Micro, small and medium enterprises (MSMEs) have voiced concern over the proposed change in MSME definition from investment criterion to annual turnover.

As per 2006 definition, manufacturing units with investment below ₹25 lakh were categorised as micro, those between ₹25 lakh and ₹5 crore as small and those above ₹5 crore to ₹10 crore as medium. As per the new definition, businesses with revenue up to ₹5 crore will be termed as micro, those with sales between ₹5 crore and ₹75 crore will be deemed small and those with revenue upwards of ₹75 crore up to ₹250 crore will be classified as medium-sized enterprises

G Krithiha, Secretary of Lagu Udyog Bharati, told BusinessLine that the organisation is in favour revising the definition of MSMEs to keep up with inflation. “We agree it needs a change, but not at the cost of erosion of MSME identity. The distinction between trading and manufacturing has been removed in the present definition.

“Lagu Udyog Bharati is apprehensive that the registration of a manufacturing unit itself would be difficult if it is based on turnover alone. Turnover can show huge changes. A firm for instance could record a turnover of ₹4 crore in the first year, when it would be classified as micro. This could leapfrog to ₹7 or ₹8 crore in the second year, and the classification would change from micro to small. If it dips to ₹4 to 5 crore the following year, it will have to be reclassified as micro again, leading to chaos over classification,” she explained.

The organisation has also voiced the apprehension that importers and multinationals engaged in trading activities could pass themselves as MSMEs and take away their benefits.

“Globally, two most important elements are used to define MSMEs — turnover and employment. If the government is moving in that direction, then we appeal for redefining the criteria to ₹50 lakh for micro, ₹50 lakh to ₹5 crore for small and between ₹5 crore and ₹10 crore for medium,” Krithiha said.

(Lagu Udyog Bharati is a business organisation for MSMEs with presence in about 346 districts across the country).