There are various schemes run by the Indian Government to boost the SME’s in the country to help them become more innovative, efficient and competitive. The enactment of the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 was a landmark initiative taken by the Government of India to enable the SMEs’ competitive strength, address the issues and challenges and reap the benefits of the global market. SME policy initiatives at the national and state level are aimed at strengthening the role of SMEs at the base as well as at the higher level.
The Tamil Nadu Government formulating an exclusive policy for micro, small and medium enterprises sector to encourage agro-based industries is a recent example of the changes taking place at the ground level. Some of the salient features of this policy include formation of multi-storied and flatted industrial estates for micro industries, liberal floor space index in plotted development of 1.5 to 1.75 for industrial sheds and 2.5 for multi-storied industrial units, 50% rebate on stamp duty and registration charges for micro and small enterprises in industrial estates and industrially backward areas.
The Ministry of Micro, Small and Medium Enterprises (MSME) is implementing the promotional schemes for the development of micro, small and medium enterprises. The schemes and programmes generally focus on capacity building in states and regions, nevertheless, there are a few schemes and programmes, which are inidual beneficiary-oriented.
Some of the schemes are by The Ministry of Micro, Small and Medium Enterprises (MSME) are as below.
• Scheme of Surveys, Studies and Policy Research
• Entrepreneurship Development Institution Scheme
• Scheme of Fund for Regeneration of Traditional Industries (SFURTI)
• Rajiv Gandhi Udyami Mitra Yojana (RGUMY)
• Marketing Assistance Scheme (Implemented through NSIC)
• Performance and Credit Rating Scheme (Implemented through NSIC)
• Prime Minister’s Employment Generation Programme (PMEGP) (Implemented through KVIC)
• Product Development, Design Intervention and Packaging (PRODIP) (Implemented through KVIC)
• Khadi Karigar Janashree Bima Yojana for Khadi Artisans (Implemented through KVIC)
• Interest Subsidy Eligibility Certification (ISEC).
While there are no specific reservations for women, in the latter, there are some oncessions/incentives available under these programmes for the benefit of women entrepreneurs. In respect of entrepreneurship/skill development training programmes, under the National Awards for Entrepreneurial Development (Quality Products) and Trade Related Entrepreneurship Assistance and Development (TREAD) Programme for women, the necessary guidelines have been issued and specific reservation provided for women. Similarly, under two employment generation programmes being implemented by the Ministry like Rural Employment Generation Programme (REGP) and Prime Minister’s Rozgar Yojana (PMRY), some concessions have been provided for women beneficiaries. Besides, the Coir Board is implementing the Mahila Coir Yojana, which is a women oriented self-employment programme.
There are certain schemes which National Small Industries Corporation carries forward to assist small enterprises with a set of specially tailored schemes designed to put them in a competitive and advantageous position. The schemes comprise of bank credit facilitation, Export credit Insurance, SME Credit Rating, Bill discounting schemes, Government stores purchase programme, infomediary services, facilitating marketing support, technology support and other support services.
Besides these schemes, the Government of India also runs a International Cooperation Scheme for Technology infusion and/or upgradation of Indian MSMEs, their modernisation and promotion of their exports are the principal objectives of assistance under the International Cooperation Scheme.
The Scheme would cover the following activities:
• Deputation of MSME business delegations to other countries for exploring new areas of technology infusion/upgradation, facilitating joint ventures, improving market of MSMEs products, foreign collaborations, etc.
• Participation by Indian MSMEs in international exhibitions, trade fairs and buyer-seller meets in foreign countries as well as in India, in which there is international participation.
• Holding international conferences and seminars on topics and themes of interest to the MSME.
Till date, the government’s development strategy for Micro, Small and Medium Enterprises (SMEs) has primarily evolved around Protective Discrimination (industrial reservation), Integration with Large Scale Industries (ancillarisation) and Institutional support. However, to increase cost competitiveness of SMEs in domestic and export markets, there is an urgent need to shape tax policies specific to this sector, especially Indirect taxes. Some issues ailing SMEs are discussed here.
Currently, the turnover limits for exemption from Central Excise duty and Service tax are mere Rs 15 million and Rs 0.8 million respectively. Considering that Government has more than doubled the investment criteria for SMEs in recent years, there is a clear need to accordingly revise the exemption turnover limit upward. Also, scrapping the cumbersome compliance requirements for exempted units would reduce administrative costs for SMEs and Government alike. The Government should also have a re-look at the rules prohibiting job-workers producing branded goods from claiming the small-scale exemption.
In view of the significant share of SMEs in India’s exports, our Foreign Trade Policy should preferably include SME-specific export promotion schemes.
However, in reality, many current benefits for exporters are also out of reach for SMEs; key deterrent being the entry norms that prescribe high turnover or investment criteria (e.g. EOU scheme requires minimum investment of Rs 10 million, served from India scheme requires minimum export revenues of Rs 1 million). With indirect taxes contributing 20-30 per cent of price of goods and services, there is serious need for rationalisation and reforms to ensure that the SME growth story continues.