Medium units’ turnover limit hiked to ~250 cr

The Cabinet Committee on Economic Affairs (CCEA) on Monday approved reclassification of medium scale companies as those with ~50 crore as investments and ~250 crore as turnover, up from ~20 crore and ~100 crore, respectively.

This comes weeks after Union Finance Minister Nirmala Sitharaman expanded the definition of medium, small manufacturing enterprises (MSMES) while announcing the ~20-trillion Atmanirbhar Bharat package.

The government also raised the minimum support price (MSP) of 17 kharif crops in the range of 2-7.5 per cent year-onyear on the day India got its first monsoon shower.

The increase in MSP was among the lowest in last five years for many crops. The new prices would be 50-83 per cent more over the cost of production, agriculture minister Narendra Tomar said. The Centre also extended the interest subvention scheme for crop loans for three months till August 31.

The move to increase the turnover limit for medium units to ~250 crore took into account the rising cost of businesses and is expected to bring a much larger number of companies into the MSME fold. The government clarified proceeds from exports will not be counted in the turnover limit for any MSME. The new definition is expected to go live from July 1.

Sharad Kumar Saraf, president of the Federation of Indian Exports Organizations, said the move will bring automation to certain processes that are required for competitive manufacturing.

The Cabinet approved provisioning of ~20,000 crore as subordinate debt to provide equity support to almost 200,000 stressed MSMES and proposed equity infusion of ~50,000 crore for units through a Fund of Funds, as part of the roadmap to implement the package announced for the sector.

The equity infusion is likely to help MSMES expand capacity and eventually get listed in the markets of their choosing. Nitin Gadkari, minister for road transport and MSME, clarified the government would now buy equity stakes up to 15 per cent in MSMES that choose to get listed as public entities. Once the listed price of the firm's stock gathers strength to a certain degree, the government would divest its investment, allowing the money to be given to another MSME, the Gadkari said.

The Cabinet also cleared a scheme under which street vendors can avail a working capital loan of up to ~10,000, repayable in monthly instalments in the tenure of one year. The scheme — PM Svanidhi — is likely to benefit about 5 million.

Prime Minister Narendra Modi said: “Our government has fulfilled its promise to our hardworking farmers of fixing the MSP at a level of at least 1.5 times of the cost of production. To give impetus to the campaign for a self-reliant India, we have not only changed the definition of MSMES, but have also approved several proposals to revive it. This will benefit the small and medium scale industries, as well as create huge employment opportunities.”

Simon George, president, Cargill India, said: “The move (on MSP) would give adequate assurance to farmers in these difficult times.” However, CARE Ratings chief economist Madan Sabnavis said announcing MSP is one thing and ensuring that maximum farmers benefit from it is completely different. "Unless there is large scale government procurement in most crops at MSP, these don't make much of a difference," he said.

Announcing the extension of the deadline for interest-subvention, Tomar said ~28,000 crore was spent on the scheme last year. Farmers are given 2 per cent interest subvention after which loans to them draw 7 per cent interest rate. Those who pay their dues on time are given 3 per cent further subvention after which the interest rate comes down to 3 per cent.

Tomar said Kisan Credit Card covers about 66.5 million farmers. About 25-30 million farmers who were still left out are being brought under the scheme, he said. Almost ~4 trillion is disbursed to farmers under the scheme, he said, adding that once all farmers are covered, ~2 trillion more will go to the farming community.