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By Vaiebhav Wadhawan
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New Nomenclature and Classification of MSME |
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Enterprises |
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| Manufacturing Enterprises | Service Enterprises | |
| (Ceiling on investment in Plant & Machinery) | (Ceiling on investment in Equipment) | |
| Rs 25 lakh | Micro | Rs 10 lakh |
| Rs 5 Crore | Small | Rs 2 Crore |
| Rs 10 Crore | Medium | Rs 5 Crore |
Job absorption in the agricultural sector has been on the decline. On the other hand, the large industrial sector has seen a jobless growth over the last few years. In this scenario, only the small and medium sector provides some silver lining for creating additional employment for our rising young population. But, unfortunately, in the face of global competition and in the age of cutting edge technology, Indian small and medium enterprises are facing a difficult time. And the fact is that if the domestic policies are not made conducive enough to enhance their competitiveness, these enterprises will continue to languish as in the past.
Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 that become operational on 2nd October last year is a landmark legislation for it provides statutory recognition to micro, small and medium enterprises. This brings our small and medium enterprises at par with their counterparts in the world and the legal framework that has now been accorded to this sector will help it attract foreign investments.
The Act not only addresses several issues faced by the micro, small & medium industries, but also answers key governance and operational concerns. It calls for procedural simplifications and their implementation would help in brining down the much abhorred Inspector Raj which hampers the day-to-day working of the small industrial units only to breed corruption.
By strengthening legal provisions against delayed payment, the Act also seeks to ensure a better cash flow for micro and small enterprises. The Act makes it mandatory for the buyer of goods or services from such enterprises to make payment on or before the date agreed upon between them. The Act says, "Where any buyer fails to make payment of the amount to the supplier, as required under Sec 15 of the Act, the buyer shall notwithstanding anything contained in any agreement between the buyer and the supplier or in any law for the time being in force, be liable to pay compound interest with monthly interests to the supplier on the amount from the appointed day or, as the case may be, from the date immediately following the date agreed upon, at ‘three times’ of the bank rate notified by Reserve Bank of India."
Another positive element of the Act is that it empowers the Central Government to credit funds by the way of grants for the purpose of this Act. The Act says, "the Central Government may, after due appropriation made by Parliament by law in this behalf, credit the funds by the way of grants for the purpose of this Act, such sums of money as the Government may consider necessary to provide for the upliftment of manufacturing sector and other Small and Medium Scales units." The Act also arms the Government to overcome difficulties in giving effect to the provisions of the Act.
The Act is unique in many ways. The Act provides for ‘inclusion of industrial representatives’ in the Board called National Board for Micro, Small & Medium enterprises. The Board is supposed to advise the Central Government on matters under the Act. For the first time the lawmakers have felt that apart from the bureaucrats, people having first-hand experience of handling the subject should also be on the Board. Industry representatives have also been provided seats in MSE Facilitating Councils for adjudicating disputes over delayed payments.
A certain section of our political leadership believes that other than the central level, such boards should be created at the state level and further down the rung, district level committees or councils should also be set up to provide a much wider framework to the consulting process. Some others argue for formation of Centre-State coordination committees to ensure unhindered implementation of the Act.
The Act is also exceptional for it seeks to achieve gender equality. It provides for inclusion of at least three representatives of the associations of women’s enterprises in such bodies.
Notwithstanding many positive features that the Act has, some trade analysts believe that enough has not been provided for addressing the credit needs of the small enterprises. Finance is crucial for these enterprises to achieve technological up-gradation and capacity building for successfully facing global competition. Though the Finance Minister has raised the corpus of Credit Guarantee Fund from Rs. 1133 crore to Rs. 2500 crore and instructions have been given to all public sector banks for 20 per cent year-to-year credit growth to this sector, they say, the net credit flow to this sector is still very low and lethargic.
European Union and the United States of America unleash huge subsidies for their small and medium enterprises under the cover of Innovation Fund. Why can’t we have such a fund? An SME Innovation Fund administered by Small Industries Bank of India may not be out of place.
Our SMEs have the resilience to withstand the vicissitudes of global competition provided they are given the level playing field, at least for the sake of creating jobs in less developed areas. MSMED Act imparts the right direction, but much depends on how the provisions of the Act are implemented at the ground level.
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SSI Ministry institutes National Awards for small industries Small Industries Service Institute has informed that the Ministry of Small Scale Industry has instituted National Awards for small entrepreneurs to encourage them to achieve higher excellence in production. The first such award for the year 2006 will be given away shortly. The awards will be given under three enterprise categories - tiny, small and ancillary. Only the units registered with the State Directorate of Industries on or after 1st January1998 and having been in production for at least four years during that period would be eligible for awards for the year 2006. Nominations can be sent in the prescribed format (in triplicate) along with enclosures to the Director, Small Industries Service Institute (SISI) of the State/Union Territories by 30th May 2007. For more details, contact the Small Industries Service Institute, Ministry of Small Scale Industry, Government of India, Shaheed Capt. Gaur Marg, Okhla, New Delhi 110020, Tel: 26838118, 26838068, 26838269, Fax: 26838016, Email: sisi@del3.vsnl.net.in; Website: www.sisinewdelhi.com |
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CNBC TV 18 gives away International Trade Awards |
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In a ceremony held at Mumbai on 24th March 2007, the well known television channel CNBC TV 18 gave away ‘International Trade Awards 2006-07’ to recognize the contribution of Indian companies towards exports. The awards were given separately to both large and non-large exporters under various product categories. FIEO President Mr. Ganesh Kumar Gupta was amongst the jury which selected the awardees from a list of 245 companies under various categories. Large exporters were awarded under product categories such as Auto & |
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President, FIEO, Mr. Ganesh Kumar Gupta (extreme right) amongst other jury members adjudicating CNBC TV-18 International Trade Awards. |
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Auto Ancillaries; Chemicals, Plastics, Fertilizers & Agro-Products; Textiles, Fashion, Garments & Leather; Drugs, Pharmaceuticals, Healthcare & Lifesciences; IT, ITES & Electronics; Engineering & Machine Tools; and Travel, Tourism, & Hospitality. Non-Large exporters were awarded under product categories such as Engineering Goods; Chemicals & related products; Agriculture, Food, FMCG & Allied Products; IT, ITES, Communication & Infocomm; and Others (including gems & jewellery & infrastructure & utilities)n |
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