Whether MSMEs get a revised definition or not is a big question post budget
New Delhi, July 8 (KNN) The Micro Small and Medium Enterprises (MSMEs), which form a significant part of Indian industry, are waiting for the revised definition for classifying them.
The Union Cabinet chaired by Prime Minister Narendra Modi had approved the change in the basis for classifying MSMEs from ‘investment in plant and machinery/equipment’ to ‘annual turnover’.
In this regard, the MSMED (Amendment) Bill 2018 was introduced on July 23, 2018, in the monsoon session of the Parliament by former MSME Minister Giriraj Singh.
According to amendments, a micro enterprise will be defined as a unit where the annual turnover does not exceed Rs 5 crores; a small enterprise will be defined as a unit where the annual turnover is more than Rs 5 crore but does not exceed Rs 75 crore and a medium enterprise will be defined as a unit where the annual turnover is more than Rs 75 crore rupees but does not exceed Rs 250 crore.
The distinction between manufacturing and service has been removed in the new definition, as per the amendments.
KNN India spoke to Arun Kumar Panda, Secretary, Ministry of MSME.
On Classification of MSMEs, he said "This has to be brought to the Parliament by way of MSME development Act and the Ministry will now take it up to reintroduce that particular bill in the parliament so that parliament can take a decision for the amendment of that particular act as far as definition or classification of MSMEs are concerned.”
The Micro Small & Medium Enterprises (MSMEs) are defined under the MSMED Act 2006 on the basis of capital investment made in plant and machinery, excluding investments in land and building.
As per 2006 definition, Manufacturing units having investment below Rs 25 lakh were termed Micro, those between Rs 25 lakh and Rs 5 crore termed as Small and from Rs 5 crore to Rs 10 crore Medium. Similarly, for Service units, corresponding investment thresholds were up to Rs 10 lakh Micro, between Rs 10 lakh to Rs 2 crore Small and between Rs 2 crore to Rs 5 crore Medium.
Time and again, the MSME sector has been demanding a revision in 12 year old definition of MSME as they are of the view that the new classification will bring many players under the MSME Act, along with ease of doing business.
However, some MSME associations like KASSIA are apprehensive about the new definition as they believe that proposed definition will bring in large number of firms within the definition of MSME and will pose a serious threat as such a thing will likely crowd out a large number of small units from the benefits targeted to them.
In the month of May, KNN India spoke to Senior Fellow & Head of Research, Pahle India Foundation Nirupama Soundarajan on the sidelines of a seminar on ‘Definition of MSMEs’, regarding the correct parameter for defining MSMEs.
She said “We should look at turnover primarily because it’s simplest but some kind of sectoral definitions are also necessary to take into account those that would be disadvantaged because of turnover based definition.”
While on the other hand, Group Executive Vice President, Small Enterprises Banking, Yes Bank, Vikas Arora said “According to me, the correct parameter to define MSMEs is to club both the parameters i.e. investment in plant & machinery and turnover.” (KNN/YV)