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Major Recommendations of One-Man Committee for National Policy for MSMEs

Updated: Apr 12, 2017 10:11:50am
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Major Recommendations of One-Man Committee for National Policy for MSMEs

New Delhi, Apr 12 (KNN) The One-Man Committee to make recommendations for a National Policy for MSMEs has submitted its report to the Ministry of Micro, Small and Medium Enterprises (MoMSME). The Committee was chaired by Prabhat Kumar, Ex-Cabinet Secretary and Ex-Governor Jharkhand.

Here are the main highlights of the Recommendations made:

  • The Committee examined the two suggested bases of redefining the MSMEs, i.e. turnover and employment and found that they do not add anything worthwhile over the present system.
  • It is recommended that the Government may set up a group to look into the structures of different industries and suggest appropriate investment-bands for each subsector.
  • The proposed investment limits for manufacturing units are

For Micro - Up to Rs.50 lakh; For Small - Above Rs. 50 lakh Up to Rs.7 Crore; and For Medium above Rs. 7 Crore Up to Rs.25 Crore.

  • While the proposed investment limits for services units are

For micro- Up to Rs.25 lakh; for Small - Above Rs. 25 lakh & Up to Rs.4 Crore; and for Medium - Above Rs. 4 Crore & Up to Rs.15 Crore.

  • It is also recommended that the Central Government may be empowered to change the investment limits for Micro, Small and Medium enterprises from time to time instead of being forced to go to the Parliament. The Act of 2006 may accordingly be amended.
  • It is imperative to create an apex authority under the chairmanship of the Prime Minister. The Authority may be called the National MSME Authority.
  • It will also be desirable to have an institutional forum for constant consultation between Centre and the States. An Advisory Service may also be considered for communication with the states.
  • The Committee recommends the abolition of the Advisory Committee from the MSMED Act 2006.
  • The Committee feels that there is an urgent need for creating a comprehensive MSME database, which can be used to deliver a range of services to individual and groups of enterprises.
  • In order to give an incentive to the micro entrepreneurs to get registered, the government can offer them free insurance based family medical care scheme on the lines of RSBY. The premium for the insurance can be shared between the Central and state governments.
  • The Committee recommends that the issue of a comprehensive MSME database be considered in consultation with state governments and other subject matter ministries and then placed before the proposed National Authority at the earliest.
  • It is proposed that the new entrepreneurs should be given a provisional registration. Further, a new field of women entrepreneurs, Scheduled Caste entrepreneurs and Scheduled Tribe entrepreneurs should be added in the alphanumeric registration number.
  • An appropriate Grievance Redressal Mechanism and facility for online application for Central and State Government schemes may be suitably incorporated in the portal. Ideally, a single application for bank loans should also be incorporated in the proposed portal to reach the banks.
  • It is proposed that a Task Force be constituted for preparing the scheme of a comprehensive Database to consider the Committee's suggestions and submit a proposal for MSME INDIA within a short time.
  • Good programmes and schemes should be adopted with such modifications as appropriate e.g. Credit Guarantee Scheme, Credit Linked Capital Subsidy scheme, SFURTI, PMEGP etc.
  • The MSMED Act, 2006 (Act of 2006) and the Interest on Delayed Payment to Small Scale and Ancillary Industrial Undertaking Act. 1993 (Actof 1993) are Special Acts and should supersede all earlier Special Acts.
  • It is urged that the discussions on a single legislation for MSEs with less than 40 workers should gather pace and culminate into a positive outcome for the benefit of the MSESector.
  • The Committee recommends that efforts should be made to provide social security cover for micro entrepreneurs.
  • Micro and small enterprises play a major role in employment generation in the country and the Bankruptcy Code may cause avoidable hardship for them. It is therefore suggested that a study may be undertaken to assess the likely impact of the code on the MSME Sector.
  • The Telengana model for ensuring statutory clearances for start-ups could be worth replicating
  • In Gujarat also DICs have facilitation counters at five centres in the big cities. This number is going to be increased to 10. This is also worth considering.
  • There is need to start a series of annual research publication entitled SME India Monitor/Index on the lines of the above referred world documents including GEM-India Report 2014. The suggested Monitor/Index may cover the stage SMEs development in India, ease of doing business, access to finance, and competitiveness.
  • There have been requests from the industries to pave the way for conversion of all leasehold plots to freehold and easy conversion of agricultural land for industrial use.
  • The Committee sees merit in these requests and advocates the State Governments to allow conversion of lease hold industrial plot to free hold bases after evaluating the success of a unit after five years. Similarly the Committee feels that if a particular entrepreneur is willing to satisfy all norms; especially those related to pollution and environment, easy conversion of agricultural land for micro and small industrial uses may be allowed.
  • It is proposed that a Land Bank be created by State Governments with support from the Central Govemment to promote them for Industrial development.
  • There is a critical need for restoration and renovation of existing Industrial Estates.
  • To promote Micro units in the Rural Areas, it is recommended that small Rural Business Zones (RBZ) be created after conducting baseline survey of the resources and skills available in the rural areas.
  • It is also proposed that the State Governments may be encouraged to identify mid-sized land parcels in urban and semi-urban areas for development as Business Parks to be leased to SMEs.
  • The Central Government may request the State Governments to lease land to the State Industrial Development Corporation and or Private Promoters who will, through Public Private Partnership develop an Integrated Business Park (IBP)(mostly Sector Specific) through an Spy company.
  • The Integrated Business Park should be on a "Plug and Play Model" so that the SMEs come to and rent out j take on lease the facility with their business knowledge supported by their investment in Plant and Machinery.
  • Industrial and Artisan Clusters grow naturally and many times in an unplanned manner and as such their growth gets stunted. It is recommended that such clusters be identified and appropriate infrastructure be planned for them. Such Infrastructure can be called .Cluster Parks.
  • The Central and the State Governments should be sensitive to the need for funding Infrastructure projects. Adequate budgetary provisions need to be made to fund Industrial Infrastructure specific to the MSMEs.
  • DICs should be developed as Udyami Udyog Bandhus with block and panchayat level presence with the supporting infrastructure. A specialized cadre of trained officials employed by the Udyami Udyog Bandhus need to work with local partners to counsel, mentor and to train small business.
  • The UdyamjUdyog Bandhus can also provide handholding of micro entrepreneurs in getting them financing through MUDRA. They can also playa major role in timely online grievance redressal carried out through a digitalized platform.
  • The Committee feels that the MSME-DIs should be developed as Udyami Udyog Mitras and Information, awareness and Guidance on all Schemes should be their core activities. Furthermore, Reimbursement based schemes should be administered directly by DIs as much as possible. They can be converted into clearing houses of available technologies and helpers in technology adaptation.
  • A dedicated TV Channel named as Udyam Bharat can be started in the lines of Lok Sabha TV and Rajya Sabha TV. This could be an effective instrument for disseminating information and will enable best practices and progressive entrepreneurial culture to be showcased.
  • There is an urgent need for accreditation of truly representative Associations by the Government and to encourage creation of forum of Associations industry wise/zone wise. Accredited Associations can find a place in the Boards of Public sector Banks /Fts.
  • On Credit and Finance, the Committee recommended improvements in the MUDRA scheme.
  • The limits for giving loans under various categories of MUDRA should be enhanced
  • Categorization of Banks' Credit to MSMEs through NBFCs under the Priority Sector and loans given by banks to NBFCs for the purpose of on-lending to Micro, Small and Medium Enterprises should be treated as indirect finance to MSMEs eligible for classification under the Priority Sector lending of banks.
  • Classification of loans to medium enterprises should exclude from the priority sector and Priority sector lending certificate should be discontinued.
  • The Committee Recommended change in classification of NPA norms in Banks' lending to MSMEs: The ,Committee recommends that the 90 days limit fixed by RBI for classifying over dues of MSMEs as Non-Performing Assets should be increased to 180 days so that MSMEs are not constrained to divert their working capital towards servicing of their loan-instalments and clearing of their over dues at the cost of their normal business operations. This improvement in the RBI guidelines will save a large number of MSMEs from turning sick or getting closed resulting in loss of economic activity and loss of employment, and further preventing avoidable classification of bad debts and unwarranted litigation by banks thereby saving the banks from losses.
  • The Committee recommends that The Reserve Bank of India should permit the establishment of MSME centric Non-Banking Finance Companies (NBFCs) and specially created 'MSMEs' Receivables Financing Funds' for limited purpose of promoting financing against Receivables and discounting of their supply bills. These NBFCs or Special Purpose Funds can be promoted in joint sector by the Government through Banks or other Institutions jointly with the Private Sector. These NBFCs & Funds can be allowed to attract investment from domestic and international sources and could be operated by banks or the private sector to finance MSMEs' book debts or to discount MSME supply bills. These NBFCs would serve only MSME customers primarily to finance their receivables & book debts or to discount their supply bills.
  • The Committee recommends that in order to obviate the financial constraints faced by MSMEson account of delayed payment of their bills E-financing web portal where all such supply bills and receivables could be offered for discounting or financing to banks and other financing institutions like NBFCs and factoring companies should be established. This financing mechanism should enable availability of an E-platform on which MSMEs can upload their supply bills for discounting by interested parties who .should offer their competitive discounting rates for the MSMEs to opt for any of them keeping in view their competitive rates. This E- platform should enable levying o finterest for delayed period on the buyers.
  • The Committee recommends that the Govemment should meet a part of expenditure of SMEs incurred by them in the initial listing of their equity on the SME exchanges. This partreimbursement of listing expenditure could either be limited upto 50% of the total listing expenditure or Rs.I0 Lakhs whichever is lower.
  • The Committee recommends that the Govemment should provide tax exemption for the investments in IPOs of SME companies under section 80C of the Income Tax Act 1961 within the overall prevailing ceilinglimit of Rs. 1,50,000/-.
  • The Committee recommends to establish a separate 'SME Equity Investment Fund' by the Ministry of MSME to be managed by a professionally run entity of fund managers.
  • Acceptance of MSME Performance and Credit Rating by Banks for lending: The Committee recommends that the Performance and Credit Rating Scheme of the Ministry of MSME for which the Ministry is incurring huge amount of expenditure should be accepted by the Reserve Bank of India as eligible rating for availing Bank loans and no separate Bank Loan Rating should be required from MSMEs.
  • E-Tracking of MSME loan proposals and creation of Database of credit to MSME sector: The Committee recommends that a comprehensive ePortal should be established by the Ministry of MSME which should be available to all MSME applicant borrowers throughout the country so that they can register their loan applications on such portal against acknowledgement number and the bank should provide complete information about disposal of such applications. Any loan applicant should be able to track the current status of his/her application by logging on to such electronic platform / portal.

(KNN Bureau)

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