Budget 2001-2002

Industrial Restructuring

51. Government had constituted a high level committee on law relating to revival, reconstruction and/or winding up of companies. The Committee has submitted its report and Government has accepted its key recommendations. It is proposed to repeal the SICA and also to amend the Companies Act in order to set up a National Company Law Tribunal. These legislative proposals are proposed to be introduced during the current session by my colleague, the Minister for Law, Justice and Company Affairs.

Labour Market

52. Along with these changes, it is also necessary to address the contentious issue of rigidities in our labour legislations. Some existing provisions in the Industrial Disputes Act have made it almost impossible for industrial firms to exercise any labour flexibility. The Government is now convinced that some change is necessary in this legislation. Chapter VB of the ID Act stipulates that employers in specified industrial establishments must obtain prior approval of the appropriate government authority for effecting lay-off, retrenchment and closure, after following the prescribed procedure. It is proposed that these provisions may now apply to industrial establishments employing not less than 1000 workers instead of 100. The separation compensation will be increased from 15 days to 45 days for every completed year of service. The enhancement of compensation would act as a deterrent on employers to take recourse to lay-off, retrenchment and closure in a routine manner.

53. Similarly, rigidities inherent in the existing legislation regarding Contract Labour inhibit growth in employment in many service activities. Section 10 of the existing Act envisages prohibition of contract labour in work/process/operation if the conditions set therein like perennial nature of job etc. are fulfilled. Section 10 enables the contract labour engaged in prohibited jobs to become direct employees of the principal employer. To overcome this difficulty and at the same time ensure the protection of labour, it is proposed to bring an amendment to facilitate outsourcing of activities without any restrictions as well as to offer contract appointments. It would not differentiate between core and non-core activities, and provide protection to labour engaged in outsourced activities in terms of their health, safety, welfare, social security, etc. It would also provide for larger compensation based on last drawn wages as retrenchment compensation for every year of service.

54. These measures will promote industrial investment in labour intensive, and export oriented activities providing for renewed industrial growth, while, at the same time safeguarding the interest of workers. My colleague, the Minister for Labour will introduce appropriate legislation to amend the Industrial Disputes Act and Contract Labour Act within this session.

Ashraya Bima Yojana

55. I am conscious of the short-term impact on organized labour force of the on-going liberalization of the economy. I therefore propose to introduce a new scheme of group insurance viz. "Ashraya Bima Yojana" to extend security cover to such affected workers. The policy will provide compensation of up to 30 per cent of last drawn annual pay for a period of one year to workers who lose their jobs. It is proposed that the policy will initially cover all employees drawing a salary up to Rs 10,000 per month. The four Government owned general insurance companies will administer this policy on a "No Profit No Loss" basis and will announce full details including premium rates of the proposed policy by the end of June 2001.  

Small Scale Industries

56. Government’s commitment to the Small Scale sector has been repeatedly demonstrated. A comprehensive policy package for this sector was announced by the Prime Minister on 30, August, 2000.  

57. In order to encourage production and employment in this sector, the exemption limit has been doubled to Rs 1 crore from September 1, 2000.

58. The new Credit Guarantee Scheme of August 2000 has been provided budgetary support of Rs 100 crore in the current year. The limit of loan without collateral which was earlier fixed at Rs 10 lakh has been raised to Rs 25 lakh under this scheme. Already 7 banks have entered into an agreement with the Credit Guarantee Fund Trust that has been created to implement the scheme. A credit linked capital subsidy scheme for technology upgradation was launched in October 2000 envisaging 12 per cent capital subsidy. It is expected that loans to the extent of Rs 5000 crore would be made available to the SSI sector over the next 5 years under the scheme.

59. Our small-scale entrepreneurs have proved their competitiveness in providing over 35 per cent of national exports. To enable further new investment and technology upgradation in some of the key export oriented sectors, it is now proposed to dereserve another 14 items related to leather goods, shoes and toys.

Textiles

60. The Government has recently announced a New Textile Policy aimed at preparing industry for the new challenges of global competition. I am happy to announce a textile package comprising the following schemes:

• A scheme for setting up Integrated Apparel Parks is being initiated. This will enable the dereserved readymade garment industry to set up modern units with the best infrastructure. A budget provision of Rs 10 crore has been provided for the year 2001-02.

• A strong and modern weaving sector is very critical for this purpose. At least 50,000 new shuttleless looms and the modernisation of 2.5 lakh plain looms to automatic looms is expected to take place by 2004 through funding from the Technology Upgradation Fund Scheme (TUFS). The budget provision under TUFS is being raised from Rs 50 crore this year to Rs 200 crore in the next year.

• The Cotton Technology Mission is being continued and strengthened. The budget provision is being increased from Rs 15 crore to Rs 25 crore.

• The budget allocation for Ministry of Textiles is being enhanced substantially from Rs 457 crore in 2000-01 to Rs 650 crore in 2001-02.

• I shall provide the details of the proposed fiscal changes in Part B of my speech.