New MSMED act brings renewed hope to SME sector

CHENNAI: An Apex Consultative Body with a wide representation of stakeholders is being formed to examine the factors affecting the promotion and development of Micro, Small & Medium Enterprises (MSMEs) said Jawhar Sircar, Addl. Secretary & Development Commissioner, SSI, Government of India in his keynote address at the Interactive Session on MSMED Act, 2006 organized by the Confederation of Indian Industry (CII) in Chennai.

Sarkar said the proposed body would review policies and programs, make recommendation to the Government and advise the Central Government on the use of funds constituted by the Central Government under the newly enacted Micro, Small & Medium Enterprises Development (MSMED) Act 2006, which has come into force w.e.f 2, October 2006.

He said that the new act would ensure smooth credit flow to MSMEs. This would translate into minimizing sickness amongst them ensure enhancement of competitiveness and export growth.

Under the new Act, the credit period offered to the SME’s by large companies has reduced from 120 days to 45 days. This would boost the SME sector, where lending from banks is expected to gross Rs 25,000 crores this year. A phenomenal growth from 15000 cr, last year and 5000 cr. the year before.

To address the problem of delayed payments, Sircar said that the account books of the big industries must reflect the cases where SME payments have been delayed. The rate of interest on outstanding amount to SME’s has been increased to three times the bank rate compounded on monthly basis, he further added.

Small and Medium Enterprises (SMEs) are the most important sector accounting for 80-85% of employment generation, 75% of the productivity and over two thirds of the industrial output.

He urged the State Governments to constitute a MSME Facilitation Council to ensure that the benefits are reaching the SMEs under the purview of the new act.

The new Act redefined SSI’s as SME’s and service enterprises have been included. The earlier concept of ‘Industries’ have undergone a sea change over the past decade and now the new law classifies them as “Enterprises” - Manufacturing and Services.

The Manufacturing enterprises have been further defined in terms of investment in plant & machinery into Micro, Small and Medium Enterprises with investments upto 25 lakhs, 5 crores and 10 crores.

Similarly service enterprises have been defined as Micro, Small and Medium with investments upto 10 lakhs, 2 crores and 5 crores.

Earlier in his address, C V Karthik Narayanan, Past Chairman, CII – Southern Region & Chairman & Managing Director, UCAL Products Pvt Ltd welcomed the introduction of the MSMED Act.

He said that the new Act would enable SMEs to enhance their competitiveness and explore new export markets. He said that the new Act has consolidated the interest of all categories of industries in the SME sector and urged for a regulatory mechanism to monitor the progress in implementation of the new Act.

© CIOL Bureau