As part of measures unveiled under the #AatmaNirbharBharatAbhiyan package announced by Finance Minister Nirmala Sitharaman on Wednesday, the definition of Micro, Small and Medium Enterprises (MSMES) is being revised, with the investment limits being raised.
Since the package includes numerous benefits for MSMEs, the eased definition is likely to benefit several businesses.
Under the old rules, the criteria for investment in plant and machinery or equipment for a micro-enterprise was Rs 25 lakh in manufacturing and Rs 10 lakh in the services sector. For small enterprises, it was Rs 5 crore in manufacturing and Rs 2 crore in the Services sector. For medium enterprises, it was Rs 10 crore and Rs 5 crore for manufacturing and services respectively.
Now, under the new composite criteria for investment and annual turnover, the distinction between manufacturing and services will be eliminated. Now, a micro-enterprise should have an investment of under Rs 1 crore and turnover under Rs 5 crore, a small enterprise should have investment under Rs 10 crore and turnover below Rs 50 crore, and a medium enterprise should have investment Rs 20 crore and turnover under Rs 100 crore.
These changes will be brought about through necessary amendments to the law.
According to the government, the low threshold in MSME definition had “created a fear among MSMEs of graduating out of the benefits and hence killing the urge to grow,” with a long-pending demand for revisions.
As per the Udyog Aadhaar Registration website, India has 1.31 crore MSME enterprises registered. However, according to the Ministry of Micro, Small, and Medium Enterprises Annual Report 2018-19, there 63 million small businesses in India overall.
Under the relief measures announced today, up to Rs 3 lakh crore worth of collateral-free automatic loans would be made available to MSMEEs, with a 4-year tenure and a 4-month moratorium and 100 per cent credit guarantee. The move is expected to benefit 45 lakh units.
In addition, provision of subordinate debt of Rs 20,000 will be facilitated as well as Rs 50,000 crore equity infusion through the ‘fund of funds’.
According to the All India Manufacturer’s Organisation, MSMEs had suffered a loss of over 12 lakh crore since the lockdown began.