MSME body Federation of Indian Micro and Small & Medium Enterprises (FISME) has urged the government to introduce a sector-agnostic production linked incentive (PLI) scheme tailored specifically for MSMEs, with a focus on employment generation. In its detailed 10-point recommendations to Finance Minister Nirmala Sitharaman ahead of the first full budget of the Modi 3.0 government on July 23, FISME highlighted the need for a revised PLI framework that prioritizes sectors capable of generating maximum employment per unit of investment, positioning MSMEs to gain significantly.
FISME expressed concerns about the existing PLI scheme’s ad-hoc and potentially lobby-driven approach, which may neglect crucial sectors. The organization emphasized the absence of key metrics such as job creation—an area where MSMEs demonstrate strong performance.
According to government data, as of January 17, 2024, 746 applications across 14 sectors have been approved under the PLI scheme, with an expected investment exceeding Rs 3 lakh crore. Of these, 176 MSMEs have benefited in sectors including bulk drugs, medical devices, pharmaceuticals, telecom, white goods, food processing, textiles, and drones.
Significantly, the Udyam registration portal showed that MSMEs have reported over 20 crore jobs in the country, as of July 8, 2024. This included 2.32 crore jobs by GST-exempted informal micro enterprises, reflecting a 66 per cent increase from 12.1 crore jobs in July last year.
Additionally, FISME has called for a review of the Special Mention Account (SMA) framework, advocating for a “liberal restructuring option” for MSMEs impacted by long Covid and geopolitical turmoil. Currently, banks categorize stressed accounts based on overdue payments: SMA-0 for overdue less than 30 days, SMA-1 for 31-60 days, and SMA-2 for 61-180 days.
FISME highlighted that once an account is marked as SMA, it severely hampers normal banking operations, causing unnecessary alarms and forced closures of MSMEs.
FISME also recommended eliminating the Bank Loan Rating (BLR) system, which rates MSMEs using the same criteria as listed companies, complicating capital-raising efforts. It also proposed a Disaster Support Mechanism to provide swift support to MSMEs during crises.
Other key recommendations from FISME included streamlining packing credit for export-oriented MSMEs, implementing insurance surety in place of bank guarantees, introducing a ‘payment act’ to address delayed payments to MSMEs and more.