The micro, small and medium sector (MSME) has received a major policy boost through a big relaxation in the benefits accorded to them through the ministry.
The ministry of micro, small and medium sector has allowed use of all non tax benefits available to the MSMEs for a period of three years even if they graduate to their next higher level. These benefits will be available to entities falling under three categories, micro, small and medium units and come into effect from April 1, 2013.
According to official sources, this decision has been taken to help the MSMEs tide over the tough economic conditions and weak market conditions both in India and overseas.
Explaining this move, source said, these benefits will be available even if a micro unit graduate to small, small to medium and medium to large.
Non tax benefits primarily include continuation of benefit in the government procurement policy, market development assistance, funding for international cooperation and credit guarantee facilities etc.
The major benefit of the government procurement policy is that all central ministries and public sector undertakings will fulfill 20% of their annual purchase from products produced and services rendered by the MSE sector within a period of three years starting 2012. Policy has also earmarked four% of the 20% procurement from MSMEs to be from units owned by proprietors belonging to scheduled caste and tribe categories.
Another major benefit extended by the ministry to the MSE sector is the credit guarantee scheme so as to strengthen credit delivery system and facilitate flow of credit to the MSE sector.
Otherwise referred to as Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), the objective is to give composite credit to the borrowers so that the borrowers obtain both term loan and working capital facilities from a single agency. The Credit Guarantee scheme (CGS) seeks to reassure the lender that, in the event of a MSE unit, which availed collateral free credit facilities, fails to discharge its liabilities to the lender, the Guarantee Trust would make good the loss incurred by the lender up to 75 / 80/ 85% of the credit facility.
Under the current conditions, such benefits are available to the micro, small and medium units as standalone units in the specified category. The benefits get reviewed before it could be made available to a unit once it graduates to a new level – micro to small , small o medium, medium to large. With this relaxation, without any review, such units will get the benefit extended to them for a period of three years, explained sources. They added that otherwise, withdrawal of such benefits in such weak market conditions will be difficult for the units to survive.
