The year 2020 has opened up new avenues for the highly vibrant and dynamic Micro, Small and Medium Enterprises (MSME) sector of the Indian economy with our Hon’ble PM Shri Narendra Modi announcing “Aatmanirbhar Bharat Abhiyan” i.e. Self – Reliant India.
Manufacturing enterprises and enterprises rendering services are classified as micro, small, and medium based on the composite criteria of investment in plant & machinery/equipment and the annual turnover.
Investment in Plant & Equipment
<= Rs.1 crore
|<= Rs. 5 crore|
<= Rs.10 crore
<= Rs. 50 crore
|Medium||<= Rs.50 crore||
<= Rs. 250 crore
MSME schemes & the benefits
The MSMEs play an important role by providing employment, reducing regional imbalances through industrialization, and help in the equitable distribution of national income and wealth.
Getting registered as an MSME is now free, paperless, and based on self-declaration also for ensuring timely receipt of business revenue buyers paying for purchases beyond 45 days would be charged compound interest on the delayed payment which is 3 times the rate notified by the RBI. Other benefits of getting registered as an MSME include collateral-free bank loans, 50% subsidy on industrial promotion and patent registration, interest rate exemption on overdraft facility, concession on electricity bills, reimbursement of expenses spent on ISO certification.
There has been a budgetary allocation of Rs. 7572 crore for FY 2020- 21 to the ministry of MSME which is an increase of 8% from FY 2019-20 figures of Rs. 7011.29 crore.
The Budget 2020 has brought forth some initiatives like an increase in the turnover threshold for the audit of accounts of MSMEs from 1 crore to 5 crores thereby reducing their compliance burden and it has disallowed global tenders up to Rs. 200 crores which will eliminate the unfair competition faced by MSMEs from foreign companies helping them to increase their business.
In addition to the above benefits the ministry of MSME has introduced a number of schemes, some of which along with their benefits are enlisted below:
A) Schemes that provide financial assistance to set up new enterprises:
1. Prime Minister’s Employment Generation Programme (PMEGP)
Any individual above 18 years of age who is at least 8th standard pass investing in new projects costing above Rs.10 lakh and maximum Rs. 25 lakh in the manufacturing sector and above Rs. 5 lakh and maximum Rs. 10 lakh in the business/service sector, Self Help Groups, Institutions, Production Co-operative Societies and Charitable Trusts are eligible for this scheme if they have not availed benefits under any other scheme.
The Financial subsidy under this scheme is based on the Area of Operation i.e. location of project/unit for General category 15%(Urban), 25%(Rural), Special category 25%(Urban), 35%(Rural) the remaining cost of the project will be provided by the banks in the form of term loan and working capital.
2. Credit Guarantee Trust Fund for Micro & Small Enterprises (CGT SME)
Existing and new enterprises are eligible under the scheme for collateral free loan up to a limit of Rs. 100 lakh on payment of guarantee fee to bank by the MSE.
3. Interest Subsidy Eligibility Certificate (ISEC)
This Scheme supports only the khadi and the polyvastra sector by providing them credit at a concessional rate of interest @ 4% per annum for working capital.
RELATED POST: ESOPs for Start-ups: Basics, Benefits & Issues
B) Schemes for the Development of Khadi, Village Industries, and Coir Industries:
1. Market Promotion & Development Assistance Scheme (MPDA)
The Khadi institutions with valid Khadi certificates and categorized as A+, A, B, and C are only eligible for this scheme and are allowed modified MDA @ 30% on the Prime cost of Khadi and Polyvastra.
2. Revamped Scheme of Fund for Regeneration of Traditional Industries (SFURTI)
Institutes which expertise to undertake cluster development like Non-Government Organizations (NGOs), Institutions of the Central and State Governments and Semi-Government Institutions, Panchayati Raj Institutions (PRIs), and similar agencies are provided assistance in the form of 3 interventions namely:
- a) Soft Interventions provide 100% of scheme funding with a maximum ceiling limit of Rs.25 lakh.
- b) Hard Interventions provide 75% of scheme funding as per project requirement.
- c) Thematic Interventions provide 100% of scheme funding.
3. Coir Industry Technology Upgradation Scheme (CITUS)
Newly established coir production/processing units as well as units registered with Coir Board under Coir Industry (Registration) Rules, 2008 and having Udyog Aadhar (for modernization) can apply for this scheme. The units eligible for this scheme are provided with financial assistance which is 25% of the cost of admissible items of plant and machinery procured by the coir units for modernization, upgradation, and/or establishing a new unit with a ceiling limit of Rs.2.50 crores per coir unit/ project.
4. Science and Technology Scheme (S&T) for Coir
Research and development activities with research outcomes beneficial to the coir industry and trade in India and abroad carried out by the Central Coir Research Institute, Kalavoor and Central Institute of Coir Technology, Bangalore are eligible to use funds for technology transfer, incubation, testing and service facilities.
5. Skill Upgradation & Mahila Coir Yojana (MCY)
For skill development of coir artisans and workers, the stipend is provided to encourage them to undertake training programmes; honorarium is given to the trainer and financial assistance is provided to the training agency in order to help them meet the operational cost of the training for raw material, power charges, other incidentals, etc
6. Welfare Measures Pradhan Mantri Suraksha Bima Yojana (PMSBY)
Coir workers enrolled through Coir Board, coir workers engaged in the units of PSUs, Corporations, Federations, Cooperative Societies, etc are given one-year insurance cover renewable from year to year, and accident insurance coverage is given for death or disability on account of the accident.
C) Other Benefits:
Financial Assistance is also provided to MSMEs for Technology Upgradation and Quality Certification for:
- Inculcating the practice of Zero Defect in manufacturing processes, ensure continuous improvement, and supporting the Make in India initiative.
- Promoting Innovation, Rural Industry & Entrepreneurship (ASPIRE).
- Credit Linked Capital Subsidy for Technology Upgradation (CLCSS) by providing 15% upfront capital subsidy to MSEs
- Marketing Support/Assistance to MSMEs (Bar Code) where reimbursement of the registration fee and the annual recurring fee is done for the use of barcoding.
All these benefits give MSMEs an edge in business operations supporting them to perform their functions efficiently and support the large-scale organizations with their ancillary support services.