Stretch the small horizon

CURRENT global concerns for more stringent environmental standards on product quality might sound a death knell for the smallscale industry in India if steps are not taken to review the criteria for defining it. A recently conducted survey on products reserved for production by smallscale industries, conducted by the Confederation of Indian Industry (CII), has revealed that the current investment limit of Rs 60 lakhs for plant and machinery will have to hiked to eliminate problems of deficiency in product quality and non-confirmation to product standards.

The CII has proposed to the Department of Small Scale Industry (DSSI) that the present policy should be redefined, emphasising more on employee strength and turnover rather than investment. "If you have investment as the basis for classification, it will discourage investment in plant and machinery," says Gurpal Singh of the CII. The report also stated that the technological upgradation needed to meet export requirements will ensure "cost effectiveness and environment friendliness".

Anticipating additional costs on account of pollution abatement, the DSSI has already issued a notification to exclude the costs of R&D and investment in pollution control equipment while calculating the total investment for a particular industry. "Environmental management in smallscale units is becoming increasingly more complex as the international standards have serious implications for the production process," says Singh.

The pressure to meet export requirements has also led to the exclusion of some items which have a large export market. The investment ceiling in the case of garments has been raised to Rs 3 crore, provided 50 per cent of the produce is exported. This has been allowed mainly to allow for investment in superior technology.
Reluctant to regulate Both the DSSI and the Union ministry of environment and forests (MEF) are, however, reluctant to opt for policy instruments to regulate or discourage polluting industries in the small sector. "To use either the reservation policy or any other policy instrument to discourage certain items in the smallscale sector is politically very sensitive," says an industry observer.

"In the new liberalised scenario, we do not want to go in for further controls to regulate the smallscale industries," confirms a DSSI official. Says George Joseph, joint secretary in the MEF, "We are concerned about the large number of polluting units like tanning and electroplating proliferating in the smallscale sector. But to debar smallscale units from producing certain items on environmental grounds will weaken it. Instead, our thrust is towards guiding small manufacturers in waste management."

The MEF has already identified 17 most polluting industries for special monitoring. Smallscale units producing any of these items will have to furnish all relevant information to the state pollution control boards. The MEF has also initiated a programme to help the units in establishing common effluent treatment plants.

While some officials support the need for rationalising the parameters for technological upgradation for smallscale units they do not want environment to become a pawn in the corporate game, which has large units trying to do away with the reservation policy. Even the CII has a success story to relate, in which the cluster approach to the development of infrastructure for smallscale units has reaped dividends to the extent that some of them have qualified for the ISO 9000.

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