Govt proposes change in definition of MSME by raising capital limits in P&M
Updated: Nov 26, 2014 05:26:16pm
New Delhi, Nov 26 (KNN) MSME Secretary, Madhav Lal has proposed that the definition of MSME be changed by raising the capital limits in plant and machinery, calling for comments to the proposed amendments.
In a letter of November-20 to Chief Secretaries of all States and Union Territories, Lal has suggested that capital limits in plant and machinery in manufacturing be raised for micro units from the present Rs 25 lakh to Rs 50 lakh; for small from Rs 5 crore to Rs 10 crore and for medium from Rs 10 crore to Rs 30 crore, according to official data from the Ministry.
As far as services are concerned, it has been suggested that capital limits in plant and machinery be raised for micro units from the present Rs 10 lakh to Rs 20 lakh; for small from Rs 2 crore to Rs 5 crore and for medium from Rs 5 crore to Rs 15 crore.
On the proposed amendments, “The need for change in definition of micro, small and medium enterprises has also be raised by various stakeholders from time to time considering changes in price index and dynamic market situation,” Madhav Lal said.
At present, enterprises are classified as micro, small and medium depending on their investment in plant and machinery. The existing limits were fixed in 2006 under the MSMED Act. Since then there has been a significant increase in the price index and cost of inputs. The indices have roughly doubled since 2006, he said.
The Union Budget 2014-15 had also announced review of definition of MSME to provide for higher capital ceiling.
“Accordingly, this Ministry is proposing to address this issue by amending the provision relating to definition of MSMEs in the Act,” he said.
Earlier, in answer to several demands made by the micro, small and medium enterprises sector with regard to issues related to sickness of MSMEs, non performing assets and exit policy, the MSME Ministry had issued a notification that it was planning to introduce a new chapter in the MSME Act that would address those issues.
It has been represented that there is no legal frame work for re-organisation / winding up/exit for small units leading to huge waste of human resources (promoters and employees), capital (banks and financial institutions) and physical resources (industrial land and buildings, plant, machinery, etc).
"The objective of proposed amendment for MSME Act is two-fold - revival and exit of MSMEs. Revival - MSMEs that seek early assistance to tide over difficult financial times and provide a framework where a viable MSME can seek standard as well as customised relief and concession to revive; and Exit - to provide an easier and expeditious exit procedure for the benefit of promoters and guarantors through liquidation and change in management," the MSME Ministry said. (KNN/ES)
In a letter of November-20 to Chief Secretaries of all States and Union Territories, Lal has suggested that capital limits in plant and machinery in manufacturing be raised for micro units from the present Rs 25 lakh to Rs 50 lakh; for small from Rs 5 crore to Rs 10 crore and for medium from Rs 10 crore to Rs 30 crore, according to official data from the Ministry.
As far as services are concerned, it has been suggested that capital limits in plant and machinery be raised for micro units from the present Rs 10 lakh to Rs 20 lakh; for small from Rs 2 crore to Rs 5 crore and for medium from Rs 5 crore to Rs 15 crore.
On the proposed amendments, “The need for change in definition of micro, small and medium enterprises has also be raised by various stakeholders from time to time considering changes in price index and dynamic market situation,” Madhav Lal said.
At present, enterprises are classified as micro, small and medium depending on their investment in plant and machinery. The existing limits were fixed in 2006 under the MSMED Act. Since then there has been a significant increase in the price index and cost of inputs. The indices have roughly doubled since 2006, he said.
The Union Budget 2014-15 had also announced review of definition of MSME to provide for higher capital ceiling.
“Accordingly, this Ministry is proposing to address this issue by amending the provision relating to definition of MSMEs in the Act,” he said.
Earlier, in answer to several demands made by the micro, small and medium enterprises sector with regard to issues related to sickness of MSMEs, non performing assets and exit policy, the MSME Ministry had issued a notification that it was planning to introduce a new chapter in the MSME Act that would address those issues.
It has been represented that there is no legal frame work for re-organisation / winding up/exit for small units leading to huge waste of human resources (promoters and employees), capital (banks and financial institutions) and physical resources (industrial land and buildings, plant, machinery, etc).
"The objective of proposed amendment for MSME Act is two-fold - revival and exit of MSMEs. Revival - MSMEs that seek early assistance to tide over difficult financial times and provide a framework where a viable MSME can seek standard as well as customised relief and concession to revive; and Exit - to provide an easier and expeditious exit procedure for the benefit of promoters and guarantors through liquidation and change in management," the MSME Ministry said. (KNN/ES)
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