New Delhi: To encourage Micro, Small and Medium Enterprises (MSME) sector, Finance Minister P Chidambaram today proposed continuing non-tax benefits to these units for three years even after they graduate to a higher category.
"To encourage them to grow, I propose that the benefits or preferences enjoyed by them will stay with them for up to three years after they grow out of the category in which they obtained the benefit," Chidambaram said while presenting the Budget for the 2013-14 fiscal in the Lok Sabha.
The MSME Ministry provides a number of non-tax benefits to the sector including Market Development Assistance (MDA) scheme and Design Clinics Scheme.
MSMEs have a large share of jobs, production and exports. Too many of them do not grow because of the fear of losing the benefits associated with staying small or medium, the Finance Minister said.
The proposal is significant for the MSMEs who would be supplying goods and equipment to the retail sector.
"To begin with, I propose that the non-tax benefits may be made available to a MSME unit for three years after it graduates to a higher category," he added.
The MDA scheme offers funding for participation in international fairs and trade delegations to help MSMEs develop overseas markets.
The Design Clinics scheme is aimed at encouraging application of design and innovation to promote design as a value-adding activity.
Besides, Chidambaram announced doubling the Small Industries Development Bank of India (SIDBI) re-financing facility allocation to Rs 10,000 crore.
During 2012-13, the outlay for the SIDBI was Rs 5,000 crore.
These announcements brought cheer to the MSME sector.
Federation of Indian Micro and Small and Medium Enterprises (FISME) Secretary General Anil Bhardwaj said continuation of non-tax benefits for the units even after they graduate to a higher category is a welcome step, especially after the government allowed 100 per cent FDI in single-brand retail and allowing up to 51 percent FDI in multi-brand retail sector.
"Also, the doubling of the refinance outlay of SIDBI to Rs 10,000 crore from Rs 5,000 crore will help in addressing the issue of credit crunch to the MSMEs," he said.
SIDBI extends financial assistance in the form of loans, grants and equity to the non-government organisations/ Micro Finance Institutions for on-lending to micro units, among others.
Besides, the Finance Minister announced allocation of another sum of Rs 100 crore to the India Micro finance Equity (IME) Fund.
The IME fund was set up by SIDBI in 2011-12 with a budgetary support of Rs 100 crore to provide equity and quasi-equity to Micro Finance Institutions (MFI).
"An amount of Rs 104 crore has been committed to 37 MFIs. I have allocated Rs 100 crore to the IME Fund in the Budget and I now propose to provide another sum of Rs 100 crore to the Fund," Chidambaram said.
Besides, he proposed to provide a corpus of Rs 500 crore to SIDBI to set up a Credit Guarantee Fund for factoring.
The Factoring Act 2011 seeks to provide for and regulate the assignment of receivables by making provision for registration, rights and obligations of parties. Factors provide liquidity to SMEs against their receivables from customers and is regarded as a cash management tool.
To encourage innovation among MSMEs, Chidambaram proposed to provide with the World Bank assistance, a sum of Rs 2,200 crore during the 12th Plan period to set up 15 additional centres.
At present, there are various Tool Rooms and Technology Development Centres across the country to assist these units in extending technology and design support.
Reacting to this, Jagdish Mahapatra, Managing Director for India and SAARC at McAfee said the provisions regarding MSME sector are appreciable and will spur the growth of the economy in the right direction.