Dear Friends,

We have gathered here to deliberate on the subject "Legal reforms for Resurgence of small scale and Medium Units".

The moment we consider the resurgence, it comes to our mind the ongoing process of liberalization, privatisation, globalization and convergence of technologies popularly known as ICE (Information Communication Entertainment) and also the 1991 New Industrial Policy Resolution. It also comes to our mind the GATT agreements, WTO and the ongoing negotiation and work programmes towards further liberalization and elimination of Tariff and non rejection of protectionism and discriminatory treatment in international trade relation. The ultimate goal of WTO is to create world environment, where trade flows freely. We are all aware that India is part of WTO and a signatory to it.

In today’s world of E-Commerce and Information Technology and events and processes moving at lightening speed, we have only option of either fall in line by modernising ourselves to the world standards in terms of innovative prices and quality of goods and services or else we will be left behind.

The Industrial policy of 1991 noted the developing situation in International context and proposed to take the policy initiatives to meet the challenge.

Para 21 of the policy resolution highlight the number of changes in the proposed direction.

"In order to achieve the objectives of the strategy for the Industrial sector for the 1990s and beyond, it is necessary to make a number of changes I the system of industrial approvals. Major policy initiatives and procedural reforms are called for in order to actively encourage and assist the Indian entrepreneurs to exploit and meet the emerging domestic and global opportunities and challenges. The bedrock of any such package of measures must be to left the entrepreneurs to make investment decisions on the basis of their own commercial judgement. The attainment of the technological dynamism and international competitiveness requires that entrepreneurs must be enabled to swiftly respond to fast changing external conditions that have become characteristic of today’s industrial world. Government policy and procedures must be geared to assisting entrepreneurs in their efforts. This can be done only if the role played by the government were to be changed from that of only exercising control to take one of providing help and guidance by making essential procedures fully transparent and by eliminating delays."

Para 12 of statement says for Small Scale Sector as follows:

"The Govt. will provide enhanced support to the Small Scale sector, so that it flourishes in an environment of economic efficiency and continuos technological upgradation."

From the above it is clear that there is clear reversal of Govt. role from protectionist and control regime to guiding and promotional.

We have before us several studies and suggestions made by the national and state level expert Commissions. National Council for Applied Economic Research, New Delhi has submitted its report in 1993. In the same year, S.S Industries Ministers Conference that was held on 8^th June, 1993 has made strong plea for radical restructuring of administrative and regulatory measures for simplification of procedures, while approving the measures suggested by Mahapatra Committee. One Man Law Commission constituted by Govt. of AP, Shri VVV Satyanarayana submitted its reports in the year 1998.

The Small Scale Industries through various representatives has enlisted several complaints before them and also suggested their views for overcoming the oppressive and the impossible to comply with the existing rules and regulations and also the "Inspector Raj Regime".

The complaints enlisted by SSI Association are as follows:

1. There are no specific and proposed protective law for Small Scale Industries Development.
2. Numerous executive orders issued by various Ministries and departments both at Central and State Governments.
3. Appraisal and applicability of various laws laws, plethora of rules and procedures that the units have to comply with.
4. Arbitrary and obnoxious inspections through inspectors resulting in "Inspector Raj".
5. Lengthy procedures for registration of lands and discretionary powers to infrastructure corporations, Urban Land Ceiling Authorities, Revenue Authorities, Electricity Board, SCFS Sales Tax Authorities, Water Supply and Sewerage Agencies, Pollution Control Board etc.

Some of the demands of the associations are as follows:

1. Self Declaration and automatic registration of approvals, permissions.
2. End of Inspector Raj.
3. Prior approval should be insisted only in case of hazardous and dangerous processes.
4. Large number of returns, registers, which have become outdated or unnecessary to be dispersed with.
5. The Labour Laws and Factories should be applied to only units which employ more than 25 workers using power and 50 workers not using power.
6. Annual declaration should be allowed to be filed stating compliance of various laws and regulations.
7. The reservations, incentives, tax concessions, holidays should be given.

The consolidated view of recommendations made by various Expert Commissions have recommended as follows:

1. Prior approvals should only be required in case of hazardous and dangerous processes (Ministries Conference 1993).
2. A large of number of returns and registers need to be abolished, a system of co-return to be adopted (Ministries Conference 1993).
3. The procedure for registration should be further simplified. The form of registration should be simple and short granting automatic registrations to members of Industries Associations may be examined. Incidentally such a provision among other things would encourage emergence of strong and responsible industry associations at local and regional levels.
4. In the changing environment, the Govt. will have largely to play the role of catalyst to ensure that necessary inputs, information and infrastructure are available even for tiny sector the various subsidies, reservation and other concessions will have to be withdrawn over a period of time in a phrased manner.

Abid Hussain expert Committee recommendations:

1. Uniform Promotional Framework is desirable to service the overall interest of Small Enterprises to enable compatible structures vis-à-vis banking institutions, Corporate Bodies and issues of national concern such as employment, rural development and social service.
2. Constitution of appropriate industry facilitation councils to resolve the disputes and various concerns using techniques of mediation and arbitration.
3. Single agency for clearances and approvals.
4. Provision for voluntary registration.
5. A move towards self-certification in the compliance with different laws that effect them.
6. Periodical inspection on random basis to oversee the compliance with laws.

There are fast growing changes in the global arena. The WTO/GATT provisions now covered not only trade in goods but also services and Intellectual Property Rights. Now the market accessibility is being thrown open to all irrespective of national boundaries. The modernization of technology and management techniques with the ability to react and restructure its industry and business in fastest manner possible is the need of the hour i.e., even a small unit is exposed to international Competition and market fluctuations in regard to the price quality and quantity of the goods and services.

In the light of the above on going changes and in view of the need for entrepreneurs need to restructure without any delay in tune with the global changes. Unit should be given more liberty and powers while removing unnecessary regulatory also to examine the feasibility of applying the doctrine of separation of powers to SSI’s while regulating and enforcing the substantive provisions of the law meant for protecting the revenue of the Govt., interests of the workers, other interest groups including public interests such as protecting the environment etc.

The legal frame should also ensure the optimal utilization of national resources for the development of SMEs and the nation as a whole. We, therefore, request you to formulate the ideas and present the same in the ‘Brain Storming’ session fro creating appropriate legal framework and procedures that will enable the achievement of the broader objective of Resurgence of SMEs.