The Cabinet Committee on Economic Affairs (CCEA) chaired by Prime Minister Narendra Modi cleared the upward revision of the definition of micro, small and medium enterprises (MSMEs). 

It cleared enhancing the turnover limit for classifying units as “medium” units to Rs 250 crore from Rs 100 crore announced last month along with the package for the sector. 

MSME sector

Micro, small and medium enterprises (MSMEs), popularly called as MSMEs, are the backbone of Indian economy. Operating in different areas across the country, more than six crore MSMEs have a crucial role to play in building a stronger and self-reliant India. These small economic engines have a huge impact on the country’s GDP-making a contribution of 29 per cent. They contribute to almost half of exports from the country. Also, more than 11 crore people are employed in the MSME sector.

How are the categories revised?

After the MSME package announcement on 13 May, 2020, there were several representations that the announced revision is still not in tune with market and pricing conditions and it should be further revised upwards. 

Keeping in mind these representations, it was decided to further increase the limit for medium manufacturing and service units. 

The definition of micro manufacturing and services unit was increased to Rs 1 crore of investment and Rs 5 crore of turnover. 

The limit of small unit was increased to Rs 10 crore of investment and Rs 50 crore of turnover. 

Similarly, it increased the limit for medium manufacturing and service units. Now it will be Rs 50 crore of investment and Rs 250 crore of turnover.

The revision in definition of MSME has been done after 14 years since the MSME Development Act came into existence in 2006. 

The CCEA 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, MSME Minister Nitin Gadkari said.

New packages to boost the sector

In the aftermath of COVID-19 pandemic, the government announced a Rs 20 lakh crore package to help revive economic activities.

To provide immediate relief to the MSME sector, a Rs 3 lakh crore collateral free  automatic loan was also announced for them.

The government approved provisioning of Rs 20,000 crore as subordinate debt to provide equity support to stressed MSMEs and proposed equity infusion of Rs 50,000 crore for units through a fund of funds as part of the roadmap to implement the package announced for the sector.

The approval for provisioning of Rs 20,000 crore as subordinate debt to provide equity support to the stressed MSMEs will benefit 2 lakh such MSMEs, Gadkari said. 

Besides, equity infusion of Rs 50,000 crore for MSMEs through fund of funds will establish a framework to help MSMEs in capacity augmentation and also provide an opportunity to them to get listed in stock exchanges.

A fund of funds with corpus of Rs 10,000 crore will be set up, which will be operated through a mother fund and few daughter funds. The fund structure will help leverage Rs 50,000 crore of funds at daughter funds level, Gadkari said, adding that he hopes this “revolving fund” will multiply in value terms significantly in the coming years. 

PM launches portal to empower MSMEs

PM Narendra Modi launched a web portal — champions — to help solve grievances of MSMEs, and work as a “one-stop place” for them.

‘Champions’ is an acronym for Creation and Harmonious Application of Modern Processes for Increasing the Output and National Strength.

It is a real one-stop-shop solution of MSME ministry. The portal is for making the smaller units big by solving their grievances, encouraging, supporting, helping and handholding. It is a technology driven control room-cum-management information system. The system utilising modern ICT tools is aimed at assisting Indian MSMEs march into the big league.

According to an official statement, the system will help resolve the problems of MSMEs, including those of finance, raw materials, labour and regulatory permissions.

It will also help them capture new opportunities, including manufacturing of medical equipment and accessories such as personal protective equipment and masks, and supply them in national and international markets.

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