Giving a big push to small, medium enterprises

Recognising the important role played by the micro, small and medium enterprises in generating employment, spurring manufacturing growth, industrialisation of backward areas, and increasing exports, the Centre is focussing on a number of schemes to give the MSME sector a boost.

While the key programmes for the sector such as the Prime Minister’s Employment Generation Programme (PMEGP), the scheme for promotion of innovation, Rural Industry and Entrepreneurship (ASPIRE), and the Scheme of Fund for Regeneration of Traditional Industries (SFURTI) are executed by the Ministry of Small and Medium Enterprises MSMEs, other Ministries and Departments such as Textiles and Industrial Policy & Promotion also run schemes that benefit small enterprises such as the Weaver Mudra Card scheme and the Start-Up India scheme.

Given the problems small enterprises have in accessing credit, many of the schemes dedicated to the sector are focussed on addressing this issue. PMEGP, a flagship scheme of the government run by the Khadi and Village Industries Commission, offers credit linked subsidy to set up new enterprises for generating continuous and sustainable employment in rural and urban areas. The primary aim is to generate jobs by way of self-employment ventures, micro-enterprises, and other eligible projects. It also aims at bringing back the tradition of village artisanship and helping urban youth who are unable to get a job due to one reason or the other.

For people belonging to the general category, the beneficiary needs to be able to contribute at least 10 per cent of the project cost. The Union government, in this case, provides 15 per cent of the funding for projects in urban areas and 25 per cent for those in rural areas.

The government has also set up a Credit Guarantee Trust for MSMEs (CGTMSE) to strengthen credit delivery system and facilitate flow of credit to the MSME sector. The credit guarantee under CGTMSE seeks to reassure the lender that, in the event of a unit that has availed itself of collateral-free credit failing to discharge its liabilities to the lender, the CGMSE would make good the loss incurred by the lender up to 85 per cent of the credit facility.

A scheme to improve credit availability for small artisans and weavers, called the Weaver Mudra Scheme, has been introduced by the Textiles Ministry. One of the aims of the scheme is to make timely and ample credit available to small weavers so that they can function independent of master weavers.

The maximum credit available to weavers under the scheme has been increased to ₹5 lakh from ₹2 lakh (the old scheme has now been discontinued) and weavers can draw credit up to ₹50,000 from ATMs using RuPay debit cards.

To promote start-ups in rural areas, the MSME Ministry launched the ASPIRE scheme in March last year with a corpus of ₹210 crore. It seeks to set up a network of technology and incubation centres to accelerate entrepreneurship and also to promote start-ups for innovation and entrepreneurship in rural and agriculture based industry.

According to the Centre, the planned outcomes of ASPIRE are setting up Technology Business Incubators , Livelihood Business Incubators and creation of a Fund of Funds for such initiatives with SIDBI.

The Department of Industrial Policy & Promotion’s Start-Up India scheme, too, is aimed at promoting entrepreneurship and innovation among mostly small players. Start-ups that meet the norms get income-tax exemption for three years and various other incentives such as guidance for filing for patents and reduced fees.

The improve ease-of-doing-business amongst MSMEs, the Ministry last year notified that every MSME unit shall file an Udyog Aadhaar Memorandum (UAM). The UAM replaces the filing of Entrepreneurs’ Memorandum with the respective States/UTs which continued to be filed manually in many places. The cumbersome filing of EM has now been dispensed with and the entrepreneurs in the MSME sector just need to file online, a simple one-page UAM on a given official website and instantly get a unique Udyog Aadhaar Number (UAN). The information sought is on self-certification basis and no supporting documents are required at the time of online filing of UAM.

The Centre is also working towards improving the existing mechanism for addressing revival, rehabilitation and exit of small enterprises is very weak in the country. In the World Bank’s Doing Business Report, India is ranked 137 out of the 189 economies for resolving insolvencies. Resolving insolvency in the country takes 4.3 years on average and costs 9 per cent of the debtor’s estate, with the most likely outcome being that the company will be sold as piecemeal sale, as per the report. To address this problem, the government notified the Framework for Revival and Rehabilitation of MSMEs in May last year.

The features of the framework include identification of incipient stress, setting up committees for distressed MSMEs, a Corrective Action Plan (CAP) by the committee with various options, a restructuring process, prudential norms on asset classification and provisioning and identification of willful defaulters and non-cooperative borrowers.

The MSME Ministry has introduced the Micro, Small and Medium Enterprises Development (Amendment) Bill, 2015 in the Lok Sabha seeking to enhance the existing limit for investment in plant and machinery considering changes in price index and cost of inputs consistent with the emerging role of the MSMEs in various Global Value Chains. It also proposes to include medium enterprises apart from small enterprises in Section 7(9) to enable them to get the benefits reserved for the category and become competitive.

The Bill, once it becomes a law, will also empower the Centre to revise the existing limit for investment by notification, considering inflation and the market situation.

There are, however, some concerns that by widening the definition of MSMEs, smaller units may lose some of the advantages they have over the relatively larger units.

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