The government has launched a Credit-Linked Capital Subsidy Scheme (CLCSS) for Micro, Small and Medium Enterprises (MSMEs). MSMEs currently contribute 29% to the Gross Domestic Product (GDP).
The CLCSS scheme would help in raising the MSMEs contribution to 50% of GDP. The scheme also aims at increasing the MSMEs share of exports to 50% from the present 40%.
The scheme also provides for an upfront subsidy of 15% on the grant of institutional credit up to Rs 1 crore in the case of MSMEs in specified 51 sub-sectors.
The cabinet committee had initially sanctioned the scheme with an outlay of Rs 2,900 crore. However, the scheme is now demand-driven without any upper limit on overall annual spending on the subsidy disbursal.
There is also an additional 10% subsidy grant for SC-ST entrepreneurs. Further, there are special provisions for 117 ‘aspirational’ districts, hill states and the northeastern region.
A committee has also been set up to look into the issue of delay in payments to MSMEs. An estimated of Rs 48,000 crore is outstanding as dues from various public sector undertakings to MSMEs.
The government has made efforts to improve the TReDS (Trade Receivables Discounting System) platform and the online bill discounting platform. TReDS helps MSMEs in raising funds by selling their trade receivables to corporates.
A number of suggestions have been made to expand the number of exchanges allowed on TReDS and connecting them with the government e-marketplace platform.
The government has mandated that all companies with a turnover of over Rs 500 crore shall be required to get themselves on the TReDS platform. The requirement applies to all companies registered under the Companies Act, 2013 and Central Public Sector Enterprises (CPSEs). However, only 27 CPSEs and about 750 corporates have registered so far on TReDS.
Among other benefits to MSMEs, the government had announced a 30-day window for clearing all pending Goods and Services Tax (GST) dues to MSMEs.
The U K Sinha committee has proposed several reforms for MSMEs. The committee had suggested a Rs 5,000-crore stressed asset fund for reviving the MSME sector. The RBI had suggested the fund along with the revival of bank NPAs of MSMEs.
The finance and the MSME secretaries are due to finalise the U K Sinha committee within the next week. The government seeks to implement the recommendations within 15 days.
The committee also highlighted the concern of MSMEs having to register with various entities such as the Udyog Aadhaar portal, the GSTN and the NSIC. The committee has suggested making PAN as a ‘Unique Enterprise Identifiers’ for procurement, availing government-sponsored benefits, and other purposes.
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