MSME capital rules may be revised often
NEW DELHI: The government plans to revise the capital investment criteria to qualify as micro, small and medium enterprises (MSMEs) on a regular basis to make them more realistic and aligned with changing inflation levels, two officials aware of the proposal said. The revision could happen every three or five years, depending on the view emerging after consultations with stakeholders on the draft MSME policy, the officials said on condition of anonymity.
The Union MSME ministry is planning to include the proposal in the upcoming MSME policy and will send it for cabinet approval once the policy is final. Currently, there is no provision in the Micro Small and Medium Enterprises Development Act, 2006, for revising the investment-based definition of MSMEs at regular intervals. Once the MSMED Act is amended, the Centre will be empowered to change the qualification norms at frequent intervals through notifications.
“This would be a good development as the size and scale of the MSME segment are also growing with the growth in business and opportunities,” said an expert from a consulting firm, asking not to be named. “Regular revision of investment-based definition would help MSMEs to grow. The government revised the definition in the pandemic year 2020 after a gap of 14 years since the enactment of the MSMED Act, 2006. This was a long gap for such action. Regular revisions giving weightage to prevailing inflation will make
the process realistic,” he said.
MSMEs are the second-biggest employers, employing over 110 million people across industries. They were adversely affected by the pandemic outbreak in 2020, and the sector’s recovery is vital to bring about an early recovery of the economy. In the Atmanirbhar Bharat package announced in June 2020, the government increased the definition of micro-manufacturing and services units to ₹1 crore of investment and ₹5 crore of revenue.
The limit for small units was increased to ₹10 crore of investment and ₹50 crore of revenue, and the limit for a medium unit was increased to ₹50 crore of investment and ₹250 crore of revenue. At the time, the government called it another step to improve the ease of doing business, attract investments and create more jobs in MSME. The Centre is also looking at drafting a model law on the MSME sector for circulation among states.