)
The Micro Small and medium enterprises Development Act 2006 is up for an amendment to address the issue of rising nonperforming assets and sickness in sector.
According to a note addressed by the ministry to all states, the major lacunae for restructuring and exit of promoters from the MSMEs is lack of legal framework for reorganising/ winding up/ exit for small units. Due to rising losses in the sector, there is a multiplying effect on the economy leading to huge waste of human resources both promoters and employees, capital lent by the banks and financial institutions and physical resources and fiscal incentives extended in the form of industrial land, buildings, plant and machinery etc.
Thus the proposed amendment in the form of MSME Development (Amendment) Bill will incorporate amendments to cater to twin issues of revival of the sick SMEs and if not then exit of the MSME. The provisions will provide for standardised relief and concessions to revive and tackle difficult financial position. It will also provide for easier and expeditious exit mode for the benefit of promoters and guarantors through liquidation and change in management.
Besides, there is a proposal to review the definitions of the MSME to provide for higher capital ceiling. According to the draft, medium, small and micro enterprises are classified on the basis of investment in plant and machinery and the current definitions was fixed in 2006. Since 2006, price index and cost of inputs both have increased manifold. Thus it is proposed to increase the capital limit for the manufacturing sector wherein the capital ceiling for micro enterprises is expected to go up from Rs 25 lakh to RS 50 lakh, small enterprises from RS 5 crore to RS 10 crore and medium enterprises from Rs 10 crore to Rs 30 crore. Similarly, for enterprises engaged in the services sector, the ceiling for capital investment will be increased from Rs 10 lakh to Rs 20 lakh in micro category followed by an increase of RS 2 crore to RS 5 crore for the small category and from Rs 5 crore to Rs 15 crore for the medium sector.
The MSME sector and related legal framework has come into limelight following the “make in India” initiative of the government and rising number of sick micro, small and medium enterprises in the country at the same time. In order to boost the growth of the MSME sector during the 12th Five-Year Plan, an outlay of Rs 24,124 crore has been allocated for the Ministry of MSME. This 12th Plan allocation represents an increase of 133.53 per cent over the 11th Five-Year Plan allocation of Rs 10,330 crore.
To promote MSMEs in the country, the government is implementing various schemes/programmes relating to credit, technology upgradation and skill development such as the Prime Minister’s Employment Generation Programme, Credit Guarantee Scheme, Performance and Credit Rating Scheme, Credit Linked Capital Subsidy Scheme, National Manufacturing Competitiveness Programme (NMCP) and Skill Development Programme to provide skilled manpower for the sector.
