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MSME definition: Do we need a new one
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Bikky Khosla | 01 Apr, 2014
Micro, Small and Medium Enterprises (MSMEs) in India are currently defined as per their capital investment: Micro (less than Rs. 25 lakh), Small (between Rs. 25 lakh -5 crore) and Medium (Rs. 5- 10 crore). The corresponding thresholds for service sector MSMEs are less than Rs. 10 lakh, Rs 10 lakh- 2 crore, and Rs 2- 5 crore, respectively. Is this categorization appropriate? For quite some time now a demand has been getting stronger that this definition needs to be changed. The current definition is not friendly enough to our enterprises. Do you think so?
The main drawback of the current definition is that it is linked only to investment in plant and machinery and does not take into account turnover and labour costs. In some other parts of the world these factors are considered. For example, the European Union definition is based on balance sheet total, net turnover and average number of employees. Similarly, the US definition takes into account factors such as revenue, number of employees, ownership criteria and industry. I find enough logic behind this type of categorization -- capital investment shouldn't be the only criteria. We need a more accurate definition.
In addition, I think the investment limits are very low and as a result, the enterprises which want to expand soon find themselves bereft of benefits For example, as soon a small firm's capital investment crosses the Rs 5-crore limit, it turns into a medium enterprise becoming non eligible for the benefits it earlier enjoyed as a small enterprise. In the Union Budget 2013, the government announced extension of the non-tax benefits to MSMEs for three years after the firm graduates to higher category, but the proposal, according to many, has not yet been implemented effectively. Many blame our slow bureaucratic processes for this.
Another major concern is the small number of registered MSMEs. India has about 36 million MSME units but only 1.56 million units are registered. Percentage wise, around 96 percent of our MSMEs are still unregistered. This means majority of our MSMEs have no access to policy support and there is an urgent need to speed up MSME registration across the country. Without getting the 96 percent of the unorganized sector units registered, we will never be able to promote any real growth of the Indian MSME sector.
As per the 2013-2014 Economic Survey, 94.9 percent of our registered MSME units are micro enterprises while only 4.9 percent are small enterprises and 0.2 percent medium enterprises. This data, according to some, indicates our small units' unwillingness to grow in the fear of losing the government benefits. This may be true to some extent but what is most concerning is the fact that we have only few thousand small and medium enterprises which are registered and have access to MSME support measures. This situation needs to be changed immediately.
I invite your opinions.
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MSME Definition : Do we need a new one?
CA. Santosh H. Doshi | Sat May 3 07:41:54 2014
I think comparing bases of MSME definition as prevalent in India & other advanced countries is itself on wrong footing. In developed countries, as paper work is almost regulated in a way or other, you can easily have amounts of turnover of unit, total of balance sheet etc. That is not a case in India wherein a substantially large portion of business is done in cash as well as not 100% business is a recorded one. So, the parameters as set present to identify category of unit - micro / small / medium / large on the basis of gross investment in Plant & Machinery only is, by & large, correct base.
Only the point is that, as it has already been declared in media, the investment limits as set at present to identify category of unit as micro / small / medium / large should be linked up to cost of inflation index. So that, the said limits will be in sync to inflation index &, effectively, units will be at no gain or at loss from investment point of view.
SME DEFINITION
ASITAVA CHACKERBUTTY | Wed Apr 16 16:33:01 2014
1. IT IS NOT MANDATORY FOR SME'S TO REGISTER AS PER MSMED ACT 2006 AND YET CLAIM BENEFITS. HENCE BENEFITS CAN BE CLAIMED WITHOUT REGISTRATION
2. THE MORE RELEVANT POINT IS THE COMPLETE VIOLATION OF THE MSMED ACT EVEN BY PUBLIC SECTOR COMPANIES- ASKING FOR 180 DAYS CREDIT WITHOUT INTEREST PAYMENT WHEN IT IS MANDATORY FOR ALL COMPANIES TO PAY INTEREST AT 3 TIMES THE BANK RATE OF INTEREST AS PER MSMED ACT.
I CAN GO ON AND ON LIKE SME'S BEING KICKED OUT OF BANKS SAYING THEY DO NOT HAVE FACILITIES TO CATER TO SMALL COMPANIES.
Registration of an unit
R Kumar | Sun Apr 13 14:31:52 2014
MSME registration is very easy. its online. any body can register his unit himself online through www.eudyog(name of state).in
MSMEs
Mahendra Naidoo (South Africa) | Wed Apr 9 08:08:22 2014
Further to my reply, I forgot to mention bribery and corruption. Is Sonia Gandhi still fighting eradication of those corrupt officials in Government? Hats off to her for all the good she's doing for the poor in Mother India.
Improve registration
Saikat Batabyal | Tue Apr 8 09:53:37 2014
Truly it is urgent to improve registration process of our MSME sector all over India. It will benefit our country. Employment will be increase undoubtedly.
MSME Definition
Raj Mohan | Sun Apr 6 05:08:50 2014
The definition is based on the global standards. But, the base has to be increased.If a person invests approx Rs.1Cr in CNC lathe can earn a little around Rs.1 lakh per month. With this he cannot even repay the loan. Unless he is able to utilise the SME benefits, he cannot survive. Over a period of time, he may have to add new machines to survive and build sustainability. Growth may hinder availing the benefits. A detailed study of the industrial scenario is warranted, after which the new definition need to be given.
MSME - Bleak future unless policy corrected now
G.Mazumdar | Sat Apr 5 11:45:50 2014
With 96% unregistered MSME, how can the sector grow! It is strongly felt that GoI should form a separate small office, which would publish and provide hard copy of schemes/ incentives against token amount to aspiring enterprises/NGOs/ individuals. Hard copy does matter for tiny sector.
Stress and strain of carrying on business in India
TRvenkataraman | Fri Apr 4 06:19:03 2014
Other than central excise Turnover limit for payment of duty ,i don't think Small businesses enjoy substantial benefits any longer.
Even benefits of subsidy for backward area,ISO Regn. etc are hard to get due to bureaucracy.
Small remains small for the following reasons.Let us not think that the entrepreneurs want to remain small.
1.Big corporates 's exploitation of small businesses.
2.State Govt. have a policy of allotting only a small plot of land with no scope for expansion.
3.Banks do not come to the rescue of small businesses in times of need.
4.In general entrepreneurs get tired of doing business in India, in particular manufacturing and their heirs are not at all keen to take over and expand due to stress and strain of carrying on business in India.
Of course, there are are many more reasons!
Political Will & Co-Operation Is the Solution
S.Dharmarajan | Thu Apr 3 13:45:26 2014
You think the government do not know these statistics ?. Obviously not they have tons of ideas to improve the situation rusting in files. What is needed is true will followed by a mutually rewarding policies between Central and State Governments. Unless there is absolute co-operation among states and center through creative revenue sharing pattern MSMEs will continue to linger along. Technology is another key area where optimum usage has to be ensured to bring unregistered units into one a robust platform for better monitoring and interaction. If the government truly rises to the occasion and adopt radical measures there is no way why the situation has to be so bad as we see now. If this problem is addressed truly on its merits, then huge employment and investments can be possible in this highly profitable sector. The Big Brothers of the industry have to chip in to take care of their smaller offspring. There is no real need to give 'ideas' to the government. All they need is to go back to their archives and implement those already sleeping in their files. Hope this comment is taken constructively in the interest of the nation's industrial growth.
Registration problems
Harish Jethwa. | Thu Apr 3 13:20:31 2014
Sir, today when India is thinking about multinationals and fund and so on do u think we should be discussing micro...
just imagine . One ordainery man in a village wants to start a micro business: like grill welding workshop
like roasted rice mill, like a husking maching like a flour mill should these not considered micro industry? Now if such a person wants to register what he has to do?..Start from land. mutation.. conversion etc.. (roughly six months time and a lots of taxess) then a commercial elect connection.. than a loan valuation, project report, PAN card etc etc and in return what he will get 30 % subsidy? that too only after all the loan is repaid and repeatedly going to BDO, DIC. bank etc. etc...
MSME needs redifining
Leena. J | Thu Apr 3 10:21:56 2014
At last the nation is awakening to the needs of the industry. Certainly the differentiation in monetary terms for manufacturing & services should be eliminated as both are of similar importance. Manufacturing sectors need services for shutdown & preventive maintenance. Engaging the services of a service co. is more economical than maintaining, a maintenance team of their own. Service sector can employ more personnel and works out very well in employment generation, resettlement programs for gulf returnees & grooming Technical institute graduates. Then why differentiate amounts for these sectors. Moreover a more robust team should be deployed at the DLTF level to evaluate service sector projects under PMEGP. The powers of DLTF to sanction amounts which includes the Lead bank representation must not be questioned by the service area bank on the viability of the project. This type of remarks & rejections by the banks, certainly points out the inefficiency / incompetence of the DLTF. Moreover, the collectorate should be the venue for interviews by the DLTF every 2 mths. A dedicated super committee a must at the collectorate to guide the Collector in regards to the applications,queries, complaints & appraisals, capable of superseding the DLTF's primary decisions required in certain cases. Lack of - transparency in advising the changing collectors at the collectorate & e-mail interactions; e-governance, has delayed the timely implementation of various innovative projects.
No concern area
M.N.Rai | Thu Apr 3 06:58:18 2014
Micro and small enterprises are falling into "NO CONCERN" GOI as well state Govts working under the influence of "economic reforms' agenda dictated by WTO and capitalist economies.Be it Manmohan Singh, Narendra Modi or Nithish Kumar. Nitish and Modi are faces of same coin and they can go to compromise with anyone,helping them to ride on power.Their faith lies with sponsors of capitalism not with people of India.Nithish has fallen,Modi will fall.
MSME has no future if Manmohan continues or Modi comes to power.
MSME Registration
Biswanath Bose | Wed Apr 2 19:44:12 2014
Dear Sir,
Regret to inform you that MSME is farce. We did it through ONCRA/Delhi, paid them get registration but got no incentives, no financial support, no electrical bill discount - just NOTHING from MSME and no support from ONCRA/New Delhi. They don't even pick-up phones for any support. They just count for our payment - like fraudulent business.
People not aware where to get registration
Snehal Jethwa | Wed Apr 2 13:42:54 2014
Hi,
First of all Thank you for your write ups.
Major problem I see in getting registration done under MSME are listed below 1) People are not aware as where to get the registration done 2)Problem is that the agents are demanding too much of money to get the MSME certificate.
3)Concern office is asking for too many paper work.
I could not get the registration done for my unit is because of above 3 reasons.
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Re: People not aware where to get registration
CA. Santosh H. Doshi | Sat May 3 07:31:41 2014
Pl. note that these registrations are done at District Industry Center office, set at each district level throughout India by Ministry of Industry.
You can directly approach over there to concerned officer & get your work done - no need of an agent.
Required papers are standard one - Constitution related papers - M & A of Co. / Partnership Deed, Registration Certificates, Proof of place of business, declaration about date of commencement of your business etc. In fact, a list of documents required is prescribed one & you can get the same from said office / from website of respective state govt.
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Competition is so tough
Balbir Singh | Wed Apr 2 09:15:01 2014
It is a good article regarding MSMEs. But I do not agree with the views that micro/small enterprises are not willing to grow because of fear of loosing the government benefits. The competition is so tough that it is very difficult even to sustain the present levels. Regards.
Does India need MSMEs
Mahendra Naidoo(South Africa) | Wed Apr 2 08:54:05 2014
It's about time that India considers catering for the Micro, Small and Medium Enterprises. The poor are always left out in the cold, in fact this applies to most countries in the World. But, this is where the unfortunate part of business applies is when 'unforeseen circumstances' occur, for example, change in weather patterns (monsoons), which is more so applicable in India and unemployment. Also, what 'Security' measures are implicated to verify whether the lender can afford to repay the advances offered. There's also a high possibility that those so-called 96% of unregistered businesses are non-conforming (with the legal aspects), employers.
Let us have a new look
Rajesh | Wed Apr 2 06:31:39 2014
I completely disagree with the present system and also with the new one proposed. We need to have a fresh look at the way Govt deals with industry. Describing industries as micro, small medium or large on the basis of capital investment or on turnover, no of employees etc basis is irrelevant and does not matter at all. The more important thing is that how the govt improves environment for growth. Small and micro industries have some basic inbuilt problems. They are always short of capital to run the units, how can we see them investing in R&D. There is a huge vacuum for technology source. Access to finance is another major problem. Car and housing loans are available very cheap and easily, but loan for industry is available at a minimum 4% higher than them and needs extensive documentation and procedure to mature. Mere registering does not give anything to industry, that's why most do not register. The Govt schemes mostly stay on paper but practically to avail benefits there are so many ifs and buts that most entrepreneurs prefer not to avail. If there has to be a change, it has to be in the basic will to help industry grow. Changing the definitions or type is not going to take industry any further. First address the problem, why most of them (about 96%) do not register at all. Availability of skilled labor is another problem. Availability of land at affordable rates is still another. Try to register a unit with dept., you will experience how difficult it is to get it done.
MSME definition
Ghanshyam Toshniwal | Wed Apr 2 06:14:10 2014
Activity & Product Classification for MSME Sector Based on ASICC 2000 & NIC 2004 Volume II released by Statistics & Databank Division, Ministry of MSME, GOI does have any eligibility ? Why not this Volume taken into consideration by Ministry of Central Excise, Customs & Service Tax prior to levy tax or prior to passing any rules. This volume clarifies the boundaries of manufacturing and other sectors clearly but Ministry of CECS has levied service tax on products falling under manufacturing goods and harassing MSME. MSME being harassed by CECS by issuing Ex-party notices without considering anything. Like this, there are many more reasons like non cooperative bureaucracy and lac of honesty in our country are the main reasons for MSME not getting registered.
I think, our MSME definition need not require any changes. Changes are required at bureaucrats level.
No beniefits
bhavesh thakker | Wed Apr 2 04:14:43 2014
No use of registration also. We are registered but did not get a penny , still after 4 years. Lot of corruption in ssi and after paying also no use.
Trading cos
L JAGAD ESWAR | Wed Apr 2 02:46:51 2014
I think the regulators should consider include Trading companies as enterprises. I feel in the absence of this trading MSME are deprived of some benefits such as exemption of tender fees, PBG etc which are extended to a manufacturing company. Can you clarify this please.
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