The Micro, Small, and Medium Enterprises Development (MSMED) Act, 2006 is a comprehensive legislation in India aimed at promoting and developing the Micro, Small, and Medium Enterprises (MSME) sector in the country. The act provides for various provisions and policy measures to support the growth and sustainability of MSMEs. Here are the key features of the MSMED Act, 2006 and the policy package for MSMEs:
- Definition of MSMEs: The MSMED Act classifies enterprises into two categories based on their investment in plant and machinery or equipment:a. Manufacturing Enterprises:
- Micro Enterprises: Investment in plant and machinery up to INR 25 lakhs.
- Small Enterprises: Investment in plant and machinery between INR 25 lakhs and INR 5 crores.
- Medium Enterprises: Investment in plant and machinery between INR 5 crores and INR 10 crores.
- Micro Enterprises: Investment in equipment up to INR 10 lakhs.
- Small Enterprises: Investment in equipment between INR 10 lakhs and INR 2 crores.
- Medium Enterprises: Investment in equipment between INR 2 crores and INR 5 crores.
- Credit Facilitation: The act mandates banks and financial institutions to provide collateral-free credit to MSMEs. It encourages banks to give priority to MSMEs in lending decisions and offers various credit schemes at concessional interest rates.
- Delayed Payment Protection: The MSMED Act ensures timely payment to MSMEs for the goods and services they provide. If a buyer fails to make payment to an MSME within the agreed-upon period, the buyer is liable to pay compound interest with monthly rests to the supplier.
- Technology Upgradation: The act promotes technological advancement and modernization of MSMEs. It encourages MSMEs to adopt energy-efficient and cleaner production methods.
- Facilitation of Marketing Support and Export Promotion: The government provides marketing assistance and support to MSMEs to enhance their competitiveness in domestic and international markets. Various export promotion schemes are made available to MSMEs to increase their export potential.
- Cluster Development: The act encourages the formation of MSME clusters, where enterprises operating in the same industry or related fields can collaborate and share resources, knowledge, and technology for mutual benefit and growth.
- Assistance for Entrepreneurial and Skill Development: The government offers training and skill development programs to entrepreneurs and employees working in MSMEs to improve their technical and managerial capabilities.
- Support for Women and Minority Entrepreneurs: The act promotes the participation of women and minority communities in the MSME sector by providing specific incentives and support programs.
- Grievance Redressal: The MSMED Act establishes Micro and Small Enterprises Facilitation Councils to address disputes related to delayed payments, other issues concerning MSMEs, and to facilitate their growth.
The policy package for MSMEs based on the MSMED Act, 2006, aims to create a favorable business environment for MSMEs, enhance their competitiveness, boost job creation, and foster inclusive economic growth. It acknowledges the importance of the MSME sector as an engine of economic development and addresses various challenges faced by these enterprises in their journey towards growth and sustainability.