Nitin Gadkari's mega plan for small biz

The plan includes step-wise expansion of a crucial credit guarantee net, establishment of an unprecedented number of functional clusters and increased government procurement from MSMEs.

Illustration: Uttam Ghosh/Rediff.com

Spending on micro, small and medium enterprises (MSMEs) by the government is set to shoot up as the Nitin Gadkari-led ministry prepares a plan to boost the number of new ones being registered to an unprecedented 100,000 this fiscal year.

The additional financial infusion is expected to provide a lifeline to the sector.

It has seen massive layoffs over a year, due to a continuing liquidity crisis even as industrial demand reduces.

According to the ministry, their plan includes step-wise expansion of a crucial credit guarantee net, establishment of an unprecedented number of functional clusters and increased government procurement from MSMEs.

"While GST (goods and services tax) dues are rapidly (being) cleared by the finance ministry, our existing programmes are being retooled to provide the next stage of support to small businesses," a MSME ministry official said.

Focus on jobs: According to ministry data reviewed by Business Standard, the number of new MSMEs being registered through the Prime Minister’s Employment Generation Programme (PMEGP) doubled to 73,427 in 2018-19, from 48,398 in 2017-18.

Direct employment generated as a result was 570,000, up from 387,000 the year before.

"These are sustainable employment generation, with relatively low level of exposure to business shock and high potential for growth, mostly in the rural areas," the official said.

According to a ministry study, Rs 96,000 is the mean investment currently entering a unit. On average, a unit employs 7.62 people.

Aimed at setting up micro enterprises in the non-farm sector, the PMEGP allows manufacturing units to get a loan up to Rs 25 lakh from the Centre.

The Cabinet has since approved a second dose of loan up to Rs 1 crore, on a maximum interest rate of 15 per cent a year, for units paying back in time, senior sources confirmed.

The new rules are under implementation, they added.

The ministry is also targeting the setting up of 400 MSME clusters, in both manufacturing and services, up from 98 last year. According to official statistics, the overall sector comprises nearly 63.39 million units, according to the 73rd round of the National Sample Survey (2015-16).

It had created 111 mn jobs (49.8 mn in rural areas and 61.2 mn in urban areas).

Wider credit: Gadkari has told officials to expand the total coverage under the government’s Credit Guarantee Trust for MSEs (CGTMSE) scheme to Rs 50,000 crore this financial year, from Rs 30,168 crore in 2018-19.

This is the biggest direct credit guarantee scheme being run by a ministry.

"Our credit guarantee coverage had hovered around Rs 19,000 crore (annually) for three years till 2017-18. Last year, it crossed Rs 30,000 crore.

"There was a 58 per cent increase in credit guarantee support and 65 per cent in number of beneficiaries," said the official quoted earlier.

The number of beneficiaries, currently estimated at 435,000 units, is expected to touch an estimated 600,000 by the end of 2019-20.

The ministry has also targeted at least Rs 50,000 crore worth of procurement by the government from MSMEs.

This figure was Rs 40,326 crore in 2018-19.

The government had on Friday announced quick clearance of all GST refunds due to MSMEs.

Finance Minister Nirmala Sitharaman has assured that all pending dues would be cleared within 30 days.

In future, all such dues - estimated to be as high as Rs 7,000 crore by the MSME ministry - would be cleared within 60 days of application.