Businesses seek law tweak to retain MSME space

With MSMEs being one of the few beneficiaries to get substantive COVID-19 relief by the government and Reserve Bank of India, many small businesses, which no longer qualify for MSME status, have now been requesting the government to tweak rules to include them into the small and medium industry space.

While India’s seven crore strong traders, including wholesale, retail and others, have written to Prime Minister Narendra Modi for their inclusion in MSME sector, the apparel export council has urged to tweak some of the criteria so that they are not excluded.

Follow live updates on coronavirus here

“Apparel sector employs close to 13 million workers of which 70% are women. Garment industry is spread across the country. Tamil Nadu, Karnataka, Delhi, Haryana, Maharashtra, Punjab, Uttar Prdaesh and Gujarat are mainly the hubs. Exports industry turnover depends on foreign exchange rates hence we would like the criteria of turnover to be removed for apparel sector and only investment criteria of Rs 50 crore should be applied for them for inclusion in MSME,” the Apparel Export Promotion Council wrote to MMSME Minister Nitin Gadkari.

In a letter to Prime Minister Narendra Modi, the Confederation of All India Traders said traders have been excluded from the MSME definition

“The inclusion of service sector by the Finance Minister under definition of MSME clearly reflects the intention of the Government for awarding such package to traders too since traders are regarded as part of service sector but in absence of any crystal clear clarification, it leaves the scope of ambiguity and discretionary at the hands of the officials,” CAIT said in the letter.

It said about 45% traders of the country are operating their business activities in rural and semi rural areas and can be better termed as 'marginal traders' while 55% of other traders are conducting their business operations in urban areas and are having a great bunch of financial load to be meted out on lifting of lockdown in the Country.

The government has announced Rs 3 lakh crore emergency working capital facilities for businesses, including MSMEs. This is a direct aid for eligible MSMEs (i.e., having turnover up to Rs 100 crore and outstanding debt up to Rs 25 crore) in form of collateral-free, interest-capped, fixed-tenured with fixed-moratorium and government-guaranteed automatic loans.

It has also announce Rs 50,000 crore equity infusion through MSME fund funds designed to encourage potential MSMEs to expand their size and capacity. The government has also announced revision in definition of MSME which was previously based only on investment in plant and machinery/equipment to investment in plant and machinery /equipment and annual turnover.