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FinMin says working on modifying 'outdated' MSME definition

Last Updated: Tuesday, September 11, 2012 - 19:30

Mumbai: The finance ministry is working at redefining micro, small and medium enterprises (MSME) as it feels that the current definitions are "outdated", a senior ministry official said here on Tuesday.

"We are thinking of modifying (the definition of MSMEs) because the norms have become very old now...We think they are outdated today," Additional Secretary in Financial Services department Sunil Soni told reporters here on the sidelines of a Sidbi event.

He said at present the investment into a company is the sole criteria for classifying it.

The new norms under consideration, which are being prepared with the help of Sidbi, will have enlarged caps on the investment front, and will also take into account factors like turnover and number of people employed, Soni said.

As per the MSME Development Act of 2006, two categories viz services and manufacturing have been created and investment sizes set, according to which companies are classified.

A company with an investment of under Rs 25 lakh in plant and machinery in the manufacturing sector is classified as a micro enterprise, while the same for a medium enterprise is between Rs 5 and Rs 10 crore.

For capital light services sector, a micro-enterprise is one which has an investment of under Rs 10 lakh in equipment, after which it becomes a small company if the investment is up to Rs 2 crore, while an investment of above Rs 2 crore but under Rs 5 crore, makes it as a medium company.

The classifications are important as they bestow a host of privileges like getting loans under the priority sector lending norms.

Soni said Sidbi is at present working on the document and a meeting is expected to be held next week after which the document will be sent to the MSME ministry.

The change will come about through the legislative route as the limits are at present ingrained in the Act, he said.

To make it more flexible for the government for future changes, the finance ministry is also planning to take the classification norms outside the purview of the law so that the government can make changes in it from time to time through simple notifications.

Sidbi on Tuesday launched a website (www.Smallb.In) dedicated for promoting youth entrepreneurship.


First Published: Tuesday, September 11, 2012 - 19:30
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