policy framework sse

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Policy Focus

Priority to mitigate regional imbalances 1977

Measures to promote ancilarisation 1988

Stress on Exports and dispersal of enterprises inrural areas year 1990

Priority for Small tiny agro industries 1991

MSMED Act 2006

EVOLUTION OF POLICY FRAMEWORK


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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 croresand upto Rs 10 crores


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Service enterprises defined in terms of their investment in

equipment (excluding land and building) classified into

a. Micro enterprises-investment upto Rs 10 lakhs

b. Small enterprises-investment above Rs 10 lakhs andupto Rs 2 crore

c. Medium enterprises-investment above Rs 2 crores and

upto Rs 5 crores

Constitution of national board, advisory committee

Provisions for clear cut procurement policy, credit, delayed

payment, closure of business etc

SALIENT FEATURES OF MSMED ACT - 2006


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MSMED Act 2006 and its Impact

Clause Salient Features Impact

1.Establishment of

National Small and

MediumEnterprises Board

Maximum No. of

members 47

1. Specific representation

for Women

2. Mandatory QuarterlyMeeting

Statutory Status,

compact board and

quarterly meetingswill address

problems of SMEs

immediately to take

corrective action

2.Concept ofEnterprises

Clear-cut demarcation ofmanufacturing/production

and rendering services

Facilitates SMEs toenter into service

enterprises

aggressively


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MSMED Act 2006 and its Impact


3.Definition of Enterprises Specific ceiling limit for

manufacturing/producti

on and service

enterprise definition for

Medium enterprises

Existing small units can

graduate into Medium

units and avail facilities

under the act.

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

Replacement of

registration with

memorandum

Facilitates SMEs to avail

the benefits of the act

immediately after

setting up of the unit.

Contd/----


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MSMED Act 2006 and its IMPACT


7.Dispute Resolution Establishment of

MSE facilitationCouncil; 90 daysframework fordispute resolution

Easy financial

planning and nowaste of humanresources forchasing/follow up.

8. Delayed Payment allowable

deduction under ITAct 1961

Deduction disallowed This will encourageprocurement

agencies to ensuretimely payment toSMEs.

9.Closure ofBusiness

Statutory notificationof scheme forclosure

Facilitatesexpedition ofliquidation

Contd/-


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MSMED Act 2006 and its IMPACT


10. Notification ofguidelines orinstructions for

promotion ofSMEs wrt. ToFundsappropriationand release

Statutory Mandatory on allfacilitatingdevelopment of

SMEs ensuring fastgrowth

11. FacilitatingCredit

Statutory Mandatory on allproviding credit.Guidelines for creditfor 20% year onyear growth


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PRESENT POLICY FRAMEWORK

Enactment ofMSMEDAct 2006.

The present policy framework covers specific actions for growth ofMSME 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 ofMSMEs

Loan limit under credit guarantee fund to be raised to 50 lakhs

Credit guarantee cover to be raised from 75% to 80% for microenterprises up to 5 lakhs

Fiscal support excise exemption limit increased to Rs. 1.5 crores


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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 continuedduring next Plan period

Technology Mission to be launched

Support for Marketing

Support for Entrepreneurial and Managerial Development

Empowerment for women owned enterprises

PRESENT POLICY FRAMEWORK


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MAJOR SCHEMES

FOR

MSMEs SUPPORT


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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 prioritysector 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 NPAsof MSMEs

5. Interest band prescribed


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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

Performance and Credit Rating

Scheme


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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 (USD64000).

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.


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Technological Support

1. Credit Linked Capital Subsidy Scheme for Technology Upgradation

Scheme meant to improve quality of products by technologyupgradation.

Investment upto INR 10 million (US$ .250,000) eligible forsupport 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


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Marketing Assistance and Export

Promotion1.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 forpublicity, market studies and adoption of

modern market practices


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Cluster Development Programme

technology upgradation & productivity

improvement

energy conservation & pollution control

Rs 1 million assistance for capacity building

activities without fixed assets

Grant upto 80% of Project cost with ceiling ofRs.100 million to implementing agency for:


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Entrepreneurship Development

Programmes Prime Ministers Employment Generation

Programme PMEGP

EDP Institutes

Incubators


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International Cooperation Programme

Provides exposure to MSMEs to the latesttechnologies, manufacturing practicesprevalent in their fields in different

countries.

Encourages their participation ininternational exhibitions for exports


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Institutional Support Structurefor 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)

MSMEs

At State Level1. Directorate of

Industries

2. District Industries

Centres

3. State FinanceCorporation

4. State Industrial

Development

Corporation

5. TechnicalConsultancy

Organisations

6. Entrepreneurship

Development

Institutions (EDIs)

Others

1. Industry

Associations

2. NGOs

3. Banks/Financial

Institutions


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Manufacturing Enterprises

Micro Rs. 2.5 million (US$ 56000)

Small Rs. 50 million (US$ 1.1 million)

Medium Rs. 100 million (US$ 2.2 million)

Services Enterprises

MSME classification based on investmentMSME classification based on investmentlimit in plant and machinery:limit in plant and machinery:

MicroMicro Rs. 1 million (US$ 22000)Rs. 1 million (US$ 22000)

SmallSmall Rs. 20 million (US$ 0.4 million)Rs. 20 million (US$ 0.4 million)

MediumMedium Rs. 50 million (US$ 1.1 million)Rs. 50 million (US$ 1.1 million)


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a) Reservation of items for exclusive manufacturingin small sector

b) Preferential credit support measures

c) Preferential government procurement policiesd) Fiscal concessions

e) Infrastructural development like development ofindustrial estates, testing labs, common facilitycentres

f) Entrepreneurship development

Specific policy measures initiated forboosting the growth of tiny, small and

cottage industries:


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MSMED Act 2006 promulgated

in order to :

1. remove impediments due to multiple laws

2. introduce statutory consultative and

recommendatory bodies on MSME policies

3. improve registration procedures ofMSMEs

4. statutory basis for purchase preference andcredit policies

5. Improve realisation of payments ofMSMEs


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Micro, Small and Medium Enterprises

Development Act, 2006 - Salient Features

1. Industry replaced by enterprise whichinclude service enterprises also.

2. Ambit of sector enlarged to covermedium enterprises.

3. Constitution of MSME Board

4. Simplification of registration procedure


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5. Policy of preferential procurementfrom MSMEs

6. Progressive credit support

7. Penalty for delayed payments

8. Provision for exit policy

Salient Features of MSMED Act 2006

policy framework sse

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