In a bid to bail out the ailing MSME (micro, small, and medium enterprises) sector in the State, the Telangana Government has announced a six-pronged strategy to put them on the path to growth. The MSME Policy 2024 says the government will focus on the development of infrastructure, access to finance and human resources, availability of raw materials; promotion of technology adoption; and enhancing access to markets.
A high-level steering committee will supervise the policy’s execution, monitor progress, and set the strategic direction. The government will spend ₹600 crore over the next five years to support these initiatives.
Addressing a gathering of MSME representatives, Telangana Industries Secretary Jayesh Ranjan announced that an exclusive wing will be established in the Industries Department to oversee the implementation of the policy. “We have outlined 40 parameters to ensure the policy’s success. The new wing will take the responsibility of implementing the policy,” he said.
New Industrial Parks
The policy envisions the creation of an Industrial Park in each of the 33 districts in the State, with each park setting aside 20 per cent of the space for MSMEs. “We are going to set up 10 Industrial parks in the area between the Outer Ring Road and the upcoming Regional Ring Road. Of these, five will be dedicated exclusively for MSMEs, including one each for women and start-ups,” D Sridhar Babu, Minister for IT and Industries, said.
Realising the fact that most of the MSMEs are using outdated technologies, the policy introduced a ₹100-crore fund to help MSMEs modernise their technologies and help them to graduate to the Industry 4.0 era.
Recognising the unique needs of women entrepreneurs, the government will also establish flatted factories equipped with essential facilities in all 119 constituencies, further promoting women’s participation in the MSME sector.
Challenges
Although the average investment into MSMEs rose to ₹2.15 crore in 2022 from ₹1 crore in 2018, the sector encountered several challenges in advancing to a higher level. Over 65 per cent of MSMEs failed to get formalised owing to the high costs involved.
Another challenge that the sector faces is the persistently low number of ‘medium-sized’ enterprises. “Between 2016 and 2023, medium-sized enterprises account for only 2.9 per cent of all manufacturing MSMEs and 3.5 per cent of all service MSMEs,” the policy noted.
“The MSMEs in the State also struggle to grow in size. They need adequate resources and remunerative avenues to grow in size,” it said.
Incentives
Under the T-IDEA scheme, the government will provide a subsidy of 25 per cent (up to a limit of ₹30 lakh) to MSMEs. For women, who currently receive an additional subsidy of 10 per cent, the subsidy will increase by 10 percentage points more (with a limit of ₹20 lakh).
For MSMEs owned by SC and ST entrepreneurs, the government will offer a subsidy of 50 per cent (with a limit of ₹1 crore) under the T-PRIDE scheme.
Pilot programme
The State Government will launch a pilot programme offering revenue-based financing to MSMEs. “Under the pilot, they will be able to secure credit based on future sales, making finance more accessible. The pilot will evaluate the need for such financing instruments in the State,” the policy said.
“The government will work on blended financing in collaboration with lending institutions to expand credit options to MSMEs,” it said.
To help the MSMEs in formalising their enterprises, the government will also develop training material in Telugu on maintaining books.
The Government also proposes to reimburse the duty incurred on the import of raw material at the time of import itself. Currently, the reimbursement occurs only after the final product is exported. The new proposal would help MSMEs reduce working capital requirements.