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Cabinet Approves Alteration in MSME Definition to Aid Ease of Doing Business Amid COVID-19

By Ishita Joshi      Jun 03, 2020      0 Comments
Union Cabinet MSME Business COVID19

Government of India, on Monday, 1st June 2020, approved the revision in the definition of MSMEs to accordingly improve the ease of doing business. 

For micro-enterprises, the investment and turnover limits have been increased to Rs 1 crore and Rs 5 crore, respectively. On the other hand, for small enterprises, the investment and turnover limits were increased from Rs 1 crore and Rs 5 crore to Rs 10 crore and Rs 50 crore respectively. Similarly, for medium-sized enterprises, the investment limit was increased to Rs 50 crore and the turnover limit was increased to Rs 250 crore.

 The announcement was made in a press briefing by Environment Minister Prakash Javadekar, MSME Minister Nitin Gadkari, and Agriculture Minister Narendra Singh Tomar. Cabinet also sanctioned the Rs 50,000 Crore Equity Scheme for MSMEs, which was reportedly announced earlier this month by Union Finance Minister Nirmala Sitharaman, with a Fund of Funds Corpus of Rs 10,000. 

The program would, therefore, enable small to medium-sized companies to be mentioned on the stock exchanges. The Fund would be run by a mother fund and a few daughter funds. This is higher than the definition announced by Sitharaman as part of the Rs 20 lakh- crore Atmanirbhar Bharat package to counter the economic and social impact of the Covid-19 pandemic and the consequent lock-down, which set the investment limit for medium-sized enterprises at Rs 20 crore and Rs 100 crore. 

The revision of definition was announced by Union Finance Minister Nirmala Sitharaman as part of the economic package from the investment of plant and machinery or facilities focused on a mix of investment and turnover. Manufacturing units with investments of less than Rs 25 lakh, less than Rs 5 crore, and less than Rs 10 crore in plant and machinery or equipment were identified as micro, small and medium enterprises respectively.

For service companies, the investment cap was less than Rs 10 lakh, less than Rs 2 crore and less than Rs 5 crore as micro, small and medium enterprises respectively. MSME Minister Nitin Gadkari on Sunday, 31st May 2020, stated that a committee was constituted by Prime Minister Narendra Modi to be led by Rajnath Singh to address some issues with the execution of the Rs 3 lakh crore collateral-free loan scheme for small and medium enterprises.

 In an online interaction with members of the Mahratta Chambers of Commerce, Industry and Agriculture (MCCIA) based in Pune, Maharashtra, MSME Minister Nitin Gadkari asked small businesses to email him directly in the event of issues they encounter in securing credit under the scheme. Nitin Gadkari said, “Whether these are micro, small or medium enterprises, their export turnover will not be factored in.” 

The Ministry of Micro, Small and Medium Enterprises, a department of the Government of India, is the executive body responsible for formulating and implementing the policies, regulations, and laws pertaining to micro, small and medium-sized enterprises in India. The Minister of Micro, Small and Medium Enterprises is Nitin Gadkari and the Minister of State has been Pratap Chandra Sarangi since 31st May 2019. 

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