The Litmus Test of 'MSME Ammendment Bill' is Set for Lok Sabha

By Faiz Askari, Editor of SMEStreet

MSMEs across India have shown humongous strength in terms of numbers. The GST registration data showed that around 1 Crore MSMEs exist today. The MSME Aadhaar registration data is almost half of this figure. Now, now such onset, the MSME Amendment Bill is set to do become a rock star news flasher.  The micro and small businesses have been struggling with many problems and challenges. The global slow-economic pace, domestic financial reforms or a complete financial overhaul of the system has just been through and the surprising demonetization which absolutely stunned the entire business crowd are some examples of events that have made every entrepreneur dance on the beats.

Now, as the MSME Amendment Bill has just to get Rajya Sabha nod to pass the Parliament test, the industry is coming forward with a rationale that the new criteria of defining MSMEs on the basis of turnover is a welcome step. Federation of Indian Micro and Small & Medium Enterprises (FISME) has said the new criteria to define MSMEs on turnover basis will definitely bring more transparency in the system.

Brief History of MSME Amendment Bill

The Micro, Small and Medium Enterprises Development (Amendment) Bill was introduced in Lok Sabha last week. It provides for a change in the criterion of classification of MSMEs from the existing 'investment in plant and machinery or equipment' to 'annual turnover' of the enterprise.

The bill was introduced in the Lok Sabha by Minister of State for MSMEs Giriraj Singh after he withdrew the 2015 bill on the issue.

As per the amendments, any business with a turnover of up to Rs 5 crore would be considered as a 'microenterprise'. A 'small enterprise' would be the one whose annual turnover is more than Rs 5 crore to Rs 75 crore and those with turnover over Rs 75 crore but upto Rs 250 crore would be deemed as a 'medium enterprise'.

The 2006 MSME Act was enacted to facilitate the promotion and development and enhancing competitiveness of MSMEs.

The bill was modified in of the view that often business owners keep their investment sizes small, in order to retain the advantages of belonging to the MSME category.

What Industry Says

Stating that the MSMEs are looking forward to passage of the Bill, FISME President Dinesh Chandra Tripathi said, “This Bill will bring dynamics in the sector and will provide impetus to natural growth. This will also support the setting up of new MSMEs with modern technologies which so far were beyond the definition of MSME due to the archaic historic investment based definition.”

Meanwhile, two RSS-affiliates – Laghu Udyog Bharti and Swadeshi Jagran Manch (SJM) have opposed the MSME amendment bill and urged the Prime Minister Narendra Modi to halt its passage in Parliament.

“We urge upon the Prime Minister and MSME Ministry to immediately halt the process of passage of the bill in the interest of the small industries, make in India, entrepreneurship development and our youth with a dream of working for India,” Swadeshi Jagran Manch (SJM) co-convener Ashwani Mahajan said in a statement.

It is feared that with a change in definition, small and medium enterprises would be able to enjoy the benefits of MSME by shifting from manufacturing to trading and assembling.

In another feedback, leading exporter from the garment industry domain mentioned, "The amendment is needed, but it must be created while considering the fact that this sector is struggling with multiple problems. So, this policy document should bring relief instead of another reason to cry."

This could lead to rise in imports and adversely impact the indigenous manufacturing, he said. Stating that 98 percent of small units have a turnover of less than rupees 15 crores, Mahajan said this change in definition hardly 2 percent would attain the status of MSMEs at the cost of 98 percent.