Prime Minister Narendra Modi has unveiled a 12-point action plan for micro, small and medium enterprises (MSMEs), including subsidised loans, higher procurement and easier labour and green rules. The PM sought to address concerns of small businesses, many of whom have been critical of demonetisation and the goods and services tax. This was much required for the MSMEs, so it's indeed a welcome step from the Government. Easy access to Capital would allow SMEs not only to sustain and scale their businesses, but will also aid them to embrace innovation and actively collaborate in global value chains.
The outreach programme comes against the backdrop of a credit crunch, sluggish manufacturing activity and increased competition from imports, especially from China. "In this age of globalisation, the 12-point action plan will strengthen MSMEs and help write a new chapter for them,” Modi said, announcing the measures he described as “Diwali gifts” for the sector. In the action plan, the provision for a 2% interest subsidy for new or incremental loans of up to Rs 1 crore taken by MSME units through a new portal that promises to approve loans in 59 minutes is seen to be most significant.
In the next 100 days, the PM also plans to monitor its implementation across 100 districts. In the action plan, there will be an additional 2% subsidy for small exporters for pre- and post-shipment credit, the PM announced, in what was seen as an attempt to boost exports and bridge the current account deficit to ease pressure on the rupee that has depreciated around 15% in 2018.
The subsidy, which came with steps to ease cash flow due to payments held up with large buyers, is seen as a move to address credit woes of small businesses that have been adversely impacted by the liquidity crunch in the system after IL&FS defaulted on repayment and banks and mutual funds became wary of lending to the sector. The government has been trying to get RBI to ease rules for non-banking finance companies that are a major source of funding for MSMEs. Apart from credit, the bouquet of steps focuses on enhanced market access for which the government has decided to tap public sector companies and government departments.
As part of the offer, PSUs have been asked to procure 25% of their goods from small enterprises, instead of 20% at present, with a new quota of 3% purchases introduced for women entrepreneurs. This will help MSME units to provide goods and services through the platform.
The 12-point scheme for MSME -
1. Loan upto Rs. 1 cr. within 59 minute through online portal
2. Interest rebate of 2%
3. All PSUs and companies above Rs. 500 cr. turnover to upload all supply invoices on TRADES platform which will count MSME Receivables against which banks give bill discounting facilities
4. All PSUs to buy 25% from MSME
5. PSU to buy 3% from woman MSME
6. All CPSU to buy through Govt. GEM Purchase portal
7. 6000 crs for 100 technology training and upgrade centre for MSME
8. 70 clusters for pharma MSME, 75% cost borne by central govt.
9. 8 labour laws returns only twice in a year
10. Factory inspector visit assignment through random computerise selection and online reporting within 48 hours
11. Environment clearance based on self certification for MSME, Common for air and water clearance, Only 10% inspection.
12. Companies Act amendment ordinance removing harsh punishments of jails etc. small violations, 60% pending cases will be out through these amendments.
“This was much required for the MSMEs, so it's indeed a welcome step from the Government. Easy access to Capital would allow SMEs not only to sustain and scale their businesses, but will also aid them to embrace innovation and actively collaborate in global value chains,” says Pawan Gupta - founder & CEO, Connect2India.