The Cabinet Committee on Economic Affairs (CCEA) under Prime Minister Narendra Modi on Monday approved upward revision of the MSME definition, a move that was earlier announced under the Atmanirbhar Bharat Package but its modalities have now gotten an approval.
In the package announced on May 13, the definition of micro-manufacturing services unit was increased to Rs 1 core of investment and Rs 5 crore of turnover. The limit of the small unit was increased to Rs 10 crore of investment and Rs 50 crore of turnover. Similarly, the limit of the medium unit was increased to Rs 20 crore of investment and Rs 100 crore of turnover. The revisions were made 14 years after the MSME Development Act came into existence in 2006.
Welcoming the move, Anil Bhardwaj, Secretary-General of Federation of Indian Micro and Small & Medium Enterprises (FISME) said, “FISME welcomes upward revision in the definition of Medium Enterprises as MSME. We had originally proposed Rs 250 crore which the government now has finally come to. It would help sectors such as gems and jewellery, cables and conductors etc. where turnover is largely made of the cost of raw material.”
India has more than 6 crore units falling under the Micro, Small and Medium Enterprises (MSME) categories which contribute 29% to the country’s GDP. The MSME industry employs around 11 crore people and contributes to half of the country’s exports.
However, Ravi Sood, General Secretary of Badli Industrial Estate Association, Delhi, which has 400 MSME units, seemed a bit disappointed. He said, “The earlier decision to redefine MSME was positive. but the new definition change seems addressed towards big players who don’t want to come out of the MSME comfort zone as it gives them lot of freedom.”
He added that the 15 per cent equity support promise is welcome as it will help small units to get interest-free investment from the government and help them to revive and grow without interest burden.
According to K E Raghunathan, Former National President of All India Manufacturers Organisation, at this moment the government should focus on saving MSME and nurturing them to normalcy.
“In our opinion, reclassification should be into various types of Traders, Exporters, Services and Manufacturing categories. Because each of them has different needs of investment in plant and equipment, lead time to ramp up, capacity utilisation, employment categories and turnovers,” he said. For example, a manufacturing company has high investment in P&E, takes longer time to reach full capacity utilisation, and employs unskilled, semi-skilled, skilled, blue and white-collar employees, he explained, adding, “Also, if we go with these, it will also help us tomorrow to compile data on various sectors for analysis. Let us do it right for next few decades.”
According to a recent survey conducted by AIMO, under the earlier redefinition, 90 per cent of around 6 crore MSMEs in the country qualified as micro-units, while the Rs 3 lakh crore stimulus package offered relief to only 47 lakh units. Together with the new redefinition of medium size units, around 50 lakh MSME units stand to benefit under the relief packages. It is not adequate as 37 per cent of the MSME units in the country are dying, while 8 per cent are facing uncertainty.