EVOLUTION OF POLICY FRAMEWORK

Industrial Policy Resolution 1948 Priority to promote rural and traditional industries in sectors, such as: Handlooms, Handicrafts, Sericulture, Coir and Khadi and village industries Constitution of Statutory Boards / Commissions for the same Industrial Policy Resolution 1956 Policy Framework for SSI sector Constitution of Independent Board for Small Scale Industries Policy on Credit, Marketing, Technical Assistance, Industrial Infrastructure and Extension Services.

EVOLUTION OF POLICY FRAMEWORK

Policy Focus  Priority to mitigate regional imbalances 1977  Measures to promote ancilarisation 1988  Stress on Exports and dispersal of enterprises in rural areas year 1990  Priority for Small tiny agro industries 1991 MSMED Act 2006

SALIENT FEATURES OF MSMED ACT - 2006

Manufacturing enterprises defined in terms of investment in Machinery and Equipment (excluding land and building) classified into a. Micro enterprises - investment upto Rs 25 lakhs, b. Small enterprises - investment above Rs 25 lakhs and upto Rs 5 crore c. Medium enterprises - Investment above Rs 5 crores and upto Rs 10 crores

SALIENT FEATURES OF MSMED ACT - 2006

Service enterprises defined in terms of their investment in equipment (excluding land and building) classified into
a. b.

Micro enterprises-investment upto Rs 10 lakhs Small enterprises-investment above Rs 10 lakhs and upto Rs 2 crore Medium enterprises-investment above Rs 2 crores and upto Rs 5 crores

c.

Constitution of national board, advisory committee Provisions for clear cut procurement policy, credit, delayed payment, closure of business etc

MSMED Act 2006 and its Impact

Clause Salient Features Impact Statutory Status, compact board and quarterly meetings will address problems of SMEs immediately to take corrective action Facilitates SMEs to enter into service enterprises aggressively

1.Establishment of 1. Specific representation National Small and for Women Medium 2. Mandatory Quarterly Enterprises Board Meeting Maximum No. of members 47 2.Concept of Enterprises Clear-cut demarcation of manufacturing/production and rendering services

MSMED Act 2006 and its Impact

Clause 3.Definition of Enterprises Salient Features Specific ceiling limit for manufacturing/producti on and service enterprise definition for Medium enterprises Replacement of registration with memorandum Impact Existing small units can graduate into Medium units and avail facilities under the act. Facilitates SMEs to avail the benefits of the act immediately after setting up of the unit.

4. Filing of memoranda optional for Micro and Small enterprises in manufacturing and service sector Medium enterprises in Service Sector but mandatory for Medium enterprises in manufacturing sector

Contd/----

MSMED Act 2006 and its IMPACT

Clause 5. Procurement Policies

Salient Features Notification of preference policies by central or State Governments for goods and services provided by Micro & Small enterprises

Impact Facilitates opportunity for supply of goods/services without any hassles. Public Procurement Policy under Section 11 of MSME Act, yet to be notified SMEs can plan their cash flow/financial requirement

6. Delayed Payment Penalty & dispute resolution

Period of payment by the procuring organizations 45 days Penal interest 200% of PLR

MSMED Act 2006 and its IMPACT

Clause Salient Features Establishment of MSE facilitation Council; 90 days framework for dispute resolution Impact Easy financial planning and no waste of human resources for chasing/follow up. This will encourage procurement agencies to ensure timely payment to SMEs. Facilitates expedition of liquidation
Contd/-

7.Dispute Resolution

8. Delayed Payment Deduction disallowed allowable deduction under IT Act 1961 9.Closure of Business Statutory notification of scheme for closure

MSMED Act 2006 and its IMPACT

Clause 10. Notification of guidelines or instructions for promotion of SMEs wrt. To Funds appropriation and release 11. Credit Salient Features Statutory Impact Mandatory on all facilitating development of SMEs ensuring fast growth

Facilitating Statutory

Mandatory on all providing credit. Guidelines for credit for 20% year on year growth

PRESENT POLICY FRAMEWORK

 

Enactment of MSMED Act 2006. The present policy framework covers specific actions for growth of MSME sector in the Areas of:

Specific legislation on limited liability partnerships covering Micro, Small and Medium enterprises Guidelines by RBI for 20% year on year growth of credit to SMEs Grant for SIDBIs Portfolio risk fund Additional Branches by SIDBI to cater to credit needs of clusters of MSMEs Loan limit under credit guarantee fund to be raised to 50 lakhs Credit guarantee cover to be raised from 75% to 80% for micro enterprises up to 5 lakhs Fiscal support excise exemption limit increased to Rs. 1.5 crores

PRESENT POLICY FRAMEWORK

Identification of new sites for clusters and Management of Infrastructure related assets in public-private partnership mode. Project cost for cluster program to be raised to 10 crores Support and quality up gradation through setting up of new product development centres Assistance for attainment of ISO 9000 and 14001 to be continued during next Plan period Technology Mission to be launched Support for Marketing Support for Entrepreneurial and Managerial Development Empowerment for women owned enterprises

MAJOR SCHEMES FOR MSMEs SUPPORT

Credit Support
1. Public sector banks advised to double the flow of credit to MSMEs within 5 years (20% annual growth) 2. A minimum of 40% of bank credit earmarked for priority sector lending which includes loans to MSEs 3. Specialised SME Bank branches in industrial clusters for smooth flow of credit to MSMEs 4. One Time Settlement (OTS) scheme for settling NPAs of MSMEs 5. Interest band prescribed

Performance and Credit Rating Scheme

1. Helps MSMEs in accessing credits from banks & financial institutions, orders from foreign buyers 2. Helps in assessing their strengths and weaknesses. 3. Rating by one of the empanelled national or international Rating agencies. 4. Government subsidises 75% of the cost of Rating fee 5. Concessional credits from Banks/FIs to such rated units

Credit Guarantee Fund for Small Enterprises Credit Guarantee Fund Trust for Micro & Small Enterprises (CGFTSI) gives guarantee to its Member Lending Institutions for their collatoral free loans to MSEs upto INR 2.5 million (USD 64000). Initial guarantee fee at specified rate (1.5% ) of the credit facility sanctioned shall be paid upfront and thereafter annual fee. Provides comfort to the Banks and Financial Institutions.

Technological Support
1. Credit Linked Capital Subsidy Scheme for Technology Upgradation Scheme meant to improve quality of products by technology upgradation. Investment upto INR 10 million (US$ .250,000) eligible for support with subsidy upto 15% on investment. 2. Technology Business Incubators for incubating new enterprises 3. Testing Centres for Quality Certification 4. Tool Rooms and Training Centres for skill upgradation 5. Incentive scheme for obtaining ISO Certification by MSEs

Marketing Assistance and Export Promotion

1. Support for participation in trade fairs and exhibitions national as well as international 2. Training programmes on packaging for exports 3. Purchase preference in Government procurement 4. Market Development Assistance Scheme for publicity, market studies and adoption of modern market practices

Cluster Development Programme

Grant upto 80% of Project cost with ceiling of Rs.100 million to implementing agency for:  technology upgradation & productivity improvement  energy conservation & pollution control Rs 1 million assistance for capacity building activities without fixed assets

Entrepreneurship Development Programmes

Prime Ministers Employment Generation Programme PMEGP EDP Institutes Incubators

International Cooperation Programme

Provides exposure to MSMEs to the latest technologies, manufacturing practices prevalent in their fields in different countries. Encourages their participation in international exhibitions for exports

Institutional Support Structure for MSMEs in India

At Federal Level
1. Ministry of MSMEs 2. Small Industries Development Organisation (SIDO) 3. National Small Industries Corporation(NSIC) 4. Khadi & Village Industries Commission(KVIC) 5. Coir Board 6. Entrepreneurship Development Institutions (EDIs)

At State Level
1. Directorate of Industries 2. District Industries Centres

MSMEs

3. State Finance Corporation 4. State Industrial Development Corporation 5. Technical Consultancy Organisations 6. Entrepreneurship Development Institutions (EDIs)

Others
1. Industry Associations 2. NGOs 3. Banks/Financial Institutions

MSME classification based on investment limit in plant and machinery:

Manufacturing Enterprises
Micro Small Medium Rs. 2.5 million Rs. 50 million Rs. 100 million (US$ 56000) (US$ 1.1 million) (US$ 2.2 million)

Services Enterprises Micro Small Medium Rs. 1 million Rs. 20 million (US$ 22000) (US$ 0.4 million)

Rs. 50 million (US$ 1.1 million)

Specific policy measures initiated for boosting the growth of tiny, small and cottage industries:
a) b) c) d) e) Reservation of items for exclusive manufacturing in small sector Preferential credit support measures Preferential government procurement policies Fiscal concessions Infrastructural development like development of industrial estates, testing labs, common facility centres Entrepreneurship development

f)

MSMED Act 2006 promulgated in order to :

1. 2. 3. 4. 5. remove impediments due to multiple laws introduce statutory consultative and recommendatory bodies on MSME policies improve registration procedures of MSMEs statutory basis for purchase preference and credit policies Improve realisation of payments of MSMEs

Micro, Small and Medium Enterprises Development Act, 2006 - Salient Features
1. Industry replaced by enterprise which include service enterprises also. 2. Ambit of sector enlarged to cover medium enterprises. 3. Constitution of MSME Board 4. Simplification of registration procedure

Salient Features of MSMED Act 2006

5. Policy of preferential procurement from MSMEs 6. Progressive credit support 7. Penalty for delayed payments 8. Provision for exit policy