Namrata Kath Hazarika | 06 Mar, 2012
Indian Micro, Small and Medium Enterprises (MSMEs) have urged the government to provide access to adequate credit, which is imperative for survival and growth of SME manufacturing.
The Federation of Micro, Small and Medium Enterprises (FISME) in its budget recommendation to the Finance Ministry has said that venture capital and private equity funds are badly needed by the SME sector to start new ventures and scale up existing ones.
"This segment needs to be expanded fast not only for innovative and high-tech start-ups but also for conventional industries," it added.
Also, this sector requires particular banks that are SME dedicated. "Large SME dedicated banks may be encouraged to be set up by domestic and foreign players with deep pockets and experience in hand holding MSME borrowers. This step will create much needed competition and nudge the existing bankers also to aggressively lend to MSMEs," FISME opined.
Further, it said that securitization of trade receivables may be introduced to allow bond market to develop and attract funds in large volumes and at concessional rates all in the interest of MSMEs.
In addition, FISME mentioned that Non-Banking Financial Companies (NBFCs) can help to provide finance to the micro and small enterprises, but they need to be actively promoted through supportive policies.
It also suggested that the ongoing process for an SME exchange needs liquidity to stay afloat. So, some fiscal incentives could be extended to Mutual Funds/ FIs investing in these exchanges.
On direct taxes, FISME proposed that accelerated depreciation should be allowed to MSMEs on the purchase of production machinery and R&D equipment.
In fact, profit ploughed by the SMEs into business could also be exempted from levy of income tax, and to encourage SMEs to move to the Company format, slab wise taxes in line with individuals and proprietorship firms. In addition, interest should be allowed on late payment to MSMEs and tax concession may be allowed to large enterprises on purchases from MSMEs, the association also said.
On indirect taxes, the industry body also demanded for refunding central excise duty and interest on central excise duty (CED) on supplementary invoices.
On service taxes, it urged the government to introduce GST as this is one reform, which the MSME sector is waiting anxiously.
FISME added that all ongoing safeguard and anti-dumping duties levied to protect large monopoly domestic producers with scant regard to the interests of MSME industrial consumers whose competitiveness is adversely affected actually need to be reviewed.
