INTRODUCTION to MSME Sector
Micro, Small and Medium Enterprises (MSME) (MSME) sector has emerged as a highly vibrant and dynamic sector of the Indian economy over the last five decades. MSMEs not only play crucial role in providing large employment opportunities at comparatively lower capital cost than large industries but also help in industrialization of rural bac!ward areas, thereby, reducing regional imbalances, assuring more e"uitable distribution of national income and wealth. MSMEs are complementary to large industries as ancillary units and this sector contributes enormously to the socio#economic development of the country. $he %Micro, Small and Medium Enterprises &evelopment 'ct, *+, came into force
from nd ctober *. $he Micro, Small and Medium enterprises (MSMEs) have been accepted as the engine of economic growth and for promoting e"uitable e"uitable development development in all over the world. -et there be any category of countries (&eveloped, &eveloping and nder &eveloped), the e/istence of MSMEs is inevitable. $he ma0or advantage of the sector is its pivotal role throug through h its contri contribut bution ion in Indust Industria riall output output,, E/port E/ports, s, and ma0orly ma0orly in Employ Employment ment generation generation at low capital cost. $he labour intensity intensity of the MSME sector is much higher than that of the large enterprises. enterprises. $he MSMEs MSMEs constitute constitute over 12 of total enterprises enterprises in most most of the the econ econom omie iess and and are are credi credite ted d with with gener generat atin ing g the the high highes estt rates rates of employment growth and account for a ma0or share of industrial production and e/ports. In India, the MSMEs contribution is highly remar!able in the overall industrial economy of the country. In recent years the MSME sector has consistently registered higher growth rate compared to the overall industrial sector. 3ith its agility and dynamism, the sector sector has shown shown admira admirable ble innova innovativ tivenes enesss and adapta adaptabil bility ity to survive survive the recent recent economic downturn and recession. In Indian mar!et, MSMEs rapid growth could be seen as Indian entrepreneurs are ma!ing remar!able progress in various Industries li!e Manufacturing, 4recision Engineering &esign, 5ood 4rocessing, 4ro cessing, 4harmaceutical, $e/tile $e/tile 6arments, 7etail, I$ and I$ES, 'gro and Service sector. $he sector not only serves for for urban urban mar! mar!et et but but also also help helpss in indu indust stri rial aliz izat atio ion n of rural rural and and bac!w bac!war ard d areas areas,, reducin reducing g region regional al Imbala Imbalance ncess and assuri assuring ng more e"uita e"uitable ble distri distribut bution ion of nationa nationall inco income me and and weal wealth th.. MSME MSMEss comp comple leme ment nt larg large e indu indust stri ries es as anci ancillllary ary unit unitss and and contrib contribute ute enormous enormously ly to the socioeco socioeconom nomic ic develo developme pment nt of the country country.. MSMEs MSMEs account for 892 of India+s manufacturing output, about 82 of India+s total e/ports: employ about ;< mn people in more than <= mn units spread across the country, manufacture more than *, products ranging from traditional to high tech items (MSME report ==). $he report also pro0ects the total production coming from the
MSME sector at =,19;.* bn in 5>==, an increase of more than ==2 over the previous year contribution. $hou $hough gh,, MSME MSMEss contr contrib ibut utio ion n is pheno phenome menal nal in the the growt growth h of Indi Indian an econo economy my,, Simultaneously, MSMEs are facing intense pressure and constraints to sustain their comp compet etititiv ivene eness ss in globa globalilize zed d worl world. d. Some Some other other issu issues es such such as reces recessio sion, n, low demand demand,, financ finance, e, heavy heavy compet competiti ition on from from M?@s M?@s etc. etc. are becomi becoming ng conspic conspicuou uouss dilemma to MSMEs in India. In this competitive world, MSMEs need to be able to confront the increasing competition from developed and emerging economies and to plug into the new mar!et opportunities, provided by these countries. $here is a direct lin! lin! betwe between en interna internatitional onaliza izatio tion n and increas increased ed MSMEs MSMEs perform performanc ance. e. Interna Internatio tional nal acti activi vitities es rein reinfo force rce grow growth th,, enhan enhance ce comp compet etititiv iven eness ess and and supp support ort the the long long term term sustainability of companies. >et Indian MSMEs still depend largely on their domestic mar! mar!et etss despi despite te the the oppor opportu tuni nitities es brou brough ghtt by the the enla enlarg rged ed sing single le mar! mar!et et and and by globalizatio globalization n at large. &e#reservation &e#reservation of items which were earlier reserved for MSMEs, MSMEs, increasing competition by liberalizing the policies and allowing foreign companies to operate in Indian mar!et are some of the emerging challenges before MSMEs.
THE MICRO, SMALL & MEDI UM MEDI UM ENTERPRISES ACT, 2006
$AE MI@7, SM'-- '?& ME&IM E?$E747ISES &EBE-4ME?$ '@$, '@$, * 'n '@$ to provide for facilitating the promotion and development and enhancing the competitiveness of micro, small and medium enterprises and for matters connected therewith or incidental thereto. $he conceptual and legal framewor! for small scale and ancillary industrial underta!ings is derived from the industries &evelopment and 7egulation 'ct, =19=. $he 'ct provided the necessary powers to the central govt. to amend the provisions of this act from time to time so as to encourage small scale and ancillary underta!ings. $he Small and Medium Enterprises &evelopment Cill, 9 which was enacted in Dune * was renamed as Micro, Small and Medium Enterprises &evelopment 'ct, *F aims at facilitating the promotion and development of small and medium enterprises. Barious notifications issued by the @entral 6overnment from time to time relating to increase in slap rate of investments in plant and machinery for manufacturing enterprises and e"uipments in service enterprises provides a clear cut proof that the economy of our country is striving towards achieving the economies of scale by increasing the volume of production of goods. $he Micro, Small and Medium Enterprises &evelopment 'ct, * (MSME&') e/tends the scope to accomplishes many long standing goals of the government and sta!eholders in the MSME sector including the service sector.
MSME sector at =,19;.* bn in 5>==, an increase of more than ==2 over the previous year contribution. $hou $hough gh,, MSME MSMEss contr contrib ibut utio ion n is pheno phenome menal nal in the the growt growth h of Indi Indian an econo economy my,, Simultaneously, MSMEs are facing intense pressure and constraints to sustain their comp compet etititiv ivene eness ss in globa globalilize zed d worl world. d. Some Some other other issu issues es such such as reces recessio sion, n, low demand demand,, financ finance, e, heavy heavy compet competiti ition on from from M?@s M?@s etc. etc. are becomi becoming ng conspic conspicuou uouss dilemma to MSMEs in India. In this competitive world, MSMEs need to be able to confront the increasing competition from developed and emerging economies and to plug into the new mar!et opportunities, provided by these countries. $here is a direct lin! lin! betwe between en interna internatitional onaliza izatio tion n and increas increased ed MSMEs MSMEs perform performanc ance. e. Interna Internatio tional nal acti activi vitities es rein reinfo force rce grow growth th,, enhan enhance ce comp compet etititiv iven eness ess and and supp support ort the the long long term term sustainability of companies. >et Indian MSMEs still depend largely on their domestic mar! mar!et etss despi despite te the the oppor opportu tuni nitities es brou brough ghtt by the the enla enlarg rged ed sing single le mar! mar!et et and and by globalizatio globalization n at large. &e#reservation &e#reservation of items which were earlier reserved for MSMEs, MSMEs, increasing competition by liberalizing the policies and allowing foreign companies to operate in Indian mar!et are some of the emerging challenges before MSMEs.
THE MICRO, SMALL & MEDI UM MEDI UM ENTERPRISES ACT, 2006
$AE MI@7, SM'-- '?& ME&IM E?$E747ISES &EBE-4ME?$ '@$, '@$, * 'n '@$ to provide for facilitating the promotion and development and enhancing the competitiveness of micro, small and medium enterprises and for matters connected therewith or incidental thereto. $he conceptual and legal framewor! for small scale and ancillary industrial underta!ings is derived from the industries &evelopment and 7egulation 'ct, =19=. $he 'ct provided the necessary powers to the central govt. to amend the provisions of this act from time to time so as to encourage small scale and ancillary underta!ings. $he Small and Medium Enterprises &evelopment Cill, 9 which was enacted in Dune * was renamed as Micro, Small and Medium Enterprises &evelopment 'ct, *F aims at facilitating the promotion and development of small and medium enterprises. Barious notifications issued by the @entral 6overnment from time to time relating to increase in slap rate of investments in plant and machinery for manufacturing enterprises and e"uipments in service enterprises provides a clear cut proof that the economy of our country is striving towards achieving the economies of scale by increasing the volume of production of goods. $he Micro, Small and Medium Enterprises &evelopment 'ct, * (MSME&') e/tends the scope to accomplishes many long standing goals of the government and sta!eholders in the MSME sector including the service sector.
DEFINITION OF MSME-
Ministry of '67 and 77'- Industries and Ministry of Small Scale Industries have been merged into a single Ministry, namely “Minitr! o" Micro #n$ S%# #n$ Me$i'% Enter(rie) De"inition o" MSME i *i+en ! MSME Act, 2006In In$i#, te enter(rie #+e een c#i"ie$ ro#$! into t.o c#te*orie/
(i) Manufacturing: and (ii) $hose engaged in providingGrendering of services. Coth Coth categor categories ies of enterpr enterprises ises have been been further further classi classifie fied d into into micro, micro, small small and medi medium um ent enterpr erpris ises es base based d on their heir inves nvesttment ment in plan plantt and and mach machin iner eryy (for (for manufa manufactu cturin ring g enterpr enterprise ises) s) or on e"uipm e"uipment entss (in case case of enterpr enterprises ises providi providing ng or rendering rendering services). $he present present ceiling ceiling on investment investment to be classified as micro, small or medium enterprises is as underH
T!(e T!(e o" Enter(rie Ei*ie to e Re*itere$ 'n$er MSME Act, 2006
'll classes of enterprises, whether 4roprietorship, Aindu undivided family, family, 'ssociation of 4ersons, 4ersons, cooperative cooperative society, society, 4artnership firm, @ompany or nderta!ing, nderta!ing, by whatever whatever name called can apply for the registration and get "ualified for the benefits provided under the 'ct.
Re*itr#tion o" MSME /
=) Boluntary and not compulsory with respect to Micro and Small Enterprises. ) &I@ is the primary registering centre. <) $wo typesH • •
4rovisional 7egistration. 4ermanentG5inal 7egistration.
Continuous Disclosure –
a. @hange in the investment in plant and machinery or in e"uipment, the enterprise who have already filed Entrepreneurs Memorandum should inform the &istrict industries @entre of the same in writing within < month of the change in investment. b. @hange of products and that of services or addition in products or services. $he enterprises which have already filed Entrepreneurs Memorandum should inform the &istrict industries @entre of the same in writing within < month of the change. Note- EM 4'7$ II to be filed within years or else the EM 4'7$ I filed by a person
will become invalid. ON-LINE Re*itr#tion o" MSME-
$he online service is introduced mainly to help the entrepreneurs to obtain ac!nowledgement to EM. 4art = readily without contacting the 6eneral Managers of &istrict Industries @entres (&I@) and 7egional Doint &irector. MSME Registration
MSME stands for micro, small and medium enterprises and any enterprise that falls under any of these three categories can apply for registration. MSME registration that falls under the MSME& 'ct facilitates promotion and development of enterprises and improves its functioning. 'ny type of enterprise can apply for SME registration. $hese includes proprietorship enterprises, enterprises managed by Aindu undivided family, enterprises run by association of individuals, co#operative societies, partnership firms and enterprises managed by companies or underta!ings etc. 'fter registration, an enterprise becomes eligible to get the benefits under the MSME& 'ct. $here are two stages of registration#provincial and permanent (final). 'n enterprise is granted provincial registration when it is at a pre#investment stage. 'fter getting provincially registered, an enterprise can apply for permanent registration 0ust before launching its production facilities. Aowever, an enterprise that is already functioning need not have to apply for provincial registration as it is eligible to apply for permanent registration. Enterprises falling under the three categories (micro, small and medium) are further categorized into two types of industries# manufacturing industry and service industry. $he status of an enterprise under the MSME& 'ct is determined according to the investment slab under which an enterprise falls . ene"it o" MSME Re*itr#tion in In$i#
$he MSME registration process in India has been conceptualized to provide ma/imum benefits to all types of enterprises. 'fter registration, any enterprise becomes "ualified to reap the benefits offered under the MSME& 'ct. 5or e/ample, after provincial registration an enterprise can see! financial credit and also other facilities li!e land, industrial set#up, and waterGelectricityGtelephone connections. 'fter getting registered under a competent authority, an enterprise is allotted a MSME& registrationGentrepreneurs memorandum (EM) number. $he concerned enterprise should get the number printed on letter heads, invoices, bills, supply order sheets and other necessary documents. $he EM number helps in identification of MSE suppliers and in this case an enterprise becomes an authorized MSE supplier after registration .
$he registration scheme has no statutory basis. nits would normally get registered to avail some benefits, incentives or support given either by the @entral or State 6ovt. Cenefits available under the MSME& 'ct 7egistration of Micro, Small and Medium (MSM) Enterprises under MSME& 'ct is a very powerful medium to en0oy the regime of incentives offered by the @entre generally contains the followingH Micro #n$ S%# Enter(rie/ • •
• • • • •
• • • • • • • • • • • • • • • •
Easy finance availability from Can!s, without collateral re"uirement 4rotection against delay in payment from Cuyers and right of interest on delayed payment 4reference in procuring 6overnment tenders, Stamp duty and ctroi benefits, @oncession in electricity bills 7eservation policies to manufacturing G production sector enterprises $ime#bound resolution of disputes with Cuyers through conciliation and arbitration 7eimbursement of IS @ertification E/penses @redit prescription (4riority sector lending), differential rates of interest etc. E/cise E/emption Scheme E/emption under &irect $a/ -aws. Stamp duty and ctroi benefits, Statutory support such as reservation and the Interest on &elayed 4ayments 'ct. Subsidy on IS @ertifications Subsidy on ?SI@ 4erformance and @redit ratings 4articipation in 6ovt. 4urchase registrations 7egistration with ?SI@ @ounter 6uarantee from 6ovt. of India through @6S$I 3aiver in Earnest Money (Security &eposit ) in 6ovt. tenders Stamp duty and ctroi benefits, =92 weight age in price 4reference. 7eduction in rate of Interest from ban!s (Sub0ect to ratings) 5ree of @ost 6ovt. tenders
(It is to be noted that the Can!ing -aws, E/cise -aw and the &irect $a/es -aw have incorporated the word SSI in their e/emption notifications. $hough in many cases they may define it differently. Aowever, generally the registration certificate issued by the registering authority is seen as proof of being SSI).
StatesG$s have their own pac!age of facilities and incentives for small scale. $hey relate to development of industrial estates, ta/ subsidies, power tariff subsidies, capital investment subsidies and other support. Coth the @entre and the State, whether under law or otherwise, target their incentives and support pac!ages generally to units registered with them. Me$i'% Enter(rie/ • • • •
Easy finance availability from Can!s, without collateral re"uirement 4reference in procuring 6overnment tenders 7eservation policies to manufacturing G production sector enterprises $ime#bound resolution of disputes with Cuyers through conciliation and arbitration
$he Cuyers have to ensure whether those suppliers of goods and services are under the purview of MSME& 'ct i.e. the Cuyers have to confirm the registration of the suppliers under the MSME& 'ct. $he Cuyer should ensure the payment before the end of credit period decided else the interest would be payable. In case of disputes, application to Micro and Small Enterprises 5acilitation @ouncil (MSE5@) would trigger the conciliation and arbitration process. nce the application is done under MSE5@, there is no provision to withdraw the proceedings. $herefore, the Cuyer should ensure the best ways to resolve the disputes, if any, instead approaching to MSE5@ in the initial stages of dispute. $he Cuyers need to ensure that the Cuyer does not owe any outstanding amount including interest due to MSM Enterprises for more than =9 days. therwise, the Cuyer needs to disclose this non#payment in the 'nnual 5inancials of the Cuyer.
1OERNMENT POLICIES AND SUPPORT MEASURES/ RIEF HISTOR3 4 Te e+o'tion o" te (oic! "r#%e.or5 #n$ '((ort %e#'re o" te 1o+ern%ent c#n e ro#$! *ro'(e$ into te "oo.in* tree (erio$/
789-77/ In all the 4olicy 7esolutions from =18J to =11=, recognition was given to the
micro and small enterprises, termed as an effective tool to e/pand employment opportunities, help ensure e"uitable distribution of the national income and facilitate
effective mobilization of private sector resources of capital and s!ills. $he Micro, Small and Medium Enterprises &evelopment rganisation Kearlier !nown as Small Industries &evelopment rganization (SI&)L was set up in =198 as an ape/ body for sustained and organized growth of micro, small and medium enterprises. 3ithin ne/t two years, the ?ational Small Industries @orporation, the hadi and Billage Industries @ommission and the @oir Coard were also set up. $he era provided the supportive measures that were re"uired to nurture MSEs, in the form of reservation of items for their e/clusive manufacture, access to ban! credit on priority through the 4riority Sector -ending 4rogramme of commercial ban!s, e/cise e/emption, reservation under the 6overnment 4urchase 4rogramme and =92 price preference in purchases, infrastructure development and establishment of institutes for entrepreneurial and s!ill development. MSME &evelopment Institutes Kearlier !nown as Small Industries Service Institute (SISI)L were set up all over India to train youth in s!illsGentrepreneurship. $ool 7ooms were established with 6erman and &anish assistance for providing technical services essential to MSEs as also for s!ill#training. 't the State level, &istrict Industries @entres were set up all over the country.
77-777/ $he new 4olicy for Small, $iny and Billage Enterprises of 'ugust, =11= laid
the framewor! for government support in the conte/t of liberalization, which sought to replace protection with competitiveness to infuse more vitality and growth to MSEs in the face of foreign competition and open mar!et. Supportive measures concentrated on improving infrastructure, technology and "uality. $esting @entres were set up for "uality certification and new $ool 7ooms as well as Sub#contracting E/changes were established. $he Small Industries &evelopment Can! of India (SI&CI) and a $echnology &evelopment and Modernization 5und were created to accelerate finance and technical services to the sector. ' &elayed 4ayment 'ct was enacted to facilitate prompt payment of dues to MSEs and an Industrial Infrastructure &evelopment (II&) scheme was launched to set mini industrial estates for small industries. 777 on.#r$/ $he Ministry of MSME Kearlier !nown as Ministry of Small Scale
Industries and 'gro 7ural Industries (SSI '7I)L came into being from =111 to provide focused attention to the development and promotion of the sector. $he new 4olicy 4ac!age announced in 'ugust, sought to address the persisting problems relating to credit, infrastructure, and technology and mar!eting more effectively. ' @redit -in!ed @apital Subsidy Scheme was launched to encourage technology up gradation in the MSE sector and a @redit 6uarantee Scheme was started to provide collateral#free loans to micro and small entrepreneurs, particularly the first generation entrepreneurs. $he e/emption limit for relief from payment of @entral E/cise
duty was raised to 7s.= crore (N.9 million) and a Mar!et &evelopment 'ssistance Scheme for MSEs was introduced. 't the same time, consultations were held with sta!eholders and the list of products reserved for production in the MSE sector was gradually reduced each year. In *, the long#awaited enactment for this sector finally became a reality with the passage of the Micro, Small and Medium Enterprises 'ct. In March, ;, a third 4ac!age for the 4romotion of Micro and Small Enterprises was announced which comprises the proposalsGschemes having direct impact on the promotion and development of the micro and small enterprises, particularly in view of the fast changing economic environment, wherein to be competitive is the !ey of success.
PRESENT POLIC3 FRAME:OR; AND FOCUS AREAS Micro, Small and Medium Enterprises &evelopment 'ct, * $he Micro, Small and Medium Enterprises &evelopment (MSME&) 'ct, * see!s to facilitate the development of these enterprises as also enhance their competitiveness. It provides the first#ever legal framewor! for recognition of the concept of enterpriseF which comprises both manufacturing and service entities. It defines medium enterprises for the first time and see!s to integrate the three tiers of these enterprises, namely, micro, small and medium. $he 'ct also provides for a statutory consultative mechanism at the national level with balanced representation of all sections of sta!eholders, particularly the three classes of enterprises: and with a wide range of advisory functions. Establishment of specific 5unds for the promotion, development and enhancing competitiveness of these enterprises, notification of schemesGprogrammes for this purpose, progressive credit policies and practices, preference in 6overnment procurement to products and services of the micro and small enterprises, more effective mechanisms for mitigating the problems of delayed payments to micro and small enterprises and assurance of a scheme for easing the closure of business by these enterprises are some of the other features of the 'ct. Forei*n Direct In+et%ent
3ith the promulgation of the MSME& 'ct, *, the restrictive 82 ceiling prescribed for e"uity holding by industrial underta!ings, whether domestic or foreign, in the MSEs has been done away with and MSEs are defined solely on the basis of investment in plant and machinery (manufacturing enterprises) and e"uipment (service enterprises). $hus, the present policy on 5&I in MSE permit 5&I sub0ect only to the sectoral e"uity caps entry routes and other relevant sectoral regulations.
Li%ite$ Li#iit! P#rtneri(
$he salient features of the proposed --4 'ct, J are as underH (i) --4 shall be a body corporate and a legal entity separate from its partners. It will have perpetual succession. Indian 4artnership 'ct, =1< shall not be applicable to --4s, since --4 shall be in the form of a body corporate. (ii) 'n --4 has to be incorporated with a minimum of two persons. $he 'ct does not restrict the benefit of --4 structure to certain classes of professionals only and would be available for use by any enterprise which fulfills the re"uirements of the 'ct. (iii) $he --4 will be an alternative corporate business vehicle that would give the benefits of limited liability but would allow its members the fle/ibility of organizing their internal structure as a partnership based on an agreement. (iv) n registration --4 shall be capable ofH (a) Suing and being sued: and (b) 'c"uiring, owning, holding and developing or disposing off property. (v) ' person may cease to be a partner of a --4 in accordance with an agreement with the other partners or in absence of agreement with the other partners, by giving a notice in writing of not less than < days of his intention to resign as partner. (vi) In the event of an act carried out by a --4, or any of its partners, with intend to defraud creditors of the --4 or any other person or for any fraudulent purpose, the liability of the --4 and partners, who acted with intend to defraud creditors or for any fraudulent purpose shall be unlimited for all or any of the debts or other liabilities of the --4. (vii) ' contribution of a partner may consist of tangible, movable or immovable or intangible property or other benefits to the --4 including money, promissory notes, and other agreements to contribute cash or property, and contracts for services performed or to be performed. (viii) 3hile the --4 will be a separate legal entity, liable to the full e/tent of its assets, the liability of the partners would be limited to their agreed contribution in the --4. 5urther, no partner would be liable on account of the independent or unauthorized actions of other partners, thus allowing individual partners to be shielded from 0oint liability created by another partnerOs wrongful business decisions or misconduct.
(i/) 'n --4 shall be under obligation to maintain annual accounts reflecting true and fair view of its state of affairs. (/) 4rovisions have been made in the 'ct for corporate actions li!e mergers, amalgamations etc. (/i) $here is a provision of voluntary winding up as well as winding up by the $ribunal . (/ii) $here are provisions for inter conversion of --4 into private company etc. $he --4 'ct should pave the way for greater corporatization of the Small and Medium Enterprises thereby enhancing their access to e"uity and funds from the mar!et. De-reer+#tion
$he issue of de#reservation has been a sub0ect of animated debate within government for the last twenty years. $he 'pproach to the Eleventh 5ive >ear 4lan notes the adverse implications of reservation of products for e/clusive manufacture by the MSEs and recommends the policy of progressive dereservation. $o facilitate further investments for technological up gradation and higher productivity in the micro and small enterprises, *98 items have been ta!en off the list of items reserved for e/clusive manufacture by the manufacturing micro and small enterprises in the last few years reducing it to = at present. $his has helped the sector in enlarging the scale of operations and also paved the way for entry of larger enterprises in the manufacture of these products in !eeping with the global standards.
Cre$it>Fin#nce @redit is one of the critical inputs for the promotion and development of the micro and small enterprises. Some of the features of e/isting credit policy for the MSEs areH
Priorit! Sector Len$in*P@redit to the MSEs is part of the 4riority Sector
-ending 4olicy of the ban!s. 5or the public and private sector ban!s, 82 of the net ban! credit (?C@) is earmar!ed for the 4riority Sector. 5or the foreign ban!s, however, <2 of the ?C@ is earmar!ed for the 4riority Sector, of which =2 is earmar!ed for the MSE sector. 'ny shortfall in such lending by the foreign ban!s has to be deposited in the Small Enterprise &evelopment 5und (SE&5) to be set up by the Small Industries &evelopment Can! of India (SI&CI).
Intit'tion# Arr#n*e%ent $he SI&CI is the principal financial institution for
promotion, financing and development of the MSE sector. 'part from e/tending financial assistance to the sector, it coordinates the functions of institutions engaged in similar activities. SI&CIOs ma0or operations are in the areas of H (i) 7efinance assistance (ii) &irect lending, and (iii) &evelopment and support services. @ommercial ban!s are important channels of credit dispensation to the sector and play a pivotal role in financing the wor!ing capital re"uirements, besides providing term loans (in the form of composite loans). 't the State level, State 5inancial @orporation+s (S5@s) and twin#functional State Industrial &evelopment @orporations (SI&@s) are the main sources of long#term finance for the MSE sector. 7ecognizing the importance of easy and ade"uate availability of credit in sustainable growth of the MSE sector, the 6overnment has announced a O4olicy 4ac!age for Stepping p @redit to Small and Medium Enterprises (SMEs)O, with the ob0ective of doubling the flow of credit to this sector within a period of five years. $o ensure better flow of credit to MSEs, the Ministry of MSME is also implementing the following ma0or schemesH Cre$it 1'#r#ntee Sce%e-
$o ensure better flow of credit to micro and small enterprises by minimizing the ris! perception of ban!sGfinancial institutions in lending without collateral security, the 6overnment launched @redit 6uarantee 5und Scheme for Micro and Small Enterprises in 'ugust . $he scheme covers collateral#free credit facility e/tended by eligible lending institutions to new and e/isting micro and small enterprises for loans up to 7s.= la!h (N9,) per borrowing unit. $he guarantee cover is up to ;9 per cent of the credit sanctioned KJ92 in respect of loans up to 7s.9 la!h (N=,9) and J2 for loans provided to MSEs ownedGoperated by women and all loans in the ?orth# East 7egionL. Per"or%#nce & Cre$it R#tin* Sce%e
$he 4erformance @redit 7ating Scheme for manufacturing MSEs was launched in 'pril, 9 with the ob0ective of assisting the MSEs in obtaining performance#cum#credit rating which would help them in improving performance and also accessing ban! credit on better terms if the rating is high. nder the scheme (implemented by the ?ational Small Industries @orporation in con0unction with reputed rating agencies), ;92 of the
fee charged by the rating agency is reimbursed by the 6overnment sub0ect to a ma/imum of 7s.8, (N=,). E%er*in* So'rce
5aced with increased competition on account of globalization, MSMEs are beginning to move from an obsession with ban! credit to a variety of other specialized financial services and options. In recent years, the country has witnessed increased flow of capital in the form of primaryGsecondary securities mar!et, venture capital and private e"uity, e/ternal commercial borrowings, factoring services, etc. More advanced MSMEs have started realizing the importance of these alternative sources of funding to raise resources and the need for adopting better governance norms to ta!e advantage of these funding sources. $he enactment of the -imited -iability 4artnership 'ct, J is e/pected to provide a thrust to the MSMEs in their move towards corporatization. Co%(etiti+e Tecnoo*!
In todayOs fast paced global business scenario, technology has become more vital than ever before. 3ith a view to foster the growth of MSME sector in the country, 6overnment has set up ten state#of#the#art $ool 7ooms and $raining @entres. $hese $ool 7ooms provide invaluable service to the Indian industry by way of precision tooling and providing well trained craftsmen in the area of tool and die ma!ing. $hese $ool 7oom are highly proficient in mould and die ma!ing technology and promote precision and "uality in the development and manufacture of sophisticated moulds, dies and tools. $he $ool 7ooms are not only e"uipped with the best technology but are also abreast with the latest advancements li!e @'&G@'M, @?@ machining for tooling, Bacuum Aeat $reatment, 7apid 4rototyping, etc. $he $ool 7oom $raining @entres also offer various training programmes to meet the wide spectrum of technical manpower re"uired in the manufacturing sector. $he training programmes are designed with optimum blend of theory and practice giving the trainees e/posure on actual 0obs and hands on wor!ing e/perience. $he $ool 7ooms have also developed special training programmes to meet the re"uirements at international level, which are attended by participants from all over the globe.
Te Minitr! o" MSME i%(e%ent te "oo.in* ce%e #n$ (ro*r#%%e "or te '( *r#$#tion o" tecnoo*! o" te MSME/ ISO 7000>800 Certi"ic#tion Fee Rei%'re%ent Sce%e
$o enhance the competitive strength of the MSEs, the 6overnment introduced a scheme to incentives technological up gradation, "uality improvement and better environment management by the MSEs. $he scheme reimburses ;92 of the fees, sub0ect to a ma/imum of 7s.;9, (N), for ac"uiring Quality Management System (QMS)GIS 1 certification andGor Environment Management System (EMS)GIS =8= certification by the MSEs. Micro #n$ S%# Enter(rie C'ter De+eo(%ent Pro*r#%%e
$he Micro and Small Enterprises @luster &evelopment 4rogramme (MSE@&4) is implemented for holistic development of clusters of MSEs. $he programme envisages measures for capacity building, s!ill development, technology up gradation of the enterprises, improved credit delivery, mar!eting support, setting up of common facility centers, etc., based on diagnostic studies carried out in consultation with cluster units and their collectives and management of cluster#wide facilities by the cluster collectives. Cre$it Lin5e$ C#(it# S'i$! Sce%e
$he @redit -in!ed @apital Subsidy Scheme (@-@SS) aims at facilitating technology up gradation by providing =92 upfront capital subsidy w.e.f. 1th September, 9 to manufacturing MSEs, on institutional finance up to 7s.= crore (N.9 million) availed of by them for induction of well established and improved technologies in the specified sub#sectorsGproducts approved under the scheme. N#tion# M#n'"#ct'rin* Co%(etiti+ene Pro*r#%%e
$he ?ational Manufacturing @ompetitiveness 4rogramme is the nodal programme of the 6overnment of India to develop global competitiveness among Indian MSMEs. @onceptualized by the ?ational Manufacturing @ompetitiveness @ouncil, the 4rogramme was initiated in ;#J. $here are ten components under the ?M@4 targeted at enhancing the entire value chain of the MSME sector. $hese areH (a) 'i$in* A.#rene on Inteect'# Pro(ert! Ri*t "or te Micro, S%# & Me$i'% Enter(rie
them in using effectively the tools of Intellectual 4roperty 7ights (I47) of innovative pro0ects. $he main features of the scheme areH (i) 'warenessGSensitization 4rogrammes on I47: (ii) 4ilot Studies for Selected @lustersG6roups of Industries: (iii) Interactive seminarsG3or!shops: (iv) Specialized $raining: (v) 'ssistance for 6rant on 4atentG6I 7egistration: (vi) Setting up of I4 5acilitation @entre (I45@): and (vii) Interaction with International 'gencies. $hese initiatives are being developed through 4ublic#4rivate 4artnership (444) mode. <= Sce%e "or Pro+i$in* S'((ort "or Entre(rene'ri# #n$ M#n#*eri# De+eo(%ent o" SME tro'* Inc'#tor/
$he scheme aims at nurturing innovative business ideas (newGindgenious technology, processes, products, procedures, etc.), which could be commercialized in a year. nder the scheme, various institutions li!e Engineering @olleges, 7esearch -abs etc. will be provided funds up to 7s.*.9 la!h for handholding each new ideaG entrepreneur. $he incubator will provide technology guidance, 3or!shop and -ab support and lin!age to other agencies for successful launching of the Cusiness and guide the entrepreneur in establishing the enterprise.
&uring the year J#1, 6oI launched a scheme, OEnabling Manufacturing Sector be @ompetitive through Quality Management Standards (QMS) and Quality $echnology $ools (Q$$)O in order to improve "uality and productivity in the MSE sector. $he scheme is aimed at improving the "uality of the products in the MSE sector and inculcates the Quality consciousness in this sector. $he ma0or activities under this scheme areH (i) Introduction of 'ppropriate Modules for $echnical Institutions: (ii) rganizing 'wareness @ampaigns for MSEs: (iii) rganizing @ompetition#3atch (@#3atch): (iv) Implementation of Quality Management Standards and Quality $echnology $ools in selected MSEs: (v) Monitoring International Study Missions: and (vi) Impact Studies of the initiatives.
<$= Mini Too Roo% 'n$er PPP %o$e/
nder the scheme, OMini $ool 7ooms under 444 modeO, =9 Mini $ool 7ooms will be set up during the ==th 4lan period. @ompetitive bidding from entrepreneurs and 'ssociations will be invited to set up $ool 7ooms with 6overnment support up to 7s.1 crore. $hey will be more competitive and user friendly as they will not be bound by the 6overnment procedure and competitiveness will be the only criteria for selection of promoters of these $ool 7ooms. $he approved 4lan e/penditure under the Scheme is 7s. =<9 crore '((ort to MSE <#r Co$e=/
$he ob0ective of the OMar!eting 'ssistanceG Support to MSEsO scheme of ?M@4 is to popularize the Car @ode registration and motivate the Small and Micro# Manufacturing Enterprises to adopt the Car @ode @ertification on large scale and to sell their value added products worldwide and enable higher e/port price realization. It also helps in domestic mar!eting (wholesale retail). ;92 of annual fee (recurring) of Car @ode certification for the first three years are reimbursed to Micro Small Entrepreneurs, under the Scheme. <"= Le#n M#n'"#ct'rin* Co%(etiti+ene Pro*r#%%e "or MSME/
nder the -ean Manufacturing 4rogramme (-M4), MSMEs will be assisted in reducing their manufacturing costs, through proper personnel management, better space utilization, scientific inventory management, improved process flows, and reduced engineering time and so on. -M4 also brings improvement in the "uality of products and lowers costs which are essential for competing in national and international mar!ets. $he total 6oI contribution is stipulated as 7s. J.* crore (appro/.) for this scheme. $he broad activities planned under the scheme include $otal 4roductive Maintenance ($4M), 9S, Bisual @ontrol, Standard peration 4rocedures, Dust in $ime, anban System, @ellular -ayout, 4o!a >o!e, $4M, etc. $he Scheme has been approved as a pilot pro0ect for -ean $echni"ues interventions in = Mini @lusters. <*= Pro%otion o" In"or%#tion & Co%%'nic#tion Too
$he ob0ective of this programme envisages that some of those clusters of SMEs, which have "uality production and e/port potential, shall be identified encouraged and assisted in adopting I@$ applications to achieve competitiveness in the national and international mar!ets. $he total 6oI contribution is stipulated as 7s. =* crore (appro/.) for this scheme. $he broad activities planned under the scheme include, identifying target clusters for I@$ intervention, setting up of e#readiness infrastructure, developing
web portals for clusters, s!ill development of MSME staff in I@$ applications, preparation of local software solutions for MSMEs to enhance their competitiveness, construction of e#catalogue, e#commerce, etc. and networ!ing MSME cluster portals on the ?ational -evel 4ortals in order to outreach MSMEs into global mar!ets. <= Dei*n Cinic Sce%e "or MSME/
$he main ob0ective of the scheme is to bring the MSME sector and design e/pertise into a common platform and to provide e/pert advice and solutions on real time design problems, resulting in continuous improvement and value#addition for e/isting products. It also aims at value#added cost effective solutions. $he 6oI contribution is stipulated as 7s.9 crore for this scheme. $he broad activities planned under the scheme include creation of &esign @linics Secretariat along with regional centers for intervention on the design needs of the MSME sector.
$he ob0ective of this scheme is to identify and encourage those clusters of MSMEs, which have "uality production and e/port potential and assist them to achieve competitiveness in the national and international mar!ets. $he scheme aims at improving the mar!eting competitiveness of MSME sector by improving their techni"ues and technology for promotion of e/ports. $he 6oI contribution is stipulated as 7s.=1 crore for this scheme. $he broad activities planned under the scheme include technology up gradation in pac!aging, development of modern mar!eting techni"ues, competition studies, etc. <@= Tecnoo*! #n$ ?'#it! U( *r#$#tion S'((ort t o MSME/
$he ob0ective of the Scheme is to sensitize the manufacturing (MSME) sector in India to upgrade their technologies, usage of energy efficient technologies to reduce emissions of 6reen Aouse 6ases, adoption of other technologies mandated as per the global standards, improve their "uality and reduce cost of production, etc., towards becoming globally competitive. $he ma0or activities planned under the scheme include @apacity Cuilding of MSMEs @lusters for Energy EfficiencyG@lean &evelopment Interventions, Implementation of Energy Efficient $echnologies in MSME sector, Setting up of @arbon credit aggregation centers and encouraging MSMEs to ac"uire product certification licences from ?ationalGInternational bodies. S5i De+eo(%ent/ $he Ministry of Micro, Small Medium Enterprises promotes the
development of micro and small enterprises in the country with the ob0ective of creating self employment opportunities and upgrading the relevant s!ills of e/isting and potential entrepreneurs. $he entrepreneurship and s!ill development scheme is implemented by
ffice of the &@ (MSME) through its networ! of 9J MSME#&Is and their branches. $he programmes are conducted include Entrepreneurship &evelopment, Entrepreneurship and S!ill &evelopment, Management &evelopment and Cusiness S!ill &evelopment. $hese programmes are of short duration and the curriculums based on needs of the industry and are customized, if re"uired by the clients. 2 of the targeted training programmes are conducted e/clusively for the wea!er sections of the society (S@GS$G3omenG4hysically Aandicapped), for which no fee is charged. Cesides, a stipend of 7s.9G# p.m. is provided. $he office of the &@ (MSME) also conducts vocational and educational training through its 7egional $esting @entres, 5ield $esting Stations and autonomous bodies li!e $ool 7ooms and $echnology &evelopment @entres ($&@s). $his long term, short term, tradeGfield#specific and industry#specific tailor#made courses also include specialized programmes for Engineers, &iploma holders so that their absorption by the industry is immediate. ' good number of trainees have set up their own enterprises in creating employment opportunities. $he Ministry is at present training about < la!h persons per annum both for business and technical s!ill development, which is among the largest programme by any single Ministry in India. $he Ministry is also focusing on socially bac!ward groups and on least developed areas under its Outreach 4rogrammeO. M#r5etin* #n$ Proc're%ent
nder 6overnment Stores 4urchase 4rogramme, various facilities are provided to enterprises registered with ?ational Small Industries @orporation (?SI@) in order to assist them for mar!eting their products in competitive environment. $hese facilities areH (i) issue of $ender Sets free of cost: (ii) E/emption from payment of Earnest Money &eposit: (iii) 3aiver of Security &eposit up to the Monetary -imit for which the unit is registered: and (iv) price preference up to =92 over the "uotation of large#scale units. In addition to these facilitiesGbenefits, <9J items have also been reserved for e/clusive purchase from the MSE Sector. Aowever, as these guidelines wereGare not of a mandatory nature, the same has failed to achieve the desired results. $o assist the MSEs in mar!eting of their products, Section = of the new MSME& 'ct en0oins the formulation of a scheme of preferential procurement of goodsGservices producedGrendered by MSEs both at the @entral and StateG$ levels. nce formulated, the procurement scheme may be more effective in providing the much#needed mar!eting support that MSEs see! so desperately. Each MinistryG&epartment, @4S, etc., would have to ma!e specific mention of the compliance of the preference policy in its 'nnual 7eport to be tabled in 4arliament.
E(ort Pro%otion
E/port promotion from the MSE sector has been accorded a high priority. $o help MSEs in e/porting their products, the following facilitiesGincentives are providedH (i) 4roducts of MSE e/porters are displayed in international e/hibitions and the e/penditure incurred is reimbursed by the 6overnment: (ii) $o ac"uaint MSE e/porters with latest pac!aging standards, techni"ues, etc., training programme on pac!aging for e/porters are organized in various parts of the country in association with the Indian Institute of 4ac!aging: (iii) nder the MSE Mar!eting &evelopment 'ssistance (M&') Scheme, assistance is provided to individuals for participation in overseas fairsG e/hibitions, overseas study tours, or tours of individuals as member of a trade delegation going abroad. $he Scheme also offers assistance for H (a) Sector specific mar!et study by MSE 'ssociationsGE/port 4romotion @ouncilsG5ederation of Indian E/port rganisation: (b) InitiatingGcontesting anti#dumping cases by MSE 'ssociations: and (c) 7eimbursement of ;9 per cent of the one time registration fee and annual fee (7ecurring for first three years) charged by 6SI India (formerly E'? India) for 'doption of Car @oding. In"r#tr'ct're De+eo(%ent
5or setting up of industrial estates and to develop infrastructure facilities li!e power distribution networ!, water, telecommunication, drainage and pollution control facilities, roads, ban!s, raw materials, storage and mar!eting outlets, common service facilities and technological bac! up services, etc., for MSMEs, the Integrated Infrastructural &evelopment (II&) Scheme was launched in =118. $he scheme covers rural as well as urban areas with a provision of 9 per cent reservation for rural areas and 9 per cent industrial plots are to be reserved for the micro enterprises . $he Scheme also provides for up gradationGstrengthening of the infrastructural facilities in the e/isting industrial estates. $he estimated cost (e/cluding cost of land) to set up an II& @entre is 7s.9 crore (N=.9 million). @entral 6overnment provides 8 per cent in case of general States and up to J2 for ?orth East 7egion (including Si!!im), D, A.4. and ttara!hand, as grant and remaining amount could be loan from SI&CIGCan!sG5inancial Institutions or the State 5unds. $he II& Scheme has been subsumed under the Micro and Small Enterprise @luster &evelopment 4rogramme (MSE@&4). 'll the features of the II& Scheme have been retained and will be covered as ?ew @lustersF under MSE@&4.
Fic# Conceion
nder the 6eneral E/cise E/emption Scheme, full e/cise e/emption up to turnover of N<;9 thousand per annum is provided to enterprises having annual turnover of up to N= million. Aowever, the limits of e/cise e/emptions has encouraged tendency among MSEs is to go in for horizontal e/pansion (i.e., fragmentation) rather than vertical e/pansion and upward graduation into medium and large enterprises. 5or incentivizing such graduation of small to mediumGlarge enterprises so as to enable them to achieve economies of scale, e/tension of e/cise e/emptions to the graduating medium enterprises on a tapering scale is under consideration of the 6overnment. Stren*tenin* o" D#t##e
' reliable database is the !ey input in any policy decision#ma!ing process. $his is more so for the MSME sector in view of its large size and wide disparity among the enterprises within the sector. $he Ministry has so far conducted three @ensus in the year =1;=#;, =11#1< and < for strengtheningGupdating the database on MSE sector. Aowever, the long gap between the @ensus has limited the reliability of the MSE database. $o strengthen the database for the MSME Sector, statistics and information will now be collected in respect of number of units, employment, rate of growth, share of 6&4, value of production, e/tent of sic!nessGclosure, e/ports and all other relevant parameters of micro, small and medium enterprises, including !hadi and village industry, through annual sample surveys and "uin"uennial census. $he "uin"uennial census and annual sample surveys of MSMEs will also collect data on women#owned and G or managed enterprises. Inc'i+ene
$he Ministry of MSME launched a special programme, namely, Outreach 4rogramme for S!ill &evelopment in -ess &eveloped 'reasO in September, *. nder this programme, the field offices of the Ministry organize short#term s!ill development programmes in the less developed areas. Such short#term courses are tailor#made for these areas so as to enable trainees to get employment or start self#employment ventures. $hese programmes are of short duration of =#< wee!s and the activity selected for trainees are relevant to the local re"uirement. $he target group consist wholly or partly of disadvantaged sections. 5urther, under the recently announced 4romotional 4ac!age for MSEs, 2 of S!ill &evelopment 4rogrammes have been reserved for wea!er sections along with the provision of a stipend of 7s.9 per capita per month e/clusively for S@sGS$s, women and physically handicapped. In case of the regular E&4GM&4GS!ill &evelopment programmes, a nominal fee of 7s.= is charged. Aowever, there is no fee for S@sGS$s, women and physically handicapped candidates.
IndiaOs pioneering policies for the development of MSEs offers case studies for the developing world. 6overnment has moved away, though not yet fully, from its role of direct interventions to that of a friend and facilitator. $here is growing realization that protection in the form of reservation needs to be replaced with easy access to capital, technology and s!ill development to integrate the MSMEs more firmly with the domestic and global economy. 'nd these are now the specific target areas of the Ministry of MSME.
INDIAN MSME/ AREAS OF COOPERATION India benefited immensely from e/perience of several countries, especially in the field of technology. Aowever, the rich Indian e/perience gained in the last si/ty years in the MSME sector could also be of e"ual use for both developing as well as developed countries. Some of the areas that offer ample opportunities for cooperation in the MSME sector areH 5ee#based consultancy services and training in the following areasH i. @apacity Cuilding of Entrepreneurs and $echnical Manpower of SMEs: ii. 4olicy Institutional 5ramewor! for SME 4romotion, &evelopment and Enhancing @ompetitiveness: iii. Entrepreneurship &evelopment: and iv. Cusiness &evelopment Services.
i. ii. iii. iv. v. vi. vii. viii. i/.
Establishment of $urn!ey 4ro0ects for setting up manufacturing MSMEs on commercial terms. S!ill up gradation programmes in selected areas such as @?@ Machining, Sheet# Metal $echnologies, @'& @'M &esigning, 3ool 4rocessing 3eaving, -eather $echnology, 4lastic $echnology, 3ood 3or!ing, etc. @onducting surveys and studies to identify the tooling and related s!ill re"uirements in specific areas or regions li!e hillyGbac!wardGindigenous. 4roviding turn!ey assistance to set up $ool 7ooms $raining @entres. 4roviding consultancy to e/isting manufacturing SME in upgrading their production facilities, selection of machine tools, design consultancy for tools, moulds, dies, 0igs fi/tures, etc. 4roviding specializedGtailor#made training courses for specific target groups. 4roviding consultancy to e/isting training institutes in course design and curriculum development including trainers training programmes. 'ssistance in product design, tool design and manufacturing of intricate toolings. Aigh precision tools, moulds, die, 0igs fi/tures etc. as per designGspecifications of local industry. 4roduct development rapid prototyping services.
IAN MSME/ AREAS OF COO
IND
INITIATIES OF THE MINISTR3 OF MICRO, SMALL AND MEDIUM ENTERPRISES
In a significant policy initiative, the 6overnment has enacted RMicro, Small and Medium Enterprises &evelopment 'ct, *%, which aims to facilitate the promotion and development and enhance the competitiveness of MSMEs. $he 'ct, which came into force from nd ctober *, fulfilled a long#cherished demand of this sector. 'part from giving legal strength to the definitions of micro, small and medium enterprises, this 'ct also contains penal provisions relating to the delayed payment to these enterprises. 2B ;#$i #n$ i#*e In$'trie Co%%iion Act, 76
$he hadi and Billage Industries @ommission 'ct, =19* has been comprehensively amended in *, introducing several new features to facilitate professionalism in the operations of the @ommission as well as field#level formal and structured consultations with all segments of sta!eholders. ' new @ommission has also been constituted in ?ov. ==. B Pri%e Miniter E%(o!%ent 1ener#tion Pro*r#%%e
' national level credit lin!ed subsidy scheme, namely, R4rime Minister%s Employment 6eneration 4rogramme (4ME64) %was introduced in 'ugust J by merging erstwhile 4M7> and 7E64 schemes of this Ministry. nder this programme, financial assistance is provided for setting up of micro enterprises each costing up to 7s.= la!h in service sector and 7s.9 la!h in manufacturing sector. $he assistance is provided in the form of subsidy up to 9 per cent (<9 per cent for Special category including wea!er sections) of the pro0ect cost in rural areas while it is =9 per cent (9 per cent for Special category including wea!er sections) for urban areas. &uring =#=<, disbursements were made in 9*,11; cases utilizing 7s.=;J.*= crore as margin money subsidy. $he estimated employment generation is 8.J la!h persons. 'n amount of 7s.=8=J.J crore including 7s.=
8B Proc're%ent Poic! "or MSE
' 4ublic 4rocurement 4olicy for MSEs was notified in March =. $he policy envisages that every @entral MinistryG4S shall set an annual goal for procurement from the MSE sector with the ob0ective of achieving minimum 2 of the total annual purchases from MSEs in a period of three years. f this, 82 will be earmar!ed for procurement from MSEs owned by S@GS$ entrepreneurs. $he policy will help to promote MSEs by improving their mar!et access and competitiveness through increased participation by MSEs in 6overnment purchases and encouraging lin!ages between MSEs and large enterprises. B T#5 Force on MSME
' $as! 5orce under the chairmanship of the 4rincipal Secretary to 4rime Minister was constituted to address the issues of MSME sector. $he $as! 5orce, in its 7eport, has made recommendations in the areas of credit, mar!eting, labour, rehabilitation and e/it policy, infrastructure, technology, s!ill development, ta/ation and development of MSMEs in the ?orth#East and Dammu ashmir. ' large number of recommendations have been implemented. ' @ouncil on MSMEs under the chairmanship of Aon%ble 4rime Minister has been constituted to lay down the broad policy guidelines and review the development of the MSME sector. 5or ensuring timelyGspeedy implementation of the recommendations of the $as! 5orce and follow#up on the decisions of the 4rime Minister%s @ouncil on MSMEs, a Steering 6roup under the chairmanship of 4rincipal Secretary to the 4rime Minister has also been constituted. 6B 8t A In$i# Cen' o" MSME
$he 8th 'll India @ensus of MSMEs (*#;), which was launched in May J, were released during ==#=. $he results reveal that there are <*. crore MSMEs in *# ;, providing employment to over J crore persons. $his is the first @ensus after the enactment of the MSME& 'ct, * and includes, for the first time, medium enterprises also. B En#nce$ Cre$it Fo. to te MSE Sector
5or strengthening the delivery of credit to the MSEs, the 6overnment announced a R4olicy 4ac!age for Stepping up @redit to Small and Medium Enterprises (SME)% in 'ugust 9 for doubling the credit flow to this sector within a period of five years. $his has resulted in a significant increase in the credit flow from 4ublic Sector Can!s (4SCs) to the micro and small enterprises (MSE) sector P with the outstanding credit of public sector ban!s increasing from 7s.=,,99 crore at the end of March ; to 7s.,;J,<1J crore at the end of March =. It has further enhanced to 7s.<,1*,<8< crore at the end of March =. 3ith constant monitoring and efforts made by the 6overnment, the credit flow from 4ublic Sector Can!s (4SCs) to the MSE sector has
registered a growth of 8;.82, *.*2 and 89.82 during ;#J, J#1 and 1#= respectively P higher than the stipulated 2 in the 4olicy 4ac!age. $he growth of credit during ==#= and =#=< have been 92 and 92 respectively. 9B Cre$it 1'#r#ntee Sce%e
$he 6overnment has set up a @redit 6uarantee 5und to provide relief to those micro and small entrepreneurs who are unable to pledge collateral security in order to obtain loans for the development of their enterprises. $he guarantee cover provided is up to ;92 of the credit facility up to 7s. 9 la!h(J92 for loans up to 7s. 9 la!h provided to micro enterprises, J2 for MSEs ownedGoperated by 3omen and all loans to ?E7)with a uniform guarantee at 92 of the credit e/posure above 7s. 9 la!h and up to 7s. = la!h. ' composite all#in annual guarantee fee of =. 2 per annum of the credit facility sanctioned (.;92 for credit facility up to 7s. 9 la!h and .J92 for above 7s.9 la!h and up to 7s.= la!h for women, micro enterprises and units in ?E7 including Si!!im) is now being charged. 's a result, the scheme has been able to overcome the initial inhibition of ban!ers and is steadily gaining in acceptance. 5urther, efforts made to enhance the awareness have led to the coverage of =8,=1,J; proposals ( for guarantee cover for a sanctioned loan amount of 7s. ;*.J crore) at the end of March =8. $he 6overnment is ma!ing concerted efforts to further enhance the awareness of the scheme throughout the country for enhancing the coverage of the Scheme. 9. National Manufacturing Competitiveness Programme
Ensuring the growth of Small Scale Sector at a healthy rate is crucial for the overall growth of Manufacturing Sector as also the National Economy. For this to happen the small scale sector has to become competitive. In the 200!0" #u$get% the &overnment announce$ formulation of a National 'ompetitiveness (rogramme% particularly to support the Small an$ Me$ium Enterprises )SMEs* in their en$eavor to become competitive. +ccor$ingly% the National Manufacturing 'ompetitiveness 'ouncil )NM'(* has finali,e$ a five year National Manufacturing 'ompetitiveness (rogramme )NM'(*.
$he ?ational Manufacturing @ompetitiveness 4rogramme (?M@4) highlights the needs for enhancing the competitiveness of Indian Manufacturing sector. $his is determined by measuring the productivity vis##vis the use of its human capital and natural resources.
=. MICRO & SMALL ENTERPRISES CLUSTER DEELOPMENT PRO1RAMME
$he Micro and Small Enterprises @luster &evelopment 4rogramme (MSE#@&4) is being implemented for holistic and integrated development of micro and small enterprises in clusters through Soft Interventions (such as capacity building, mar!eting development, e/port promotion, s!ill development, technology up gradation, organizing wor!shops, seminars, training, study visits, e/posure visits, etc.), Aard Interventions (setting up of @ommon 5acility @enters) and Infrastructure &evelopment (createGupgrade infrastructural facilities in the newGe/isting industrial areasG clusters of MSEs). 'ssistance is provided for the following activities under the scheme# (i) 4reparation of &iagnostic Study 7eport with 6overnment of India (6oI) grant of ma/imum 7s .9 la!h (7s.=. la!h for filed offices of the Ministry of MSME). (ii) Soft Interventions with 6oI grant of ;92 of the sanctioned amount of the ma/imum pro0ect cost of 7s 9. la!h per cluster. 5or ?E Aill States, @lusters with more than 92 (a) microG village (b) women owned (c) S@GS$ units, the 6oI grant will be 12. (iii) &etailed 4ro0ect 7eport (&47) with 6oI grant of ma/imum 7s 9. la!h for preparation of a technical feasible and financially viable pro0ect report. (iv) Aard Interventions in the form of tangible assets li!e @ommon 5acility @entre having machinery and e"uipment for critical processes, research and development, testing, etc. with 6oI grant upto ;2 of the cost of pro0ect of ma/imum 7s =9. crore. 5or ?E Aill States, @lusters with more than 92 (a) microG village (b) women owned (c) S@GS$ units, the 6oI grant will be 12. ; (v) Infrastructure &evelopment with 6oI grant of upto *2 of the cost of pro0ect of 7s =. crore, e/cluding cost of land. 6oI grant will be J2 for pro0ects in ?E Aill States, industrial areasG estates with more than 92 (a) micro (b) women owned (c) S@GS$ units. (vi) $he 6oI assistance shall also be available to 'ssociations of 3omen Entrepreneurs for establishing e/hibition centres at central places for display and sale of products of women owned micro and small enterprises T 82 of the pro0ect cost. C'ter De+eo(%ent/ ' total of 1= interventions in various clusters spread over J
States and = $s in the country have so far been ta!en under the programme for &iagnostic Study, Soft Interventions and Aard Interventions (@5@s). 5urther, =; pro0ects have been ta!en up for infrastructure development under the scheme.
PERATION
B Tecnoo*! Centre S!te% Pro*r#%%e
Ministry of Micro, Small and Medium Enterprises, 6overnment of India have established =J $echnology @entres ($@s) earlier !nown as $ool 7ooms (= ?os) and $echnology &evelopment @entres (J ?os) spread across the country. $he $echnology @enters+ primary focus is to support industries particularly MSMEs in the country through access to advanced technologies providing technical advisory support as well as s!illed manpower by offering opportunities for technical s!ill development to the youth at varying levels ranging from School &ropouts to 6raduate Engineers. 7ecent evaluation studies of $@s have found a strong need to replicate them at more places. In view of important role played by these @entres for providing thrust to manufacturing sector, 6overnment is considering to upgrade and e/pand networ! of MSME $echnology @entres at an estimated cost of 7s. crore with 3orld Can! funding. $owards achieving this ob0ective, Ministry of MSME, 6overnment of India is in the process of establishing =9 $echnology @enters ($@s) and upgrading G modernizing the e/isting $@s under $echnology @entre Systems 4rogramme ($@S4). $he 4rogramme is e/pected to improve the competitiveness of Micro, Small and Medium Enterprises (MSMEs) in !ey manufacturing industries across India by facilitating improved access to technology and business advisory services as well as s!illed wor!ers through systems of financially sustainable $echnology @entres. $he 4roposed 4rogram will reinforce the technical capability of the $echnology @enters as well as industry sector to perform well at both ?ational and International levels. 2B Cre$it Lin5e$ C#(it# S'i$! Sce%e
$he Ministry of Micro, Small and Medium Enterprises is operating a Scheme, namely, @redit -in!ed Subsidy Scheme (@-@SS) for technology up gradation of Micro and Small Enterprises (MSEs). $he Scheme aims at facilitating technology up gradation of Micro and Small Enterprises by providing =92 @apital Subsidy (limited to ma/imum 7s. =9. la!h) for purchase of plant and machinery. Ma/imum limit of eligible loan for calculation of subsidy under Scheme is 7s. =. la!h. 4resently, 9= well established and improved technologiesGSub#Sectors have been approved under the Scheme. 5or effective and transparent implementation of the Scheme, Ministry has started Uonline 'pplication and $rac!ing system‖ w.e.f =.=.=< for online lodgment of subsidy claims by nodal ban!s. Since inception of the Scheme, J,J; units have availed subsidy of 7s. =,*=1.<< crore up to <=.<.=8.
B Entre(rene'ri( #n$ S5i De+eo(%ent
In today%s fast paced economic and industrial scenario, technology has become more vital than ever before. Its development and absorption are !ey ingredients for the overall economic development of a nation. $his is even more relevant in the conte/t of developing countries li!e India where technological development and employment generation have to go hand to hand. $hus the Ministry of MSME, which has the overall mandate for the development of MSMEs, has been underta!ing a number of programmes for encouraging entrepreneurship and s!ill development amongst youth to fulfill the need of s!illed manpower by the industry. $hese programmes are conducted through a nationwide networ! of establishments under office of &evelopment @ommissioner (MSME), hadi and village Industries @ommission (BI@), ?ational Small Industries @orporation (?SI@), @oir Coard and various other organizations under the Ministry.
8B R#@i+ 1#n$i U$!#%i Mitr# 3o@#n#
$he scheme aims to promote and support establishment of new micro and small enterprises through handholding of potential first generation entrepreneurs, who have already successfully completed Entrepreneurship &evelopment 4rogramme (E&4)G S!ill &evelopment 4rogramme (S&4) G Entrepreneurship#cum#S!ill &evelopment 4rogramme (ES&4) of at least two wee!s% duration, or have undergone vocational training (B$) from I$Is. ne of the main ob0ectives of handholding is to guide and facilitate the potential entrepreneurs in dealing with various procedural and legal hurdles and completion of various formalities which are re"uired for setting up and running of enterprise successfully and to save them from harassment at the hands of various regulatory agencies for want of re"uired compliances. It will not only increase the proportion of potential entrepreneurs trained under various E&4sG S&4sGES&4sG B$ in setting up their enterprises, more importantly, it will also enhance survival G success rate of newly set up enterprises.
B Per"or%#nce #n$ Cre$it R#tin* Sce%e
$o sensitize the MSE sector on the need for credit rating and encourage the MSEs to maintain good financial trac! record enabling them to earn higher rating for their credit re"uirements, the 6overnment in 'pril 9 launched the R4erformance and @redit 7ating Scheme%. $he implementation of the scheme is through ?ational Small Industries @orporation (?SI@). 7eputed 7ating 'gencies have been empanelled by ?SI@ from which the MSEs can select the one to be engaged by it for obtaining the rating. $he
Ministry of MSME subsidises the cost of rating by sharing ;92 of the fee charged by the 7ating 'gency, sub0ect to a ceiling of 7s.8,. 6B N#tion# S%# In$'trie Cor(or#tion
?ational Small Industries @orporation -td. (?SI@), is an IS 1=HJ certified 6overnment of India Enterprise under Ministry of Micro, Small and Medium Enterprises (MSME). ?SI@ has been wor!ing to fulfill its mission of promoting, aiding and fostering the growth of small industries and industry related Micro, Small and Medium Enterprises in the country. ver a period of five decades of transition, growth and development, ?SI@ has proved its strength within the country and abroad by promoting modernization, upgradation of technology, "uality consciousness, strengthening lin!ages with large medium enterprises and enhancing e/ports pro0ects and products from small enterprises. ?SI@ operates through countrywide networ! of offices and $echnical @entres in the country. $o manage operations in 'frican countries, ?SI@ operates from its office in Dohannesburg, South 'frica. In addition, ?SI@ has set up $raining cum Incubation @entre with a large professional man power: ?SI@ provides a pac!age of services as per the needs of MSME sector. ?SI@ carries forward its mission to assist small enterprises with a set of specially tailored schemes designed to put them in a competitive and advantageous position. $he schemes comprise of facilitating mar!eting support, credit support, technology support and other support services. B ;#$i Re"or% De+eo(%ent Pro*r#%%e <;RDP=
In order to revitalize and reform the traditional !hadi sector with enhanced sustainability of !hadi, increased artisans welfare, increased incomes and employment opportunities for spinners and weavers with lesser dependence on 6overnment grants, a hadi 7eform and &evelopment 4rogramme was formulated by the Ministry of MSME in consultation with hadi and Billage Industries @ommission (BI@), 'sian &evelopment Can! ('&C), &epartment of Economic 'ffairs (&E') and MGs 4rice 3aterhouse @oopers (43@). $his programme is proposed to be implemented in < selected !hadi institutions willing to underta!e the identified reforms. $he &E' has arranged a sum of SN =9 million e"uivalent to 7s.;=; crore (appro/.) from '&C to be given to BI@ as grant in four tranches over a period of <* months. 'fter completion of procedural formalities, and signing of necessary agreement and announcement by '&C, the first tranche of 7s.1* crore was released to BI@ in 5ebruary, =. Rhadi Mar!%, a mar! to establish genuineness of hadi was launched in September =< under the 7&4.
9B M#r5et De+eo(%ent Ait#nce
$he scheme has been introduced w.e.f. =.8.= and envisages financial assistance T 2 on value of production of !hadi and polyvastra which will be shared among artisans, producing institutions and selling institutions in the ratio 9H<H89. $he scheme has been introduced on the basis of recommendations of several committees constituted during the past few decades and after running several pilot pro0ects in the past. $he need had arisen because hadi production so far was not based on mar!et demand or performance and the rebate system did not benefit the spinners and weavers. 'lso BI@ was constrained to devote most of its resources for administration of rebate: to the detriment of its remaining responsibilities regarding development of the sector. M&' see!s to rectify this imbalance and provide fle/ibilityG freedom to the !hadi institutions to ta!e innovative measures to improve its mar!eting infrastructure such as renovation of outlets, training sales persons, computerization of sales, design improvement, publicity, discount to customers, improved e"uipments of production, training of artisans and capacity building so that !hadi can attract more customers not 0ust because of discount, but because of its "uality design and appeal. Most importantly, for the first time a definite share of 92 of M&' has been earmar!ed for spinners and weavers which will give them a prominent role in the entire !hadi chain of activities. 'n amount of 7s.=*.18 crore has been released to BI@ during =<#=8 towards M&'. 7B :or5e$ Sce%e "or ;#$i Arti#n
nder this scheme, assistance is provided for construction of 3or!sheds for hadi artisans for better wor! environment. 5inancial assistance of 7s.J.< crore for establishment of wor!shed has been provided to 8888 artisans in =<#=8. 20B Sce%e "or En#ncin* Pro$'cti+it! & Co%(etiti+ene o" ;#$i In$'tr! #n$ Arti#n
$he scheme aims to provide financial assistance to of the R'V% and R'% category !hadi institutions of which 9 institutions would be those which are managed e/clusively by beneficiaries belonging to Scheduled @astesGScheduled $ribes to ma!e them competitive with more mar!et driven and profitable production by replacement of obsolete and old machinery and e"uipment.
2B Sce%e "or Re@'+en#tion, Mo$erniG#tion #n$ Tecnoo*ic# U( *r#$#tion o" Coir In$'tr!
nder the scheme being implemented since ;#J, assistance is provided to spinners and tiny household sector for replacement of outdated rattsGlooms and for constructing wor! sheds so as to increase production and earnings of wor!ers. 22B Sce%e o" F'n$ "or Re*ener#tion o" Tr#$ition# In$'trie
$his Scheme was launched in 9 for regeneration of traditional industries identified clusters in !hadi, village industries and coir sectors with a view to ma!e these industries more productive and competitive and increase the employment opportunities in rural and semi#urban areas. $he ob0ective of the Scheme is to establish a regenerated, holistic, sustainable and replicable model of integrated cluster#based development of traditional industries in !hadi, village and coir sectors. So far 1* clusters (!hadi 1, Billage Industries 8; and @oir # ) have been developed under S57$I. It is proposed to develop J clusters during the WII 4lan.
2B M##t%# 1#n$i Intit'te "or R'r# In$'tri#iG#tion
' national level institute named M6I7I has been established at 3ardha, Maharashtra as a society under Societies 7egistration 'ct, =J* by revamping Damnalal Ca0a0 @entral 7esearch Institute has in association with II$, &elhi for strengthening the 7 & activities in !hadi and village industry sectors. $he main ob0ectives of the institute are as underH X $o accelerate rural industrialization for sustainable village economy so that BI sector co#e/ists with the main stream. X 'ttract professionals and e/perts to 6ram Swara0 X Empower traditional artisans X Innovation through pilot studyGfield trials X 7& for alternative technology using local resources
28B N#tion# o#r$ "or MSME
$he 6overnment has set up for the first time, a statutory ?ational Coard for Micro, Small and Medium Enterprises so as to bring together the representatives of different sub# sectors of MSMEs, along with policy#ma!ers, ban!ers, trade unions and others P in order to move towards cohesive development of the sector. $he Coard has been meeting periodically. $he Coard has recently been re#constituted on ;th May =<.$he deliberations and directions of the ?ational Coard pave the way to guide and develop enterprises in this sector P to become more competitive and self#reliant. 9. Anno'nce%ent "or MSME ector in Union '$*et,20-8 Aon%ble nion 5inance Minister, while presenting nion Cudget =<#=8 to the 4arliament, made various announcements specifically for MSME sector, as underH •
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Micro, small and medium enterprises (MSME) have a large share of 0obs, production and e/ports. $oo many of them do not grow because of the fear of losing the benefits associated with staying small or medium. $o encourage them to grow, the benefits or preferences en0oyed by them will now stay with them for upto three years after they grow out of the category in which they obtained the benefit. $o begin with, the non#ta/ benefits would be made available to an MSME unit for three years after it graduates to a higher category. $o provide greater support to MSMEs, the refinancing capability of SI&CI has been enhanced from the current level of 7s.9, crore to 7s.=, crore per year. SI&CI set up the India Microfinance E"uity 5und in ==#= with budgetary support of 7s.= crore to provide e"uity and "uasi#e"uity to Micro 5inance Institutions (M5I). 'n amount of 7s.=8 crore has been committed to <; M5Is. Earlier 7s.= crore were allocated to the IME 5und in the budget and now another sum of 7s.= crore has been provided in present budget for the 5und. $he 5actoring 'ct == has been passed by 4arliament. ' provision of a corpus of 7s.9 crore to SI&CI has been made in the present budget to set up a @redit 6uarantee 5und for factoring. $ool 7ooms and $echnology &evelopment @entres set up by the Ministry of Micro, Small and Medium Enterprises have done well in e/tending technology
