Increasing number of inspectors hurt SME growth: Assocham

New Delhi, June 4 (UNI) Productivity of Small and Medium enterprises (SMEs) has been crippled by almost 30 per cent due to increasing number of inspectors from about 35 to over 40, coupled with substantial hike in the interest rates from seven to 15 per cent.

If the trend is not reversed, SME's contribution of 60 per cent to total export proceeds of India will also be affected, a joint survey of ASSOCHAM-Tradeindia.com today revealed.

''The number of inspectors examining various records of SMEs should have come down, but it is increasing and might exceed 45 with new services being brought into tax net,'' Assocham SME Committee Chairman Bikky Khosla said.

Likewise, the rate of interest for SMEs is around 15 per cent, which is totally unserviceable and hurts productivity of SMEs, suggests the report.

The chamber has submitted a proposal to the Prime Minister, requesting his intervention to bring down the number of inspectors to 15 in the next two years and subsequently less than five in another two years time.

It has also suggested that there be only one inspector for examining the records of SMEs in PF, excise, bonus and sales tax.

''Sectoral arrangements should be made in a manner so that one inspector is made incharge of five different functions of SMEs,'' said Mr Khosla.

The survey also highlighted that banks have not been forthcoming in lending to SMEs at the desired interest rates as its actual costs works out to be about 15 per cent.

The procedural issues faced in raising loans include lot of paperwork, collateral security, high processing fee and prepayment charges.

''The time taken by banks to process the request of loans is also adversely affecting the growth in this sector,'' Assocham Secretary General D S Rawat said.

The average export company is smaller than a manufacturing firm, employing less staff. With fewer fixed assets to offer as collateral, it often faces problems maintaining financial liquidity, he added.

SMEs have difficulty adopting expensive quality management systems, or certification procedures that sometimes have to be repeated several times, the survey observed.

The other internal barriers are lack of information, capability to build up an international market position and maintaining international business relations and insufficient management skills, suggests the report.

''Most enterprises in this sector are more product and technology oriented than market oriented. Moreover the lack of managers with international experience and foreign language skills is another hindrance in their growth,'' said Mr Khosla.

Among external barriers, technical trade restrictions including standardisation, quality requirements, conformity assessment, packaging and labelling, ecology requirements, bureaucratic procedures, marketing and distribution problems, lack of risk assurance in the more distant countries, high transportation costs and communication problems, points the survey.

UNI