All About Draft MSME Policy

The Indian MSME Ministry released a draft National Policy for MSMEs. The policy proposal includes technology upgradation, competitiveness, and infrastructure development. Since 2015, the Ministry of MSME, led by Dr Prabhat Kumar, former Cabinet Secretary, has been working on an MSME policy for India. The committee submitted suggestions in 2017 January.

Role & Responsibilities of Government

DC-MSME has released a new draft for comments and suggestions by the 28th of February, 2021, for a policy consultation paper on MSMEs. With 8 specific action areas, the government wants to build an ecosystem to help the MSMEs proliferate and thrive.

Different levels of government in India play different roles when it comes to MSMEs. State governments create a policy on MSMEs that aligns and enables businesses to become MSMEs. The government develops an SOP (Standard Operating Procedures) for registering MSMEs and reviews the framework to regulate and fund the RBI, SIDBI, and other private and public lenders. This is meant to encourage competitive enterprises.

Legislation Substructures for MSMEs- An Overview

Late payment of employee dues is a common issue faced by small and medium businesses in India. After employee dues are paid, the Bankruptcy Code of 2016 states that MSME dues must take precedence over unsecured payments. MSME dues should be paid first when a firm goes bankrupt or to the NCLT (National Company Law Tribunal). The draft policy talks about facilitation councils, one in each district. This policy would help ensure that small businesses are treated fairly and get the money they are owed.

The draft says that rethinking the MSMED Act simplifies MSMEs’ entry, continuation, and exit rules and documentation procedures. This would make it easier for small and medium-sized businesses (MSMEs) to deal with regulations and increase their chances of success.

FCs at the district level can help people form state councils. These councils must make quick decisions, but many FCs need help with making decisions quickly. Co-Chairman of the CII National MSME Council and MD of Frontier Technologies, Ashok Saigal, told the Financial Express Online that FC decisions must be made rapidly and implemented without MSMEs going to court. DC-MSME did not immediately comment on this story but is expected to do so in the near future.

Access to Support for MSMEs- Everything You Should Know

Financial Support

Small businesses often find it challenging to get loans from banks as the application formats are different for every bank, and the products that fit their financing demands are based on their balance sheet or turnover instead of their expected cash flows. The draft stated that making all loan application formats the same, making products that fit their financing requirements based on anticipated cash flows, using data from GST and bank statements, and standardized scorecards instead of a balance sheet or turnover to judge their creditworthiness, will make it easier for MSMEs to get loans and use them productively.

Technological Development

What is being suggested is creating an institution that will develop research and technology specifically for MSMEs. This institution will allow studying the specific issues MSMEs face and help build their capacity through standard operating procedures, manuals, checklists and guidelines. Additionally, every district would have an MSME tool room.

Data Management

The central government establishes two vertical-specific databases in order to unify MSME data and make the government and other stakeholders use data analytics to make better decisions. The first database would be for all state and local MSME offices to use the same network for things like PAN applications, UAM registration, NOCs, clearances, etc. The second database would be easily accessible for cloud-based payments, credit, marketing, insurance, procurement, technology, training, etc.

Also Read: Impact of Government Regulations on Business

Effortless Business Progress

The draft stated that linking clusters with other important MSME centres to the country’s transport infrastructure and export terminals helps MSMEs trade internationally. A significant port manager should investigate MSMEs’ export and import issues. MSMEs must get low-cost legal help in their district for tasks that are non-judicial, like contract drafting, technical legal advice, etc., when enforcing contracts. The draft also requested a contract helpline or chat service at the national or state level.

Skill Expansion

The draft policy stated that setting up a cell would collect information from training organizations about their six-month training programmes and talk to enterprises about the skills training their employee needs. Raising awareness is integral to this policy, as many enterprises are informal businesses.

Training centres and enterprises always have a good relationship, making it challenging to match skills. Draft policy nodal centres are suggested to help MSMEs find skilled workers. In an interview with Financial Express Online, Murali Kasinath, Chief Operating Officer of the Skills India Foundation, said it would be better when the government organizes the cells in every cluster, where there are always a lot of MSMEs.

Last But Not Least
The draft stated that MSME entrepreneurs should be aligned with the Insolvency Resolution Process under the Bankruptcy Code, 2016. This would make it easier for them to leave their businesses. Also, micro-enterprises would find district-level arbitration faster and easier, and they would have the chance to appeal.

MSMEBlog discusses issues with finding suitable funding sources for MSMEs and guides them with the procedures to acquire the necessary financing. Visit MSME Blog website for more information on MSME finance.

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