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    MSME definition widened further to include firms with up to Rs 250 cr turnover

    Story outline

    • A company with up to Rs 50 crore investments and up to Rs 250 crore turnover is classified as a medium enterprise.
    • The definition has been widened in line with industry suggestions.
    • It will help a wider section of companies to avail various sops announced for the sector.
    • The enhanced turnover limit brings relief to many companies that were worried that they would not be eligible for MSME status.
    Hike in MSP of kharif crops; new definition, 50K cr equity infusion for MSMEs: Watch cabinet briefing highlights
    New Delhi: The Union cabinet has approved further changes to the definition of micro, small and medium enterprises, a Rs 20,000-crore fund to provide equity support to stressed entities in the sector, and equity infusion of Rs 50,000 crore into MSMEs through a fund of funds.

    As per the new definition, a company with up to Rs 50 crore investments and up to Rs 250 crore turnover is classified as a medium enterprise.

    This is higher than the definition announced by finance minister Nirmala Sitharaman as part of the Rs 20 lakh-crore Atmanirbhar Bharat package to counter the economic and social impact of the Covid-19 pandemic and resultant lockdown, which had pegged the investment limit for medium companies at Rs 20 crore and turnover at Rs 100 crore. The Atmanirbhar package provided for Rs 3 lakh crore collateral-free loans for MSMEs.

    The definition has been widened in line with industry suggestions and will help a wider section of companies to avail various sops announced for the sector, MSME minister Nitin Gadkari told reporters after the cabinet meeting on Monday.

    “When we interacted with different associations, we were told that the turnover limits should be widened,” he said. “So the government, led by Prime Minister Modi, has accepted this request.”

    As per the new definition, micro units can have up to Rs 1 crore investments and turnover of up to Rs 5 crore while businesses with an investment of up to Rs 10 crore and turnover of up to Rs 50 crore will be classified as small.

    “Whether these are micro, small or medium enterprises, their export turnover will not be factored in,” Gadkari said.

    Industry insiders said the enhanced turnover limit brings huge relief to many companies that were worried that they would not be eligible for MSME status.

    “For the first time in the history of Indian economy, viable stressed MSMEs will be able to come out of NPA stigma and be able to get additional funding too in the form of subordinate debt,” said Mukesh Mohan Gupta, president of Chamber of Indian MSMEs (CIMSME).

    The cabinet on Monday also gave its nod to the proposal for provisioning of Rs 20,000 crore as subordinate debt to provide equity support to stressed MSMEs, which is expected to benefit 200,000 stressed units.

    A proposal for equity infusion of Rs 50,000 crore for MSMEs through a fund of funds has also been approved. This will establish a framework to help MSMEs in managing the debt-equity ratio and in their capacity augmentation, the government said.

    "While I am pleased on setting up of funds and subordinate debt, the extent of impact on MSMEs due to these measures owing to abnormal circumstances is a matter of debate,” said KR Sekar, Partner at Deloitte.

    15 Comments on this Story

    Dilip 43 days ago
    Good decisions,correct the confusions Jaitley created.
    ESMAIL MEMON44 days ago
    MTNL MUMBAI IS NOT PAYING DUES FROM JUNE 2019 TO IT'S VENDORS PLZ SOMEONE IN GOVERNMENT SEE TO IT THAT ALL THE DUES ARE CLEARED BY MTNL MUMBAI. AS WE HAVE TO PAY GST, ADVANCE TAX AND INCOME TAX , MCGM PROPERTY TAXES OTHER LEVIES TO GOVERNMENTS, BUT WE ARE NOT PAID BY MTNL, MUMBAI.
    Rajan Tungare44 days ago
    The step to increase the threshold limit of both turnover and investment is a welcome step. The crucial aspect is to have smooth flow of credit in terms of working capital or CC CC limit in banking terminology. The institutional arrangement of Bank for small scale industries need to be strengthened. This sector of the economy has tremendous potential in terms of exports and employment generation. Since the problem of employment generation is very crucial at this juncture and hence as a matter of policy we may incentivize those units which provide employment. At least at the policy level this perspective should not take a back seat.
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