Standard Operating Procedure for MSME Sector

Introduction Standard Operating Procedure for MSME Sector

The Micro, Small and Medium Enterprises sector (MSME) has been the hardest hit courtesy of the COVID-19 pandemic and its aftermath. The restrictive nationwide lockdowns and disruption in supply chains worldwide have drained the entire life out of the sector.

Demand is near to nil making it unfeasible for the enterprises to resume operations even after India has started its Unlock 1.0. With an already dwindling economy, it has become next to impossible for the MSME sector to kickstart again without State intervention.

Upward Revision of MSME Definition

The centre has responded to the same by releasing SOPS to help the distressed sector. The SOPs were approved by the Cabinet and were announced through a series of press meets followed by deliberations and press meets again. One of the many crucial developments in this regard was the widening of the ambit of the MSME sector[1].

According to the latest revision, companies with ₹50 crore investment and ₹250 crore of turnover are included under the ambit of the Medium category in the MSME Sector. This will indeed help a lot of distressed companies to avail of the benefits sanctioned for the MSME sector. If one goes back in time, this is the second revision in the definition of MSME.

The initial revision saw Finance Minister setting the cap at ₹20 crores of investment and ₹100 crores of turnover as a part of the Atmanirbhar Bharat relief package. Also, the micro-units have their caps set at a ₹1 crore investment and a turnover of ₹5 crores while the small units are limited at an investment of ₹10 crore and turnover of ₹50 crore, respectively.

Also, a huge relief has been given by the fact that the export turnover, will not be added to the total turnover of any company operating in the MSME sector.

Equity Support & Infusion

The centre has set up a ₹20,000-crore package for providing equity support to the sector. This would come as subordinate debts to those stressed MSMEs. Also, an additional ₹50,000 crores for equity infusion was given the nod by the Cabinet. The same is to be made available to the MSMEs through funds of funds.

The earlier SOPs announced by Hon’ble Finance Minister Nirmala Sitharaman to boost the MSME sector and address the fiscal needs of the same have been formally launched after approval from the standing Cabinet Committee on Economic Affairs.

This includes collateral-free loans up to 3 lakh crores for the sector. Furthermore, these loans are to be provided with no guarantee fee for a period of 4 years. Other notable announcements include the removal of global tenders for government procurements up to Rs 200 crore. This is expected to give a big boost to indigenous MSMEs and is also expected to promote the Make in India and Vocal for local campaigns.

Online Assistance

In order to provide online assistance to the sector, the government has launched the  CHAMPIONS portal[2], with a three-fold objective of :

  • Unified, one-step grievance redressal
  • Assistance for start-ups dealing with COVID-19 combat products such as PPE, Face Masks.
  • Identifying ‘SPARKS’, i.e., companies that have the potential to make it big at the National and International level.

Clearing of Dues

The Government and Public Sector has promised to repay all the existing dues to the MSME establishments within a period of 45 days. This comes as a boon to companies that often complain of delays from the state departments.

Employee Salary Revisions

As far as salary reforms for the employees in this sector are concerned, there has been a 2% rebate in the existing 12% prescribed contribution to the Provident Funds, for a period of three months.

SOP for functioning at workplaces

This being said, a strict SOP[3] has been issued, entailing out the measures to be taken at workplaces of the MSMEs. This includes:

  • Disinfection of workplaces & entire premises of the facility.
  • Mandatory thermal screening of workers, disinfection of vehicles entering premises
  • Sanitizers inaccessible areas.
  • One-hour cooldown period between two shifts.
  • One meter social distancing, wherever and whenever possible.
  • Operation of vehicles with 30-40% seating only.
  • List of nearby facilities authorized to handle COVID-19 cases to be maintained at all times.
  • Installing of Arogya Setu app is highly advised.

Critical Analysis

Though such strict restrictions have been placed on the operations of the MSME industries, the SOPs issued with regard to the revival of the sector has come as a beacon light of hope to the distressed sector. All these SOPs have been received positively by the MSME sector, to the extent that other industries are also batting for the same benefits.

For instance, small and medium-sized hospitals coming under the Union Ministry of Health have also reached out to the center for similar benefits. Arun Singhal, Special Secretary, Health Ministry quoted as follows, “As far as the benefits are concerned (to the hospitals that register under the MSME sector), the MSME ministry will decide on it”

Thus, as far as registration of medical facilities under the MSME sector is concerned, we do not have a clarity pertaining to the same and is still ambiguous.

This is still not the end of the road and the MSME ministry is working on a plethora of other initiatives such as the strengthening of Non-Banking Financial Institutions to further extend their ambit which will in turn be highly beneficiary to the sector.

This includes working out the action plans for financial lending institutions of all categories to help the MSME sector. Also, strict action against banks refusing to provide loans to the MSME sector has been promised by the Union Minister of State for Finance and Corporate Affairs, Anurag Thakur[4].

Conclusion

The center’s decision not to provide direct cash support to the sector has come under the critic radar of many leaders such as Rahul Gandhi who expressed his concerns over the same. As stated, time and again, the SOPs do promise a lot on paper, effective implementation of the same is for time to answer.

REFERENCES


[1] Cabinet approves Upward revision of MSME definition and modalities, Ministry of Micro, Small & Medium Enterprises,

[2] Handholding mechanism named “Champions” in place to assist MSMEs, Ministry of Micro, Small & Medium Enterprises, (Jun. 03, 2020)

[3]Covid-19 Standard Operating Procedure (SOP) For MSMES At Workplace, Ministry of Micro, Small & Medium Enterprises

[4] “Banks to face action if loans to MSMEs are delayed: Anurag Thakur”, THE HINDU BUSINESS LINE, (Jun. 05, 2020),

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