Illustration by Ajay Mohanty
The government on Thursday launched the updated Credit linked Capital Subsidy Scheme (CLCSS) to allow micro, small and medium enterprises (MSMEs) access to capital.
MSME Minister Nitin Gadkari announced the government would prepare a final report on the recommendations of the U K Sinha
committee, which had been set up by the Reserve Bank of India
(RBI) to suggest expeditious ways to strengthen MSMEs, within the next eight days.
Gadkari said the CLCSS scheme would be crucial in raising MSME contribution to gross domestic product from the current 29 per cent to 50 per cent, in addition to increasing exports from the sector to 50 per cent from 40 per cent now.
The scheme provides an upfront subsidy of 15 per cent on institutional credit up to Rs 1 crore for MSMEs
in the specified 51 sub-sectors.
In February, the Cabinet Committee on Economic Affairs approved an outlay of Rs 2,900 crore for the scheme. Now, it is a demand-driven one without any upper limit on overall annual spending on the subsidy disbursal, a senior official said. In the relaunched scheme, there is an additional 10 per cent subsidy for SC-ST entrepreneurs while special provisions have been made for 117 'aspirational' districts, hill states and the northeastern region.
Gadkari also said a committee was being set up under the MSME secretary to look into the issue of delayed payments. The finance ministry estimates that public sector undertakings owe MSMEs
above Rs 48,000 crore.
The government is brainstorming ways to improve the TReDS (Trade Receivables Discounting System) platform and the online bill discounting platform, which helps MSMEs
raise funds by selling their trade receivables to corporates. Suggestions include expanding the number of exchanges allowed on TReDS and connecting it with the government e-marketplace platform, the government's chief public procurement portal.
While the government has already notified that all companies registered under the Companies Act, 2013, with a turnover of over Rs 500 crore, along with the Central Public Sector Enterprises (CPSEs), shall be required to get themselves on the platform, only 27 CPSEs and about 750 corporates have registered, according to the official data. Last month, the Centre announced a 30-day window for all pending goods and services tax (GST) dues owed to MSMEs to be cleared, apart from easier borrowing norms and wider credit coverage.
The next set of government reforms will come as part of the implementation of the U K Sinha
committee report, said a senior MSME department official. The committee had suggested a Rs 5,000-crore stressed asset fund for domestic MSMEs hurt by demonetisation, the GST and an ongoing liquidity crunch. The committee had pointed out such a fund could work in tandem with the RBI-mandated restructuring schemes or banks-led NPA revival solutions for MSMEs.
On Thursday, Gadkari said the finance and MSME secretaries would finalise the report on the recommendations within the next week. The government will seek to implement the recommendations within 15 days. The RBI committee had also flagged the current practice of MSMEs having to register multiple times with various entities such as the Udyog Aadhaar portal, the GSTN and the NSIC.
It suggested that PAN numbers be made a 'Unique Enterprise Identifiers' for procurement, availing government sponsored benefits, and other purposes.