MSMEs are apprehensive, and wonder if the benefits announced by the finance minister in February 2013 will be implemented
By Richa Chakravarty
Saturday, June 29, 2013: The announcement in the Union Budget 2013 that non-tax benefits would be provided to the micro, small and medium enterprises (MSMEs) for three years, even after they grow out of the category, had come as a relief to MSMEs. The government had realised that many MSMEs were apprehensive to grow because they feared losing the benefits associated with remaining as a small or medium enterprise. As a result, to provide support to these MSMEs, the re-financing capability of the Small Industries Development Bank of India (SIDBI) was also enhanced from Rs 5 billion to Rs 10 billion per year.
However, according to an official from the Ministry of Micro, Small and Medium Enterprises (Ministry of MSME), even three months after the announcement was made in February 2013, no formal notification has been received on this issue. “We have heard about the announcement but we have not received any formal letter from the Ministry of Finance, indicating the seriousness of the announcement,” the official says.
MSMEs are also doubtful about the implementation of this proposal. Subhash Chauhan, managing director, Subtech Electronics, who is not aware of such an announcement, says, “This initiative sounds encouraging, but only if it is implemented in time. The government makes many promises, but not all of them are kept. So I have my apprehensions about this one, too. Yes, given an option, I would definitely want to graduate to a higher category, yet enjoy all the benefits offered to MSMEs as they would help me to grow further.”
Adds Pawan Sharma, director, Victor Components Systems Pvt Ltd, “No doubt the initiative taken by the government is good, but all the bureaucratic processes of the Ministry of MSME are very lengthy and it operates at a very slow pace. As a result, I doubt how many MSMEs will opt for these benefits.”
Anil Bali, vice president, Deki Electronics, on the other hand, feels that the move made by the government will surely help the sector to grow. Deki was an MSME and has now moved out of the bracket. Shares Anil Bali, “There are two sets of people—those who want to grow and those who do not. It is like running in front of a tiger, when the only way to survive is by running faster. Hence, if an MSME really wants to grow, it should be determined to do so and in the process avail the benefits extended by the government, even if the process is cumbersome. But all this discussion needs to take place only after the above-mentioned announcement is implemented.”
Additional benefits MSMEs would enjoy
Once the government gives a formal notice to the Ministry of MSME, several benefits will be extended to the MSMEs. To begin with, there will be non-tax benefits, including the Market Development Assistance (MDA) scheme and the Design Clinics programme. The MDA scheme aims to help MSMEs develop overseas markets by offering funds to participate in international trade fairs. The Design Clinics scheme, on the other hand, encourages innovation and aims to promote design as a value-adding activity.
The government also plans to set up five new tool rooms and technology development centres with World Bank assistance and a budgetary allocation of Rs 22,000 million during the 12th Five-Year Plan (2012-17) to help extend technology and design support to small businesses.
However, most of the MSMEs do not avail these benefits. Complains Pawan Sharma, “We have never opted for any benefit offered to an MSME, as availing these benefits is a very lengthy process and we cannot afford to divert our energy and time for this purpose. The government should make these processes less cumbersome. It took us one-and-a-half-years to obtain an MSME certificate; so you can understand the pace at which the ministry operates.”
Different definitions of MSMEs
The Reserve Bank of India and the Government of India distinguish between MSMEs that are in the manufacturing sector and those in the services sector.
The manufacturing sector refers to enterprises engaged in the manufacture or production, processing or preservation of goods as MSME.
| Category | Definition |
| Micro enterprise | A micro enterprise is one in which the investment in plant and machinery does not exceed Rs 2.5 million |
| Small enterprise | A small enterprise is one in which the investment in plant and machinery is more than Rs 2.5 million but does not exceed Rs 50 million |
| Medium enterprise | A medium enterprise is one in which the investment in plant and machinery is more than Rs 50 million but does not exceed Rs 100 million |
In the services sector, enterprises engaged in providing or rendering of services, are referred to as MSMEs.
| Category | Definition |
| Micro enterprise | A micro enterprise is one in which the investment in equipment does not exceed Rs 1 million |
| Small enterprise | A small enterprise is one in which the investment in equipment is more than Rs 1 million but does not exceed Rs 20 million |
| Medium enterprise | A medium enterprise is one in which the investment in equipment is more than Rs 20 million but does not exceed Rs 50 million |
