The 2010-11 budget allocation of Rs, 2400 crore for SMEs which has been raised from Rs. 1800 crore would  take care of the additional needs of the sector witnessing an increase in overall turnover and employability of the sector, said H.P Kumar, Chairman and Managing Director, National Small Industries Corporation Ltd in an exclusive interview to SME Times. 
 
                                                                                Excerpts of the interview...

The Union Budget 2010-11 must have been promising for the SME sector this time. What is your take on this?
H.P Kumar: Of course, one of the benefits given in the budget is the interest subvention. This will benefit the SME exporter to meet the global competitiveness due to the reduction in the costs of credit.

The second benefit that have been given to the SME sector is by way of increasing the presumptive taxes turnover limit from Rs 40 lakhs to Rs 60 lakhs. The micro units and service providers can take advantage of this Rs. 60 lakhs limit and pay taxes in lump-sum instead of keeping books of accounts, auditing and etc. This is a big advantage for the micro sector.

The third advantage and the facility which has been given is the increase in the limit of tax audit. This tax audit demand of Rs. 40 lakhs was long time back. And, there was a demand from the SME sector that this tax audit limit should be increased, which has been increased from Rs. 40 lakhs to Rs. 60 lakhs.

These are the direct benefits given to the individual units. Apart from that, the budget allocation for the sector has been raised from around Rs. 1800 crore to Rs 2400 crore. That is a substantial jump of about 33 per cent in one year. It will take care of the additional needs of the sector, which are emanating on the account of implementation of the programs by the Ministry of MSME and other organizations. So, this will bring a jump in fact in their activities and ultimately reach to the increase in the overall turnover, employability of the sector.

How will the disbursement take place of the budget allocation for SME sector?
H.P Kumar: The disbursement does not take place in a way that the money will have to be given to the smaller units. This happens through the implementation of the schemes such as the interest subsidy schemes, credit link subsidy schemes etc. The schemes are already under implementations and some of the new schemes which are going to be implemented on the account of the recommendations of PM's Task Force. So, these disbursement of the fund and the utilization of the fund would take place with the implementation of the schemes, which is a standard factor.

Why SMEs are apprehensive about getting listed in the much-awaited SME stock exchange?
H.P Kumar: Equity investment is considered to be a risky proposition. Not only for SMEs but also the larger organization, if you investing in equity then you are taking risks. Equity is not returnable, it is not a loan. If the company does well, equity will be able to generate dividends and profits. If the company does not do well, then the equity will face losses.

So, in case of the SME sector which is considered to be high risk-prone sector, naturally the investors will be extra careful in investing in this new area. That is why, the guidelines have been prepared so that the investors have the protection and also the SME sector is able to raise resources from the market. In that way, it will benefit both.

Why the market is not accepting the concept of SME stock exchange?
H.P Kumar: No, I will not say the market is not accepting. I would rather say that there are certain stake holders who are not comfortable as per as I have got the feedback. Basically, the merchant bankers those who have been casted upon their responsibilities for compulsory market-making. They may not be feeling comfortable. And, that is why the consultation process is still on. But, it will certainly get implemented because the government has clearly made the intention and it is the platform which the government wants to provide to the SME sector in order to benefit them.

Can we expect MSMEs' contribution India's GDP growth to touch double-digit?
H.P Kumar: It has been already touching double-digit and it will continue to do so. The point is not only double-digit but it can grow over the double-digit. Last count, the SMEs GDP contribution has been 8 per cent and it is rising now. In the coming years we can expect to reach 10 per cent and beyond.

Marketing is another major obstacle for the growth of this sector. Is the government formulating any scheme that would ensure good business result?
H.P Kumar: Yes, in the task force recommendations we have included some new schemes for improving the marketing potential of the MSME sector such as Market Intelligence Cell. We are going to set up this Market Intelligence Cell to collect the information from all over the country as well as from other countries those are the bulk buyers of Indian goods. In that way, it will help the MSME exporters to get the information and target the buyers in a better way.

Innovation is a prime issue for SMEs, which cannot be ignored at all. In fact, the Secretary of Ministry of MSME informed that a specific scheme addressing the need of SME's innovation likely to be launched very soon. Are you aware of that?
H.P Kumar: Information Communication Technology (ICT) scheme is one of the schemes which going to be implemented. The purpose is to create a central helpline to collect and provide information to the SME sector. It gives opportunities to new entrepreneurs and the youngsters to start their business enterprises. It is likely to be introduced in another few months.