Ease of Doing Business for MSMEs: MSME Minister Nitin Gadkari in a press briefing announced the Cabinet approval to the revision in the changed definition of medium enterprises along with a distressed assets fund for MSME accounts that are NPAs and a Fund of Funds to encourage stock listing of MSMEs.
Ease of Doing Business for MSMEs: MSMEs have welcomed the approvals given by the Cabinet to the three major relief measures announced by the Finance Minister Nirmala Sitharaman last month as part of the Rs 20 lakh crore economic package for the country. MSME Minister Nitin Gadkari in a press briefing on Monday announced the Cabinet approval to the revision in the changed definition of medium enterprises along with a distressed assets fund for MSME accounts that are NPAs and a Fund of Funds to encourage stock listing of MSMEs. Under the distressed assets fund, the government will provide Rs 4,000 crore support to the CGTMSE to give partial credit guarantee to banks for lending to MSMEs. “This distressed asset fund is of Rs 4,000 crore wherein we will provide credit guarantee of up to Rs 75 lakh or 15 per cent of the credit,” Gadkari said.
“For the first time in India, funding for NPA MSMEs has been announced. So, MSMEs will also be out of the NPA stigma as well. It is a historical decision of Modi Government, due to which many viable NPA MSMEs will live with dignity with the new standard classification to them after getting this funding,” Mukesh Mohan Gupta, President, Chamber of Indian Micro, Small & Medium Enterprises (CIMSME) told Financial Express Online. The association represents 1.10 lakh MSME members.
From Rs 20 crore investment and Rs 100 crore turnover limits in medium enterprises announced by Sitharaman, the increase in threshold to Rs 50 crore in investment and Rs 250 crore in turnover was approved. “Government looks serious to help MSMEs as with the new measures most of the businesses will be highly relieved from the distress they were going through. Now more units will come under the threshold to benefit and grow faster as Covid had increased suffering of MSMEs that were anyways going through multiple challenges,” Vishwanath, Co-chairman, Industry Committee, PHD Chamber of Commerce and Industry told Financial Express Online.
The increase in investment and turnover limit for micro and small units were also approved. The investment cap now stands at Rs 1 crore for micro-businesses and Rs 10 crore for small businesses while in terms of turnover, the limit has been extended to Rs 5 crore for micro establishments and Rs 50 crore for small firms across manufacturing and services businesses.
“It would have been better to put ‘Or’ in place of ‘And’ for definition criteria amongst investment in plant & machinery and turnover,” said Gupta. However, “the delivery system needs to be monitored so that smaller firms or micro-enterprises do not get crowded out in this process,” said Arun Singh, Chief Economist, Dun and Bradstreet India.
On the other hand, under the Rs 10,000 Fund of Funds, the government will buy up to 15 per cent equity in the total amount raised by MSMEs through stock exchange listing. The fund will be operated through a Mother fund and few daughter funds. “I don’t think there should any major challenge for MSMEs to grow from here but those that are only dependent on government subsidies will continue to complain,” said Vishwanath.