msme new definition: MSME definition widened further to include firms with up to Rs 250 cr turnover – The Economic Times

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The Union Cabinet on Monday said it has approved and further revised the definition of MSMEs in the country.

New Delhi: The Union cabinet has approved further changes to the definition of micro, small and medium enterprises, a Rs 20,000-crore fund to provide equity support to stressed entities in the sector, and equity infusion of Rs 50,000 crore into MSMEs through a fund of funds.

As per the new definition, a company with up to Rs 50 crore investments and up to Rs 250 crore turnover is classified as a medium enterprise.

This is higher than the definition announced by finance minister Nirmala Sitharaman as part of the Rs 20 lakh-crore Atmanirbhar Bharat package to counter the economic and social impact of the Covid-19 pandemic and resultant lockdown, which had pegged the investment limit for medium companies at Rs 20 crore and turnover at Rs 100 crore. The Atmanirbhar package provided for Rs 3 lakh crore collateral-free loans for MSMEs.

The definition has been widened in line with industry suggestions and will help a wider section of companies to avail various sops announced for the sector, MSME minister Nitin Gadkari told reporters after the cabinet meeting on Monday.

“When we interacted with different associations, we were told that the turnover limits should be widened,” he said. “So the government, led by Prime Minister Modi, has accepted this request.”

As per the new definition, micro units can have up to Rs 1 crore investments and turnover of up to Rs 5 crore while businesses with an investment of up to Rs 10 crore and turnover of up to Rs 50 crore will be classified as small.

“Whether these are micro, small or medium enterprises, their export turnover will not be factored in,” Gadkari said.

Industry insiders said the enhanced turnover limit brings huge relief to many companies that were worried that they would not be eligible for MSME status.

“For the first time in the history of Indian economy, viable stressed MSMEs will be able to come out of NPA stigma and be able to get additional funding too in the form of subordinate debt,” said Mukesh Mohan Gupta, president of Chamber of Indian MSMEs (CIMSME).

The cabinet on Monday also gave its nod to the proposal for provisioning of Rs 20,000 crore as subordinate debt to provide equity support to stressed MSMEs, which is expected to benefit 200,000 stressed units.

A proposal for equity infusion of Rs 50,000 crore for MSMEs through a fund of funds has also been approved. This will establish a framework to help MSMEs in managing the debt-equity ratio and in their capacity augmentation, the government said.

“While I am pleased on setting up of funds and subordinate debt, the extent of impact on MSMEs due to these measures owing to abnormal circumstances is a matter of debate,” said KR Sekar, Partner at Deloitte.

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