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By Shri S. K. Bagrodia,
M.P and Chairman,
Department Related Parliamentary Committee on Industry, Union of India
I am pleased to associate with today's Seminar on very important issue of "Relevance of Ancillarisation in context of Globalisation and emerging Trade Relations".
I compliment the organizers for envisaging such an event.
As the Chairman of the Committee on Industry, I may inform you that it has been our considered view that the benefits of globalisation must be available to SSI and Tiny sector.
These Sectors make significant contribution to the economy and employment particularly in the developing countries.
Shri S. K. Bagrodia delivering the keynote address
However, the experience has been that the globalisation has benefited only bigger business. Movement of global capital has resulted in acquisitions/ merger and consolidation of bigger business.
Smaller business if not strengthened may be driven out of the market place.
It has been observed that the SSIs are unable to match bigger business in competition for open market space.
This restricts the maneuverability of SSI units. It has been a major cause of sickness in SSI sector. The viability of SSI units is critically dependent on the financial health of larger buyers.
In recent past, as the Indian industrial sector underwent major restructuring with major PSEs getting either sick or privatized, the supplier SSIs in the adjacent area too have fallen sick.
We have to give protective buffer to the SSI sector.
However, on the other hand ancillarisation ensures a secured market to SSIs. They are saved of overheads like marketing, publicity, R&D etc.
Initial ancillarisation can provide a base for the SSI unit to graduate into a Medium Industry.
Exploring possibilities in Export market could be a promising area for SSIs.
We do consider that SSI sector should explore the export market.
We have benefited from the Outsourcing in services. Small-Scale enterprises have gained global experience. Indian skill in IT sector have flourished with service outsourcing.
Can the success in Service sector be replicated in manufacturing too?
With global manufacturing and engineering giants setting up their units in BIMST countries, there is vast potential for ancillarisation.
These countries are located around the Bay of Bengal and have potential to synergies our economic potential. (Members are Bangladesh, India, Myanmar, Sri Lanka, Thailand, Bhutan and Nepal)
However, rules pertaining to payments, standardization and quality control have to be elaborated.
We have seen SSI suffering due to recalcitrant buyers. Delays in payments, has been major factor of sickness. Norms should be standardized.
BIMSTEC was set up to promote regional economic cooperation. The objective is to evolve into Free Trade arrangement.
In the current WTO regime, regional free trade arrangements, act like consortium and increase collective strength in global market.
The countries have agreed to establish a BIMSTEC Free Trade Association to strengthen and enhance economic cooperation through:
- progressive elimination of tariffs and non-tariff barriers in substantially all trade in goods;
- progressive liberalization of trade in services with substantial sectoral coverage;
- establishing an open and competitive investment regime that facilitates and promotes investments within the BIMSTEC FTA;
- provision for special and differential treatment and flexibility to the least developed countries in the region;
- flexibility to the countries to address their sensitive areas in the goods, services and investment sectors based on agreed principles of reciprocity and mutual benefits;
- establishing effective trade and investment facilitating measures, including, but not limited to, simplification of customs procedures and development of mutual recognition arrangements;
- expanding economic cooperation in areas as may be mutually agreed among the parties that will complement the deepening of trade and investment links among the parties and formulating action plans and programmes in the agreed sectors/ areas of cooperation and
- establishing appropriate mechanisms for implementation of this Agreement.
Six sectors have been identified for cooperation namely:
- Trade & investment,
- Technology,
- Transportation and communication,
- Tourism,
- Fisheries and energy
Under the Trade and Investment sub-sectors like Drug & Pharma, Textile and Clothing, Gem and Jewelry, Horticulture, Processed food, Automobile and parts, Rubber, tea, Coconut and spices etc have been identified as the areas of cooperation.
These areas have significant presence of SSI and Agro-rural industries.
Export market will give SSI sector the opportunity to cater to high- end market.
Coming back to ancillarisation, it gives our SSI opportunity to supply vale-added products for high-end markets.
This will give SSI units an exposure to international market, new technologies and international marketing networks.
Another issue, pertaining to ancillarisation is harmonization of tax/duty structures among the member countries of BIMST.
Our Auto component sector is facing undue competition due to inverted duty structure on the auto component.
As we have substantially reduced the custom duties on the imported auto units, the Excise and other Taxes levied on them put domestic manufacturers at competitive disadvantage. This should be corrected. Domestic manufacturers should be given level playing field if not protection.
Globalisation is also an opportunity to build global capital, technological and knowledge networks. We are witnessing a new phase of consolidation of global enterprise.
Companies are relocating and repositioning their business with emerging Asian markets as their target.
BIMST countries are strategically located at the highway of marine trade.
India particularly is strategically placed in the midst of BIMST on one hand and Indian Ocean Rim countries on the other hand.
We have skilled manpower and world-class professionals. We are at the highway of the global knowledge network.
The Policy environment is conducive to enterprise. We are fast emerging as the most favoured investment destination.
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