It is generally perceived that the small and medium enterprises of the country have borne the brunt of the central government's twin disruptions - demonetization and goods and services tax (GST), the most. In an interview with Business Today, Giriraj Singh, Minister of State, Independent Charge, Ministry of Micro, Small and Medium Enterprises (MSME) tries to clear the perception, and stress on the importance of MSME sector as the country's most important employment generator.
BT: MSMEs are the ones that were most affected by the twin disruptions - the demonetization and GST implementation. What did the ministry do to minimize their problems?
Singh: I don't agree to that view. These decisions were taken in the national interest. And it was only natural that there would be some problems during the transit phase of such path breaking reforms. Be it employers or chartered accountants, every stakeholder had to familiarize with the new regime. By now 90 per cent of the problems have been sorted out. So there is no need to demoralize MSMEs. This is a sector that provides more employment that any others.
BT: What has been the impact of GST on MSME? Have you done any assessment?
Singh: Let me repeat. Let us not see the transit phase in that manner. It is only natural to go through difficulties whenever a major project is undertaken. Just take the example of Metro rail construction. Do we analyse it on the basis of the difficulties faced during the construction period? No, we look at the future benefits it offers. It was a transit phase, and it is over.
BT: Budgetary allocation for MSME sector has seen an increase this year. What are the policy priorities of the government for the sector?
Singh: Let me talk about two major interventions. First is about a collateral free credit guarantee scheme for MSMEs. The credit limit has gone up to Rs 2 crore, and 75 per cent of that will be given collateral free. I am sure this will have a major impact on credit flow to the sector in 2018-19. The other is about the ease of doing business measures. We had engaged Management Development Institute (MDI), Gurgaon to conduct a study to understand the sectors that provide maximum employment under the Prime Minister's Employment Generation Programme (PMEGP). The results indicated that for a project that costs Rs 7 lakh on an average, there was an average employment of 7. In order to boost this segment, we have done away with several licensing and registration hurdles by introducing Udyog Aadhaar Memorandum which is a simple self declaration registration form that can be filled up in just 3 minutes. Central public sector enterprises (CPSEs) do purchases worth several lakh crores every year. We ensured that 20 per cent of that is procured from MSMEs. Now, we have launched a Samadhan portal to monitor the payment for such purchases. Over 8000 complaints have already been sorted out through Samadhan portal. Further we have also got CPSEs to list all the items they want to procure in a Sambanth portal for MSMEs to see and be part of the procurement process. We have also changed the definition of MSME to free them from inspector raj. Earlier MSME categorisation used to be on the basis of capital investment, so people were wary of investing in better technology or machines for the fear of getting out of the micro or small scale bracket. Now it is on the basis of GST turnover. No inspector can trouble a MSME unit on the basis of the money spent on plant and machinery.
BT: Government has announced some custom duty hikes to help domestic industry compete with cheap imports. Will it benefit MSMEs in a big way?
Singh: Anti-dumping measures are meant to help domestic industry. It is dealt with at the WTO level, it is also handled at the country level. The 18 technology centres that we have are catering to the needs of industries ranging from agri-tech to space. We are adding another 15 which will go a long way in enhancing the competitiveness of Indian MSMEs. This Rs 550 crore project is out of this year's budget outlay.
BT: Are new jobs being created in the MSME sector?
Singh: The biggest job intensive sector is garments and textiles. The next one is leather. When Prime Minister said 70 lakh new jobs were created, he was referring to the EPFO numbers. I will tell you that thrice that number of jobs have been created in the informal sector. We have an organization called NSIC (National Small Industries Corporation) which provides overall support to MSME sector. I asked them, and also another Mumbai-based organisation to get an advance job creation plan from MSMEs to have an idea of how many new jobs these companies are planning to create in the next 18 months. Almost 26 per cent of the people they met said they have no plans to hire more people in 2018-19. But 74 per cent said they will hire. On an average they were planning to hire 7 persons each. Jobs are being created. Now there is a policy which says that once you shift from informal sector to formal sector, the government will pay 8.33 per cent of PF for the first three years, I am expecting a huge shift from informal to formal sector in 2018-19.
BT: What is the ministry doing to tackle the bad loan problem?
Singh: What we want to suggest is, if an MSME loan becomes NPA for whatever reasons, you change the criteria of considering a loan default as bad debt from 90 days to 180 days. And introduce a scheme for refinancing and restructuring that debt. It is just a thought as of now. The idea is to have a separate structure to help sick MSME units. We should realize that MSME sector is honest. Small entrepreneurs never run away from this country. So we need to protect our MSME sector. Prime Minister is doing it.