New SME definition in the pipeline: Anand Sharma

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Saurabh Gupta | 18 Aug, 2012
In a bid to help small and medium enterprises (SMEs) fully garner the benefits of its decision to allow foreign single-brand retail firms to operate in the country, the government is fine-tuning the definition of SMEs, said Union Minister for Commerce & Industry and Textiles, Anand Sharma on Friday, in New Delhi.

"That's under process," Sharma told SME Times, when asked about the development in this regards.

Earlier, the minister had said that the government was "seriously" considering to fine-tune the definition of SMEs for giving a boost to single brand retail in the country.

"The Department of Industrial Policy and Promotion (DIPP) is working on the issue," Sharma said on the sidelines of the Hastkala Conclave in the national capital on Friday.

A commerce industry official also told our correspondent that a new SME definition would be a reality when the DIPP finalizes the issue.

After the government's decision to allow FDI in single brand retail, particularly Swedish firm IKEA's raising the issue that once a foreign firm starts sourcing from an SME, the profit and size of the SME might grow rapidly, and as a result it might fall outside the present definition of SME, taking away the benefits given to the sector under a range of government schemes.

The minister had earlier emphasised that any firm cannot be "punished" for performing well. "The concerned departments will discuss it. What I am saying is you cannot punish an SME for performing well. This is the issue that is being discussed," Sharma said earlier.

"We have to remember that policy evolution is a continuous process. The policy has just been put in place and now we are learning about it," Sharma added.

When SME Times raised the issue in its daily poll, seeking opinion about changing the current SME definition, over 75 percent of participants said they are in favour of a new definition.

The SME sector is considered as the backbone of India economy contributing to 45 percent of the industrial output, 40 percent of exports, employing 60 million people, create 1.3 million jobs every year and produce more than 8000 quality products for the domestic and international markets.

In accordance with the provision of Micro, Small & Medium Enterprises Development (MSMED) Act, 2006, in manufacturing sector, any unit having investment in plant & machinery up to Rs 25 lakh is consider as Micro; more than Rs. 25 lakh but does not exceed Rs. 5 crore is Small; and having investment of more than Rs. 5 crore but does not exceed Rs. 10 crore is Medium Enterprises.