Ashwani Mahajan
In the Monsoon session of the Parliament Micro, Small and Medium Enterprises (MSME) Minister introduced a bill according to which the basis of the definition of micro, small and medium enterprises would be changed from the cost of plant and machinery to turn over. It is notable that at present micro enterprises are those in which the cost of plant and machinery less than 25 lakhs and in case of small and medium enterprises this limit is Rs. 5 crores and Rs. 10 crores respectively. According to the proposed definition Micro units would be defined as those units with an annual turnover of rupees 5 crores. For small units this limit would be rupees 75 crores and for medium units, this limit would be rupees 250 crores. Today out of all units coming under MSME 98 percent are the once who have turnover of less than Rs. 15 crores. With this change in definition to the turnover of Rs. 75 crores and Rs. 250 crores for small and medium enterprises respectively one can easily understand that this exercise is all about benefiting two percent enterprises, who which come under MSME category today.
This is not for the first time that definitional change is the matter of debate in the country. At earlier occasions also such kind of efforts were being made, successfully as well as unsuccessfully. Before Atal Bihari Vajpayee became Prime Minister in 1999, earlier Government under Indra Kumar Gujral had changed the definition of small scale industry with investment in plant and machinery of Rs. 60 lakh to Rs. 3 crores (5 time increase in one go). Atal Bihari Vajpayee had expressed his disagreement about this change and after assuming office of Prime Minister he reduced this limit to Rs. One crore. Even that time bureaucracy had tried to scuttle this move, but unsuccessfully.
During Atal Bihari Vajpayee regime a seperate ministry was carved out for small scale industries, so that the problems of small scale industries could be tackled efficiently and they are put on growth trajectory. However, the nomenclature of SSI was changed to SSE discretely, which meant small scale enterprise, which implied that apart from industries small scale service enterprises would also be included in SSEs. After this yet another change took place according to which the nomenclature of SSI Ministry was changed to MSME ministry, which meant that apart from micro and small, even medium enterprises would also been included in this definition. Small industries had to bear the brunt of these definitional changes. It is notable that Government has been giving numerous facilities to small entrepreneurs like reference in Government purchase, finance, marketing and technical support. Now for all these facilities micro and small enterprises have to compete with medium enterprises.
Why this Change is Illegitimate?
Sometime back, Government of India constituted a One Man Committee under the Chairmanship of Shri Prabhat Kumar, Ex Cabinet Secretary in the Union Government. This Committee too recommended to keep the definition of MSME on the basis of cost of Plant and Machinery, though bureaucrats had recommended for change the same tp turnover basis, which Prabhat Kumar Committee had summarily rejected. Therefore, this amendment in definition of MSME is not only against real stakeholders like small scale enterprises but also against the recommendations of the Committee constituted to make recommendations for a National Policy for MSMEs. 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 small units have a turnover of less than rupees 15 crores. 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. It is feared that with change in definition, small and medium enterprises would be able to enjoy the benefits of MSME by shifting from manufacturing to trading and assembling. Those who are running industries would be inclined to become traders. It is well known that small industries’ development is key to employment generation in the country, thus this definitional change would act against make in India and employment generation. In the era of globalisation due to anti small scale industries’ policies, small industries are fast vanishing and Indian markets are full with Chinese products. Domestic industrialists are forced and lured to become traders and assemblers and are selling all Chinese products. Small entrepreneurs, are able to survive by way of whatever little incentives are available to them because big industries do not come under the category of MSME. However, with this change in definition they will lose all that advantage. Sufferer would be make in India dream of the nation and particularly our youth. It’s unfortunate that definition is being changed by bringing in bill in the Parliament due to misguidance of bureaucracy. We should not forget that at an earlier occasion when definition was tweaked favourably and limit of investment in plant and machinery was lowered by then Government under Atal Bihari Vajpayee Prime Ministership from 3 crores to one crores, small industries benefitted enormously and number of workforce in self employment increased from 54 percent to 57 percent (NSSO).
After New Economic Policy was started implementing, it’s first victim was product based reservation for SSIs as reservation was successively withdrawn causing destruction of SSIs on a large scale. Along with this policy of preference for procurement was also drastically tweaked. Despite SSIs being in the priority sector category, they continued to face major problems in the availability of finance; and policies regarding marketing, technical assistance and Industrial estates became subject matters of history. Recently, with introduction of GST, facility of excise duty exemption of SSIs upto the rupees 1.5 crores was automatically withdrawn; however there was partial resolution of this issue, when SSIs were given relief by way increasing the scope of ‘Composition Scheme’ and reduction in the rates of GST. We need to understand that small scale industries have been playing an important role in GDP growth, employment, exports and decentralisation. After the policy of globalisation and open imports, these small enterprises are fighting for their existence due to flooding of Chinese imports, plethora of laws and gradual withdrawal of facilities from the Government. Under these circumstances to save guard the employment and to fulfill the ‘Make in India’ dream, it is imperative to keep out the medium enterprises and protection be provided to the small industries. Therefore, the proposed change in definition of MSME would work against the small industries and therefore needed to be stalled at any cost.
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