under Lean Manufacturing Competitiveness Scheme in 2016-17 an expenditure of ` 13.03 crore has been made. In this Financial Year 75 Special Purpose Vehicles (SPVs) [a mini cluster of 6 to 10 units is formed under each SPV] are formed for Lean Manufacturing interventions in the units.
98. The Ministry informed that during the financial year 2016-17 till 10.02.2017, 251 MSMEs have been assisted and subsequently subsidy of ` 13.16 crore was released under Technology and Quality Up- gradation Support Programme (TEQUP). Apart from this, MSME-DIs have conducted about 50 Awareness Programmes benefitting about 1500 MSMEs. The target of Awareness Programmes and utilization of funds allocated during 2016-17 will be achieved by 31.03.2017.
99. The Committee wonders whether holding of awareness programmes for Technology & Quality Up-gradation, with intangible outcome, be a sufficient parameter to measure the achievements of a Scheme. The Committee observed that very small numbers of units have actually been assisted under the Scheme during the 12th Plan period.
100. The Committee observed that under Support for Entrepreneurship and Managerial Development Programme (NMCP) 147 Host Institutions/Business Incubators and 430 Ideas have been approved during 12th Plan period till Nov, 2016.
101. The Committee wondered if mere approval could be construed as a measure of performance of any Scheme. How is the success of this Scheme measured? The Committee further sought whether any audit of such institutions receiving Assistance is done and also sought the details of monitoring and audit mechanism. 25
102. The Ministry replied that the purpose of the scheme is to provide small doses of assistance to students/ex-students of science and technology and entrepreneurs to enable them to try out their innovative ideas regarding processes and products at the laboratory or workshop stage and beyond-to carry forward the idea from its mere conception to 'know-how 'and then to 'do how' stage. The scheme is designed for sustaining, at some basic or introductory level, the incubation of ideas that would have otherwise been lost for want of support. The expectations are that a sizeable percentage of the grantees/incubatees would be graduating to higher levels of operation, which would then require other levels of support under other schemes/ organisations and from Venture Capital or Angel Funding.
103. The Committee may be informed of the status of 430 new ideas that have been financed under Support for Entrepreneurship and Managerial Development Programme and details of those who have been commercialized. The Committee may also be informed if these ideas have been assisted under several innovation and entrepreneurship development schemes of the Ministry like ASPIRE Fund. The Committee has not been informed regarding monitoring process of the utilization of assistance by the Host institution. The Committee would also like to be informed whether any Audit has been undertaken of the Institutions that received assistance under the NMCP.
104. The Committee noted that under Design Clinic, after 5 years, only a MoU between NID, Ahmedabad and DC (MSME) has been signed. What has been the performance of this Scheme in 2016-17? Can the Scheme meet the objectives set for 12th Plan?
105. The Ministry replied that the MoU between O/o DC (MSME) and NID signed on 8.8.2016 was for implementation of Up-scaled Design Clinic Scheme. Under up-scaled Design Clinic Scheme, 764 Nos. of MSMEs benefitted, and 76 Nos. of Professional Design Projects were approved, etc., with an expenditure of ` 7.18 crore in 2016-17.
106. Regarding improvements made in the scheme the Ministry informed the Committee that the Lean Manufacturing Competitiveness Scheme (LMCS) was up-scaled in 2013, considering the recommendations of the evaluation report conducted by independent agency, the number of National Monitoring and Implementation Unit (NMIU) has been increased from one to two and cluster size has been reduced from10+- 2 units to 6 to 10 units. In the pilot phase, MSMEs having EM-II with District Industries Centre (DIC) to avail the scheme benefits, whereas in the up-scaled LMCS, MSMEs registered with DIC (EM-II) or with any other agencies (professional body, association, Govt. Agency / Udyog Aadhaar Memorandum (UAM), Department, etc.) can take benefits under the scheme, etc., as a result the progress under up-scaled scheme are 697 number of National Workshops were organised and 397 Special Purpose Vehicles (SPVs) formed for lean intervention in the units, etc.
107. The Design Clinic Scheme was up-scaled in 2015-16, considering the recommendations of the evaluation report conducted by independent agency, the number of implementing agency has been increased from one to three as National Institute of Design (NID), Ahmedabad who act as Principle Implementing Agency and with other implementing agencies like Indian Institute of Science (IISc) & Council of Scientific and Industrial Research (CSIR) are coordinating to have a wider outreach of the scheme. 26
108. In Up-scaled Design Clinic Scheme the subsidy percentage for micro projects increased from 60% to 75% in case of Micro Industries. A new provision has been made for National level Workshop. The progress under up-scaled scheme are 764 Nos. of MSMEs benefitted, 14 Nos. of seminars, 5 Nos. of orientation programme, 1 no. of National Workshop organised and 76 Nos. of Professional Design Projects were approved for design intervention amongst MSMEs, etc.
109. Another Scheme for ZED Certification has been launched this year. However no separate allocation has been made for the Scheme for 2017-18. The Committee sought the reason for not allocating funds and about the target set.
110. The Ministry replied that an amount of ` 18 crore has been allocated for ZED Certification scheme in BE (2017-18) under Technology Upgradation and Quality Certification and allocation for ZED is not separately reflected in Detailed Demands for Grants (DDG) of this Ministry. The target under the scheme for 2017-18 is to conduct 700 Awareness Programmes, 2 National Workshops and 6 Training of MSME- DIs & TCs officials.
111. The Committee noted that the independent Third Party evaluation of NMCP components was conducted in the beginning of the 12th Plan by the NIESBUD, which was an autonomous organization under the Ministry and the Quality Control Council, wherein the Government has significant stakes. The Committee raises questions over independence of such Third Party evaluation.
112. The Committee considers that the NMCP is critical to enhance competitiveness of MSMEs in the country. However, compared to the scope, spread and magnitude of this sector the allocation has been too meager to make any significant intervention. The number of units benefitted by these schemes is too insignificant to measure any impact of this Scheme. However, observing the utilization of allocated funds and physical achievement of Scheme throughout the 12th Plan, greater emphasis has been on awareness programmes. The Ministry may also inform the Committee whether it counts those who attended awareness programmes, without actually availing the benefits as beneficiaries.
113. The Committee is constrained to note that during first three years of the current Plan the utilization has been meager. The Schemes have been repeatedly reframed and thereby withholding the expenditure pending the mid-course review. The Third Party Review of all the components of NMCP in the beginning of 12th Plan, had commended the utility of these components and recommended their continuation. The Committee finds that these Third Party review, though selected through bidding, were conducted by the NIESBUD, which was an autonomous organisation under the Ministry and Quality Council of India, wherein Government has significant stakes. That is why the Committee has been steadfast in its recommendation that the NMCP Scheme must be Performance Audited by the CAG. The Committee may be informed of the salient outcomes of the Audit for which CAG has already been requested and Ministry's compliance thereon. 27
ASSISTANCE TO TRAINING INSTITUTIONS (ATIS)
114. The Committee has raised questions on the quality of training under the ATI scheme of the Ministry and employability of the trainees. The Ministry too has conceded that only 24% of the trainees could be wage/self employed. The Committee also sought details of Planned Outlay for 12th Plan, Year -wise BE/RE allocations and actual utilization, Institution-wise target of trainees and actual achievement.
115. The Ministry informed the Physical targets under the ATI Scheme for the 12th FYP is as under:-
Plan Financial Physical Financial (` in Crore) period Year (ATI and Non-ATI)
Target Achievement Plan BE RE Utilization Outlay
XII Plan 2012-13 1,41,000 2,38,805 58.22 64.00 64.00 58.22
2013-14 1,69,000 2,72,212 102.00 102.00 142.00 116.58
2014-15 2,03,000 4,30,436 133.00 132.00 87.00 86.25
2015-16 2,44,000 2,03,486 133.00 80.00 75.02 72.87
2016-17 2,45,000 1,31,932 134.78 79.99 43.34 27.27 (As on (As on 31.01.2017) 31.01.2017)
TOTAL 10,02,000 561.00 457.99 411.36 361.19
116. Institution-wise target and achievement under the ATI Scheme during the 12th FYP was informed as given below:-
Institute 2012-13 2013-14 2014-15 2015-16 2016-17 (As on 31.01.2017) Target Achiev Target Achiev Target Achiev Target Achiev Target Achiev ement ement ement ement ement IIE 33520 31911 16575 8779 20285 20639 0 0 * * NIESBUD 37975 38584 51685 39979 56410 53947 9625 9735 * * NIMSME 28380 28585 31555 31211 47575 47092 31775 31874 4050 2280 NSIC 8420 8463 2685 1644 1390 1208 2003 1523 4565 1947 CTRL 7275 7364 8000 7959 12225 12271 7375 7284 8600 #3229
TOTAL 115570 114907 110500 89572 137885 135157 50778 50416 17215 7456
*IIE and NIESBUD were transferred to M/o SDE w.e.f. 22.05.2015 # As on 31.12.2016. 28
117. The Committee observes inconsistent allocation and utilization of funds and achievements of annual targets particularly in the years 2013-14 and 2014-15. Every year while utilization of funds has been lower than the allocation, the achievement far exceeded the target. Though the five Institutions concerned under ATI have only met their targets. In 2014-15, the achievement was double the target even with lower utilization of funds. Even after shifting the two institutions to M/o Skill Development, the targets remained the same with lower allocation of funds. The Committee also observed that the targets and achievements of the training institutions covered under ATI scheme, have been modest over the years. The Committee finds figure incredulous and sought to know which were the training institutions that achieved such incredible performance. The Ministry may explain the pattern in allocation, utilization and achievements.
118. The Committee sought to know what steps were being taken to improve employability of trainees and whether the courses offered in these Institutions were recognized by professional bodies and were NSQF compliant.
119. The Ministry informed that national EDIs viz. NIMSME, NIESBUD, IIE and Central Tool Rooms and NSIC are specialized agencies of Government, which have developed training modules/courses over a period of time. With the introduction of NSQF, all the Apex Institutions have been directed to make their training courses National Skills Qualification Framework (NSQF) compliant.
120. Notwithstanding Ministry's submission, the Committee takes note of the Ministry's reply to the Committee's observations in 278th Report, wherein it was stated that as per the survey from trainees within the six months of completion of training, wage and self employment, figures were only about 24%. The Committee reiterates that such performance is colossal waste of financial and human resources.
121. The Committee also recommends that Ministry should frame a time bound programme to make all its courses NSQF compliant and should also start a special campaign to enroll skilled artisans from unorganized sector for these programmes as NSQF is essentially for these artisans. The Ministry must inform the Committee about such Scheme.
122. The Committee noted that the allocation to ATI Scheme reduced from ` 79.99 crores in BE 2016-17 to ` 43.44 crores in RE 2016-17 and then further lowered in BE 2017-18 to ` 30 crores.
123. The Ministry submitted that the ATI Scheme was revised w.e.f. 01.09.2016 in view of formation of new Ministry of Skill Development Entrepreneurship in July, 2014, which is mandated to look after the requirement of skill and entrepreneurship development in the country and subsequent transfer of two national EDIs, namely, NIESBUD and the IIE from Ministry of MSME to Ministry of Skill Development and Entrepreneurship in May 2015. The objective of the revised Scheme is to have more focus on strengthening of training infrastructure of the training institutions of Ministry of MSME and the existing State level EDIs; MSME related issues and skill development programmes. Amendment to the Scheme during 2016-17 has been one of the reasons for low utilization of funds. Allocation for 2017-18 have been proposed keeping in view the requirement of funds in 2017-18. 29
124. In view of indifferent performance of ATIs and lower employability of trainees, the Committee has been recommending Performance Audit of Ministry's training institutions. The Committee asked about the status of Committee's recommendation for Performance Audit of ATIs and TC/TRs for the 12th Plan period.
125. The Ministry informed that a request has been made vide letter No. 3(1)/2016-EDI dated 16.12.2016 to CAG to undertake performance audit of the ATI Scheme as per the recommendation of the Hon'ble Committee. Reply from CAG Headquarter is awaited.
126. Office of DC (MSME) have written a letter dated 09.05.2016 to CAG requesting them to conduct the Performance Audit of 18 Tool Rooms & Technology Development Centres, under Audit Regulations 2007(Chapter 7) of CAG Act, 1971. A team of Officers from CAG Office, New Delhi has visited this office in September, 2016 and asked to provide various documents pertaining to Tool Rooms. All the documents have been provided to them. Response from CAG is awaited.
127. The Committee may be apprised of the outcome of the Performance Audit of ATI scheme and Tool rooms and compliance thereof by the Ministry.
128. The Committee noted that the allocation for Infrastructure Development and Capacity Building, which also includes Tool Rooms and Technology Centers, has been substantially increased in 2017-18.
129. It was informed that World Bank assisted Technology Centre Systems Programme envisage establishment of new TCs as well as upgradation of existing TCs. The allocation under TCSP of ` 450 Cr. include budget for establishment of new TCs as well as upgradation of existing TCs. 46 machines worth ` 85 Crores have been procured for modernization of three existing TCs and under 2nd phase, 6 TCs are considered for modernization.
130. The Ministry further explained that Ministry of MSME through office of Development Commissioner, MSME is implementing "Technology Centre Systems Programme (TCSP)" to establish 15 new Technology Centres (TCs) and upgrade existing Technology Centres at an estimated cost of ` 2200 crore including World Bank Loan assistance of USD $ 200 Mn. After close of the design phase on 14.01.15, Implementation Phase started w.e.f 15.01.15.
• For establishing Technology Centres under TCSP, Programme Steering Committee has finalised 15 locations in various states, while under upgradation of existing TCs, nine of the existing TCs have been considered currently for modernization/upgradation.
• For construction work under the project, Letter of Acceptance (LoA) have been issued for 8 new TCs and one existing TC. The cost of construction of these 9 sites is ` 486 Crore.
• Construction work at IDEMI, Mumbai and IGTR Aurangabad is also under Bidding process with an estimated cost of ` 27 Crore.
• Construction work for remaining 7 new TCs and 4 existing TCs will also require funds to the tune of ` 400 crore approx. 30
• Machines and Equipments for 6 existing TCs and new TCs worth approx. Rs 1000 Crore will be procured in the next two years.
131. The Secretary in his presentation stated that the Budget allocation of Rs 250 crore has been made for the year 2017-18 which will not be sufficient.
132. The Committee noted that the Ministry had demanded a BE of Rs 532.70 crore in BE 2017-18. In view of the submission made by the Secretary and the committed expenditure in the on-going projects, the Committee recommends that the Ministry should seek requisite funds from M/o Finance after reviewing the progress in expenditure on the on-going projects. The Committee is of the opinion that as the project involves assistance from a multi-lateral agency, the Government should fulfill its commitments under the agreement and expedite the usage of assistance.
133. The Committee has questioned the employability of the trainees trained in more than 6 month courses and sought details of employability for last three years vis-a-vis number of trainees trained in respective TC/TRs.
134. The Ministry provided details of trainees trained in more than six months duration courses and their placement for the year 2013-14; 2014-15 and 2015-16 as given below:
Year Total Number No of Trainees No of Trainees No of Trainees of Trainees Opted for Placed opted for self Trained Placement employment
2013-14 12369 6337 5296 253
2014-15 31150 9645 6367 311
2015-16 33456 11695 8761 270
135. The Committee further asked whether courses offered in TC/TRs were NSQF compliant and about steps being taken to improve employability of trainees from TC/TRs
136. It was informed that 23 training programmes have already been approved by NSQF and 37 courses are also under process for getting approval.
137. The Committee expresses its reservation over continued low employability of trainees from TC/TRs. Without raising the employability it will be wastage of resources. The Committee expects the Ministry to inform the concrete steps taken to improve employability.
138. The Committee recommends that Ministry should launch special drive for tradionally skilled craftsman who do not possess any formal qualification. Training them is the objective of NSQF.
SFURTI
139. The Committee noted that the 12th Plan target for SFURTI was reduced from 800 Clusters to 71 Cluster in First Phase. 31
140. The Ministry replied that Hon'ble Finance Minister in Union Budget for 2013-14, announced setting up of 800 clusters of Khadi, Village Industries and Coir during Twelfth Plan with an outlay of ` 850.00 Crore to cover around 4 lakh artisans. Subsequently, in the EFC meeting held under the chairmanship of Secretary (Expenditure) on 3.01.2014, it was decided that assistance from Multilateral Development Banks may be tied up through Department of Economic Affairs for extending SFURTI to 800 clusters during Twelfth Plan. In the meanwhile, the scheme may be recast with modified norms, but with reduced total cost and the modified scheme may then be appraised by departmental EFC/SFC as per delegated appraisal limits.
141. A proposal for mobilizing external assistance for implementation of SFURTI was sent to Planning Commission and Department of Economic Affairs for in-principle approval on 18.02.2014 along with a preliminary Project Report. Ministry's request for external assistance for SFURTI was considered in 40th meeting of the Screening Committee of the Department of Economic Affairs on 28.02.2014. Assistance of US$ 134 million for SFURTI Progamme was tentatively given in-principle approval subject to a project study. Technical assistance of US $ 225000 was approved on 18.02.2015 by ADB for developing the SFURTI project study to be completed within six months.
142. As decided in the EFC meeting held on 3.01.2014, a meeting of the EFC under the Chairmanship of Secretary (MSME) was held on 26.02.2014 to consider the implementation of revamped SFURTI scheme during the terminal three years of the Twelfth Five Year Plan with a financial outlay of ` 149.44 crore for 71 clusters. The scheme guidelines could be approved in 2014 and were revised again in 2015 owing to difficulties being faced in implementation. Since 2015, 60 proposals have been given final approval out of which 4 KVI clusters and 4 Coir clusters have been operationalized so far. By March 2017, 25 clusters would be operationalized.
143. A total amount of ` 80.09 crore including ` 49.80 crore during the year 2016-17 has been released upto 31.12.2016 under SFURTI.
144. The Committee asked about average membership of each approved Cluster and how many Units will be benefited.
145. Ministry informed that as per the actual approval for 60 clusters given as of now, 4 Heritage (1000 to 2500 artisans), 16 Major (500 to 1000 artisans) and 40 Mini clusters (upto 500 artisans) have been approved with total artisans of 54,091, who will be benefited out of the scheme as against a target of 44000 artisans from 71 Clusters. A total of 54091 artisans are likely to be benefited under 60 clusters and total financial support for these 60 clusters will be ` 118.63 crore.
146. The Ministry informed the Committee that Soft Interventions under SFURTI were awareness, counseling, motivation and trust building; skill development and capacity building/for the entire value chain different skills need to be imparted; institution development; exposure visits; market promotion initiatives; design and product development; participation in seminars, workshops and training programmes on technology upgradation, etc. 32
147. Hard interventions included creation of multiple facilities for multiple products and packaging wherever needed; common facility centres (CFCs); raw material banks (RMBs); up-gradation of production infrastructure; tools and technological up-gradation such as charkha up-gradation, tool-kit distribution, etc. warehousing facility; training center; value addition and processing center/multi-products.
148. So far the SFURTI scheme has been getting Budgetary support. The Committee asked what was the sustainable revenue model to make each Cluster financially autonomous to maintain/expand common facilities. Whether assets of the Cluster are to be transferred to Implementing agency?
149. The Ministry informed that the Implementing Agency (IA) can levy user charges on the facilities created through SFURTI grant and can market their finished products in open market or through their dedicated showrooms/stalls/shops. Assets of the Cluster will be the property of Government of India for 10 years from the sanction of the financial assistance by the Government and will be maintained by the IA and will be transferred to the IA after completion of 10 years. In case of dissolution of IA/SPV within 10 years, the assets will be vested with the Government. The Agreement with Implementing Agency is done at the level of Nodal Agency (i.e. KVIC for Khadi and VI Clusters and Coir Board for Coir Clusters). The title of the land on which the CFC is constructed lies with the SPV so created.
150. Regarding downscaling the SFURTI target, an impression is being given that the Finance Minister made a Budgetary announcement in 2013-14 of setting up 800 SFURTI Clusters with an outlay of ` 850 crores for Twelfth Plan, without adequately considering the financial implications and doing any realistic planning. There were repeated mid-term course correction and revamping of the Scheme. There was almost nil expenditure for first three years of the current Twelfth Plan. The Outlay has now been reduced to ` 149 crores for 71 clusters. After five years the Ministry is nowhere near the original target. The Committee has always expressed its reservation over the way Planned Schemes are announced in the annual Budget without making adequate institutional planning and financial provisions which subsequently results in mid-course revamping and recasting of the scheme and consequent under-utilisation of allocations for successive years. As such, The Committee observes that SFURTI Scheme is a classic case of mismanagement and poor monitoring of a Planned Scheme of the Ministry.
151. No information has been provided on the progress made in the utilization of $134 Million ADB assistance for the remaining SFURTI scheme. The Committee may be informed of terms of this ADB assistance, annual Budget support that will be required for availing this assistance and the schedule of implementing the SFURTI scheme.
152. The Committee takes note of recent CAG Report (11 of 2016) on the Ministry of MSME which has serious comments on the working of the eight sample SFURTI Clusters, maintenance of records of their assets, enhancement of remuneration of artisans, ownership of Common Facility Centres and relationship between Implementing Agency and the artisans. The Committee may be informed of the Ministry's reply and compliance to the CAGs observations. 33
153. The Committee also takes serious note that the Ministry has not included such serious Audit observations of SFURTI by the CAG, in its Annual Report. The Committee recommends that Audit Observations and compliance thereon should be included in the Ministry's Annual Report.
154. In view of recent CAG observations, the Committee reiterates its recommendation that SFURTI may be Performance Audited by the CAG for the entire Twelfth Plan period at the conclusion of current Plan. Findings of the Audit and the compliance thereon, may be informed to the Committee.
PMEGP
155. In order to bring in transparency as well as to create data base of PMEGP beneficiaries, an online PMEGP-MIS web portal has been introduced w.e.f. 1st July, 2016. All applications and fund flow will be processed online in stipulated time frame. As per on-line portal about 3,83,418 applications have been received upto 26.02.2017, where as the allocation of fund of ` 1100.00 crore under BE 2016-17 can cater only to only about 50,000 applications. Hence, more than 2/3 of the applications have to be rejected.
156. PMEGP is a flagship Scheme of the Ministry. Although Ministry has been receiving large number of applications but if is able to include only 1/3 applications for benefits and has to reject remaining 2/3rd applications, for want of funds allocated.
157. The Committee noted that during 2015-16 BE, ` 1050 crore were allocated under PMEGP, out of which ` 1019 crore were allocated towards Margin Money Subsidy and ` 31.00 crore towards Backward and Forward linkages. ` 1013.53 crore was released to the KVIC till 29.03.2016 during FY 2015-16, for providing the MM funds to the States/UTs.
158. Under RE 2015-16, additional fund of ` 235.68 crore has been allocated under PMEGP. However, RE was approved on 31 March, 2016 and the additional fund was released to KVIC only in 31.3.2016 evening, which reached to KVIC in April, 2016 and could be utilized during the FY 2016-17 only.
159. Expenditure of ` 413 crore during 2016-17 is being incurred out of budget allocation of ` 1000 crore for financial year 2015-16 under PMEGP. During 2016-17 available money under PMEGP has been ` 1500 crore and the expenditure has been only ` 700 crore. till December 2016. The Committee wondered whether it will be possible to incur remaining amount of ` 800 crore in last three months. The Committee also sought to know whether some budget of this year will be utilized in the next year.
160. During the FY 2016-17, PMEGP was shifted from off-line to complete on-line mode, PMEGP- e-portal was put into operation w.e.f. 1.7.2016, meeting/workshops were arranged at State/district levels to apprise all the stakeholders including Banks about the portal and in actual applications reached to the Banks after August, 2016, and online sanctions were started in October, 2016. Further, with the announcement of demonetization in November, 2016, the pace of sanctions was slowdown for some time and only about 1000 applications were sanctioned during Nov.-December, 2016. The pace of sanctions 34 increased thereafter and now more than 500 applications are being sanctioned per day and with this pace by the end of March more than 30,000 sanctions will be available. Though, disbursement of Margin Money to all the sanctioned applications may not be possible by March, 2017, but as huge applications are being received on the on-line portal and about 1.4 lakh applications have already been forwarded to Banks, more funds would be necessary to clear these applications during 2017-18. 161. The Committee also observes that ` 413 crores were carried over to 2016-17 from the previous year's RE whose release was delayed. As such for year 2016-17 ` 1513 crores [ ` 1100 crore (BE) + ` 413 crores (carried forward from previous FY)] were available. Of which by 31.12.16, ` 875 crores were released by the Ministry as Margin Money. That leaves ` 640 crore unspent for last quarter of 2016-17. Even of the released amount of ` 875 crores, only about ` 660 crores has actually been disbursed by the Banks. Therefore almost half the allocation is not actually disbursed till very last quarter of current Financial Year. The Committee has been repeatedly questioning the prudent financial management of the scheme and complicated structure that delays prompt disbursal to beneficiary. In view of the above facts, the Committee finds that the situation has not improved much. 162. The Committee takes note of Ministry's assertion that it may require more money to clear 1.4 lakh applications that have been forwarded to Banks. It is not clear whether these applications have been cleared by the Banks too. It has been Committee's experience that a large number of applications forwarded by the DLTFCs are rejected by the Banks too. The Committee also takes note of Ministry's admission that disbursement to all sanctioned applications may not be possible by the end of FY. From the stand point of an entrepreneur applicant, it is an unacceptable situation that legitimate benefit of a policy are denied just because RE was released in the evening of last day of the Financial Year. The Committee fails to comprehend the use of such release, except that the Government's accounts are technically reconciled though without achieving the intended objective. In such a scenario, the Ministry by its own admission is not able to disburse money till the end of FY due to technicalities involved in the Scheme and these have not been sorted out despite Committee's repeated observations and suggestions. The Committee wonders as to why further enhancement in allocation be recommended, despite huge demand for the Scheme which remains unmet every year. 163. A target of establishing 75 new PMEGP units each with investment of ` 8-10 lakh was set in each district of the country. The Committee noted that only 200 districts out of 676 districts of the country could achieve this target.
164. No. of districts State/UT-wise and no. of districts completed target of 75 numbers of projects during 2015-16 are as given below:-
Sl. No. State/U.T. Total No. of district No. of district completed target of 75 no. of project 12 3 4
1. Jammu and Kashmir 22 12
2. Himachal Pradesh 12 6
3. Punjab 22 2 35
12 3 4
4. U.T. Chandigarh 1 0
5. Haryana 21 3
6. Delhi 11 0
7. Rajasthan 33 8
8. Uttarakhand 13 8
9. Uttar Pradesh 75 20
10. Chhattisgarh 24 4
11. Madhya Pradesh 51 5
12. Sikkim 4 0
13. Arunachal Pradesh 20 0
14. Nagaland 11 2
15. Manipur 9 4
16. Mizoram 8 6
17. Tripura 8 4
18. Meghalaya 11 2
19. Assam 27 17
20. Bihar 38 12
21. West Bengal 22 10
22. Jharkhand 24 11
23. Odisha 30 16
24. Andaman and Nicobar Islands 3 0
25. Gujarat 34 0
26. Maharashtra 36 12
27. Goa 2 0
28. Andhra Pradesh 13 0 36
12 3 4
29. Telangana 10 3
30. Karnataka 30 13
31. Lakshadweep 1 0
32. Kerala 14 14
33. Tamil Nadu 32 14
34. Puducherry 4 0
TOTAL 676 208
165. The Committee was informed that efforts are made to achieve the target of 75 units for each district, district level advisory committees headed by the Hon' MPs of respective district also monitor the Scheme. However, various other factors including availability of raw material, industrial infrastructure, skilled manpower etc. also contributes to the establishment of micro units in the districts.
166. The Committee observes that all the States barring Kerala have missed the target of setting up 75 PMEGP projects per year per District, significantly. If even 75 Micro Enterprises of ` 10 lakh investment could not be set up in not more than 200 districts in a year then there is a question mark on the effectiveness of the scheme like PMEGP. The Committee wonders the efficacy of KVIC, DIC and KVIB institutions in these States which are responsible for outreach and implementation of the Scheme. The Committee may be informed about the steps, beyond the usual advisory, that have been taken in respect of these State agencies for failing to meet even a meager target which was set by the KVIC after taking into account the available funds, average cost of each PMEGP project and desirability for equal distribution of development. The Committee may be informed if the frequency of meetings held by the Review Committee under the Chairmanship of local MP and what are the major observations.
167. The Committee had asked for survey of the survival of PMEGP units beyond three years and also, number of PMEGP units that had graduated to Small and Medium enterprises.
168. The Ministry replied that no survey has yet been made on the survivability of PMEGP units beyond three years nor on the number of the PMEGP units that have graduated from Micro to Small/Medium units.
169. The Committee recommends that the Ministry must do a survey of survivability of PMEGP projects beyond three years till they repay the Bank loan. The Ministry must also conduct a Survey of the PMEGP units that have graduated to Small or Medium units.
170. The Committee recalled that the Ministry had agreed that PMEGP loans component below ` 10 lakhs can be covered under MUDRA. 37
171. The Ministry replied that as the number of applications received under PMEGP is far more than the targets fixed, KVIC was requested that the details of PMEGP applicants could also be shared with MUDRA so that the applicants seeking loans upto `10 lakh may opt for Pradhan Mantri Mudra Yojana (PMMY).
172. Having observed the structural complexities in PMEGP that have denied full and timely utilization of allocated Funds and keeping in view that average cost of a PMEGP project is between ` 8-10 lakhs as per Ministry's estimates, which can be covered under the MUDRA loan that is easy to access and with lower rate of interest, the Committee agrees with Ministry's suggestion that all the projects upto ` 10 lakhs could be covered by the MUDRA Yojna. New and even old expansion projects beyond ` 10 lakh to ` 25 lakhs may be covered under PMEGP. The Ministry may change the objective and structure of the Scheme accordingly.
173. The Committee had asked for the Performance Audit of the PMEGP for the Twelfth Plan period, which was accepted by the Ministry. The Committee may be informed of the outcome and the compliance of the Ministry.
MARKET PROMOTION AND DEVELOPMENT ASSISTANCE SCHEME
174. The Ministry informed that MDA scheme of KVIC has been modified as Market Promotion and Development Assistance Scheme (MPDA). MPDA scheme is formulated as a unified scheme by merging different schemes/sub-schemes/components of different Heads implemented in the Eleventh Plan, namely, Market Development Assistance, Publicity, Marketing and Market promotion. A new component of Infrastructure namely setting up of Marketing Complexes/Khadi Plazas has been added to expand the marketing net worth of Khadi and VI products.
175. Under the erstwhile MDA scheme financial assistance was distributed amongst Producing Institutions (30%), Selling Institutions (45%) and Artisans (25%). Under Modified MDA shall be calculated at 30% of the Prime Cost {cost of raw material plus conversion charges up to grey cloth plus processing charges without margins [establishment expenditure (25%) and trading, insurance and bank interest (8%)]}. The Modified MDA shall be distributed amongst producing institutions (40%), selling institutions (20%) and artisans (40%).
176. The Khadi institutions submit their claims through DBT portal, which is scrutinized by field offices of KVIC and Central office before making payment. The benefits to Khadi artisans and Khadi institutions are passed on to their Aadhar seeded Bank account.
177. The Committee has been pursuing the issue of low wage remuneration to Khadi artisans. It asked if KVIC is ensuring that Khadi institutions availing assistance under MPDA are paying wages at par with skilled workers.
178. The Ministry replied that linking the Minimum Daily Wage rates to Khadi artisans was not correct as Khadi spinning and weaving is a subsidiary activity. The artisans associated with Khadi Institutions are self-employed persons. They operate charkha/looms depending upon the free time available to them. The artisans are paid on piece rate basis i.e. number of hanks of yarn spun and meters of cloth woven. Hence, the wages of Khadi artisans are not strictly comparable to minimum daily wages. 38
179. The Committee takes strong objection to the Ministry's stand in respect of wages of khadi artisans. Khadi was a tool of Father of the Nation for self reliance. It cannot be allowed to become a tool of drudgery and exploitation due to technicalities. If KVIC is unable to determine the daily wage for khadi artisans, it must determine reasonable wages on piece rate basis. The Committee may be informed as to how often the KVIC has determined the piece rate wages. The Committee may also be informed of the parameters on which piece rate prices are fixed by the KVIC. The Committee may be informed of comparative piece rates determined by KVIC over last five years.
180. If wages are to be determined on piece rate basis, then steps must be taken to improve productivity of artisans without drudgery. KVIC must ensure production and supply of solar charkhas at reasonable rate and any other improved version that enhances productivity, for which the Khadi and VI Grant for S&T may be increased provided its utilization too is improved.
181. The Committee also recommends that Khadi artisans may be covered under MGNREGA for the purposes of wages. The Ministry may expeditiously take up the issue with Ministry of Rural Development in this regard to finalise the modalities. The Ministry may also inform the Committee about the outcome of discussions.
182. The Committee may also be apprised if the MPDA claims particularly in respect of artisans, submitted by the KIs are actually verified by the KVIC and method of verification adopted. The Committee may be informed whether there have been cases when Khadi artisans are given work only on monthly, i.e. for a few months and remain idle for most part of the year.
183. The Committee was informed that in order to support the Khadi sector for nursing the sick/ problematic institutions elevated from "D" to "C" category as well as those whose production, sales and employment have been declining while they have potential to attain normalcy and to support creation of marketing infrastructure in other identified outlets, the scheme of Strengthening Infrastructure of Existing Weak Khadi Institutions and Assistance for Marketing Infrastructure has been formulated. Under this scheme, financial assistance has been provided to existing weak Khadi institutions for strengthening of their infrastructure and for renovation of selected khadi sales outlets.
184. The Committee sought State-wise details of Khadi Institutions (KIs) enrolled with KVIC for availing various assistances with employment figures.
185. The Ministry provided the following State-wise list of Khadi Institutions enrolled with KVIC and employment figures:-
Sl. No. State No. of KIs Budgeted Employment (in lakh persons)
12 3 4 5
1. Jammu and Kashmir 94 0 0.24
2. Himachal Pradesh 16 15 0.08
3. Punjab 32 28 0.44 39
12 3 4 5
4. UT Chandigarh 0 0 -
5. Haryana 108 94 0.50
6. Delhi 11 10 0.04
7. Rajasthan 138 127 0.84
8. Uttarakhand 64 55 0.41
9. Uttar Pradesh 640 584 4.11
10. Chhattisgarh 22 16 0.08
11. Madhya Pradesh 27 21 0.07
12. Sikkim 1 0 -
13. Arunachal Pradesh 2 0 -
14. Nagaland 2 0 -
15. Manipur 13 4 -
16. Mizoram 1 0 -
17. Tripura 1 0 -
18. Meghalaya 2 2 -
19. Assam 24 15 0.19*
20. Bihar 96 70 1.10
21. West Bengal 363 300 1.04
22. Jharkhand 21 15 0.04
23. Odisha 86 72 0.04
24. Andaman and Nicobar 1 0 -
25. Gujarat 173 160 0.39
26. Maharashtra 34 27 0.03
27. Goa 0 0 -
28. Andhra Pradesh 86 52 0.25 40
12 3 4 5
29. Telangana 11 9 0.08
30. Karnataka 191 176 0.40
31. Kerala 39 27 0.18
32. Lakshadweep 1 0 -
33. Tamil Nadu 74 69 0.52
34. Puducherry 1 1 -
TOTAL 2375 1949 11.07
*Employment of all States of North East is shown in Assam.
Further the breakup of employment of N.E. States in absolute Number is given in the table below:
Sl. No. State Employment (in persons)
1. Sikkim 0
2. Arunachal Pradesh 87
3. Nagaland 2051
4. Manipur 370
5. Mizoram 0
6. Tripura 445
7. Meghalaya 91
8. Assam 15956
TOTAL 19000
186. The Committee may be informed if all the khadi manufacturers are required to be registered with KVIC under the KVIC Act. If not, are they still required to obtain Khadi mark which is given only by the KVIC and whether it may lead to certain conflict situations.
187. The Committee may also be informed about the difference between registered KIs and the Budgeted KIs. The Committee may be informed of the objective criteria against which certain KIs are excluded from being Budgeted. On what objective criteria the eligibility is determined and by whom.
188. The Committee notes with concern very low enrolment under MPDA scheme in the NER. The expenditure of MPDA earmarked for NER has been negligible every successive year. As per the definition of Khadi in the Act, the mandate of KVIC is to encourage silk, cotton and/or woolen hand spun and hand woven cloths. Considering that North Eastern region has rich spun 41 and woven textile tradition, KVIC should not have any reason for such low penetration of MPDA in that region. The Committee may be informed if the textile tradition of NE complies with the definition of Khadi under the Act, and why KVIC has not been able to propagate the MPDA and other khadi schemes in NE and money under MPDA, KRDP, SFURTI and ASPIRE remains unspent. In view of such indifferent performance, the KVIC must take a hard look of the performance of its regional set up and KVIB in these States and inform the Committee of their lackluster performance. KVIC must encourage and revive the textile tradition in NER through MPDA and S&T schemes.
189. The Committee sought to know whether there have been increases in number of Khadi Institutions over the last five years. The Ministry informed State-wise details as under:-
Sl. No. State 2012-13 2013-14 2014-15 2015-16 2016-17 (P)
1. Jammu and Kashmir 66 87 88 89 94
2. Himachal Pradesh 14 16 16 16 16
3. Punjab 24 27 27 29 32
4. UT Chandigarh 0 0 0 0 0
5. Haryana 93 97 97 98 108
6. Delhi 11 11 11 11 11
7. Rajasthan 215 136 136 136 138
8. Uttarakhand 59 51 52 61 64
9. Uttar Pradesh 556 588 602 632 640
10. Chhattisgarh 19 22 22 22 22
11. Madhya Pradesh 49 27 27 27 27
12. Sikkim 0 1 1 1 1
13. Arunachal Pradesh 2 3 2 2 2
14. Nagaland 2 2 2 2 2
15. Manipur 15 13 13 13 13
16. Mizoram 1 1 1 1 1
17. Tripura 0 1 1 1 1
18. Meghalaya 1 2 2 2 2 42
Sl. No. State 2012-13 2013-14 2014-15 2015-16 2016-17 (P)
19. Assam 39 24 24 24 24
20. Bihar 91 92 92 95 96
21. West Bengal 329 319 319 339 363
22. Jharkhand 25 20 20 21 21
23. Odisha 55 67 72 85 86
24. Andaman and Nicobar 0 1 1 1 1
25. Gujarat 234 168 168 172 173
26. Maharashtra 105 35 33 34 34
27. Goa 0 0 0 0 0
28. Andhra Pradesh 99 88 78 83 86
29. Telangana 0 0 10 10 11
30. Karnataka 181 180 191 191 191
31. Kerala 40 39 39 39 39
32. Lakshadweep 0 1 1 1 1
33. Tamil Nadu 72 74 74 74 74
34. Puducherry 0 1 1 1 1
TOTAL 2397 2194 2223 2313 2375
190. The Committee sought to know whether some KIs have also closed down during last five years and asked for State-wise details. Surprisingly the Ministry replied that no KIs had closed down during last five years.
191. The Committee notes with concern that despite Ministry's denial there is a decline in number of KIs in the country over last five years particularly in the States of Rajasthan, MP, Assam, Gujarat and Maharashtra. The Ministry may inform the basis of its denial and also the causes of such decline, State-wise. Whether Ministry has cautioned the State KVIC and KVIB networks about the decline in numbers and monitored their performance.
192. The Committee is inclined to suggest that the KVIC should sign MoU with State Education Departments to develop at least one Government school in every district as Khadi institution under skill development programme in schools. For this the KVIC could dovetail its schemes 43 with those of Ministry of Skill Development and Department of School Education of States. The Ministry must design such Scheme and begin negotiations with M/o Skill Development and D/o School Education and also inform the Committee of its outcome.
193. The Committee noted that under Khadi Reform & Development Programme (KRDP), the allocation has been exorbitantly enhanced in the BE 2017-18 to ` 101.39 crores as against ` 5 crore only in both BE and RE 2016-17. The Committee asked for the need for such huge enhancement.
194. It was informed that as the ADB funding for KRDP was being negotiated, a token provision was kept in BE 2016-17. Now the ADB funding has been tied up and funds are to be released during 2017-18 as such actual work on KRDP shall begin in right earnest thereafter.
195. It was informed that KRDP was approved by CCEA in its meeting held on 10.12.2009, and an amount of US $ 150 Million was approved from Asian Development Bank (ADB) as Programme Loan. This financial assistance was to be provided to Government of India and to be released to KVIC as Grants-in-Aid through the Ministry of MSME. The time line for withdrawal of proceeds of loan from ADB was originally in four tranches during the programme implementation period of 36 months from the date of loan effectiveness in 2009-10 is as follows:-
(i) 1st Tranche-$20 Million (at loan effectiveness).
(ii) 2nd Tranche-$40 Million (within 8 months of the 1st Tranche release).
(iii) 3rd Tranche-$40 Million (within 13 months of the 2nd Tranche release).
(iv) 4th Tranche-$20 Million (within 15 months of the 3rd Tranche release).
196. An amount of ` 96.00 crore (equivalent to $20 Million) was released on 17.02.2010 as 1st Tranche amount. However, owing to certain unfulfilled conditions pertaining to 2nd Tranche, no further release could be made. The project got delayed subsequently for a long time. The programme loan of ADB was renegotiated successfully and as per the revised Tranche conditions, two tranches would be applicable and the total release would be $85 Million. The total corpus was renegotiated from $150 Million to $105 Million with 50 conditions to be fulfilled under 2nd and 3rd Tranche.
197. The Committee was informed that 2nd Tranche of US$ 40 Million has become due as all 32 conditions have been fully complied by KVIC and Ministry of MSME. Further, KVIC has requested release of funds so as to facilitate to carry out the reform activities under KRDP for compliance of 2nd Tranche conditions. Thus, an additional amount of ` 267.07 crore has been sought in the 3rd Batch of Supplementary of Demands for Grants 2016-17 under KRDP budgetary head.
198. During his presentation before the Committee, the Secretary, M/o MSME sought more funds for KRDP.
199. The Ministry submitted that in the BE 2017-18, a provision of ` 101.39 crore has been allocated under KRDP. However, the funds would only be available for utilization from 1st April 2017-18. In view 44 of the paucity of funds in the BE 2016-17 to meet out the requirement of activities for 2nd/3rd Tranche release, it requested for allocation of funds under KRDP budgetary head.
200. The Committee, though inclined to recommend additional funds to meet the agreed conditions with a multilateral aid agency under KRDP, may be informed of the conditions which led to earlier suspension of subsequent tranches of assistance from a multilateral aid agency, despite mutual agreement. The Committee may be informed of the salient features of the new agreement under which the assistance has been restored and whether the points of discord have been resolved. The Committee may also be informed about the conditions that have been fulfilled by the KVIC to seek subsequent tranche of assistance.
201. The Committee noted that the Khadi institutions have been categorized in A+ to D categories on the basis of their performance. It sought to know about the criteria for giving MPDA assistance to a Khadi Institution.
202. The Ministry informed that the KIs who are certified, having valid certificate and allocated annual production target are eligible to get MPDA. Category is assigned according to performance. Scores are assigned for each indicator. The final categories will be assigned based on the performance as indicated below:
Category Range of scores for Range of scores for Nomenclature for KIs in Production KIs in Marketing Performance & Sales
A+ 75% and above 75% and above Excellent
A 60% - 75% 60% - 75% Very Good
B 40% - 60% 40% - 60% Good
C 30% - 40% 30% - 40% Average
D Less than 30% Less than 30% Needs improvement
203. From FY 2017-18 onwards, the categorization should be undertaken every year based on self- assessment of the KIs. A web-based application would be developed by KVIC, wherein the KIs can enter the data at their level. The data will be processed at KVIC level for assessing the performance and the results will be published on the KVIC website.
204. The Committee may be informed the State-wise details of A+ to D category KIs and also about the incentives assigned to each category.
205. The Committee is of the view that the KIs which have attained A+ and A categories or those who have been receiving MPDA assistance for more than five years, should be allowed to attain autonomy under KRDP instead of continuing with MPDA. Instead, the KVIC should use MPDA money in assisting new or weaker KIs. 45
206. The Committee also asked if Ministry envisages a situation when allocation for MPDA Grants will be reduced, with KIs increasingly adopting KRDP.
207. The Ministry informed that MPDA aims at (a) Rationalization of financial assistance and gradual withdrawal of subsidy, (b) Market segmentation of Khadi and Village Industry products for effective pricing to be sold at premium leading to reduced reliance on Government subsidy. Rather, as the production goes up, the assistance under MPDA may increase.
208. The Committee wonders if the objective of the Scheme is to reduce reliance on subsidy, how does the Ministry envisage an increase in MPDA assistance which is essentially a subsidy. The Ministry may elaborate on its assertion where allocation for both KRDP and MPDA would increase and whether that is the objective of KRDP.
EXPORT OF KHADI
209. The Committee has always considered that Khadi and VI products have a huge export potential particularly in the neighbouring region and in the countries with whom India has traditional cultural relations like SE Asia and Africa. The Committee noted that the Government is promoting khadi as an environment friendly green, heritage textile. It noted that so far khadi export is restricted to a few developed markets like US, Europe, Australia and Japan. Most of the exports is done by merchant exporters despite KVIC having status of a deemed Export Promotion Council. The Committee during its study visit too enquired about the steps taken to raise the export of Khadi and VI products and about the constraints faced in exporting these items. The Committee also asked if Ministry/KVIC has set any export growth target for near and medium terms?
210. The Ministry replied that the KVIC and Khadi Institutions per se were not involved directly in export of goods and commodities. Exports of Khadi and VI products are conducted through merchant exporters who buy the said products from the concerned Khadi Institutions and export. In the past, KVIC has been issued Deemed 'Export Promotion Council' (EPC) status, however, due to inadequate activities and mobilization for exports and commodities directly by the Institutions, the EPC status has become defunct. KVIC could not avail the benefits of market access initiatives scheme of Department of Commerce under which each exporter is entitled to certain financial benefits. However, efforts are being made to restore the status of EPC to KVIC and identify and encourage individual Khadi Institutions to get into exports mode without availing any help from the merchant exporters.
211. The Committee will be inclined to recommend that Ministry of Commerce should provide adequate funds to KVIC for Export Promotion provided the KVIC is able to raise its activities and mobilize exportable KVI commodities directly from the KVI institutions. The Ministry may accordingly take up the matter with Ministry of Commerce. KVIC too should expediently fulfil necessary conditions to restore the Export Promotion Council status. The KVIC must update the Committee in this regard.
212. The Committee also noted that HS Code are presently not allotted for Khadi and Village Industry products which are presently categorized as handicraft items. This makes it difficult to 46 identify and track the exports of Khadi and Village Industry products. The Committee recommends that Ministry should take up the issue with Department of Commerce to allot HS Code for Khadi and Village Industry products. The Ministry may inform what are the pre-requisites for getting HS code for Khadi and steps taken to fulfil them as well as the outcome of their efforts in this regard.
213. The Committee also recommends that Indian High Commissions and Indian Embassy abroad may use Khadi and Village Industry products in their office as well as for Gifts and presentations. They may also support Export Promotion of Khadi and Village Industry products by displaying Khadi and Village Industry products and literature through a showroom/show case in their office.
214. As Khadi is promoted as the Indian heritage, the Ministry/KVIC must use the Indian Council for Cultural Relations' centres abroad to promote Khadi products. Master artisans may be sponsored to display their craft in those countries by ICCR. Our Missions and ICCR centres abroad must maintain an exhaustive database of khadi exporting institutions to help potential foreign customers.
215. KVIC should also host online the data base of khadi exporters. KVIC should tie up with E-commerce companies to promote khadi exports. The Ministry and KVIC should communicate with Ministry of External Affairs and ICCR in this regard and apprise the Committee of the outcome.
216. The Committee noted that more and more Government institutions and PSUs are placing bulk orders for khadi products. As the KVIC do not produce khadi themselves, the Committee wonders how the khadi vendors/suppliers are selected. The Committee recommends that the KVIC should formulate a transparent method of devolving bulk orders to khadi institutions in consultation with such institutions. KVIC should also encourage and train such Khadi Institutions with 'Khadi Mark' certification, to directly register with DG S&D and with the PSUs.
COIR VIKAS YOJNA
217. Coir Vikas Yojna is for providing financial assistance to Coir Units for exports. The Scheme has six components. Financial assistance of ` 2.50 lakhs is provided to the eligible coir exporters to participate in the international fairs. Assistance for publicity material up to 25% of production cost with overall limit of ` 25000, is also admissible. Scheme also provides training to the aspiring coir workers for capacity development and quality improvement.
218. The Committee observed that ` 45.45 crores was allocated in BE 2016-17, which was further raised to ` 50.75 crores in RE but has been marginally reduced to ` 50 crores in BE 2017-18.
219. The Secretary, Coir Board explained that more Funds were required for this Scheme due to committed expenditures. And the available funds have actually reduced:
"The hon. Member was talking about the fund allocation for the Coir Vikas Yojana. Previous year, it was ` 30 crores, Sir, and during the current year, it is ` 15 crores." 47
220. However, the Committee notes that the Ministry had demanded only ` 41 crores for 2017-18 (BE) but was allocated ` 50 crores. Yet, the Committee recommends that the Ministry may look into the issue so that paucity of funds may not hamper the operations of CVY.
CGTMSE
221. The Committee noted that the maximum increase in allocation has been for the Credit Support Programme which rose from ` 50 crores in BE 2016-17 to ` 2017 crores in RE 2016-17 and has been further increased to ` 3002 crore in BE 2017-18.
222. The Ministry informed that the scheme is implemented by Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) set up jointly by the Government of India and SIDBI and covers collateral free credit facility (term loan and/or working capital) extended by eligible lending institutions to new and existing micro and small enterprises up to ` 200 lakh per borrowing unit. The guarantee cover provided is up to 75% of the credit facility up to ` 50 lakh (85% for loans up to ` 5 lakh provided to micro enterprises, 80% for MSEs owned/operated by women and all loans to NER), and uniform guarantee of 50% of the credit exposure above ` 50 lakh and up to ` 200 lakh. A composite all-in Annual Guarantee fee of 1.0% p.a. of the credit facility sanctioned (0.75% for credit facility upto ` 5 lakh and 0.85% for above ` 5 lakh and upto 100 lakh for Women, Micro Enterprises and units in NER including Sikkim) is now being charged.
223. The Government has augmented the corpus of the CGTMSE from the present level of ` 2500 crore to ` 7500 crore The increase of corpus by ` 5000 crores would be entirely contributed by Government of India. Government has increased the coverage of the loans covered under CGTMSE from ` 1 crore to ` 2 crore for the loans to be disbursed w.e.f 1.1.2017. The loans which are being extended to Micro and Small Enterprises by National Banking Finance Corporations (NBFCs) have also been taken into the ambit of the scheme.
224. The Committee sought yearly figures of NPA accounts under CGTMSE coverage. Yearly figures of NPA accounts under CGTMSE coverage for the last three years is as below:
Guarantee and NPA under CGTMSE during last three years
Year Guarantee NPA
No. Amt. (Lakh) No. Amt. (Lakh)
2013-14 325529 1737435.1 65118 340717.01
2014-15 338692 1716334.38 45796 267573.77
2015-16 439526 1709808.15 20514 90046.97
225. The Committee finds above figures suspect. While number of accounts covered under CGTMSE has increased, the Guarantee amount has come down. The Ministry may elaborate. 48
226. Similarly, the number of NPA accounts under CGTMSE have shown reduction as also the NPA amount involved. This is contrary to the estimates of Economic Survey which highlights the NPA in MSME sector. The Ministry may explain if cumulative NPA accounts under CGTMSE have actually reduced over last three years and if so, then what was the need for raising the allocation.
227. The Committee asked about the protocol and process followed by the Banks to claim the guarantee under CGTMSE.
228. The Ministry replied that in order to claim guarantee under CGTMSE, following are the steps:
(1) The account should have been marked as NPA in the CGTMSE portal.
(2) All the annual fee payments should have been made by the bank within the specified time- frame.
(3) Legal action should have been initiated against the borrower.
(4) Bank should have lodged online claim application in the CGTMSE portal within the specified time-frame (i.e., initiation of legal action and claim lodgment within one year from the date of account became NPA in cases sanctioned on or before January, 2013 and within two years from the date of NPA in respect of cases sanctioned on or after January, 2013).
229. The Committee noted that the Ministry had notified a "Framework for Revival and Rehabilitation of MSMEs" which gives an elaborate protocol to identify and rehabilitate such MSMEs. The revival and rehabilitation too will impose a cost on the Banks. It sought to know if Banks can claim such cost under CGTMSE.
230. The Ministry denied that the Banks could claim such cost under CGTMSE.
231. The Committee further sought to know if Banks could not claim dues for restructuring accounts from CGTMSE, then whether any Budget provision has been made for Banks to meet the cost of restructuring and revival under this Framework for Revival and Rehabilitation. If not, how are Banks supposed to incur the cost for restructuring loans for MSME units that have been designated as priority sector by Government and avail bank loans under Government policy.
232. The Committee further asked how many MSMEs have been rehabilitated and revived under its "Framework for Rehabilitation and Revival of MSME.
233. Taking note that the Ministry did not furnish any reply, the Committee wonders if it had any account of the efficacy of its own scheme for the revival of stressed MSMEs. The Committee desires that the Ministry may provide the number of such MSMEs rehabilitated/revived under the Framework and the cost incurred by Banks in terms of restructuring the debts of such MSMEs.
234. The Committee also acknowledges that restructured accounts are essentially NPA accounts as per RBI guidelines. And that Banks may not be inclined to declare any account NPA due to deterrent consequences. The Committee feels that coverage under CGTMSE may encourage 49
Banks to restructure accounts under the Framework prescribed by the Ministry. Accordingly, the Committee recommends that Ministry may evolve a mechanism to enable Banks to claim cost of restructuring MSME units from CGTMSE.
235. The Committee took note that recently the NBFCs too have been included under the coverage of CGTMSE. The issue was raised that NBFCs charged high rate of interest and high interest liability may lead to NPA.
236. The Secretary in his submission agreed and submitted that NBFCs seeking coverage under CGTMSE has been asked to cap interest rates at 14%.
VENDOR DEVELOPMENT PROGRAMME
237. The Committee has been examining the implementation of Public Procurement Policy wherein the CPSEs and Central Government Departments are required to procure 20% of their annual procurement requirements from MSEs of which 4% is to be sourced from the MSEs owned by SC/ST entrepreneurs. The Policy included procurement of both goods and services. During its interactions with several CPSEs most of whom were Maharatna or Navratna companies, the Committee observed that while target of 20% was met, most of the CPSEs were unable to fulfill their 4% sub-target procurement from SC/ST vendors.
238. The Ministry informed the year-wise performance of 20% Procurement Policy from MSEs as reported by CPSEs as detailed below:-
Year No. of CPSUs reported No. of CPSUs achieved 20% procurement target 2013-14 104 42 2014-15 133 43 2015-16 123 61 239. The year-wise performance of Public Procurement Policy as reported by CPSUs was informed as under:- (Rs. in Crores) Year Total Procurement from Procurement from Procurement MSEs (including SC/ST MSEs owned by owned MSEs) SC/ST 2013-14 82535.55 12425.89 80.45
(104 CPSUs) (15.06%) (0.10%)
2014-15 131766.86 15300.57 59.37
(133 CPSUs) (11.61%) (0.05%)
2015-16 134628.21 18200.34 98.98
(123 CPSUs) (13.52%) (0.07%) 50
240. The Committee notes that some goods and services have been reserved for procurement from MSEs. The Committee may be informed if 20% procurement target is met largely with such reserved items.
241. The Committee asked whether administrative Ministries have been monitoring mechanism on implementation of 20% Procurement Scheme and have been reporting regularly to the M/o MSME and DPE regarding the progress made in implementation of the scheme.
242. The Ministry instead informed that Review Committee has been constituted under the chairmanship of Secretary, (MSME) by this ministry. This committee meets regularly to monitor the progress and resolved problem being faced by CPSUs and MSEs. Review Committee has suggested various steps for enhancement of procurement from MSEs. Progress made by CPSEs in the implementation of the Scheme is communicated to DPE before evaluation of MoU with CPSEs.
243. The Committee is inclined to advise Ministry that industry associations too should be involved in the Review Committee to assess the implementation of Public Procurement Policy. The Committee also recommends that the Ministry should remind the administrative Ministries regarding policy directive to set up Grievance Redressal Committee under a Joint Secretary as required under the Policy.
244. The Committee asked whether Ministries are including a separate chapter on procurement from MSMEs under 20% procurement policy in their Annual Report as recommended by the then Secretary, Ministry of MSME.
245. The Ministry replied that CPSUs working under various ministries have also been advised through D.O. letter from Secretary (MSME) to ensure reflection of procurement data in their annual report.
246. The Committee observes that despite Policy Directives, the PSUs and Government Departments are not reporting to Ministry of MSME regarding the procurement from MSEs. The Government must direct the Secretaries of respective Departments to include this information specifically in their Annual Reports. Also, the Ministry of MSME should request DPE to issue similar directions to PSUs, failing which same may be reflected in their MoU rating.
247. The Committee noted that the Ministry was organizing Vendor Development Programmes as interface between MSE suppliers and the CPSE buyers. The State Level Vendor Development Programme (SLVDP) focus on Vendor-Vendee match with duration of one day and ` 30,000/-per programme allocated. National Level Vendor Development Programme (NLVDP) will focus on organizing Industrial Exhibition cum Buyer-Seller Meet with duration of 2-3 days. The maximum sanction per program would be of ` 8.00 lakhs (max.) and minimum recovery of 60% for "A" class city; sanction of ` 6.00 lakhs (max.).
248. In BE (2016-17), ` 5 crores were allocated for Vendor Development Programme which was reduced to ` 4.50 crores for organizing 61 National VDPs and 248 State VDPs. The actual utilization till Third Quarter was meager ` 89 lakh and only 18 National VDPs and 126 State VDPs were organized. 51
249. The Committee expresses serious reservations over under-utilisation of funds for such an enabling Scheme. The Committee is also inclined to accept the view of certain industry associations who suggested that VDPs should be more substantive in developing the capabilities of MSE vendors instead of merely providing a Business to Business interface. The Committee also appreciated that after every VDP, the participant CPSEs should be required to enroll at least certain number of MSEs as their Vendors and place orders.
250. The Committee acknowledged the issue of complicated process of registration of vendors by respective MSMEs. The Committee recommends that Ministry in coordination with DPE and other administrative Ministries should evolve a uniform process of registration of MSE vendors, as per their requirements.
251. The Ministry may share its own databank of MSE vendor and SC/ST vendors with CPSEs or the CPSE associations like SCOPE so that CPSEs are enabled to locate the relevant MSE vendors, as per their requirements.
252. Certain Industry Associations had raised the issue of restrictive conditions/specifications in the terms and conditions of Tender Documents which preempted MSEs to submit tender. Often orders are clubbed which makes it a bulk order beyond the capacity of any MSE vendor. The Committee therefore, recommends that Ministry in consultation with stakeholders should evolve a standard Tender Document with minimum necessary specification so as to allow a wider spectrum of venders to apply. In this regard the Committee is also apprehensive whether MSE vendors could meet the guarantee/after sale service requirements that are built into the Tender Documents.
253. Every tender notice should specifically mention Public Procurement Policy Provisions for MSE vendors.
254. The Ministry must also conduct regular awareness programmes with the Administrative Ministries/DPE and the CPSEs regarding the provisions and new amendments in the Public Procurement Policy. The Ministry should also take steps to popularize the government e-marketing platform.
255. The Committee noted that there was suggestion of Sectoral registration of MSE vendors or Single Point Empanelment Registration Scheme of NSIC which could be used by the sectoral PSEs for locating relevant MSE vendors.
256. The Committee recalls that the Secretary, in an earlier meeting had agreed that the number of State VDPs have declined and had agreed to look into the reasons. He had also agreed that there was a need to make VDPs and training programmes result oriented.
257. The Committee concurs with the view that possibilities may be explored by bigger PSEs to outsource certain services/contracts to MSE vendors particularly the SC/ST vendors. 52
PRABHAT KUMAR COMMITTEE TO FORMULATE MSME POLICY
258. The Committee noted that the Ministry had set up Prabhat Kumar Committee to formulate MSME Policy. The Committee has submitted its Report. It sought salient recommendations of the Committee, the Ministry's comments there on and whether implementing its recommendations will require legislative measures and extra financial resources.
259. The Committee was informed that the One Man Committee to formulate the MSME Policy headed by Shri Prabhat Kumar has submitted its report to the Government of India on 27.01.2017. M/o MSME is yet to examine its recommendation and therefore it is too early to comment whether its recommendations will require legislative measures and extra financial resources.
260. The Committee desires that the details of Prabhat Kumar Committee and its financial and legislative implications may be informed to the Committee. The Committee may also be apprised if the Ministry has set milestones for rolling out the Policy provisions in short and medium terms and benchmarks to assess the success of Policy.
IMPACT OF MAKE IN INDIA ON MSME SECTOR
261. The Committee sought to know the impact of 'Make in India' on the MSME sector. Whether Ministry has recorded any growth in MSME's contribution to GDP and employment post - Make in India?
262. The Ministry replied that the "Make in India" Strategy launched on 25th September, 2014 with an aim to promote India as an important investment destination and a global hub for manufacturing, design and innovation. The real objective of this Strategy is to ease the investment caps and controls and to open up India's industrial sectors to global participation. The 'Make in India' initiative does not target manufacturing sector alone, but also aims at promoting entrepreneurship in the country. There are 25 sectors identified under the Make in India initiative. MSME sector is an important link in the supply chain and this strategy not only boosts the marketing of the products of MSME but also makes a quantum jump in Quality and Technology for MSMEs. The effect of Make in India on MSME may be observed by the reservation of 'Make' projects upto ` 10 crore in Defence procurements for MSMEs. The 'Make' Projects are those, as mentioned in the recently announced Defence Procurement Procedure 2016, where Ministry of Defence will support Indian Industry in developing items not so far made in India".
263. However the Committee noted that the Ministry had not assessed the impact/growth in MSME's contribution to GDP and employment post - Make in India. The Committee feels that regular monitoring and survey are essential to measure efficacy of policy interventions and adjustments, if required. The Committee feels that the Ministry must make a survey to this effect and evolve policy intervention accordingly. In this respect the Committee asks the Ministry to utilize the Budget allocation for Studies, Research and Surveys.
264. The Committee further noted that the recent National Capital Goods Policy 2016 envisages enhancement of competitiveness through cluster approach especially for Capital Goods manufacturing 53
SMEs. It also proposes capital subsidy scheme for the modernization of SMEs in Capital Goods (CG) Sector. The Committee asked for suggestions on challenges faced by SMEs in Capital Goods sector.
265. The Ministry stated that objective of the scheme component is to support CG SMEs in plant modernization to acquire modern and hi-tech plant and machinery so that they may enhance their product competitiveness. Financial support for CG SMEs would help the domestic manufactures to scale up their technology either to improve their machine/component quality coupled with energy efficiency, new product manufacturing, enhance plant productivity.
266. The major constraints/challenges of capital goods SMEs include significant technology gaps across sub-sectors, lack of culture of innovation in the industry, lack of skill availability, weak support infrastructure, inadequate fiscal incentives, high interest rates, high cost of inputs lack of domestic availability of critical inputs/raw material, need to establish efficient supply chain, cost disadvantage due to duty structure in FTSs, inverted duty structure, higher infrastructure and logistics costs, limited ability of MSMEs to develop new products and processes, low awareness of standards, inadequate access to capital.
267. The Committee notes that a working Group under the Chairmanship of Secretary, Department of Heavy Industry had prepared exhaustive report on Capital Goods Sector for Twelfth plan. It had extensively dealt with these issues subsector-wise. However, it appears no follow up has been done on that Report. The Committee recommends the Ministry may make appraisal of that Report and take appropriate follow up action particularly in respect of Skill Development through its training institutions.
GENERAL OVER VIEW
268. The MSME sector which is critical for the equitable growth and employment and entrepreneurship in the economy, is a fact that can hardly be overstated. Though the Budget allocation for the Ministry of MSME is not proportionate to the importance of this Sector, the Committee reiterates that the available resources need to be used efficiently for the targeted objectives. The Committee has often noted the excuse of Schemes being demand-driven for the under-utilization of allocations. If the Ministry is not convinced of demand, then it should not seek allocation. The Ministry has not been able to generate demand for its Schemes in a Sector which is wide spread over several sectors and is starved of any worthwhile policy intervention. With number of KIs reducing and low employability of training courses the Committee wonders the quality of monitoring at Ministry's level and efficacy of its institutional network in States and at grass root levels.
269. The Committee observes that while utilization of funds has increased during last two years, the achievement in physical target remains tepid. The employability of training Schemes remains serious concern.
270. KVIC acts as regulator, promoter and certification authority for the Khadi and Village Industry sector. Its multiple rules may come into conflict. The Committee is particularly concerned 54 about the performance of State Khadi networks, who are supposed to implement Khadi schemes, and more particularly in the NE Region. The Committee noted with serious concern that despite rising demand for Khadi, the Khadi institutions registered with KVIC have shown decline in certain States. Yet, the allocation for MPDA has been increased. The Ministry remains non- committed about the wages of Khadi artisans.
271. Regarding PMEGP, the Ministry has not been able to set up even 75 units in every District. The Margin Money remains undisbursed till the last day of Financial Year.
272. Multiplication of Schemes with very Small allocation vis-a-vis vast scope of MSME sector, do not allow efficient use of available financial and human resources. The Committee has been emphasizing that every scheme has a cost of outreach, implementation and monitoring. With as many schemes, the Budget allocations do not reflect these costs which are essential for effective monitoring and delivery of scheme-objectives. Ministry therefore, must consolidate and rationalize its Schemes and allocations.
273. The Committee is particularly concerned about marginalization of abiding marginalized classes of society, i.e., SC, ST and NER regarding implementation of Schemes. Ministry has to make special efforts.
274. In view of CAG's repeated adverse observation of Ministry of MSME, the Committee has been asking for Performance Audit of major Schemes by CAG and not the third party evaluation. The Committee may be apprised of the outcome of the CAG's audit and its compliance. The Committee also recommends that Audit Paras must be appropriately included in the Annual Report of the Ministry. 55
RECOMMENDATIONS/OBSERVATIONS — AT A GLANCE
The Committee notes that contribution of MSMEs in manufacturing sector is almost stagnant but has been steadily increasing in Service sector. (Para 2)
In view of the size of the MSME sector in the country, a Budget allocation of ` 6482 crores for Financial Year 2017-18, is just meager and needs to be utilized efficiently and judiciously. (Para 3)
It was informed that there were about 25.27 lakh MSMEs registered under Udyog Adhaar Memorandum (UAM) till 31.1.2017 of which 22 lakh were micro units. The Committee also noted the submission made by the Secretary of the Ministry that there was no realistic estimation of number and scope of MSME units in the country. The Secretary had submitted that the Ministry is in the process of developing an online census of statistical data of MSMEs. The Committee believes that without realistic and updated information regarding scope and extent of MSMEs in the country, no worthwhile policy or budgetary intervention can be made. (Para 4)
However, the Committee also noted that ever since 4th Census of MSMEs, the Government has not conducted the 5th census which is due. Instead, it has been decided to discontinue the process of census and look for other sources of collecting reliable data on MSMEs. The Committee feels that Census figures are an important reference point for any future policy formulation initiative as it provides baseline data to measure prospective trends. Every year, in DFG, a separate allocation is made to strengthen the database, survey and research. The Ministry may consider using this allocation for conducting 5th decennial census of MSMEs. Also, like annual Public Enterprises Survey, Ministry of MSME too should present an annual MSME Survey on the basis of NSS Rounds. (Para 5)
The Committee feels that an assessment should be made of the impact if any, of demonetisation, on the credit-worthiness of MSMEs and whether it has led to greater NPAs in MSME sector. The Committee takes note of demands put forth by certain industry associations that in view of possible adverse impact of demonetization on the business and overall lack of liquidity in the economy, the time limit for NPA should be extended from present 90 days to 180 days. The Committee views this demand favourably and recommends the Ministry to take up the issue with Ministry of Finance and RBI and report to the Committee of its outcome. (Para 7)
The Committee notes that unlike KVIC and Coir Board, whose allocation is made under ARI Division, the Office of DC-MSME though has same mandate and implements the same Schemes as SME Division, get separate allocation in the annual Demands. The Committee has been raising the issues of overlapping and duplication of multiple Schemes of the Ministry. Considering that SME Division and DC-MSME both have not been able to utilize their allocated
55 56 funds during previous years, the Committee is inclined to recommend that two allocations may be merged so that the Schemes are also consolidated with more money available for their implementation. The Committee recommends that like KVIC and Coir Board, the allocation for DC-MSME too should be brought under SME Division for the efficient and economic utilization of available resources. (Para 12)
The Committee notes that against the Plan Outlay of ` 24124 crores for Twelfth Plan, total annual Budget allocation for the Plan period was ` 1475 crores which is only about 61% of the Plan Outlay. The Committee finds it paradoxical that a Plan outlay of such magnitude is not supported by Budget allocation. The Committee may be informed about the rationale given by Ministry of Finance on lower Budget allocation compared to Plan outlay. (Para 18)
The Committee also notes that despite low Budget allocation, the actual utilization of funds under major Schemes of SME Division and DC-MSME has been very low, thereby denying the Ministry any ground to seek high allocation in BE. The Ministry has often justified poor utilization on the ground that Schemes are demand driven. If the Ministry is not sure of demand for such Schemes then rationale for seeking higher allocation every successive year may be explained. The Committee may be informed, that beyond routine awareness programmes, of the steps taken to generate demand in a sector that seeks policy intervention. (Para 19)
The Committee is not sure that reduction in income tax rate as proposed in the Budget will make the MSME more competitive. (Para 22)
The Committee notes the demand expressed by one of the industry associations to widen the scope of this concession to proprietorship/partnership firms which constitute the majority in MSME sector. The Ministry must take up the issue with Ministry of Finance and inform the Committee of the response. (Para 26)
The Committee expresses concern over narrow tax base among informal sector individual enterprises. On the one hand MSME proprietorship/partnership firms demand their inclusion into proposed tax concession to small enterprises, on the other hand they do not even file tax returns. This is an unacceptable situation and the Committee recommends that the Ministry of MSME must take corrective but non-intrusive action in consultation with Ministry of Finance. The Committee suggests that Ministry must seek PAN and TIN/GST details of the proprietors/ partners in the UAM and, in association with the Ministry of Finance, link these references for better tax monitoring through data networking of direct and indirect taxes. (Para 29)
There were demands to make Facilitation Councils (FCs) more effective by making their decisions enforceable. The Committee observes whether the proposed Draft Model MSE-FC Rules would address this issue and whether MSE associations were consulted while drafting the new Model Rules. The Committee would like to know the pendency of cases by the end of Financial Year 2016-17 and number of cases resolved during 2016-17. (Para 31) 57
The Committee notes that for the last two years a meagre Rs. 1 lakh is being allocated each year for MSME Fund that was notified in October, 2016 and which has been vested with vast mandate to promote, develop and enhance competitiveness of MSEs. The Committee wonders that despite notification the allocation has not been raised. The Committee may be informed whether the Ministry proposes to seek enhancement at RE stage and also how the Ministry proposes to implement the mandate of MSME Fund. (Para 32)
The Committee having observed the indifferent performance of other components on NMCP over last five years of 12th Plan seeks to know Ministry's roadmap for implementing ZED Scheme? Whether, the Ministry has any sector wise database of such technologies and its suppliers. The Committee finds sweeping generalisation in broad objectives without much detail about availability of technological resources, institutional architecture and financial resources that will be required for implementation. The Committee would like to know the parameters fixed for selection of the intended beneficiaries. (Para 33)
The NSIC has established seven Finance Facilitation Centres to ensure availability of credit to MSMEs. The Ministry may provide details of structure of the Scheme. The Committee may be informed about the centre-wise details of how many MSMEs have applied for loans and successfully availed. Also, give details of the volume of credit availed and efforts made to expand the outreach of the Scheme. (Para 34)
The Committee noted that Non Banking Finance Companies (NBFCs), who together are significant lenders to MSME sector, have been covered under CGTMSE scheme. The Committee raised the issue of high rate of interest being charged by the NBFCs on the MSME loans. The Committee may be informed if the CGTMSE has designed separate guidelines and conditions for the NBFCs to become partners in the scheme. (Para 35)
It was further informed that under Capital allocation, there was only one Plan scheme i.e. Capital Outlay on Public Works, for the construction of office accommodation of MSME-DIs across the country and only one Non-Plan scheme i.e. Loans & Advances to KVIC, which was establishment related expenditure. All other schemes of the Ministry are covered under the Revenue allocation. It was informed that under previous format the entire Plan allocation was essential. The Committee feels that as the outcome of revenue expenditure is intangible in short term and results are visible only in longer term, it is essential that regular protocol of monitoring and statutory auditing must be followed. (Para 38)
The Committee notes with concern that RE allocations were substantially increased despite low utilization of available money of BE. The Committee may be informed of rationale behind increasing RE allocation for CLCSS and Credit Guarantee Scheme despite low utilization. (Para 43)
The Committee noted that Ministry was allocated ` 3000 crores in BE 2016-17. Considering that the MSME sector contributes about 35% in the country's GDP, it was a rather modest 58 allocation which was enhanced to ` 4974 crores in RE 2016-17, mainly on account of enhanced allocation to CLCSS and Credit Guarantee Schemes under the DC-MSME. However after passage of three quarters only ` 2000 crores could be spent. Expenditure by the SME Division and DC- MSME continues to be tardy, despite demanding more allocation in the Budget. Despite better utilization by ARI Division, the RE has been reduced. The Committee wonders if the Ministry will again crowd its expenditure in the last Quarter of the Financial Year 2016-17 or will carry over for next Financial year, as has been the case with PMEGP. (Para 46)
The Committee observes that despite repeated underutilization, the SME Division and DC- MSME inflated the demands. Though the allocation for SME Division has been reduced vis a vis RE 2016-17, the allocation for DC-MSME has been steeply increased mainly on account of enhanced allocations for Credit Support Programme which includes Credit Guarantee Scheme and the Technology Upgradation and Quality Certification Programme that includes CLCSS. There is a significant increase in allocation for Promotional Services institutions and programmes under which several schemes of entrepreneurship/skill development, MSME-DIs and MSME Testing Centres are being run. Under this Scheme the utilisation has been low. Of the total Plan outlay of ` 616 crores for Twelfth Plan, ` 216 crores were allocated as BE during the Plan period but actual expenditure was only about ` 162 crores, yet there is enhancement. Allocation to ARI Division though less than what was demanded, is also increased from RE of ` 1720.90 crores in 2016-17 mainly on account of Khadi Grant. In almost all other schemes, the allocation has been less than what was demanded. The Committee takes cognisance of the submission made by the Secretary, M/o MSME to enhance allocation for Technology Centers System Programme (TCSP) and Khadi Reform Development Programme (KRDP). Both these programmes have external assistance component which needs to be used as per the agreed conditions. The Committee recommends that Ministry should take up the issue of higher allocation for these programmes with the Ministry of Finance. (Para 49)
Also the Committee takes cognizance of the fact that allocation for flagship employment generation scheme PMEGP has been reduced despite encouraging response to the Scheme. It was informed that only 1/3 applications for Margin Money under PMEGP are actually honoured and remaining 2/3 are rejected for the want of adequate fund. While the Committee also notes that the Scheme is not able to utilise its allocations till the last quarter of a Financial Year and that remaining allocated money has to be carried over to next Financial Year in violation of Financial rules, and that in 2016-17 too, ` 413 crores were carried forward from previous FY 2015-16, the Committee is inclined to recommend enhanced allocation for PMEGP on condition that it improves the utilisation of allocation evenly throughout the year. (Para 50)
The M/o MSME informed that it has been continuously making efforts to rationalize the schemes. The Ministry however, accepted that it had not done any assessment of cost of publicizing, implementing etc. of Schemes in remote grass root levels, etc. (Para 52)
The Committee takes note that Scheme-wise cost of implementation has not been indicated despite Ministry's agreement with Committee's earlier recommendation to this effect. In this 59 regard the Committee takes note of CAG's earlier Report (1 of 2015) wherein the national auditor has commented on lax monitoring of utilization of Grants-in -Aids which constitute more than 90% of the Ministry's expenditure. The Ministry depends on these agencies outside the Ministry's control for outreach and delivery of most of its schemes at ground level. The Committee may be informed about the institutional, administrative and financial linkage between the Ministry and the State agencies to implement Ministry's schemes considering that most of States have parallel schemes that are primarily the responsibility of the State agencies. The Committee therefore finds it imperative that the Ministry should run only those Schemes that it can monitor effectively on regular basis through the institutions directly under its control or have an institutional MoU with the State agencies to implement its Schemes. The Committee recommends that the Ministry must consolidate its Schemes which is essential for better implementation and monitoring which is essential for efficient implementation of Schemes. (Para 54)
The Committee is alarmed at serious under-utilization of allocated funds for the marginalized communities of national life. It observes that while there is under-utilization of Funds for SC/ ST and NER, the performance of ARI division is comparatively better than the other two divisions, i.e., SME Division and the DC-MSME. These sections have traditional skills that can be scaled up into commercial enterprise. The Committee recommends that special efforts need to be made to improve the situation. The Committee recommends that the Ministry must set up a dedicated monitoring cell for SCSP, TSP and NER. Ministry may coordinate with DONER in this regard to utilize allocations for NER. (Para 57)
The Ministry may also consider putting the SCSP at the disposal of SC/ST Hub which has elaborate implementing and monitoring infrastructure under the Chairmanship of the Minister. (Para 58)
The Committee notes that the increase in allocations to NER are only incidental to overall increase in Budget allocations regardless of actual utilization of funds. The Committee finds it ironical that scarce funds meant for NER region are enhanced incidentally just to remain idle. (Para 62)
The Committee observed that this Scheme includes the same training, marketing and financial support programmes whose performance has been indifferent. The Committee noted that under Stand Up India Scheme out of 1.29 lakh Bank Branches, only some 1000 branches have met their target of lending to one SC/ST and one woman entrepreneur, fully. Some 11000 branches have met the target partially. During the submission before the Committee one of the industry associations informed the Committee that most of the Bank branches were lending to women entrepreneurs only under the Stand Up India scheme. The Committee may also be informed about the credit limit and interest rate charged under this Scheme. (Para 69)
During the interaction with the PSEs on the Central Government Public Procurement Policy for Micro and Small Enterprises Order 2012, most of the PSEs stated their difficulty in 60 finding SC/ST entrepreneurs. These marginalized groups of society possess traditional and inherent entrepreneurial skills, which need to be tapped in alignment with market requirements. The Committee recommends that the Hub should create an All India Database of SC/ST entrepreneurs location and vocation wise and share the same with PSEs. Also, the SC/ST Hub should run NSQF compliant skill development programmes for SC/ST technicians who could take contract jobs and services that PSEs outsource. (Para 70)
The Committee expresses its concern that the Ministry sets ambitious targets only to be missed significantly. The Committee had repeatedly cautioned against parallel Government schemes like ASPIRE and Atal Innovation Scheme to incubate entrepreneurship. The Committee's apprehensions seem to be realistic as the Ministry has admitted that stakeholders find the AIS and Start Up India more favourable than ASPIRE and are reluctant to avail this Scheme, Therefore there is under achievement of target. (Para 77)
As per the information provided, the Committee noted that of the 2900 trainees incubates at LBIs, only 450 have been Self/wage/PMEGP employed. The Committee has always suspected the employability of Ministry's Skill Training programmes. It reiterates its earlier observations that the Skill Development Programmes be made more employability focused. (Para 84)
The Committee cautions that Ministry will have to improve employability of incubates if the schemes were to succeed. It has been stated that 334 have been self employed. As the concept of incubation involves post training, hand holding and guidance, the Ministry and the respective Livelihood Business Incubators (LBIs) must track the survivability of these enterprises. (Para 87)
The Committee also recommends that ASPIRE must be closely linked up with MUDRA, Stand Up and Start Up schemes to provide financial assistance to the entrepreneurs. The LBIs should tie up with SHGs and women organizations, ITIs and skill development institutions. (Para 88)
The Committee is surprised to note that same organisation SIDBI is operating numerous Fund of Funds meant for Start Ups which are to be funded through Alternative Investment Funds (AIFs). The Committee wonders if it would be desirable to merge these numerous Funds of Funds to create a bigger corpus, which will also facilitate monitoring of AIFs. (Para 89)
The Committee may be informed about the templates and benchmarks on which the success of ASPIRE Fund will be judged as the start ups are not funded directly but through Alternative Investment Funds. The Committee feels that mere allocation of Funds from ASPIRE Fund to AIFs cannot be a measure of success of this mechanism. It needs to be ensured that start up actually avail the affordable finance from these AIFs and are able to survive. (Para 90) 61
The Committee may also be informed how the operations and accounts of this Fund are audited. (Para 91)
The Committee noted that under the ICT Tools component (NMCP) after five years, only an MoU with TCIL to empanel Cloud Service providers could be signed. After 2015-16 modification, Scheme is under revision though without any achievement so far. (Para 96)
The Committee wonders whether holding of awareness programmes for Technology & Quality Up-gradation, with intangible outcome, be a sufficient parameter to measure the achievements of a Scheme. The Committee observed that very small numbers of units have actually been assisted under the Scheme during the Twelfth Plan period. (Para 99)
The Committee may be informed of the status of 430 new ideas that have been financed under Support for Entrepreneurship and Managerial Development Programme and details of those who have been commercialized. The Committee may also be informed if these ideas have been assisted under several innovation and entrepreneurship development schemes of the Ministry like ASPIRE Fund. The Committee has not been informed regarding monitoring process of the utilization of assistance by the Host institution. The Committee would also like to be informed whether any Audit has been undertaken of the Institutions that received assistance under the NMCP. (Para 103)
Another Scheme for ZED Certification has been launched this year. However no separate allocation has been made for the Scheme for 2017-18. The Committee sought the reason for not allocating funds and about the target set. (Para 109)
The Committee noted that the independent Third Party evaluation of NMCP components was conducted in the beginning of the Twelfth Plan by the NIESBUD, which was an autonomous organization under the Ministry and the Quality Control Council, wherein the Government has significant stakes. The Committee raises questions over independence of such Third Party evaluation. (Para 111)
The Committee considers that the NMCP is critical to enhance competitiveness of MSMEs in the country. However, compared to the scope, spread and magnitude of this sector the allocation has been too meager to make any significant intervention. The number of units benefited by these schemes is too insignificant to measure any impact of this Scheme. However, observing the utilization of allocated funds and physical achievement of Scheme throughout the Twelfth Plan, greater emphasis has been on awareness programmes. The Ministry may also inform the Committee whether it counts those who attended awareness programmes, without actually availing the benefits as beneficiaries. (Para 112)
The Committee is constrained to note that during first three years of the current Plan the utilization has been meager. The Schemes have been repeatedly reframed and thereby withholding the expenditure pending the mid-course review. The Third Party Review of all the components 62 of NMCP in the beginning of Twelfth Plan, had commended the utility of these components and recommended their continuation. The Committee finds that these Third Party review, though selected through bidding, were conducted by the NIESBUD, which was an autonomous organisation under the Ministry and Quality Council of India, wherein Government has significant stakes. That is why the Committee has been steadfast in its recommendation that the NMCP Scheme must be Performance Audited by the CAG. The Committee may be informed of the salient outcomes of the Audit for which CAG has already been requested and Ministry's compliance thereon. (Para 113)
The Committee observes inconsistent allocation and utilization of funds and achievements of annual targets particularly in the years 2013-14 and 2014-15. Every year while utilization of funds has been lower than the allocation, the achievement far exceeded the target. Though the five Institutions concerned under ATI have only met their targets. In 2014-15, the achievement was double the target even with lower utilization of funds. Even after shifting the two institutions to M/o Skill Development, the targets remained the same with lower allocation of funds. The Committee also observed that the targets and achievements of the training institutions covered under ATI scheme, have been modest over the years. The Committee finds figure incredulous and sought to know which were the training institutions that achieved such incredible performance. The Ministry may explain the pattern in allocation, utilization and achievements. (Para 117)
Notwithstanding Ministry's submission, the Committee takes note of the Ministry's reply to the Committee's observations in 278th Report, wherein it was stated that as per the survey from trainees within the six months of completion of training, wage and self employment, figures were only about 24%. The Committee reiterates that such performance is colossal waste of financial and human resources. (Para 120)
The Committee also recommends that Ministry should frame a time bound programme to make all its courses National Skill Qualification Framework (NSQF) compliant and should also start a special campaign to enroll skilled artisans from unorganized sector for these programmes as NSQF is essentially for these artisans. The Ministry must inform the Committee about such Scheme. (Para 121)
The Committee may be apprised of the outcome of the Performance Audit of Assistance to Technical Institution (ATI) scheme and Tool rooms and compliance thereof by the Ministry. (Para 127)
The Committee noted that the Ministry had demanded a BE of Rs 532.70 crore in BE 2017-18. In view of the submission made by the Secretary and the committed expenditure in the on-going projects, the Committee recommends that the Ministry should seek requisite funds from M/o Finance after reviewing the progress in expenditure on the on-going projects. The Committee is of the opinion that as the project involves assistance from a multi-lateral agency, the Government should fulfill its commitments under the agreement and expedite the usage of assistance. (Para 132) 63
The Committee expresses its reservation over continued low employability of trainees from TC/TRs. Without raising the employability it will be wastage of resources. The Committee expects the Ministry to inform the concrete steps taken to improve employability. (Para 137)
The Committee recommends that Ministry should launch special drive for tradionally skilled craftsman who do not possess any formal qualification. Training them is the objective of NSQF. (Para 138)
Regarding downscaling the SFURTI target, an impression is being given that the Finance Minister made a Budgetary announcement in 2013-14 of setting up 800 SFURTI Clusters with an outlay of ` 850 crores for Twelfth Plan, without adequately considering the financial implications and doing any realistic planning. There were repeated mid-term course correction and revamping of the Scheme. There was almost nil expenditure for first three years of the current Twelfth Plan. The Outlay has now been reduced to ` 149 crores for 71 clusters. After five years the Ministry is nowhere near the original target. The Committee has always expressed its reservation over the way Planned Schemes are announced in the annual Budget without making adequate institutional planning and financial provisions which subsequently results in mid-course revamping and recasting of the scheme and consequent under-utilisation of allocations for successive years. As such, The Committee observes that SFURTI Scheme is a classic case of mismanagement and poor monitoring of a Planned Scheme of the Ministry. (Para 150)
No information has been provided on the progress made in the utilization of $134 Million ADB assistance for the remaining SFURTI scheme. The Committee may be informed of terms of this ADB assistance, annual Budget support that will be required for availing this assistance and the schedule of implementing the SFURTI scheme. (Para 151)
The Committee takes note of recent CAG Report (11 of 2016) on the Ministry of MSME which has serious comments on the working of the eight sample SFURTI Clusters, maintenance of records of their assets, enhancement of remuneration of artisans, ownership of Common Facility Centres and relationship between Implementing Agency and the artisans. The Committee may be informed of the Ministry's reply and compliance to the CAGs observations. (Para 152)
The Committee also takes serious note that the Ministry has not included such serious Audit observations of SFURTI by the CAG, in its Annual Report. The Committee recommends that Audit Observations and compliance thereon should be included in the Ministry's Annual Report. (Para 153)
In view of recent CAG observations, the Committee reiterates its recommendation that SFURTI may be Performance Audited by the CAG for the entire Twelfth Plan period at the conclusion of current Plan. Findings of the Audit and the compliance thereon, may be informed to the Committee. (Para 154) 64
PMEGP is a flagship Scheme of the Ministry. Although Ministry has been receiving large number of applications but if is able to include only 1/3 applications for benefits and has to reject remaining 2/3rd applications, for want of funds allocated. (Para 156)
Expenditure of ` 413 crore during 2016-17 is being incurred out of budget allocation of ` 1000 crore for financial year 2015-16 under PMEGP. During 2016-17 available money under PMEGP has been ` 1500 crore and the expenditure has been only ` 700 cr. till December 2016. The Committee wondered whether it will be possible to incur remaining amount of ` 800 crore in last three months. The Committee also sought to know whether some budget of this year will be utilized in the next year. (Para 159)
The Committee also observes that ` 413 crores were carried over to 2016-17 from the previous year's RE whose release was delayed. As such for year 2016-17 ` 1513 crores [` 1100 crore (BE) + ` 413 crores (carried forward from previous FY)] were available. Of which by 31.12.16, ` 875 crores were released by the Ministry as Margin Money. That leaves ` 640 crore unspent for last quarter of 2016-17. Even of the released amount of ` 875 crores, only about ` 660 crores has actually been disbursed by the Banks. Therefore almost half the allocation is not actually disbursed till very last quarter of current Financial Year. The Committee has been repeatedly questioning the prudent financial management of the scheme and complicated structure that delays prompt disbursal to beneficiary. In view of the above facts, the Committee finds that the situation has not improved much. (Para 161)
The Committee takes note of Ministry's assertion that it may require more money to clear 1.4 lakh applications that have been forwarded to Banks. It is not clear whether these applications have been cleared by the Banks too. It has been Committee's experience that a large number of applications forwarded by the DLTFCs are rejected by the Banks too. The Committee also takes note of Ministry's admission that disbursement to all sanctioned applications may not be possible by the end of FY. From the stand point of an entrepreneur applicant, it is an unacceptable situation that legitimate benefit of a policy are denied just because RE was released in the evening of last day of the Financial Year. The Committee fails to comprehend the use of such release except that the Government's accounts are technically reconciled though without achieving the intended objective. In such a scenario, the Ministry by its own admission is not able to disburse money till the end of FY due to technicalities involved in the Scheme and these have not been sorted out despite Committee's repeated observations and suggestions. The Committee wonders as to why further enhancement in allocation be recommended despite huge demand for the Scheme which remains unmet every year. (Para 162)
A target of establishing 75 new PMEGP units each with investment of ` 8-10 lakh was set in each district of the country. The Committee noted that only 200 districts out of 676 districts of the country could achieve this target. (Para 163)
The Committee observes that all the States, barring Kerala, have missed the target of setting up 75 PMEGP projects per year per District, significantly. If even 75 Micro Enterprises 65 of ` 10 lakh investment could not be set up in not more than 200 districts in a year then there is a question mark on the effectiveness of the scheme like PMEGP. The Committee wonders the efficacy of KVIC, DIC and KVIB institutions in these States which are responsible for outreach and implementation of the Scheme. The Committee may be informed about the steps, beyond the usual advisory, that have been taken in respect of these State agencies for failing to meet even a meager target which was set by the KVIC after taking into account the available funds, average cost of each PMEGP project and desirability for equal distribution of development. The Committee may be informed if the frequency of meetings held by the Review Committee under the Chairmanship of local MP and what are the major observations. (Para 166)
The Committee recommends that the Ministry must do a survey of survivability of PMEGP projects beyond three years till they repay the Bank loan. The Ministry must also conduct a Survey of the PMEGP units that have graduated to Small or Medium units. (Para 169)
Having observed the structural complexities in PMEGP that have denied full and timely utilization of allocated Funds and keeping in view that average cost of a PMEGP project is between ` 8-10 lakhs as per Ministry's estimates, which can be covered under the MUDRA loan that is easy to access and with lower rate of interest, the Committee agrees with Ministry's suggestion that all the projects upto ` 10 lakhs could be covered by the MUDRA Yojna. New and even old expansion projects beyond ` 10 lakh to ` 25 lakhs may be covered under PMEGP. The Ministry may change the objective and structure of the Scheme accordingly. (Para 172)
The Committee had asked for the Performance Audit of the PMEGP for the Twelfth Plan period, which was accepted by the Ministry. The Committee may be informed of the outcome and the compliance of the Ministry. (Para 173)
The Committee takes strong objection to the Ministry's stand in respect of wages of khadi artisans. Khadi was a tool of Father of the Nation for self reliance. It cannot be allowed to become a tool of drudgery and exploitation due to technicalities. If KVIC is unable to determine the daily wage for khadi artisans, it must determine reasonable wages on piece rate basis. The Committee may be informed as to how often the KVIC has determined the piece rate wages. The Committee may also be informed of the parameters on which piece rate prices are fixed by the KVIC. The Committee may be informed of comparative piece rates determined by KVIC over last five years. (Para 179)
If wages are to be determined on piece rate basis, then steps must be taken to improve productivity of artisans without drudgery. KVIC must ensure production and supply of solar charkhas at reasonable rate and any other improved version that enhances productivity, for which the Khadi and VI Grant for S&T may be increased provided its utilization too is improved. (Para 180)
The Committee also recommends that Khadi artisans may be covered under MNREGA for the purposes of wages. The Ministry may expeditiously take up the issue with Ministry of Rural 66
Development in this regard to finalise the modalities. The Ministry may also inform the Committee about the outcome of discussions. (Para 181)
The Committee may also be apprised if the MPDA claims particularly in respect of artisans, submitted by the KIs are actually verified by the KVIC and method of verification adopted. The committee may be informed whether there have been cases when Khadi artisans are given work only on monthly, i.e. for a few months and remain idle for most part of the year. (Para 182)
The Committee may be informed if all the khadi manufacturers are required to be registered with KVIC under the KVIC Act. If not, are they still required to obtain Khadi mark which is given only by the KVIC, and whether it may lead to certain conflict situations. (Para 186)
The Committee may also be informed about the difference between registered KIs and the Budgeted KIs. The Committee may be informed of the objective criteria against which certain KIs are excluded from being Budgeted. On what objective criteria the eligibility is determined and by whom. (Para 187)
The Committee notes with concern very low enrolment under MPDA scheme in the NER. The expenditure of MPDA earmarked for NER has been negligible every successive year. As per the definition of Khadi in the Act, the mandate of KVIC is to encourage silk, cotton and/or woolen hand spun and hand woven cloths. Considering that North Eastern region has rich spun and woven textile tradition, KVIC should not have any reason for such low penetration of MPDA in that region. The Committee may be informed if the textile tradition of NE complies with the definition of Khadi under the Act, and why KVIC has not been able to propagate the MPDA and other khadi schemes in NE and money under MPDA, KRDP, SFURTI and ASPIRE remains unspent. In view of such indifferent performance, the KVIC must take a hard look of the performance of its regional set up and KVIB in these States and inform the Committee of their lackluster performance. KVIC must encourage and revive the textile tradition in NER through MPDA and S&T schemes. (Para 188)
The Committee notes with concern that despite Ministry's denial there is a decline in number of KIs in the country over last five years particularly in the States of Rajasthan, MP, Assam, Gujarat and Maharashtra. The Ministry may inform the basis of its denial and also the causes of such decline, State-wise. Whether Ministry has cautioned the State KVIC and KVIB networks about the decline in numbers and monitored their performance. (Para 191)
The Committee is inclined to suggest that the KVIC should sign MoU with State Education Departments to develop at least one Government school in every district as Khadi institution under skill development programme in schools. For this the KVIC could dovetail its schemes with those of Ministry of Skill Development and Department of School Education of States. The Ministry must design such Scheme and begin negotiations with M/o Skill Development and D/o School Education and also inform the Committee of its outcome. (Para 192) 67
The Committee, though inclined to recommend additional funds to meet the agreed conditions with a multilateral aid agency under KRDP, may be informed of the conditions which led to earlier suspension of subsequent tranches of assistance from a multilateral aid agency, despite mutual agreement. The Committee may be informed of the salient features of the new agreement under which the assistance has been restored and whether the points of discord have been resolved. The Committee may also be informed about the conditions that have been fulfilled by the KVIC to seek subsequent tranche of assistance. (Para 200)
The Committee may be informed the State-wise details of A+ to D category KIs and also about the incentives assigned to each category. (Para 204)
The Committee is of the view that the KIs which have attained A+ and A categories or those who have been receiving MPDA assistance for more than five years, should be allowed to attain autonomy under KRDP instead of continuing with MPDA. Instead, the KVIC should use MPDA money in assisting new or weaker KIs. (Para 205)
The Committee wonders if the objective of the Scheme is to reduce reliance on subsidy, how does the Ministry envisage an increase in MPDA assistance which is essentially a subsidy. The Ministry may elaborate on its assertion where allocation for both KRDP and MPDA would increase and whether that is the objective of KRDP. (Para 208)
The Committee will be inclined to recommend that Ministry of Commerce should provide adequate funds to KVIC for Export Promotion provided the KVIC is able to raise its activities and mobilize exportable KVI commodities directly from the KVI institutions. The Ministry may accordingly take up the matter with Ministry of Commerce. KVIC too should expediently fulfil necessary conditions to restore the Export Promotion Council status. The KVIC must update the Committee in this regard. (Para 211)
The Committee also noted that HS Code are presently not allotted for Khadi and Village Industry products which are presently categorized as handicraft items. This makes it difficult to identify and track the exports of Khadi and Village Industry products. The Committee recommends that Ministry should take up the issue with Department of Commerce to allot HS Code for Khadi and Village Industry products. The Ministry may inform what are the pre-requisites for getting HS code for Khadi and steps taken to fulfil them as well as the outcome of their efforts in this regard. (Para 212)
The Committee also recommends that Indian High Commissions and Indian Embassy abroad may use Khadi and Village Industry products in their office as well as for Gifts and presentations. They may also support Export Promotion of Khadi and Village Industry products by displaying Khadi and Village Industry products and literature through a showroom/show case in their office. (Para 213)
As Khadi is promoted as the Indian heritage, the Ministry/KVIC must use the Indian Council for Cultural Relations' centres abroad to promote Khadi products. Master artisans may 68 be sponsored to display their craft in those countries by ICCR. Our Missions and ICCR centres abroad must maintain an exhaustive database of khadi exporting institutions to help potential foreign customers. (Para 214)
KVIC should also host online the data base of khadi exporters. KVIC should tie up with E-commerce companies to promote khadi exports. The Ministry and KVIC should communicate with Ministry of External Affairs and ICCR in this regard and apprise the Committee of the outcome. (Para 215)
The Committee noted that more and more Government institutions and PSUs are placing bulk orders for khadi products. As the KVIC do not produce khadi themselves, the Committee wonders how are the khadi vendors/suppliers selected. The Committee recommends that the KVIC should formulate a transparent method of devolving bulk orders to khadi institutions in consultation with such institutions. KVIC should also encourage and train such Khadi Institutions with 'Khadi Mark' certification, to directly register with DG S&D and with the PSUs. (Para 216)
However, the Committee notes that the Ministry had demanded only ` 41 crores for 2017-18 (BE) but was allocated ` 50 crores. Yet, the Committee recommends that the Ministry may look into the issue so that paucity of funds may not hamper the operations of CVY. (Para 220)
The Committee finds above figures suspect. While number of accounts covered under CGTMSE has increased, the Guarantee amount has come down. The Ministry may elaborate. (Para 225)
Similarly, the number of NPA accounts under CGTMSE have shown reduction as also the NPA amount involved. This is contrary to the estimates of Economic Survey which highlights the NPA in MSME sector. The Ministry may explain if cumulative NPA accounts under CGTMSE have actually reduced over last three years and if so, then what was the need for raising the allocation. (Para 226)
The Committee further sought to know if Banks could not claim dues for restructuring accounts from CGTMSE, then whether any Budget provision has been made for Banks to meet the cost of restructuring and revival under this Framework for Revival and Rehabilitation. If not, how are Banks supposed to incur the cost for restructuring loans for MSME units that have been designated as priority sector by Government and avail bank loans under Government policy. (Para 231)
Taking note that the Ministry did not furnish any reply, the Committee wonders if it had any account of the efficacy of its own scheme for the revival of stressed MSMEs. The Committee desires that the Ministry may provide the number of such MSMEs rehabilitated/revived under the Framework and the cost incurred by Banks in terms of restructuring the debts of such MSMEs. (Para 233) 69
The Committee also acknowledges that restructured accounts are essentially NPA accounts as per RBI guidelines. And that Banks may not be inclined to declare any account NPA due to deterrent consequences. The Committee feels that coverage under CGTMSE may encourage Banks to restructure accounts under the Framework prescribed by the Ministry. Accordingly, the Committee recommends that Ministry may evolve a mechanism to enable Banks to claim cost of restructuring MSME units from CGTMSE. (Para 234)
The Secretary in his submission agreed and submitted that NBFCs seeking coverage under CGTMSE has been asked to cap interest rates at 14%. (Para 236)
The Committee notes that some goods and services have been reserved for procurement from MSEs. The Committee may be informed if 20% procurement target is met largely with such reserved items. (Para 240)
The Committee is inclined to advise Ministry that industry associations too should be involved in the Review Committee to assess the implementation of Public Procurement Policy. The Committee also recommends that the Ministry should remind the administrative Ministries regarding policy directive to set up Grievance Redressal Committee under a Joint Secretary as required under the Policy. (Para 243)
The Committee observes that despite Policy Directives, the PSUs and Government Departments are not reporting to Ministry of MSME regarding the procurement from MSEs. The Government must direct the Secretaries of respective Departments to include this information specifically in their Annual Reports. Also, the Ministry of MSME should request DPE to issue similar directions to PSUs failing which same may be reflected in their MoU rating. (Para 246)
The Committee expresses serious reservations over under-utilisation of funds for such an enabling Scheme. The Committee is also inclined to accept the view of certain industry associations who suggested that VDPs should be more substantive in developing the capabilities of MSE vendors instead of merely providing a Business to Business interface. The Committee also appreciated that after every VDP the participant CPSEs should be required to enroll at least certain number of MSEs as their Vendors and place orders. (Para 249)
The Committee acknowledged the issue of complicated process of registration of vendors by respective MSMEs. The Committee recommends that Ministry in coordination with DPE and other administrative Ministries should evolve a uniform process of registration of MSE vendors. (Para 250)
The Ministry may share its own databank of MSE vendor and SC/ST vendors with CPSEs or the CPSE associations like SCOPE so that CPSEs are enabled to locate the relevant MSE vendors, as per their requirements. (Para 251) 70
Certain Industry Associations had raised the issue of restrictive conditions/specifications in the terms and conditions of Tender Documents which preempted MSEs to submit tender. Often orders are clubbed which makes it a bulk order beyond the capacity of any MSE vendor. The Committee therefore, recommends that Ministry in consultation with stakeholders should evolve a standard Tender Document with minimum necessary specification so as to allow a wider spectrum of venders to apply. In this regard the Committee is also apprehensive whether MSE vendors could meet the guarantee/after sale service requirements that are built into the Tender Documents. (Para 252)
Every tender notice should specifically mention Public Procurement Policy Provisions for MSE vendors. (Para 253)
The Ministry must also conduct regular awareness programmes with the Administrative Ministries/DPE and the CPSEs regarding the provisions and new amendments in the Public Procurement Policy. The Ministry should also take steps to popularize the Governments e- marketing platform. (Para 254)
The Committee noted that there was suggestion of Sectoral registration of MSE vendors or Single Point Empanelment Registration Scheme of NSIC which could be used by the sectoral PSEs for locating relevant MSE vendors. (Para 255)
The Committee recalls that the Secretary, in an earlier meeting had agreed that the number of State VDPs have declined and had agreed to look into the reasons. He had also agreed that there was a need to make VDPs and training programmes result oriented. (Para 256)
The Committee concurs with the view that possibilities may be explored by bigger PSEs to outsource certain services/contracts to MSE vendors particularly the SC/ST vendors. (Para 257)
The Committee desires that the details of Prabhat Kumar Committee and its financial and legislative implications may be informed to the Committee. The Committee may also be apprised if the Ministry has set milestones for rolling out the Policy provisions in short and medium terms and benchmarks to assess the success of Policy. (Para 260)
However the Committee noted that the Ministry had not assessed the impact/growth in MSME's contribution to GDP and employment post - Make in India. The Committee feels that regular monitoring and survey are essential to measure efficacy of policy interventions and adjustments, if required. The Committee feels that the Ministry must make a survey to this effect and evolve policy intervention accordingly. In this respect the Committee asks the Ministry to utilize the Budget allocation for Studies, Research and Surveys. (Para 263)
The Committee notes that a working Group under the Chairmanship of Secretary, Department of Heavy Industry had prepared exhaustive report on Capital Goods Sector for Twelfth plan. It had extensively dealt with these issues subsector-wise. However, it appears no follow up has been done on that Report. The Committee recommends the Ministry may make 71 appraisal of that Report and take appropriate follow up action particularly in respect of Skill Development through its training institutions. (Para 267)
The MSME sector which is critical for the equitable growth and employment and entrepreneurship in the economy, is a fact that can hardly be overstated. Though the Budget allocation for the Ministry of MSME is not proportionate to the importance of this Sector, the Committee reiterates that the available resources need to be used efficiently for the targeted objectives. The Committee has often noted the excuse of Schemes being demand-driven for the under-utilization of allocations. If the Ministry is not convinced of demand, then it should not seek allocation. The Ministry has not been able to generate demand for its Schemes in a Sector which is wide spread over several sectors and is starved of any worthwhile policy intervention. With number of KIs reducing and low employability of training courses the Committee wonders the quality of monitoring at Ministry's level and efficacy of its institutional network in States and at grass root levels. (Para 268)
The Committee observes that while utilization of funds has increased during last two, the achievement in physical target remains tepid. The employability of training Schemes remains serious concern. (Para 269)
KVIC acts as regulator promoter and certification authority for the Khadi and Village Industry sector. Its multiple rules may come into conflict. The Committee is particularly concerned about the performance of State Khadi networks, who are supposed to implement Khadi schemes, and more particularly in the NE Region. The Committee noted with serious concern that despite rising demand for Khadi, the Khadi institutions registered with KVIC have shown decline in certain States. Yet, the allocation for MPDA has been increased. The Ministry remains non- committed about the wages of Khadi artisans. (Para 270)
Regarding PMEGP, the Ministry has not been able to set up even 75 units in every District. The Margin Money remains undisbursed till the last day of Financial Year. (Para 271)
Multiplication of Schemes with very Small allocation vis-a-vis vast scope of MSME sector, do not allow efficient use of available financial and human resources. The Committee has been emphasizing that every scheme has a cost of outreach, implementation and monitoring. With as many schemes, the Budget allocations do not reflect these costs which are essential for effective monitoring and delivery of scheme-objectives. Ministry therefore, must consolidate and rationalize its Schemes and allocations. (Para 272)
The Committee is particularly concerned about marginalization of abiding marginalized classes of society, i.e., SC, ST and NER regarding implementation of Schemes. Ministry has to make special efforts. (Para 273)
In view of CAG's repeated adverse observation of Ministry of MSME, the Committee has been asking for Performance Audit of major Schemes by CAG and not the third party evaluation. The Committee may be apprised of the outcome of the CAG's audit and its compliance. The Committee also recommends that Audit Paras must be appropriately included in the Annual Report of the Ministry. (Para 274)
MINUTES
VII
SEVENTH MEETING
The Committee met at 10.00 A.M. on Wednesday, the 15th March, 2017 in the Committee Room 'A', Parliament House Annexe, New Delhi
MEMBERS PRESENT
1. Shri Sharad Yadav — Chairman
RAJYA SABHA
2. Shri Narendra Budania
3. Shri Ram Narain Dudi
4. Shri Vivek Gupta
5. Shri T. G. Venkatesh
LOK SABHA
6. Shrimati Ranjanben Bhatt
7. Shri Birendra Kumar Choudhary
8. Shri S. P. Muddahanume Gowda
9. Shri Mohammad Asrarul Haque
10. Shri Bidyut Baran Mahato
11. Shri Raj Kumar Saini
12. Shri G. Hari
13. Shri Rameshwar Teli
14. Shrimati Dev Varma (Moon Moon Sen)
15. Shri Rabindra Kumar Jena
SECRETARIAT
Shri A.K. Singh, Joint Secretary
Shrimati Sasilekha Nair, Director
Shri Ranjan Chaturvedi, Deputy Director
75 76
At the outset the Chairman welcomed the Members of the Committee and informed about the day's agenda to consider and adopt the Draft 280th, 281st and 282nd Reports of the Committee. The Committee, after a brief discussion, adopted the Reports.
2. The Committee also decided to present/lay Reports in both the Houses of Parliament on the 16th March, 2017. It authorised the Chairman of the Committee and in his absence Shri Ram Narain Dudi, MP and in the absence of both, Shri Vivek Tankha, MP, to present the Reports in the Rajya Sabha. Similarly, the Committee authorised Shri S.P. Muddahanume Gowda, MP and in his absence Shri Birendra Kumar Chaudhary, MP to lay the Reports in the Lok Sabha.
3. A verbatim record of the proceedings of the Meeting was kept.
The Committee then adjourned at 10.35 P.M.