The Union Cabinet during its meeting today (June 1) has approved changes to the definition of micro, small and medium Enterprises (MSMEs).
Enhancing the turnover limit for medium enterprises to Rs 250 crore from the originally announced limit of Rs 100 crores, the government hopes to broaden the scope of MSMEs and enable larger number of firms to take advantage of the measures it has recently announced for the sectors.
While unveiling the Aatmanirbhar Bharat Abhiyaan, FM Nirmala Sitharaman had announced revisions in the definition of Micro Small and Medium Enterprises (MSME). While MSMEs were earlier defined on the basis of investments, the revised definitions will also include turnover of the company.
FM had also declared that there will be distinction between Manufacturing and Service for purpose of MSMEs definition will be removed.
FM had proposed definition for medium enterprises to cover firms with turnover of Rs 100 crore and investment was kept at Rs 20 crore. But this has been enhanced to Rs 250 crores after receiving feedback from several quarters that Rs 100 crores will be a low threshold .
Briefing the media on the cabinet decisions, Union Minister Prakash Javadekar said that the new definition of MSMEs would benefit units.
Enterprises with Rs 1 crore investment and Rs 5 crore turnover would now qualify as micro enterprises.
Businesses with an investment of less than Rs 10 crore and turnover less than Rs. 50 crore will now be classified as small enterprises.
The definition for medium enterprises has been revised upwards to an investment of Rs 50 crore and a turnover of Rs 250 crore.
At present, around 63.4 million MSME units in India contribute around 6.11 percent of manufacturing GDP and 24.63 percent of services GDP as well as 33.4 percent of India's manufacturing output. They provide more than 11 crore jobs.
The cabinet has also approved a Rs 20,000 crore distressed asset fund to aid stressed MSMEs. Under this scheme, the government will provide guarantee coverage of up to 85 percent for loans up to Rs 5 lakh and 75 percent for loans beyond Rs 5 lakh from financial institutions.
Another Rs 50,000 crore equity infusion via a fund of fund has been announced for MSMEs. The proposed fund of funds aims to encourage private sector investments in the MSME sector by leveraging Rs 50,000 crore. Under the scheme, a Mother Fund would be setup where the Centre will be the anchor investor.
The Union Cabinet on May 20 had also approved additional funding of up to Rs 3 lakh crore at a concessional rate of 9.25 per cent through the Emergency Credit Line Guarantee Scheme (ECLGS) to help Micro, Small and Medium Enterprises (MSMEs) sector reeling under the impact of coronavirus pandemic.
The ECLGS was also unveiled as part of the Rs 20 lakh crore comprehensive package announced by finance minister Nirmala Sitharaman last week.
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