Cabinet approves ₹50,000 cr fund of funds for MSMES

NEW DELHI: The cabinet on Monday approved the expanded definition of micro, small and medium enterprises (MSMES) and finalised modalities for the ₹20,000 crore subordinate debt for stressed units, and ₹50,000 crore fund to boost growth of the sector—moves that will help more companies benefit from a package announced for small and medium companies, and also relieve the financial stress on them.

The upward revision of MSME definition is broadly on the lines of that detailed in the ₹21 lakh crore Atmanirbhar Bharat (Self-reliant India Initiative) package announced on May 13, but for one change – the turnover limit of “medium manufacturing and service units have been further raised to ₹250 crore, according to an official statement.

While announcing the package on May 13, finance minister Nirmala Sitharaman said that the definition of MSMES is being expanded to accommodate units that have grown bigger than the defined limit. Accordingly, the investment and turnover limits for micro manufacturing and services unit were raised to ₹1 crore and ₹5 crore, respectively. The limit of small unit was increased to ₹10 crore of investment and ₹50 crore of turnover. Similarly, the limit of a medium unit was increased to ₹20 crore of investment and ₹100 crore of turnover. The last has now been made ₹250 crore—a move that will help more companies benefit from the package.

MSME minister Nitin Gadkari told reporters that the government has also decided that the turnover with respect to exports will not be counted in the limits of turnover for any category of MSME units whether micro, small or medium.

“This is yet another step towards ease of doing business. This will help in attracting investments and creating more jobs in the MSME sector,” he said.

The cabinet approved ₹50,000 crore equity infusion for MSMES through a fund of funds to help them grow, he added. “This will establish a framework to help MSMES in capacity augmentation. This will also provide an opportunity to get listed in stock exchanges.”

Gadkari said the government has approved the proposal that will have a provisioning of ₹20,000 crore as subordinate debt to provide equity support to the stressed MSMES. “This will benefit 2 lakh stressed MSMES.”