Centre may treat medium, small business units as different verticals

The Government may do away with a single definition of MSMEs and is considering defining these units on the basis of different verticals, a long-standing demand by a section of the industry.

“To enable medium, small and micro enterprises (MSMEs) to grow, there is a need to look at different verticals,” said MSME Secretary Madhav Lal, addressing the two-day CII Global SME Business Summit here on Wednesday.

The summit, attended by 400 delegates, including 13 foreign ones, also saw the release of a report on an ‘Action Agenda’ for MSME growth by the Confederation of Indian Industry (CII).

Lal, however, said a decision on revising the definition would only be taken after consulting all stakeholders, including State Governments, industry associations and experts.

He said changing the definition would require a change in the MSME Act 2006, adding that despite ‘definitional issues’, the sector has shown impressive growth through the years, contributing about seven per cent to the country’s GDP.

At present, all MSMEs in the manufacturing sector are defined by a single definition – investment in plant and machinery of up to ₹25 lakh as micro, up to ₹5 crore as small and up to ₹10 crore as medium enterprises. For the services sector, the limit is ₹10 lakh, ₹2 crore and ₹5 crore, respectively.

Once the definition is revised, the capital investment limit, turnover and employee number etc, may be higher for units engaged in, say, auto ancillaries, aerospace, defence sectors among others, than those making garments, furniture etc.

On the ₹10,000-crore venture capital fund (VCF), announced in the Budget, the MSME Secretary said it will basically flow from the shortfall with banks in priority sector lending.

Talks are on with the Finance Ministry and SIDBI and the fund’s contours will be ready in a month, he added.

Earlier, in his keynote address to the delegates, RC Bhargava, Chairman, Maruti Suzuki India, said it was only because of SMEs that the car-maker existed today. “When we started, not a single component was made here. Now, 75 per cent of our inputs are brought to our vendors.”

Bhargava urged the Government not to club all MSMEs under a single definition if it is looking at boosting manufacturing growth in line with the Prime Minister’s call for ‘Make in India’.

“Business cannot be improved through subsidies. The level of competitiveness has to be raised,” he said, adding that there was need to segregate industries that will contribute to modern manufacturing.

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