Cabinet approves Upward revision of MSME definition and modalities/ road map for implementing remaining two Packages for MSMEs (a) Rs 20000 crore package for Distressed MSMEs and (b) Rs 50,000 crore equity infusion through Fund of Funds

Circular No. ES/176/2020-21                                                3rd June, 2020 

      

 To : Members of the Council

 

Sub: Cabinet approves Upward revision of MSME definition and modalities/ road map for implementing remaining two Packages for MSMEs (a) Rs 20000 crore package for Distressed MSMEs and (b) Rs 50,000 crore equity infusion through Fund of Funds

 

Dear Member,

 

The Cabinet Committee on Economic Affairs (CCEA) chaired by Prime Minister Narendra Modi approved two packages from MSMEs by provisioning of Rs 20,000 crore as subordinate debt to provide equity support to stressed MSMEs and proposed equity infusion of Rs 50,000 crore for units through a Fund of Funds as part of the roadmap to implement the package announced for the sector under the Atmanirbhar Bharat Package. He also cleared the upward revision of the definition of micro, small and medium enterprises (MSMEs). This was announced through the Press Release dated 1st June, 2020

 

  • In the package announcement, the definition of micro manufacturing and services unit was increased to Rs. 1 crore of investment and Rs. 5 crore of turnover. The limit of small unit was increased to Rs. 10 crore of investment and Rs 50 crore of turnover. Similarly, the limit of a medium unit was increased to Rs 20 crore of investment and Rs. 100 crore of turnover. The Table below provides the details of revised limits: -

 

 

 

 

 

Category

Old

Capital

Old

Turnover

New

Capital

New

Turnover

Micro

25 Lakh

10 Lakh

1 Crore

5 Crore

Small

5 Crore

2 Crore

10 Crore

50 Crore

Medium

10 crore

5 Crore

50 Crore

250 Crore

 

It may be noted that the above revision was done after 14 years since the MSME Development Act came into existence in 2006. After the package announcement on 13th May, 2020, there were several representations that the announced revision is still not in tune with market and pricing conditions and it should be further revised upwards. Keeping in mind these representations, it was decided to further increase the limit for medium manufacturing and service units. Now it will be Rs. 50 crore of investment and Rs. 250 crore of turnover. It has also been decided that the turnover with respect to exports will not be counted in the limits of turnover for any category of MSME units whether micro, small or medium. This is yet another step towards ease of doing business. This will help in attracting investments and creating more jobs in the MSME sector. 

 

How it will benefit the MSME?

 

  • The approval for provisioning of Rs 20,000 crore as subordinate debt to provide equity support to the stressed MSMEs will benefit 2 lakh such MSMEs

  • Besides, equity infusion of Rs 50,000 crore for MSMEs through Fund of Funds will establish a framework to help MSMEs in capacity augmentation and also provide an opportunity to them to get listed in stock exchanges.

With these approvals, implementation of Modalities and Road Map for entire components of the Atmanirbhar Bharat Abhiyan package are in place. This will help in attracting investments and creating more jobs in the MSME sector.  

To provide immediate relief to the MSME sector, various announcements have been made under the Package. The most important ones also included:

 

  • Rupees Three lakh crore collateral-free automatic loans for MSMEs to meet operational liabilities, buy raw material and restart businesses.

  • Revision of MSME definition to render maximum benefits to the sector;

  • Disallowing global tenders in procurements upto Rs. 200 crores to create more opportunities for domestic players,

  • And clearing of MSME dues by the Government and Public Sector Units within 45 days.

The Government of India has been taking all necessary steps to ensure that the benefit of these landmark decisions reaches to the MSMEs at the earliest. In this regard, following necessary policy decisions have been already taken and the implementation strategy has been put in place.

 

 

  • The scheme for Rs. Three lakh crore collateral-free automatic loans was earlier approved by CCEA and has been formally launched.

  • Modalities have been worked out for Upward revision of MSME Definition making it more inclusive broad-based providing greater avenues to MSMEs to harness their potentials.

  • Similarly, amendments in General Financial Rules mandating no global tenders for procurement upto 200 crore have been carried out. The new rules have already been issued and effected. This will open up new business avenues for Indian MSMEs.

  • To ensure that MSME payments are released within the timeframe of 45 days, directions have been issued at the level of Cabinet Secretary, Expenditure Secretary and Secretary, MSME.

  • To further ease the burden on MSMEs, RBI has extended a moratorium on repayment of loans for another three months.

Further, to manage all this, a robust ICT based system called CHAMPIONS has also been launched by the Ministry of MSME. The portal is not only helping and handholding MSMEs in the present situation, but is also providing guidance to grab the new business opportunities and in the long run, become national and international Champions.

 

MSME Ministry is committed to support the MSMEs, and the people who depend on them. All efforts are being made to encourage MSMEs to take benefit of the initiatives under the Atmanirbhar Bharat package and our other schemes.

 

Members may kindly make a note of the above.

 

Thanking you,

 

Yours faithfully,

 

S.BALARAJU

EXECUTIVE DIRECTOR

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