COMMITTEE ON
INDUSTRY
I.
Composition of the Committee
9.1 The Department-related Parliamentary Standing Committee on
Industry for the year 2005 was constituted on 5th August, 2005 under Rule 287 of the Rules of Procedure and
Conduct of Business in the Council of States.
The composition of the Committee was as under:—
1. Shri Santosh Bagrodia — Chairman
2. Shri K.B. Krishna Murthy
3. Prof. M.M. Agarwal
4. Shri Surendra Lath
5. Shri Suresh
Bhardwaj
6. Dr. K. Malaisamy
7. Shri Pyarimohan
Mohapatra
8. Dr.
Vijay Mallya
9. Shrimati Sumitra Mahajan
10. Vacant
LOK SABHA
11. Shri Guharam Ajgalle
12. Shri Kailash Baitha
13. Shri Rajnarayan
14. Shri Swadesh Chakraborty
15. Shri Bapu Hari
Chaure
16. Shri Subhash
Sureshchandra Deshmukh
17. Shri Ram Singh
Kaswan
18. Dr. Vallabhbhai
Kathiria
19. Smt. Susmita Bauri
20. Shri Sunil Kumar
Mahato
21. Shri Prakash
Paranjpe
22. Shri Kishanbhai
Vestabhai Patel
23. Shri Badiga Ramakrishna
24. Shri Gurjeet Singh Rana
25. Shri Sarvey
Sathyanarayana
26. Smt. Rubab Sayeda
27. Kunwar Manvendra
Singh
28. Shri Ganesh Singh
29. Shri Suraj Singh
30. Shri Giridhari Yadav
31. Shri Chandramani
Tripathi
9.2 On
1.
Shri
Santosh Bagrodia — Chairman
2.
Shri G. Sanjeeva
Reddy
3.
Dr. (Smt.) Prabha
Thakur
4.
Shri Kalraj
Mishra
5.
Shrimati Hema
Malini
6.
Dr. K. Malaisamy
7.
Shri Pyarimohan
Mohapatra
8.
Dr.Vijay Mallya
9.
Shri O.T. Lepcha
10.
Shri Rahul Bajaj
LOK SABHA
11.
Shri Guharam
Ajgalley
12.
Shri S.K.
Bwiswmuthiary
13.
Shri Ajoy
Chakraborty
14.
Shri Swadesh
Chakraborty
15.
Shri Subhash Sureshchandra
Deshmukh
16.
Shri Ram Singh
Kaswan
17.
Dr. Vallabhbhai
Kathiria
18.
Dr. Prasanna
Kumar Patasani
19.
Shri Krishnabhai
V. Patel
20.
Shri P. Rajendran
21.
Shri Badiga
Ramakrishna
22.
Shri Gurjeet
Singh Rana
23.
Shri Sarvey Sathyanarayana
24.
Shri Rajnarayan
Budholiya
25.
Shri K.C. Pallani
Shamy
26.
Shri Ganesh Singh
27.
Kunwar Manvendra Singh
28.
Shri V.K. Thummar
29.
Shri
Giridhari Yadav
30.
Shri Umakant Yadav
31.
Shri Mohan S.
Delkar
Sl. Sub-Committee Subject Name of the
Chairman/
No. Convener
1. Sub-Committee-I For
Ministry of Agro Dr.
Vallabhbhai Kathiria
and
Rural Industries
2. Sub-Committee-II For
Ministry of SSI Shri
Swadesh Chakraborty
3. Sub-Committee-III For
Ministry of Heavy Dr.Vijay
Mallya
Industries
and Public
Enterprises
9.3 The
Department-related Parliamentary
Standing Committee on Industry selected the following subjects for examination:
—
|
Sl. No. |
Ministry/ Department |
Subject |
|
1 |
Ministry
of Agro and Rural Industries |
PMRY,
REGP and KVI Schemes. |
|
2 |
Ministry
of SSI |
Credit flow; Cluster Development; problem and
prospects of SSI sector; and availability of
land to SSI units in upcoming of SEZ scheme. |
|
3 |
Ministry
of Heavy Industries and
Public Enterprises |
Dalmia Dadri Cement Ltd. (Acquisition and Transfer
of Undertakings) Amendment Bill, 2006; Revival of HMT Ltd.;
Professionalisation of Boards of Directors in different Sectors of CPSU and
performance review of PSEs. |
IV. (A) Sittings of the Committee: Till December
2006 the Committee held 28 sittings lasting for about 60 hours. The details of
the meeting are given in Annexure IX.
(B) Sittings of the Sub-Committee: Till December 2006, 2 sittings of the Sub-Committee
were held lasting for 03 hours 35 minutes. The details of the meeting are given
in Annexure X.
V.
Study visits: The Main Committee and
Sub-Committees undertook study visits of various parts to have an in depth
study of their respective subjects which are as under:
|
Sl.
No. |
Committee/
Sub- Committee |
Dates |
Places
of visits |
Agenda |
|
1 |
Main
Committee |
8th
July to 15th July, 2006 |
Kolkata, Chennai, |
Availability
of Bank Credit, Transport, Steel, Coal to SSI units in the States; revival
under BRPSE; review of the status of
HPF; and review the Unlocking the
Assets to Ancillaries of HMT. |
VI. Reports Presented: During 2006 the
Committee presented the following 16 Reports to both the Houses:—
Sl.No. Report
No. Date of presentation/ laying in Subject
Rajya Sabha Lok Sabha
|
1. |
178th |
22.05.2006 |
Report on Unlocking of surplus assets of CPSEs to generate
resources for revival and the status of ancillary Units of CPSEs: A case
study of HMT Ltd. |
|
2. |
179th |
22.05.2006 |
Report on Action Taken by
the Government on the recommendations contained in Committee's One Hundred Sixty-eighth
Report on Demands for Grants (2005-06) of the Department of Public
Enterprises (Ministry of Heavy Industries and Public Enterprises). |
|
3. |
180th |
22.05.2006 |
Report on Action Taken by the Government on the
recommendations contained in One Hundred Sixty-ninth Report on Demands for
Grants (2005-06) of the Department of Heavy Industries (Ministry of Heavy
Industries and Public Enterprises). |
|
4. |
181st |
22.05.2006 |
Report on Action Taken by the
Government on the recommendations contained in One Hundred Seventy-first Report on Demands for Grants (2005-06) of the Ministry of Small Scale Industries. |
|
5. |
182nd |
22.05.2006 |
Report on Action Taken by the
Government on the recommendations contained in the One Hundred Sixtieth
Report on the Tax Proposals affecting
various segments of industries of the Ministry of Small Scale Industries. |
|
6. |
183rd |
22.05.2006 |
Report on Action Taken by
the Government on the recommendations contained in the One Hundred
Seventieth Report on
the Demands for Grants ( 2005-06) of the Ministry of Agro and Rural Industries. |
|
7. |
184th |
22.05.2006 |
Report on Action Taken by the
Government on the recommendations contained in the One Hundred Seventy-
second Report on Demands for Grants (2005-06) of the Ministry of Agro and Rural Industries. |
|
8. |
185th |
22.05.2006 |
Report on Action Taken by the Government on the recommendations
contained in the One Hundred Seventy-third Report on Inter-Sectoral Strategic
Co-operation to Promote Small Scale Industries of the Ministry of Small Scale
Industries. |
|
9. |
186th |
22.05.2006 |
Report on Action Taken by
the Government on the recommendations contained in the One Hundred
Seventy-fourth Report on Operational
Effectiveness of PMRY, REGP and KVI Schemes in Bihar, Jharkhand, |
|
10. |
187th |
22.05.2006 |
Report on Action Taken by the Government on the
recommendations contained in the One Hundred Seventy-fifth Report on Key
concern areas of SSI in select states of the Ministry of Small Scale
Industries. |
|
11. |
188th |
22.05.2006 |
Report on Demands for Grants (2006-07) Ministry of
Agro and Rural Industries. |
|
12. |
189th |
22.05.2006 |
Report on Demands for
Grants (2006-07) Ministry of Small Scale Industries. |
|
13. |
190th |
22.05.2006 |
Report on Demands for Grants
(2006-07) of Department of Heavy Industries (Ministry of Heavy Industries and
Public Enterprises). |
|
14. |
191st |
22.05.2006 |
Report on Demands for Grants (2006-07) of Department
of Public Enterprises (Ministry of Heavy Industries and Public Enterprises). |
|
15. |
192nd |
23.11.2006/24.11.2006 |
Report on
the Dalmia Dadri Cement Ltd. (Acquisition and Transfer of
Undertakings) Amendment Bill, 2006 (M/o HI&PE) |
|
16. |
193rd
|
23.11.2006/24.11.2006 |
Report on Action
Taken Report on the 178th report of the |
(a) 178th
Report
Industrialization by CPSEs
9.4 The
Committee observed that since their inception the CPSEs had initiated a wave of
industrialization in their adjoining region. The CPSEs were direct mainstay for
several small-scale ancillaries and suppliers and many more indirectly. These Units had thrived on the orders from
CPSEs. The Committee was of the view that if the trend could continue this
would have benefited both parent company and the ancillary units.
Resource requirement of the HMT for its revival
9.5 Considering
the resource requirement of the HMT for its revival and the Committee’s
consistent emphasis on need to encourage the CPSEs to generate their own
resources to assume full autonomy, also appreciating the long association of
ancillaries with their parent HMT Company and taking a view of their offer to
purchase the sheds at the price ascertained by State Government agency TECSOK
as against the market price which is demanded by the HMT, the Committee recommends
that the CMD of the HMT, in exercise of the powers vested in him, on taking a
lenient and favourable view on demand of the ancillary owners, constitute a
sub-Committee in the Board of Directors to review the issue in consultation
with stakeholders within the parameters of Company’s financial requirements.
Such sub-Committee should furnish its report to the Board of Directors of the
Company, within a time frame who may then take a final view on the issue in its
earliest meeting.
9.6 The
Committee also recommended that the Government should formulate a common policy
for the CPSEs for disposal of their surplus assets in a way to maximize the
returns.
(b) 179th Report
Purchase Preference Policy
9.7 The Committee felt that Purchase Preference
Policy could be treated only as an interim arrangement. Such an arrangement
contributes practically nothing to the Consolidated Fund by way of earning from
market. The PSEs must be increasingly encouraged to diversify in the open
market and re-align themselves with the emerging market through Joint Ventures
and global marketing alliances instead of relying solely on Government/PSEs for
orders. Though the Policy provided a cushion for PSEs, they must take benefit
of current buoyancy in the market.
Notification
to repeal SICA
9.8 The Committee observed that pending
the notification to repeal SICA, the linkage between the two bodies BIFR and
BRPSE remains undefined. The Committee, therefore, recommended that the
Government should decide on linkage between BIFR and BRPSE at least, till such
time a final decision on BIFR is taken by the competent Court.
9.9 The Committee also noted that
management development courses are the main benefit of DPE’s membership of
ICPE, which had been availed by only 76 executives in last three years with DPE
paying an annual membership fee of US $ 75000. The Committee may be apprised of
the items included under this contribution. The Committee could also like the
DPE to take a fresh look into the cost benefit ratio of such membership and
justify the same of next year’s Demands and inform the Committee accordingly.
Support to PSEs in
achieving the targets in MoU
9.10 The Committee would like to know the
nature of such support to PSEs in achieving the targets in MoU. The Committee observed that the number of PSEs
earning favourable ratings is increasing while those getting ‘Poor’ rating have
decreased. Keeping this in view, the
Committee also observed that the number of PSEs entering the MoU has been
falling from
Boards
as Independent Directors
9.11 Despite elaborate policy intentions to
include persons of proven expertise in the Boards of PSEs, the Committee
observed that former bureaucrats, serving representatives of autonomous
organizations under government, representatives of subsidiary companies have
been included in the Boards as Independent Directors in addition to Functional
and Official Part- time Directors. In several cases retired bureaucrats are
reappointed as Independent Directors. The Committee felt that such an
arrangement does not fall in the spirit of the policy of appointing Independent
Directors on the Boards of Directors of the PSEs. The Committee also expressed
reservation on the practice of renewing the tenures of existing Directors in
some cases. The Committee urged the department to ascertain that the implementation
of the policy is in consonance with its true objectives and bring to the notice
of this Committee any dilution in the “Professionalisation” of Boards.
9.12 The Committee was of the opinion that
there should be uniformity in the qualification, selection and mandate of
Non-Functional Part-Time Directors, as too many categories within the Board may
affect its efficiency and autonomy. The Board must be defined in terms of its
mandate and the interest of the Company and not by the categories of its Directors.
The Committee would like to have Government’s comments on the need for
uniformity in Part-Time Directors.
9.14 The
Committee be apprised of the reasons on which is recommendation to extend the
benefits of CRR scheme to family members was refused by the Planning
Commission. The Committee reiterates its recommendation as contained in its 150th
Report in this respect, and recommends a re-look into the issue as it will
increase the family income of the VRS optees.
9.15 The Committee observed that distinct
preference was given to serving officers from the Armed Forces in the Board
level appointments in the PSEs under the Ministry of Defence, on the plea that
Armed forces were premier customers of these PSEs. The Committee wondered, if
such an arrangement reduces PSEs as a captive Company instead of an autonomous
commercial entity. The Committee was of the view that the products of these
PSEs have a large civilian market too. The Committee felt that if the private
sector is being involved in the defence sector, why cannot the defence related
PSEs harness potential in civilian and export market with their duel-use
products and technology.
9.16 The Committee felt that the maximum age
for Independent Directors too should be appropriately reduced to maintain
uniformity in the Board of Directors.
Technology upgradation to
secure high-end market
9.17 The
Committee apprehended that despite robust growth in capital goods sector, the
PSEs find difficult to secure orders and in several cases to execute the orders
due to lack of working capital and other constraints. The Committee, accordingly, recommended that
efforts should be made by the PSEs to utilize current opportunities in the
market. As the capital goods market is
essentially technology-intensive, PSEs must undertake the technology
upgradation to secure high-end market.
Linkage between BIFR and
BRPSE
9.18 The Committee recommended that the Government should decide
the on linkage between BIFR and BRPSE at least, till such time a final decision
on BIFR is taken by the competent Court.
9.19 The Committee observed with concern that multiplicity of
agencies even in deciding the revival may and has resulted in different
opinions, successive appeals and costly delays.
Even after deciding, the revival packages have failed in several
cases. The Committee apprehended that in
the process of analyzing the cases the BIFR has assessed the Techno-Financial
feasibilities of individual PSEs prepared by expert agencies. Yet the appeals are filed in AAIFR and
Long-term
objectives
9.20 The Committee noted that DHI was unable
to commit on firm and tangible long-term objectives in quantitative terms that
could be a benchmark against which the performance is assessed. On most of the long-term issues Department’s
reply has been elusive. The Committee
observes that despite huge financial liabilities all the major decisions are
still left to BRPSE. Pending its
recommendations being approved by the competent authority, the Department is
taking measures that are ad-hoc window-dressing of depleted worth of PSEs. The Committee was of the opinion that scarce
resources cannot be lost endlessly amidst huge liabilities of PSEs. A lasting solution has to be found urgently
and accountability must be accordingly fixed for which it is necessary to
determine the benchmarks of performance.
9.21 The Committee observed that while the
aggregate growth in PSEs under DHI compares well with the capital goods growth,
but this level of growth is mainly contributed by one PSE namely Bharat Heavy
Electricals Ltd. (BHEL) which showed a growth of 15% during this period. Most of the PSEs have shown a negative growth
mainly due to financial, marketing and technological constraints.
Generation of
internal resources
9.22 The Committee observed that cement and
non-metallic industries are not able to generate extra-budgetary support in the
engineering and consumer industry sector only BHEL and HPC are able to garner extra
budgetary support to some significant level.
Whereas the generation of resources by rest of the companies, is
nominal. This is certainly not an
acceptable situation. The DHI should
come out with concrete proposal so that not only the number of companies who
generate the internal resources increases but also these Companies generate
substantial resources.
9.23 The Committee noted that while the PSEs
in the heavy engineering and capital goods category are facing the constraints
due to lack of orders mainly from Government and competition from foreign
companies due to opening up of domestic market.
Heavy wage bill, inability to generate internal resources or extra
budgetary resources due to huge liabilities and previous NPAs, over reliance on
the budgetary support even for working capital and also for the orders,
inability to upgrade the produce line according to market needs, technological
drawbacks, lack of corporate dynamism, inability to create new niche in the
market or locate new market are the major constraints for any sustainable
revival of the PSEs.
9.24 The
Committee recommended that certain companies in capital goods sector are
critical for development of heavy engineering and infrastructure sectors
irrespective of their financial condition.
These companies in any case rely heavily on the Government’s investment
in huge infrastructure projects. While
they can be encouraged to generate their internal resources through innovative
corporate strategies like global tie-ups and JVs. Government must at the same
time support such facilities.
9.25 The Committee recommended the
allocation for the renewals/replacements, additions and modifications, etc.
should be judicious and should be justified by the objectives it is likely to
achieve. Allocations should not be for
mere token symbolism as it may amount to blocking scarce resources, which the
country can only ill-afford. The
Committee was informed that such allocations were necessary for the technical
requirements of budgetary process. The
Committee feels that such small amount obscures the entire scope and scenario
of prospective expenditure. The
Department may avoid blocking such amounts in future.
Lump-sum
allocations for Plan-Capital expenditure
9.26 The Committee further observed that there
are too many lump-sum allocations for Plan-Capital expenditure that have not
been sufficiently elaborated. The
Committee has been further informed that these allocations are liable to be
raised at the subsequent stages. The
Committee shall be apprised if such unexplained expenditure that cannot be
estimated, could at all be Planned-Capital expenditure.
9.27 The Committee also noted that of the
seven companies, five have been referred to BIFR. Of the seven companies only
Bridget and Roof is earning profit.
Appeals against BIFR’s decision in respect of R&C and TSL are
pending before AAIFR. The Committee also
noted that the companies under BYNL group are being placed before BRPSE in
phases. The Committee hoped that BRPSE
would expedite the matter.
Budgetary scheme
9.28 The Committee observed that the
Budgetary scheme and explanatory notes on expenditures do not give sufficient
explanation/details of the allocations.
There is always a possibility of duplication of expenditures through
multiple Heads. The test criterion of
the budget is clarity and transparency instead of ambiguity. The objective of the parliamentary scrutiny
of budget was to know efficacy of the objective and efficiency of expenditure
to achieve the objective. Expenditures
are split into classes and sub-classes, thereby preventing a clearer picture of
expenditure for a particular objective.
The Committee also liked to know
the rational necessity and objective criteria of the classification of diverse
expenditures under one category and Budget Head instead of the details of
allocations. The Committee felt that the
DHI should take up these issues for consultation with the Ministry of Finance.
(d) 181st Report
Appropriation of Non-Plan Expenditure for
NSIC in the year 2004-05
9.29 The Committee
considered the reply of Ministry of SSI and further recommended that the matter
of budgetary support to NSIC to meet out expenses on VRS must again be taken up
with Ministry of Finance so that the NSIC is given opportunity to rationalize
the manpower.
9.30 Institutional
arrangement made in North Eastern Areas for promotion of SSI in the region. The
Committee recommended that the progress in opening of offices of the NSIC
should be geared up by the Ministry so that it could take up the programmes to
increase its reach in the Region.
Strengthening of Small Industries Development
Bank of
9.31 The Committee agreed
with whatever steps had so far been taken by the SIDBI through Ministry or
itself for extending direct credit to SSI at the same time Committee
recommended that RBI could be approached again forcefully and implementation in
this direction if any could be shared with the Committee so that the issue
could be taken with higher ups of RBI/Ministry of Finance.
(e) 182nd Report
9.32 The Committee noted that the Government had extended a variety of
fiscal incentives for promoting the Small Scale Industries, however, this
Committee felt that the Advisory Committee, constituted under the Chairmanship
of Member (Central Excise), Central Board of Excise and Custom (CBEC) to advise the Government on the extent of
abatement for both excise and Service Tex, should also examine the issue of the
requisite period for which such fiscal incentive is required to promote the
SSI units. The said Advisory Committee
might also examine the issue of extending the central fiscal incentives to SSI
units engaged in the SSI activities to the select region of the country in such
a way that it might ensure the balanced industrial distribution and development
and prevent the shifting of the industries from one region to another due to
aberration in the tax-incentives.
9.33 The
Committee observed that since the medium enterprises were emerging out of the
SSI units and they were on the move towards the consolidation stage, therefore,
the Advisory Committee might also consider the issue of examining as to whether the emerging MEs required
central fiscal incentives for the rapid promotion and proliferation and
catching up with the global pace of growth.
9.34 The
Committee understood the need for obviating the inverted customs duty in order
to maintain the differential duty-structure on the raw-materials and the
finished products. The Committee agreed with the reply of the Government that
the output of one industry might be the input of another industry therefore, it
might not be possible to remove the duty-structure in all cases. However, the
Committee was of the view that
tax-structure could not be on the random basis, it had to be based on certain
reasons and principles that identified products were the finished products and
from those which could be used still as raw-material. Such identification and
its classification had to be on rational basis to avoid the double-taxation and
to maintain the accepted general principle of taxable that the import duty on
the raw-material has got to be lower than the duty structure on the finished
products. The Committee’s concern was that the end-users could get the solace
from the rational duty structure. Government would also not be under any
revenue loss from the intermediate user of products which still remained as the
raw materials.