MSME definition to be modified, FISME calls for suggestions

Ease of Doing Business for MSMEs: Due to the steep rise in raw material prices, many small enterprises have crossed the threshold of small enterprises and graduated to medium, making them ineligible for government subsidies.

MSME definition to be modified, FISME calls for suggestions
The last drastic modification to the definition of Micro, Small and Medium Enterprises (MSME) occurred two years back in 2020.

Ease of Doing Business for MSMEs: Federation of Indian Micro and Small & Medium Enterprises (FISME) is calling for suggestions to put before the central government as they seek to revise the definition of Micro, Small and Medium Enterprises (MSMEs) in the country. The criteria for Udyam registration eligibility might also be reviewed. 

The last drastic modification to the definition of Micro, Small and Medium Enterprises (MSME) occurred two years back in 2020 when the investment and turnover figures were increased to accommodate medium enterprises. 

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The recent rise in the raw material prices has increased the turnover of many small enterprises as a result of which they have crossed the threshold of small enterprises and graduated to medium. On the other hand, due to covid, turnover of many medium enterprises got affected and they became small businesses. 

In both the cases, the transition made them ineligible to access subsidies and public procurement that are reserved exclusively for micro and small enterprises.   

Also, a number of anomalies have come to light. There are sectors such as defense where capital investments is high but turnover is low. Similarly, in sectors like gems and jewellery, investment is quite low but turnover is extremely high. In either case, it is difficult to fit such huge sectors in the existing MSME definition.

In light of the above, the Union Government is likely to amend the criterion of turnover and investment for the enterprises that are capital heavy. There is also the possibility of introducing a rollover clause of a few years to assist MSMEs that have moved from one threshold to another in the sector. 

Federation of Indian Micro and Small & Medium Enterprises (FISME) is amidst collating suggestions to present to the Government for the new definition. 

According to the revised definition of MSMEs that was approved by the government in June 2020, the investment limit for micro enterprises was increased to Rs 1 crore (from Rs 25 lakhs) while the turnover limit was capped at Rs 5 crore.

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On the other hand, for small enterprises, the investment limit was increased to Rs 10 crore  from Rs 5 crore and the turnover limit was set to Rs 50 crore. For medium enterprises, the investment limit was increased to Rs 50 crore from Rs 10 crore along with the turnover limit at Rs 250 crore. The revised definition had also removed the distinction between the manufacturing and services sectors.

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