Executive Summary:
Bill No. 85 of 2015, introduced in Lok Sabha on April 20, 2015, proposes to amend the Micro, Small and Medium Enterprises Development Act, 2006. The amendments aim to revise the investment limits for classifying micro, small, and medium enterprises to reflect changes in price indexes, input costs, and the evolving role of MSMEs in global value chains. The Bill also seeks to empower the Central Government to periodically revise investment limits via notification.
Key Points / Main Content:
Amendment to Micro, Small and Medium Enterprises Development Act, 2006:
* Short Title: The amending Act is called the Micro, Small and Medium Enterprises Development Amendment Act, 2015.
* Commencement: The Act will come into force on a date to be notified by the Central Government in the Official Gazette.
Changes to Section 7:
* Revised Investment Limits for Manufacturing Enterprises (Clause a of Subsection 1):
* Micro-enterprise: Investment limit increased from twenty-five lakh rupees to fifty lakh rupees.
* Small enterprise: Investment in plant and machinery should be more than fifty lakh rupees but does not exceed ten crore rupees.
* Medium enterprise: Investment in plant and machinery should be more than ten crore rupees but does not exceed thirty crore rupees.
* Revised Investment Limits for Service Enterprises (Clause b of Subsection 1):
* Micro-enterprise: Investment limit increased from ten lakh rupees to twenty lakh rupees.
* Small enterprise: Investment in equipment should be more than twenty lakh rupees but does not exceed five crore rupees.
* Medium enterprise: Investment in equipment should be more than five crore rupees but does not exceed fifteen crore rupees.
* Empowerment of Central Government (after Subsection 1):
* The Central Government may vary the investment limits by notification, up to a maximum of three times the limits specified in clauses a and b of subsection 1.
* Changes to Subsection 9:
* The criterion of investment is changed to the criterion of higher investment.
* Micro or tiny enterprises or the village enterprises can be classified not only as small enterprises but also as medium enterprises.
Amendment to Section 29:
* Subsection 3 is amended to replace the reference from section 9 to subsection 1A of section 7 and section 9.
Statement of Objects and Reasons:
* The amendment is necessary due to significant increases in the price index and input costs since 2006.
* The changes align with the emerging role of MSMEs in domestic and Global Value Chains.
* Revising investment limits by notification will facilitate timely action due to inflation and dynamic market situations.
Delegated Legislation:
* The Central Government is empowered to vary investment limits relating to the classification of MSMEs by notification.
* The matters are of procedure or administrative details, making it impractical to include them directly in the Bill.
Impact Analysis:
Central Government:
* Impact: Given authority to adjust investment limits for MSMEs via notification, allowing for quicker responses to economic changes.
* Action Required: Establish procedures for evaluating and adjusting investment limits, and issue notifications as needed.
Micro, Small, and Medium Enterprises:
* Impact: Potential for reclassification based on new investment limits, affecting eligibility for various government schemes and benefits. Opportunity for growth and access to higher levels of the value chain.
* Action Required: Assess current investment levels and prepare for potential reclassification.
Related Industries and Stakeholders:
* Impact: Adjustments in MSME classifications can influence supply chains, investment patterns, and overall economic activity.
* Action Required: Monitor changes in MSME classifications and adapt business strategies accordingly.
Key Entities Referenced
Micro, Small and Medium Enterprises Development Act, 2006: The principal Act being amended by this Bill, related to the development and classification of micro, small, and medium enterprises.
Lok Sabha: The lower house of the Parliament of India where the Bill was introduced.
Parliament: The legislative body enacting the amendment to the Micro, Small and Medium Enterprises Development Act, 2006.
Central Government: The government body empowered to appoint the date the Act comes into force and to vary investment limits for micro, small, and medium enterprises.
Official Gazette: The official publication where the Central Government will announce the commencement date of the Act.
MSMEs: Refers to Micro, Small and Medium Enterprises, which are the subject of the policy and its amendments.
Global Value Chains: The international production networks in which MSMEs are increasingly participating.
Kalraj Mishra: The individual who presented the Bill.
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Separate paging is given to this Part in order that it may be filed as a separate compilation.
LOK SABHA
————
The following Bill was introduced in Lok Sabha on 20th April, 2015:—
BILL NO. 85 OF 2015
A Bill to amend the Micro, Small and Medium Enterprises Development Act, 2006.
BE it enacted by Parliament in the Sixty-sixth Year of the Republic of India as follows:—
1. (1) This Act may be called the Micro, Small and Medium Enterprises Development Short title and
(Amendment) Act, 2015. commencement.
(2) It shall come into force on such date as the Central Government may, by notification
in the Official Gazette, appoint.
27 of 2006. 2. In the Micro, Small and Medium Enterprises Development Act, 2006 (hereinafter Amendment
of section 7.
referred to as the principal Act), in section 7,—
(a) in sub-section (1),—2 THE GAZETTE OF INDIA EXTRAORDINARY [PART II—
(i) in clause (a),—
(A) in sub-clause (i), for the words “twenty-five lakh rupees”, the
words “fifty lakh rupees” shall be substituted;
(B) for sub-clauses (ii) and (iii), the following sub-clauses shall be
substituted, namely:—
“(ii) a small enterprise, where the investment in plant and
machinery is more than fifty lakh rupees but does not exceed ten
crore rupees;
(iii) a medium enterprise, where the investment in plant and
machinery is more than ten crore rupees but does not exceed thirty
crore rupees;”;
(ii) in clause (b),—
(A) in sub-clause (i), for the words “ten lakh rupees”, the words
“twenty lakh rupees” shall be substituted;
(B) for sub-clauses (ii) and (iii), the following sub-clauses shall be
substituted, namely:—
“(ii) a small enterprise, where the investment in equipment is
more than twenty lakh rupees but does not exceed five crore
rupees;
(iii) a medium enterprise, where the investment in equipment
is more than five crore rupees but does not exceed fifteen crore
rupees;”;
(b) after sub-section (1), the following sub-section shall be inserted, namely:—
“(1A) The Central Government may, by notification, vary the investment
limits, which shall not exceed thrice the limits, specified in clauses (a) and (b) of
sub-section (1) for the purposes of development of micro, small and medium
enterprises.”;
(c) in sub-section (9),—
(i) for the words “criterion of investment”, the words “criterion of higher
investment” shall be substituted;
(ii) for the words “as part of small enterprises”, the words “as part of small
and medium enterprises” shall be substituted.
Amendment 3. In the principal Act, in section 29, in sub-section (3), for the words and figure “under
of section 29. section 9”, the words, brackets, figures and letter “under sub-section (1A) of section 7,
section 9” shall be substituted.SEC. 2] THE GAZETTE OF INDIA EXTRAORDINARY 3
STATEMENT OF OBJECTS AND REASONS
The Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 was
enacted to address policy issues affecting MSMEs as well as to classify the enterprises as
micro, small or medium based on their investments in plant and machinery/equipments. The
existing limits under the MSMED Act were fixed in 2006. Since then, there has been a
significant increase in the price index and cost of inputs. There has also been a change in the
business environment with many MSMEs becoming part of the domestic and Global Value
Chains. Hence, it is proposed to amend the MSMED Act to enhance the existing limit for
investment in plant and machinery considering changes in price index and cost of inputs
consistent with the emerging role of the MSMEs in various Global Value Chains.
2. The MSMED Act, at present, states that the Central Government may, while
classifying any class or classes of enterprises, vary, from time to time, the criterion of investment
and also consider criteria or standards in respect of employment or turnover of the enterprises.
These provisions enable Central Government to classify micro or tiny enterprises or the
village enterprises as part of small enterprises. The current proposal is to enable Central
Government to classify micro or tiny enterprises or the village enterprises not only as small
enterprises but also as medium enterprises. This may also be based on criteria of higher
investment and also on consideration of criteria or standard in respect of employment or
turnover of the enterprises. It will open the doors of growth to MSMEs and will enable them
to go to next level of value chain.
3. Since the MSMEs are defined in the Act, any variation could be done only by way
of an amendment. Considering the inflation and dynamic market situation, there is a need to
periodically revise the criterion of investment. Revising the investment limits by way of
notification will facilitate timely action. Hence, it is proposed to amend the MSMED Act to
empower Central Government to vary by way of a notification, the investment limits,
which shall not exceed thrice the limits, specified in clauses (a) and (b) of sub-section (1) of
section 7 for the purposes of development of micro, small and medium enterprises.
4. The Bill seeks to achieve the above objects.
NEW DELHI; KALRAJ MISHRA
The 18th March, 2015.4 THE GAZETTE OF INDIA EXTRAORDINARY [PART II— SEC. 2]
MEMORANDUM REGARDING DELEGATED LEGISLATION
Sub-clause (b) of clause 2 of the Bill seeks to insert sub-section (1A) in section 7 of the
Micro, Small and Medium Enterprises Development Act, 2006, so as to empower the Central
Government to vary the investment limits relating to the classification of micro, small and
medium enterprises by way of notification.
2. The matters in respect of which rules may be made under the proposed legislature
are matters of procedure or administrative details and it is not practicable to provide for them
in the Bill itself. The delegation of legislative power is, therefore, of a normal character.
————
ANOOP MISHRA
Secretary General
PRINTED BY THE GENERAL MANAGER, GOVERNMENT OF INDIA PRESS, MINTO ROAD, NEW DELHI
AND PUBLISHED BY THE CONTROLLER OF PUBLICATIONS, DELHI—2015.
GMGIPMRND—506GI(S3)—28-04-2015.