2014 - Year end review of Indian MSME sector

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SME Times News Bureau | 26 Dec, 2014
The micro, small and medium enterprise (MSME) sector in India is diverse in terms of its size, levels of technology employed and range of products and services produced. Starting from grass root village Industries, the products from the sector spans to auto components, micro-processors, electronic components and electro-medical devices. MSMEs have shown constant growth rate of over 10 percent in recent years much ahead of the large-scale corporate sector. This sector contributes 8 percent of the country's GDP, 45 percent of the manufactured output and 40 percent of its exports. The MSMEs provide employment to over 80 million persons through over 36 million enterprises producing over six thousand products.

India is one amongst very few countries which has a legal framework for the MSME Sector in the form of MSMED Act 2006 which has established provisions under which issues like public procurement and delayed payments are addressed.

'Make in India' campaign to get Indian companies as well as global firms to invest and partner in the manufacturing sector is a well drawn out concept and is the most relevant for India's MSMEs. 'Make in India' campaign can attract the foreign MNCs to bring in their investment, set up venture/angel funds to take advantage of the inherent depth of the MSME Sector in terms of range of products and services, marketing networks and the ability to grow fast. Another advantage in Indian MSME Sector the foreign partners would experience is that production process in this sector is already underway. The various networks required for undertaking the production process are already established. The foreign MNC is just required to bring in investment and technical know-how to achieve excellence in these areas.

In order to enhance the capabilities of MSMEs, Ministry of MSME has been implementing a number of programs and schemes in the areas of finance, infrastructure, technology, marketing and skill development to address the problems confronting the sector.

The major achievements under various programmes and schemes during 2014-15 are as follows:

Procurement Policy

The Government of India notified Public Procurement Policy for MSEs, vide Order dated 23.3.2012 (effective from 1st April, 2012), for goods produced and services rendered by Micro & Small Enterprises (MSEs). The policy mandates that all the Central Ministries / Departments / CPSUs shall procure minimum of 20 percent of their annual value of goods / services required by them from Micro and Small Enterprises. Further, policy has earmarked a sub-target of 4 percent procurement out of this 20 percent from MSEs owned by SC / ST Entrepreneurs. The policy would become mandatory with effect from 1.4.2015.

The policy has been circulated to all the Central Ministries / Departments / CPSUs for successful and effective implementation and the policy along with other related documents is available on the office website. All the Chief Ministers of State Governments have also been requested by the then Minister for MSME, to formulate similar policy for Micro and Small Enterprises in their States as per the provisions in MSMED Act, 2006. Queries / doubts raised by the Ministries / Departments / CPSUs for implementation of the policy are clarified from time to time. According to available data, 37 CPSUs have made procurement, more than 20 percent from MSEs in 2013-14. For effective implementation of the Policy, Secretary MSME took one-to-one meetings with 10 CPSUs and Railway Board.
For developing MSEs Vendors, all the Ministries / Departments / CPSUs have been requested to organize Vendor Development Programmes (VDP) and buyer-seller meets between MSE- suppliers and government- procuring agencies. In 2013-14, 56 CPSUs organised 1007 VDPs for MSEs. The Office of Development Commissioner (MSME) through its field offices i.e. Micro, Small and Medium Enterprises â Development Institutes has planned for the year 2014-15 to organize over 55 National Vendor Development Programmes and 351 State Vendor Development Programmes throughout the country in order to develop MSE vendors with a budget allocation of Rs 5.00 crore for 2014-15.

MSE - Cluster Development Programme

The Ministry of MSME has adopted the cluster approach for holistic development of micro and small enterprises in a cost effective manner. Soft Interventions(such as diagnostic study, capacity building, marketing development, export promotion, skill development, technology upgradation, organizing workshops , seminars, training, study visits, exposure visits, etc.) , Hard intervention (setting up of common Facility Centres) and infrastructure upgradation (create/ upgrade infrastructural facilities in the existing industrial/ clusters of MSEs).

A total of 848 interventions in various clusters spread over 28 States and one UTs in country have so far been taken under the programme for Diagnostic study, soft and hard interventions. The efforts under the scheme are focused on covering of more and more clusters from all States / UTs. So far sanctions of Rs. 41.50 crore have been issued till 30th November, 2014 during the current financial year under MSE-CDP. To ensure transparency and speedy implementation of MSE-CDP, online application system has already been started from 1st April 2012.

National Manufacturing Competitiveness Programme

The National Manufacturing Competitiveness Programme (NMCP) for the MSMEs, aims at enhancing the competitiveness of enterprise in this sector. There are various components of the NMCP, which have been approved and are available for MSMEs. These are:

Lean Manufacturing Competitiveness Scheme (LMCS) for MSMEs
Design Clinics Scheme for design expertise to MSMEs manufacturing sector
Marketing Assistance and Technology Upgradation Scheme for MSMEs
Enabling manufacturing sector to be competitive through Quality Management Standards (QMS) and Quality Technology Tools (QTS).
Technology of Quality Upgradation Support for MSMEs
Promotion of Information and Communication Technology (ICT) in MSME sector.
Building Awareness on Intellectual Rights for MSMEs
Scheme for Providing Support for "Entrepreneurial and Managerial Developments of SMEs through Incubators".

Prime Minister's Employment Generation Programme (PMEGP)

A national level credit linked subsidy scheme, namely, 'Prime Minister's Employment Generation Programme (PMEGP)'was introduced in August 2008 by merging erstwhile PMRY and REGP schemes of this Ministry during the four terminal years of XI plan (2008-09 to 2011-12) for generating an estimated 37.38 lakh additional employment opportunities. An outlay of Rs. 8060 crore including Rs. 7800 crore as margin money subsidy for PMEGP in the XII Plan has been approved by the Planning Commission. Since inception in 2008-09 to 2013-14, 2.48 lakh units have been assisted with margin money subsidy of Rs. 4745.15 crore to create employment for an estimated 22.29 lakh persons in the country. Under this programme, financial assistance is provided for setting up of micro enterprises each costing upto Rs.10 lakh in service sector and Rs.25 lakh in manufacturing sector. The assistance is provided in the form of subsidy upto 25 percent (35 percent for Special category including weaker sections) of the project cost in rural areas while it is 15 percent (25 percent for Special category including weaker sections) for urban areas. For 2014-15 an outlay of Rs 1418.28 crore has been earmarked for the scheme. The Guidelines of the schemes are available on the website of the Ministry of MSME.

Skill Development

Skill Development has been taken up as a high priority area by the Ministry through various measures like enhancing the training capabilities of the Tool Rooms, MSME Development Institutes and other organizations under Ministry of MSME. The range of training programme is enormous, covering grass root level programmes related to traditional rural industries/activities to high-end, high tech programmes on CNC machines and other high end technologies. The agencies under the Ministry of MSME conducted programmes for skill development for nearly 5.51 lakh trainees during the year 2013-14 and the target set for 2014-15 is 5.20 lakh persons. The Ministry of MSME provides all such trainings for SCs/STs free of cost. Special programmes are organized through MSME-DIs for weaker sections of the society viz., SC/STs, women and physically handicapped free of cost besides providing a monthly stipend of Rs. 125/- per week per candidate during the entire period of training.

Credit Guarantee Scheme

The Government is implementing the Credit Guarantee Fund Scheme for Micro and Small Enterprises with the objective of facilitating flow of credit to the MSEs, particularly to micro enterprises by providing guarantee cover for loans upto Rs.100 lakh without collateral / third party guarantees. For making the scheme more attractive to both lenders as well as borrowers, several modifications have been undertaken which, inter alia, include: (a) enhancement in the loan limit to Rs.100 lakh; (b) enhancement of guarantee cover from 75 percent to 85 percent for loans upto Rs. 5 lakh; (c) enhancement of guarantee cover from 75 percent to 80 percent for MSEs owned/operated by women and for loans in North Eastern Region (NER); (d) reduction in one-time guarantee fee from 1.5 percent to 1 percent and annual service charges from 0.75 percent to 0.5 percent for loans upto Rs. 5 lakh and (e) reduction in one-time guarantee fee for NER 1.5 percent to 0.75 percent etc.

As on 30th November, 2014, cumulatively, 16,89,439 proposals have been approved for guarantee cover for a total sanctioned loan amount of Rs. 84026.76 crore.
Credit Linked Capital Subsidy (CLCS) Scheme for Micro and Small Enterprises

The scheme was launched in October-2000 and revised from 29.9.2005. The revised scheme aims at facilitating technology up-gradation of Micro and Small Enterprises (MSEs) by providing 15 percent capital subsidy (limited to maximum Rs. 15 lakhs) for purchase of Plant & Machinery. Maximum limit of eligible loan for calculation of subsidy under the scheme is Rs. 100/- lakhs. Presently, 48 well established and improved technologies/sub sectors have been approved under the Scheme.

The CLCS Scheme is implemented through 10 nodal banks/agencies including SIDBI, NABARD.

Marketing Assistance Scheme

The main objectives of Marketing Assistance Scheme are to enhance the marketing competitiveness of the micro, small and medium enterprises to provide them a platform for interaction with the individual / institutional buyers, to update them with prevalent market scenario and to provide them a forum for redressing their problems. The National Small Industries Corporation Ltd. (NSIC), a public sector undertaking under the administrative control of this Ministry, acts as a facilitator to promote marketing efforts and enhance the competency of the MSMEs for capturing the new market opportunities by way of organizing / participating in various domestic & international exhibitions/trade fairs, buyers-seller meets, intensive campaigns/seminars and other marketing promotion activities.

An amount of Rs.14.00 crore has been allocated in the Budget Estimates for 2014-15 for this activity which is targeted to support participation in international and domestic exhibitions/trade fairs and buyer-seller meets and marketing campaigns.

Performance and Credit Rating Scheme

The National Small Industries Corporation Ltd. (NSIC), a public sector undertaking under the Ministry of MSME has been implementing "Performance & Credit Rating Scheme" for micro and small enterprises (MSEs) on behalf of the Government. The scheme is being operated through seven accredited rating agencies i.e. CRISIL, SMERA, ONICRA, CARE, FITCH, ICRA and M/s Brickworks. The scheme is aimed to create awareness amongst micro, small & medium enterprises about the strengths and weakness of their existing operations and to provide them an opportunity to enhance their organizational strengths and credit worthiness. The rating under the scheme serves as a trusted third party opinion on the capabilities and creditworthiness of the micro, small & medium enterprises. An independent rating by an accredited rating agency has a good acceptance from the Banks/Financial Institutions, Customers/Buyers and Vendors. Under this Scheme, rating fee to be paid by the micro, small & medium enterprises is subsidized for the first year only and that is subject to maximum of 75 percent of the fee or Rs. 40000/-, whichever is less.

BE for the scheme for 2014-15 is Rs. 70.00 crore and it is targeted to support rating of 16000 MSEs during the year.

International Cooperation Scheme

International Cooperation(IC) Scheme is being implemented by the Ministry of MSME since 1996. Technology infusion and /or upgradation of Indian micro, small and medium enterprises (MSMEs), their modernization and promotion of their exports are the important objectives of the scheme.
The Scheme encompasses 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 MSMEs.

BE for 2014-15 is Rs. 5.00 crore and it is expected that 650 entrepreneurs would be facilitated to participate in 50 international events.

Assistance to Training Institutions

Under the scheme assistance is provided to existing and new training Institutions for establishment of Entrepreneurship Development Institute (EDI) and strengthening of their training infrastructure on a matching basis. Ministry provides assistance on a matching basis, not exceeding 50 percent of the project cost or Rs. 150 lakh whichever is less (90 percent or Rs. 270 lakh of the project cost whichever is less, for State level EDIs in Union Territories of Andaman & Nicobar and Lakshadweep Islands) excluding cost of land and working capital. The balance 50 percent of the matching contribution (10 percent for State level EDIs in Union Territories of Andaman & Nicobar and Lakshadweep Islands) should come from the concerned Institute, State/UT Government, public funded institution(s), NGOs/Trusts/ Banks/Companies/ Societies/ Voluntary organizations etc.

The assistance would be for creation of infrastructure. The land will have to be provided by the State Government or any other institution or by the applicant. Financial assistance would be for construction of building, purchase of training aids/equipments, office equipments, computers and for providing other support services e.g. libraries/data bases etc. The costs of land, construction of staff quarters etc. would not qualify for calculation of matching grant from the Central Government. All the proposals under this scheme are required to be recommended by and routed through the concerned State/UT Government.

A new component of training has been added under this scheme, i.e. assistance would be provided under the scheme to following Training Institutions, for conducting Entrepreneurship Development Programmes (EDPs) and Entrepreneurship cum Skill Development Programmes (ESDPs) and Training of Trainers (ToTs) programmes in the areas of Entrepreneurship and/or Skill Development:

National level EDIs (including branches),
Training Institutions established by Partner Institutions (PIs) of national level EDIs,
Training/Incubation centers of NSIC,
Training cum Incubation Centers (TICs) set up by Franchisees of NSIC
Other Training institutions with proven professional competency, capacity and experience, approved under the scheme.

Entrepreneurship Skill Development (ESDP) training would normally be of 100 to 300 hours (1 to 3 months). Entrepreneurship Development (EDP) training would be of 72 hours (2 weeks) and Trainer's Training for 300 hours.

BE for 2014-15 is Rs. 132 crore and it is targeted to provide financial assistance to existing/new EDIs and to train 1,37,885 persons.

Udyami Helpline

A 'Udyami Helpline' (a Call Centre for MSMEs) with toll-free number 1800-180-6763 is in operation to provide information, support, guidance and assistance to first generation entrepreneurs as well as other existing entrepreneurs to guide them regarding various promotional schemes of the Government, procedural formalities required for setting up and running of the enterprise and help them in accessing Bank credit etc. The Udyami Helpline has become a useful tool for entrepreneurs and general public to gather information about various schemes of the Ministry.

Thrust on Khadi & Village Industry

It is a matter of great pride that the sale of Khadi and Village Industry products has recorded a quantum jump in sales after the appeal of the Hon'ble Prime Minister in his Radio address to the nation 'Mann ki Baat' on October 03, 2014 "to buy at least one 'Khadi' product for use in their day-to-day life. If you buy Khadi, you light the lamp of prosperity in the house of a poor person". This has re-energised the Khadi sector which has resulted in increase of sales at Khadi Gramudyog Bhawan, New Delhi by 125 percent compared to previous year sales. This was acknowledged by the Hon'ble Prime Minister on 02 November 2014 in the same programme. The appeal by the Hon'ble Prime Minister has evoked emotional response amongst the people more so the youth of the country which has resulted in a new lease of life to Khadi sector. Khadi & Village Industries Commission (KVIC) has also risen to the occasion by renovating the Khadi Gramudyog Bhawan, New Delhi and ensuring that a wide variety of Khadi and Village Industry products are showcased to cover all age groups, all sections of textile market, such as Designer wear, home furnishing, upholstery, woolens including Pashmina, bridal wear, wide range of sarees from across the country, office wear, casual wear, children wear, ready to use and readymade dresses. In addition a wide range of Village Industry products such as Handmade Paper & products, Honey, Natural soaps, Incence sticks, Herbal Beauty & Health care products, Jewellery and gift items and decorative, household artefacts, household grocery items which are ready to eat and organic farm products.

In order to give a Youth Centric focus, KVIC has extended a special discount for students on the occasion of International Youth Day and Gandhi Jayanthi. KVIC is also taking Khadi to schools, colleges, universities, IITs, ITIs and other educational/ technical institutions by organizing college fest, fashion shows, awareness programmes and competitions to attract the youth.

In addition, KVIC has been for a long time supplier of Khadi products for key sectors like Railways and Defence and with the opening of Defence sector for domestic manufacturers and suppliers, KVIC is in the process of gearing up to explore this sector aggressively. (Source: PIB)