The government may enhance the turnover limit for a medium enterprise to ₹200 crore to allow more units to avail the benefits announced for the micro, small and medium enterprises (MSMEs).
People close to the development told ET that the government may alter the just announced definition of MSME, raising the turnover limit for medium enterprises from ₹100 crore.
“Based on the feedback from the industry, we might as well look at enhancing the turnover limit for medium enterprises while we are at it,” one of these people said.
Finance minister Nirmala Sitharaman had on May 13 announced a new definition for MSMEs as part of the ₹20 lakh crore economic stimulus package. Besides a change in definition, she had announced a ₹3 lakh crore credit guarantee scheme to provide collateral-free loans to MSMEs.
The new definition raises the investment limit to ₹1 crore from ₹25 lakh and pegs the turnover limit at ₹5 crore for businesses to be defined as micro units.
Businesses with an investment of up to ₹10 crore and turnover of up to ₹50 crore will be classified as small, while businesses with an investment of up to ₹20 crore and turnover of ₹100 crore were to be classified as medium units, says the new definition.
The new definition is yet to be notified. There are 65 million business enterprises that fall in the MSME category and the proposed change has large implications for the sector.
Industry, however, is unhappy with the proposed criterion that includes turnover and has represented to the government.
“There are several industries where the investment in machinery may not be high, but because of expensive raw material, their turnover increases,” said Anil Bhardwaj, secretary general at Federation of Indian MSMEs (FISME). “We have also said that both turnover and investment should not be the definitive criteria for MSMEs.”
At least 25,000 medium-sized businesses will lose the benefits extended to MSMEs if the turnover criteria remains at ₹100 crore.
“The increase in turnover limit for medium-sized enterprises to Rs 250 crore will help several businesses remain in the priority sector lending list of banks,” Bhardwaj said.
“A number of businesses will lose their MSME tag because the new definition has been linked to turnover,” said Mukesh Mohan Gupta, president of Confederation of Indian Micro, Small and Medium Enterprises (CIMSME).
Source : Financial Express