How to identify micro, small units from medium businesses: Real small enterprises suggest this to govt

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Published: November 11, 2019 8:10:38 PM

Ease of Doing Business for MSMEs: Laghu Udyog Bharti -- the national body for micro and small businesses in a note issued to the MSME ministry on November 6, 2019, suggested increasing the threshold limits of investment in plant and machinery.

The government in February 2018 had approved a proposal to define businesses based on turnover.

Ease of Doing Business for MSMEs: With the proposed definition on turnover basis, there will be no difference between a manufacturer and traders, and MSME benefits will go to both manufacturing and traders, Janak Bhatia, President, Laghu Udyog Bharti told Financial Express Online opposing the government’s proposal to revise the MSME definition based on their turnover from the existing basis of investment in plant and machinery. “In such a scenario, why will manufacturers take the pain to do business? People who want to set up their units will be discouraged,” said Bhatia. The government had in February 2018 approved a proposal to define businesses with turnover up to Rs 5 crore as micro, between Rs 5 crore and Rs 75 crore as small, and from Rs 75 crore till Rs 250 crore turnover as medium businesses.

Laghu Udyog Bharti — the national body for micro and small businesses in a note issued to the MSME ministry on November 6, 2019, suggested increasing the threshold limits of investment in plant and machinery to less than Rs 50 lakh to be categorised as micro-enterprises and Rs 50 lakh till Rs 5 crore as small businesses. According to the current definition, up to Rs 25 lakh investment falls under micro category while Rs 25 lakh till Rs 5 crore is bucketed as small units. While for medium enterprises, the current threshold is Rs 5 crore till Rs 10 crore investment, the body suggested formulation of a separate Micro and Small Industry Policy excluding mid-sized units. “If at all you want to change the criteria, then change the threshold limit of investment such as Rs 5 crore limit can be increased to Rs 10 crore. Moreover, industries should be owned and by Indian people with a majority share,” said Bhatia.

Also read: India’s defence in hands of startups, MSMEs: Govt to tap new ideas for self reliance

The note citing recommendations by the government’s One Man Committee report said that the turnover of MSMEs as per fourth All India Census of MSMEs in the registered sector will be much lesser for the unregistered units that constitute 95.7 per cent of the total MSMEs in India. According to the census, the average turnover of micro-units is Rs 0.21 crore, Rs 4.19 crore for small businesses, and Rs 25.24 crore for medium enterprises. “The proposed move would encourage traders to import while less manufacturing would adversely impact GDP growth. Employment will take a hit. Imports will increase and the country will be dependent on that. Balance of trade is already not in the country’s favour. Local industries will be killed as with new definition the country will head towards economic slavery,” said Bhatia.

Also, because of the census, medium businesses make up for only 0.17 per cent of total registered businesses, “almost all registered units will be re-designated as micro while all medium and most of the large sector units will be designated as small,” the note said. This would lead to all benefits to be offered by the government to micro and small businesses will go to currently classified medium and large sector businesses. However, with the suggested increase in the investment threshold to revise the definition will “increase investment in the sector and with this more employment will be generated. Production will go up which will increase GDP,” said Bhatia.

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