The Bill to redefine Micro, Small and Medium Enterprises (MSMEs) may not see the light of the day as the government seems to have developed a cold feet.

The Bill, which was introduced in the Lok Sabha during the monsoon session, is facing opposition not only from various political parties or trade bodies related with MSMEs, but also from an affiliate of the Rashtriya Swyamsevak Sangh (RSS), Swadeshi Jagran Manch (SJM).

“There is very strong opposition to the Bill. In all probability, it is on the back burner now,” a senior government official told BusinessLine .

Ashwini Mahajan, Co-convenor of SJM, feels the Bill, if enacted, will end the distinct identity of MSMEs. “No where in the world, turnover is sole criteria to define MSME, so why here?” he said adding that there should be an arm’s length to the large industry so that they can evolve with all support from the government.

Since the Bill was introduced in the Lok Sabha, its life is till the term of the 15th Lok Sabha. Only two more sessions (winter and budget sessions) remain for the current House. If the government does not get the Bill passed during the next two sessions, it will automatically lapse.

The government official, however, maintained that the new Bill has been designed keeping in mind changing business scenario, not just in India but also globally. Even after a change in the definition, various exemptions and conditions such as mandatory sourcing from MSME will continue. There will also be no change in the policy of granting more and more finance on easier terms.

The MSME Development (Amendment) Bill, 2018, prescribes any business with a turnover of up to ₹5 crore will be considered a ‘micro enterprise’. The other slabs are ₹5-75 crore for ‘small enterprise’ and ₹75-250 crore for ‘medium enterprise.’ At present, there are two sets of definitions, depending on whether the units produce goods or services. Under the goods category, the slabs are up to ₹25 lakh for micro, ₹25 lakh to ₹5 crore for small and ₹5-10 crore for medium. In the case of services, the slabs are: up to ₹10 lakh , ₹10 lakh to ₹2 crore and ₹2-5 crore.

“It has been felt necessary to change the criteria for the classification in order to align it with the needs of the current times and changing business ecosystem,” said the Bill’s statement of objects and reasons.

The statement also said the criterion of investment entails physical verification, bringing with it transaction costs. It also incentivises promoters to keep the investment size small to retain the MSME tag.

“Overall, the turnover based classification will promote the ease of doing business and will put in place a non-discretionary, transparent and objective classification system,” the statement read.

MSME numbers

The number of MSMEs registered on Udyog Aadhaar Memorandum (UAM) Portal till July 12, 2018 (since September 2015) is 48.40 lakh. However, as per the data received from the 73rd round of the National Sample Survey on ‘Unincorporated Non-Agricultural Enterprises (excluding Construction)’, conducted by National Sample Survey Office (NSSO), Ministry of Statistics & Programme Implementation (during July 2015 to June 2016), the total number of MSMEs in the country was 633.88 lakh. India’s export of products from the MSMEs increased to $137.1 billion in 2016-17 from $130.8 billion in 2015-16, registering a growth of 4.8 per cent, which was an improvement from the negative growth of 5.9 per cent in 2015-16.

Related Topics