MSME Ministry in favour of raising investment cap for SMEs

Global retailers will have to source 30% of items under the multi-brand retail policy

Micro, Small and Medium Enterprises (MSME) Minister K H Muniyappa is in favour of increasing the investment cap to $2 million in small and medium units, from which global retailers have to source 30% of items under the multi-brand retail policy.

 

As per the current FDI policy, multi-brand retailers must procure 30% of their products mandatorily from small and medium enterprises (SMEs) with an investment in plant and machinery not exceeding $1 million.

 

"This will help the units to grow further," Muniyappa told PTI at the launch function of an SME-focused news agency - Knowledge and News Network (KNN).

 

The Department of Industrial Policy and Promotion, in a draft Cabinet note, had proposed increasing the investment cap to $2 million. It had also said that multi-brand retailers should continue sourcing items from SMEs without a time cap even after they cross the investment limit and can no longer be considered small and medium.

 

The MSME ministry, however, said there must be a time limit for the retailers to continue sourcing from units that have grown beyond the investment limit.

 

It stated that "a three-year period from the day an MSME outgrows the investment limit of $2 million would provide required space to equip itself to independently supply the retailer without being covered under the 30% procurement."

 

Retail giants such as Walmart, Tesco and Carrefour have asked the government to relax the mandatory sourcing condition and instead make it a 'preferable' requirement, as in the case of single-brand retailing.

 

The Ministry is not in favour of diluting this norm.

 

"Not preferable, it is a must. We are proposing it (30% mandatory sourcing) should be a must," Muniyappa has said.