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Government fast-tracks new definition of MSMEs

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NEW DELHI: The government is fast-tracking the move to amend the definition of micro, small and medium enterprises (MSMEs) to allow these entities to grow in size. The plan, which has been in the works for months, is likely to be part of the stimulus package, that is expected to be announced shortly.

There have been detailed discussions on the issue with the law ministry, which is open to allowing the definition change, sources told TOI. There are around 6.3 crore MSME units in the country, with over 99% categorised as small units.

Unlike the current definition, which is linked to investment in plant and machinery, the government has been pushing for turnover-based classification, something that has been opposed by powerful lobby groups such as Swadeshi Jagran Manch and Laghu Udyog Bharti, arguing that it will not be in the interest of manufacturers but will benefit assemblers.

Although the Centre had intended to amend the Micro, Small & Medium Enterprises Development Act, the existing law may give the government some leeway in adding an additional condition.

The Narendra Modi government had proposed to amend the definition during its first term itself but failed to push though the legislative change due to opposition from the RSS affiliates. Last August, finance minister Nirmala Sitharaman had announced the move as part of a series of stimulus packages announced by her in the wake of slowdown.

So far, the government has once again been unable to move the Bill but is now keen to ensure that MSMEs, which want to scale up to take on competition from larger and foreign players, are not hobbled by the definition that was put in place in 2006.

According to the earlier proposal, any unit with a turnover of up to Rs 5 crore was to be classified as a micro enterprise, while those with up to Rs 75 crore annual revenue will be in the small unit category. Similarly, entities with turnover of up to Rs 250 crore will be classified as medium-sized enterprises. Until the 2006 law was enacted, there was only one category of manufacturing that was classified as small scale enterprise, eligible for several benefits, including on payment of excise.



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Written by sortiwa

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