Centre raises MSP of 17 kharif crops; further revises MSME definition

The Cabinet also approved the Rs 20,000 crore subordinate debt announced for two lakh MSMEs which are NPA or are stressed
The Cabinet Committee on Economic Affairs (CCEA) on Monday approved reclassification of medium scale companies as those with Rs 50 crore as investments and Rs 250 crore as turnover, up from Rs 20 crore and Rs 100 crore, respectively.


This comes weeks after Union Finance Minister Nirmala Sitharaman expanded the definition of medium, small manufacturing enterprises (MSMEs) while announcing the Rs 20-trillion Atmanirbhar Bharat package.


The government also raised the minimum support price (MSP) of 17 kharif crops in the range of 2-7.5 per cent year-on-year on the day India got its first monsoon shower. The increase in MSP was among the lowest in last five years for many crops. The new prices would be 50-83 per cent more over the cost of production, agriculture minister Narendra Tomar said. The Centre also extended the interest subvention scheme for crop loans for three months till August 31.


The move to increase the turnover limit for medium units to Rs 250 crore took into account the rising cost of businesses and is expected to bring a much larger number of companies into the MSME fold. The government clarified proceeds from exports will not be counted in the turnover limit for any MSME. The new definition is expected to go live from July 1.


Sharad Kumar Saraf, president of the Federation of Indian Exports Organizations, said the move will bring automation to certain processes that are required for competitive manufacturing.

The Cabinet approved provisioning of Rs 20,000 crore as subordinate debt to provide equity support to almost 200,000 stressed MSMEs and proposed equity infusion of Rs 50,000 crore for units through a Fund of Funds, as part of the roadmap to implement the package announced for the sector.


The equity infusion is likely to help MSMEs expand capacity and eventually get listed in the markets of their choosing. Nitin Gadkari, minister for road transport and MSME, clarified the government would now buy equity stakes up to 15 per cent in MSMEs that choose to get listed as public entities. Once the listed price of the firm's stock gathers strength to a certain degree, the government would divest its investment, allowing the money to be given to another MSME, the Gadkari said.


The Cabinet also cleared a scheme under which street vendors can avail a working capital loan of up to Rs 10,000, repayable in monthly instalments in the tenure of one year. The scheme — PM SVANidhi — is likely to benefit about 5 million.


Prime Minister Narendra Modi said: “Our government has fulfilled its promise to our hardworking farmers of fixing the MSP at a level of at least 1.5 times of the cost of production. To give impetus to the campaign for a self-reliant India, we have not only changed the definition of MSMEs, but have also approved several proposals to revive it. This will benefit the small and medium scale industries, as well as create huge employment opportunities.”


Simon George, president, Cargill India, said: “The move (on MSP) would give adequate assurance to farmers in these difficult times.” However, CARE Ratings chief economist Madan Sabnavis said announcing MSP is one thing and ensuring that maximum farmers benefit from it is completely different. "Unless there is large scale government procurement in most crops at MSP, these don't make much of a difference," he said.


Announcing the extension of the deadline for interest-subvention, Tomar said Rs 28,000 crore was spent on the scheme last year. Farmers are given 2 per cent interest subvention after which loans to them draw 7 per cent interest rate. Those who pay their dues on time are given 3 per cent further subvention after which the interest rate comes down to 3 per cent.


Tomar said Kisan Credit Card covers about 66.5 million farmers. About 25-30 million farmers who were still left out are being brought under the scheme, he said. Almost Rs 4 trillion is disbursed to farmers under the scheme, he said, adding that once all farmers are covered, Rs 2 trillion more will go to the farming community.


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