Govt itself weakening 'atmanirbhar' campaign: RSS affiliate on MSME plan

'Govt's recent notification on the MSME sector will enable large corporates and MNCs take indirect control of the manufacturing sector in India through their subsidiaries'

The RSS affiliated Laghu Udyog Bharati on Thursday said the government’s recent notification changing definitions of micro, small and medium enterprises, or MSMEs, would end up defeating the objectives of Prime Minister Narendra Modi’s ‘atmanirbhar Bharat’ campaign, and pave the way for increased imports of foreign manufactured goods.

The Laghu Udyog Bharati, which claims to represent micro and small industries, or MSIs, working in 465 districts across the country, said the government’s recent notification on the MSME sector will enable large corporates and MNCs take indirect control of the manufacturing sector in India through their subsidiaries.

The Laghu Udyog Bharati is the Rashtriya Swayamsevak Sangh (RSS) affiliated union of small and medium enterprises (SMEs).

In a statement, it demanded the government should set up a separate dedicated ministry to look at issues facing micro and small industries (MSIs).

It said the current bundling of micro and small industries (MSIs) with medium scale industries, service enterprises and trading services “has resulted in gross negligence and step-motherly treatment to the weaker sector of MSIs”.

The Laghu Udyog Bharati said it was “completely disheartened” after studying the extraordinary gazette notification issued by the Ministry of Micro, Small and Medium Enterprises (MSME) on June 26.

“We observe that the provisions of this notification will ultimately defeat the Atmanirbhar Bharat Abhiyan vision of Prime Minister Narendra Modi and MSME minister Nitin Gadkari,” Laghu Udyog Bharati’s national president Baldevbhai Prajapati and general secretary Govind Lele said.

Prajapati and Lele said that the new notification will allow large corporates and MNCs to have indirect control of the manufacturing sector in India through their subsidiaries.

“It will also promote trading of imported goods rather than manufacturing and innovation in our country as there is no direct incentive for the micro and small industries to do so,” the two said.

The Laghu Udyog Bharati has objected to inclusion in the MSME category of service enterprises and trading services with increased turnover limits. They said this will offer all the privileges of ‘micro and small industries’ to them, but at the cost of depriving the MSIs of these privileges.

“Our apprehensions are based on ground level feedback from all our members and manufacturing units spread all across India,” Prajapati and Lele said.

The RSS affiliated union said MSME registrations must be restricted to Indian ownership enterprises only.

“While this issue was continuously pursued by Laghu Udyog Bharati, it finds no mention in the notification,” Prajapati and Lele said.

“Our insistence on Indian ownership of MSIs stems from the experience that foreign companies have secured indirect investments and ownership in various such ventures taking advantage of such loopholes,” the two said.

The Laghu Udyog Bharati suggested that the ministry for micro and small manufacturing industry and manufacturing services industry, which was originally formed by the government, and was aimed at promotion of the micro and small industries (MSIs), should be kept separate from all other categories of enterprises, including medium enterprises, trading and service enterprises

The Laghu Udyog Bharati said the new definition continues to exclude the cost of certain items for the purposes of calculation of the amount of investment in plant and machinery.

“We recommend to include cost of all tangible assets other than land, building, furniture and fittings,” it said.

The RSS affiliate has also objected to the gazette notification excluding export turnover of enterprises to calculate turnover. “We recommend to include it in the turnover limit for the calculation of classification of MSME,” it said.

The Laghu Udyog Bharati said these exclusions and the substantial increase in the previous limits, together are likely to provide a window for bigger medium and large scale industries to indirectly squeeze in the MSME space, exploit the concessions and privileges, particularly priority lending norms given to banks for the MSME sector and the 25 per cent purchase reservation policies for government departments and public sector undertakings (PSUs).

“This will certainly lead to the already beleaguered MSIs to face further hardships as they are incapable of competing with the mighty ‘medium and large scale industries.”

The Laghu Udyog Bharati demanded that the Prime Minister’s Office and Gadkari-led MSME Ministry should immediately ask relevant departments to take corrective measures so that the real objectives of the 'Atmanirbhar Bharat Abhiyan' can be achieved.

Prajapati and Lele said corrective action would help growth of 'real' manufacturing industries in the MSI sector. “This probably is the only effective tool in the hands of the government to kickstart employment generation too,” they said.