There has
been a long standing demand from entrepreneurs, small industry associations and
related stakeholders for a single comprehensive legislation. The “Micro, Small and Medium Enterprises
Development (MSMED) Act, 2006” is the first Act for micro, small and medium
enterprises which, inter alia, provides for establishment of a statutory
National Board for Micro, Small and Medium Enterprises, filing of memoranda,
measures for promotion and development and enhancement of competitiveness of
micro, small and medium enterprises, credit facilities, procurement preference
and provisions related to delayed payments to micro and small enterprises. The medium sector has been defined for the
first time in India and Micro enterprises have been defined first time in Act.
The necessary
Notification/Rules have already been notified by the Central Government and
the Act has already come into force with effect from October 2, 2006.
Classification
of Enterprises
The
earlier concept of ‘Industries’ has been changed to ‘Enterprises’ and these
have been classified broadly into: (i) Enterprises engaged in the
manufacture/production of goods pertaining to any industry; and (ii)
Enterprises engaged in providing/rendering of services.
Manufacturing
enterprises have been defined in terms of investment in plant and machinery
(excluding land & building) and further classified into:
- Micro Enterprises – investment upto Rs.25 lakh.
- Small Enterprises – investment above Rs.25 lakh & upto 5 crore.
- Medium Enterprises – investment above Rs.5 crore & upto
Rs.10 crore.
Services
enterprises have been defined in terms of their investment in equipment
(excluding land & buildings) and further classified into:
- Micro Enterprises – investment Rs.10 lakh
- Small Enterprises – investment above Rs.10 lakh & up to Rs.2 crore.
- Medium Enterprises – investment above Rs.2 crore & up to Rs.
5 crore.
Filing of Memoranda
The process of two-stage registration
of Micro & Small Enterprises has been dispensed with & replaced by
filing of Memoranda. This filing is optional for all Micro & Small Enterprises
and for Service Sector Medium Enterprises. However, filing of memorandum is
mandatory for Manufacturing Sector Medium Enterprises.
Composite
National Board
The National
Board for Micro, Small and Medium Enterprises (MSME) is to be headed by the
Central Minister I/c of MSMEs and consisting of 46 members from among MPs
and representatives of Central Ministries,
State Governments, UT Administration, RBI, SIDBI, NABARD, associations
of MSMEs including women, persons of eminence and Central Trade Union Organisations.
National
Board is now statutory, as against non-statutory SSI Board and it is binding
on it to hold quarterly meetings on regular basis.
Promotional
Provisions
Central Government
will notify programmes, guidelines or instructions for facilitating the promotion
and development and enhancing the competitiveness of MSMEs. Central Government
will also constitute, by notification, one or more Funds for the sectors.
Credit
The policies
and practices in respect of credit to the MSMEs shall be progressive and such
as may be specified in the guidelines or instructions issued by the Reserve
Bank of India with the aims of ensuring smooth credit flow to the MSMEs, minimizing
sickness among them, and ensuring enhancement of their competitiveness.
Preference
Policies
Central Government
or a State Government will notify preference policies in respect of
procurement of goods and services, produced and provided by MSEs, by
its Ministries, departments or its aided institutions and public sector enterprises
(non-statutory till now). These preference policies will valid only for Micro
and Small Enterprises and not for Medium Enterprises.
Checking Delayed Payments
Measures
in brief: Provisions related to delayed payments to micro & small enterprises
(MSEs) strengthened; period of payment to MSEs by the buyers reduced to forty-five
days; rate of interest on outstanding amount increased to three times the
prevailing bank rate of Reserve Bank of India compounded on monthly basis;
constitution of MSE Facilitation Council(s) mandatory for State Government;
provision for inclusion of one or more representatives of MSE Associations
in the Facilitation Council; jurisdiction of the Council in a State to cover
wherever the buyer may be located; MSE Facilitation Council may utilize services
of any institution or Centre for conciliation and alternate dispute resolution
services; reference made to the Council to be decided within ninety days from
the date of reference; declaration of payment outstanding to MSE supplier
mandatory for buyers in their annual statement of accounts; interest (paid
or payable to supplier) disallowed for deduction for income tax purposes;
no appeal against order of Facilitation Council to be entertained any Court
without deposit of 75% of the decreed amount payable by buyer; and Appellate
Court may order payment of a part of the deposit to the supplier MSE.
Closure
of Business
Central Government may (within one
year of the commencement of the Act) notify a scheme for facilitating closure
of business by a micro, small or medium enterprise.
SV/AB/RTS/VN
SS-21/SF-21/17.01.2006
(Release ID :24105)