Constitution of Committee of officials to review reservation : The Advisory Committee on Reservation in its 14th meeting held on 28th August, has appointed a Committee of Officials to review the reservation list and submit recommendations to the Advisory Committee from time to time. The order of the Committee was issued on 17th October, The Committee consists of following members: - Shri T. Vijayaraghvan, additional Secretary, Ministry of Commerce - Chairman.
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Adviser, Planning commission - Member. Prasad, Addl. The Committee was asked to keep in mind the following factors while examining the list of items reserved : i Interests of small industries.
A copy of the letter is at Annexure-I. Meetings of the Committee : In all, the committee held eight meetings. Singhi, Dy. Economic Adviser, Office of the Economic Adviser, Ministry of Industry submitted two independent papers on Reservation Policy which were gone through by the Committee and the criteria indicated above were decided after discussion on the points raised in these two notes.
Notes on specific items were also received from Shri B. Bhanot also a member of the committee. In the first meeting, the Committee discussed and decided upon the general approach to be followed by it in its review of the reserved list. It may be mentioned that the officers of the office of Development Commissioner who attended the meetings strongly opposed any move for Dereservation of any items on the ground that : i Reservation has played important role in the growth of small scale sector, generation of large scale employment and diffusion of entrepreneurship.
It was clarified that an enquiry was made with State Governments, Associations which revealed that many of these items are produced in the SSI Sector and it was due to some technical reason in the interpretation of registration of items by Directorate of Industries that these items could not be listed as independent items under production by the SSI units.
Further it has been informed that many of these items are being manufactured in the unregistered SSI Sector. In a few large scale units, monopolistic trends also emerged as a result of certain established brands which were existing prior to reservation and which continue to enjoy the monopolistic position even today. Items like shoe polish, tooth-paste etc. This has either encouraged smuggling or dumping under the new Import Policy. One could mention simple items like nail cutters, knives and blades, hair clips etc. Electrical goods may be worth mentioning.
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One of the items which modern mass production technology consumes significantly less copper and results in electrical losses in the overall design. Similar is the situation in electrical chokes exclusively used for fluorescent tubes. This has given competitive edge for product marketing not only in domestic market but abroad as well.
Consumer is presently denied the price benefits as accrue on account of productivity increase.
Small capacity plants are no more available abroad and the machinery has to be tailor-made for SSI requirements. Some of our operations are in the nature of pilot projects abroad. In these days of global economy, it is difficult to survive on domestic market alone. One has to supplement by marketing abroad.
Local industry finds it difficult to even quote for large requirements for a single order as are coming in abundance now.
Neighbouring Asian countries take advantage of this lacunae for a large number of products. For bulk marketing, one has to ensure standardisation which is difficult to comply while multiscurcing. In identified area which have an export potential, one should either lower the export obligation or dde-reserve the items keeping in view long term national gains. In such a situation, local industry is denied the opportunity to manufacture a product in reasonable quality and scale, whereas foreign companies including MNCs are freely allowed to market their products.
In today's environment, there is no scrutiny in regard to import of an item and the overall duty tariff is also getting gradually reduced. Consumer pressure on quality and productivity is also increasing. There is, therefore, a need for having a re-look for certain tategories of items e.
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This results in numerous delays on account of interpretation problems. There are certain products which need minor modification in the description. General vague description has also led to a limited option for the actual user as the entire range is not produced in the country. There is a case for de-reservation of such products, lest free imports take place. The list contains 91 items which have been recommended for dereservation on the grounds : i That it is not technically feasible to manufacture quality products within the specified investment ceiling of Rs.
The list contains 56 items. The modifications have been recommended in order to bring : i Harmony and clarity in description and to avoid confusion; ii To reflect the existing situations more accurately ; iii Change in technology of production; iv To provide for integrated production wherever possible. A list giving itemwise details of changes, recommended by the Committee alongwith the rationale at Annexure II. This will also help safeguard the interests of consumers against the pricing of products of large units manufacturing reserved items in a near monopoly situation.
The Committee genuinely feels that the main problem faced by the small scale units is that of the paucity of working capital. The working capital made available to them in most of the cases is inadequate; there has been delay in sanction and the rate of interest charged is very high. All these problems lead to their sickness.
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The Committee is aware that the small scale units cannot have the advantages of economies of scale. This added with the high cost of borrowing makes their product uncompetitive. The small scale units also face difficulties in marketing their products because they cannot develop their own brand name and they cannot bear the heavy expenditure on advertisement which is considered essential these days for marketing the products. This has been one of the reasons for the Government to continue with the policy of reservation of some products for exclusive manufacture in the small scale sector.
In view of the above, though outside the scope, the Committee recommends that the banks lending rates for expansion, modernisation etc. The Committee consists of following members:. The Committee was asked to keep in mind the following factors while examining the list of items reserved :. The import and export policy particularly export orientation of small enterprises. It may be mentioned that the officers of the office of Development Commissioner who attended the meetings strongly opposed any move for Dereservation of any items on the ground that :.
Reservation has played important role in the growth of small scale sector, generation of large scale employment and diffusion of entrepreneurship. In the context of liberalised regime the need for reservation has assumed added importance because the sector is now more exposed to competition from large scale sector including multi-nationals and also due to drastic reduction in protection as result of lowering down of excise and customs duties.
There is no complaint against the quality of the goods produced in the SSI Sector as is evident from the fact that, at present, this sector is the largest contributor of Indian exports. That it is technically feasible to produce the reserved items within the present investment ceiling of Rs. Criteria adopted for review : While reviewing the various items reserved for SSI sector, the deliberations finally got categorised into following Sub-Groups Monopoly : In some areas, as a result of reservation, only limited number of units could play a role in the domestic market.
Safety, health and Noise consideration : Consumers suffer for non-compliance to safety regulation and BIS is not able to implement compulsory quality certification in large number of consumer durable products. Pollution Control : Some of the products could be classified into such categories which have a direct bearing on the environment pollution and conservation of natural resources e.
Productivity : Mass production technology and modern machinery has enhanced the productivity significantly. Minimum economic capacity plants : Some of the scales of operation are limited in our country and are of semi-automatic nature. Export potential : Reservation policy is coming in way in building exports in potential areas of thrust. Import-Export policy Related Items : After the liberalised economy, most of the items are freely allowed for import without any relevance to the reservation policy.
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Vague Description : Some of the reserved items are described in a very general way. Items not produced in the country at all : Quite a few items, though reserved in SSI, are either not produced in the country or are being made in negligible quantities. The Committee has prepared two lists for the consideration of the Advisory Committee which are as under :.
Items recommended for deletion from Reservation List. The list contains 91 items which have been recommended for dereservation on the grounds :. That it is not technically feasible to manufacture quality products within the specified investment ceiling of Rs. There has been product innovation as a result of which the scope of producing new items have emerged and these require higher investment. On the ground of safety, hygiene and production of quality goods and to meet the changed demand of consumers for quality goods.
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