Business Today

RSS affiliates oppose move to define MSMEs on the basis of turnover

LUB and SJM complain the move will only encourage micro and small scale units to shunt manufacturing and become traders or assemblers of imported products.

twitter-logo Joe C Mathew   New Delhi     Last Updated: July 31, 2018  | 20:42 IST
RSS affiliates oppose move to define MSMEs on the basis of turnover
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RSS affiliates Laghu Udyog Bharti (LUB) and Swadeshi Jagran Manch (SJM) have opposed Narendra Modi government's attempt to allow flexibility to the micro, small and medium scale (MSME) industrial sector for capital investments.

What has irked the organisations is the government's plan to amend the MSME Act to make turnover the basis of categorising an enterprise as micro, small or medium instead of the current system of defining it on the basis of the amount spent on plant and machinery. LUB is an all India organisation that aims at assisting and promoting the small scale industries. SJM is a political and cultural organisation that promotes national self reliance.

According to the prevailing definition, micro units are those with plant and machinery installation of up to Rs 25 lakh. Similarly, the plant and machinery for "small scale" units should be within Rs 5 crore and that of "medium industry", Rs 10 crore. The government proposes to change this category and consider "micro" units as entities with an annual turnover of Rs 5 crore, "small" units that have a turnover of up to Rs 75 crore and set a Rs 250 crore turn over limit for medium units. Various industry bodies had hailed this decision when it was announced early this year as they claimed that such a move will enable MSMEs to invest in better manufacturing and production facilities thereby increase their chances to be part of the global supply chain that requires installation of more expensive manufacturing systems and protocols.

However, LUB and SJM complain that the move will only encourage micro and small scale units to shunt manufacturing and become traders or assemblers of imported products. "We are of the firm opinion that this definitional change would be detrimental to the interests of small scale industries. It's notable that nowhere in the world we find definition of MSMEs based purely on turnover. It's important and interesting to note that 98 percent of (India's) small units have a turnover of less than Rs 15 crore. That means, with this change in definition hardly 2 percent would attain the status of MSMEs at the cost of 98 percent. This change in definition would incentivise small industries entrepreneurs to shun their industries and become importers/traders or assembly units and enjoy the benefits of MSMEs particularly preference in government procurement", a joint statement from the organisations said.

Since small industries' development is key to employment generation in the country, the definitional change would act against "make in India" and "employment generation" plans of the government, they added.

The organisations also noted that a government committee which looked into the matter had recommended keeping the definition of MSME on the basis of cost of Plant and Machinery, in spite of plea on the contrary.

LUB and SJM urged the Prime Minister and MSME Ministry to immediately halt the process of passage of the MSME Amendment Bill in the interest of "the small industries, make in India, entrepreneurship development and the youth with a dream of working for India".

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