RSS affiliates demand reserving MSME tag for Indian enterprises

KEY HIGHLIGHTS

• RSS affiliates - Laghu Udyog Bharati, Swadeshi Jagran Manch - suggest Indian ownership as additional qualification for MSMEs
• Call for distinctly defining MSMEs to segregate traders, service providers and professionals
• Swadeshi Jagran Manch wants government to reconsider proposed definition for MSMEs

Days after government proposed to change the definition of micro, small and medium enterprises (MSMEs) to add turnover criteria, RSS-affiliated units Laghu Udyog Bharati and Swadeshi Jagran Manch (SJM) have suggested to make Indian ownership an additional qualification for getting MSME tag.

The two Sangh outfits have also called for segregating traders, service providers and professionals from MSMEs to keep focus on promoting local manufacturing.

The government has proposed change in defintion of MSMEs based on the criteria of investment and annual sale turnover. "While we agree with this, the government should also ensure that only those firms qualify as MSME in which ownership and effective control lies in Indian hands," said Govind Lele, General Secretary, Laghu Udyog Bharati.

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"Further, MSMEs should be distinctly defined to separate traders, service providers and professionals from them," he added.

While announcing the third tranche of fiscal stimulus earlier this month, Finance Minister Nirmala Sitharaman had announced to change the definition of MSMEs. Stating that the current definition disincentivised firms from growing big due to fear of losing various incentives, she raised investment threshold multiple times and added turnover criteria. The new definition has also proposed to do away with the distinction of service and manufacturing.

Accordingly, the investment limit has been raised up to Rs 1 crore and turnover limit set at up to Rs 5 crore for a micro enterprise. As of now, an enterprise in manufacturing sector is defined as micro if its investment in plant and machinery is up to Rs 25 lakh. For those in service sector, the investment limit is Rs 10 lakh.

As per proposed criteria, those having investment up to Rs 10 crore and turnover up to 50 crore would be classified as small enterprises. This is way above the current investment level of up to Rs 5 crore for an enterprise in manufacturing sector and up to Rs 2 crore for a firm in service sector.

A medium MSME, as per the new definition, would be those with investment of up to Rs 20 crore and turnover of up to Rs 100 crore. The currently applicable investment threshold for a medium enterprise in manufacturing sector is Rs 10 crore while that for an enterprise in the service sector is Rs 5 crore.

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Moreover, Swadeshi Jagran Manch wants the medium enterprises to be excluded from the definition of MSMEs as they are as good as big unit. "First of all, the government should exclude medium enterprises from MSMEs as they are as good as large. Then, enterprise should be replaced with industry in the definition. Jobs are created more from manufacturing so we should encourage it. If non-manufacturing firms are brought into the fold of MSMEs, then all the benefits would be taken away by them," said Ashwini Mahajan, co-convenor of Swadeshi Jagran Manch.

He, however, added that there should be separate set of incentives for traders and other service segments so that one is not mixed up with the other.

Mahajan agreed with Laghu Udyog Bharti's suggestion to ensure MSME status is given only to firms with Indian ownership as the incentives provided under various schemes are for promotion of local manufacturing.

Registered MSMEs get a slew of incentives such as lower interest rate on bank loans for purchase of plant and machinery, collateral-free loan and government guarantee, and credit-linked capital subsidy for technology upgradation. Micro and small enterprises get preference in public procurement with 25 per cent of the purchase reserved for them.

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