Mumbai, Jun 26: A panel constituted by the Reserve Bank of India (RBI) to suggest measures to develop micro, small and medium enterprises (MSMEs) has proposed a Rs 10,000-crore government fund. The idea is that this will support venture capital and private equity funds investing in the MSME sector. The panel has also recommended a Rs 5,000-crore distress asset fund to assist in clusters where several small businesses are affected because of external factors, such as a change in environmental laws.
The committee has recommended a comprehensive and holistic MSME code in place of the MSMED Act, 2006, replacing present territorial jurisdiction and arbitrary inspection with policy-based monitoring systems with a sunset clause. An expert committee on the MSME sector — set up in January under the chairmanship of former Sebi chairman U K Sinha — submitted its report to RBI governor Shaktikanta Das earlier this month. The central bank released the report on its website.
According to the committee, introduction of GST has made it easier to identify companies based on turnover and this should be the criteria for determining MSMEs rather than employment, which is difficult to implement. Given the role of state governments, the panel wants SIDBI to engage with them. The collaboration of state governments is also seen as crucial in helping MSMEs move up.
The report said that the other areas where SIDBI can contribute is developing and deploying additional instruments for debt and equity, which help crystallise new sources of funding for MSMEs and MSME lenders, such as first-loss guarantees, pass-through certificates (PTCs). It added that for this, it needs partnership arrangements and may, if required, raise funds directly from the market based on its AAA rating.
To help small businesses recover their dues from large corporates, the panel has recommended creating an information utility to collect details of invoices. Based on this information, the designated authority will write to corporates, asking them to clear bills.
To help small industries come up, the panel has suggested a central scheme to support setting up of enterprise development centres (EDCs) in the district industries centres. “These EDCs, while being principally funded by the government of India, must have the operational flexibility to partner with the private sector, particularly in the areas of skilling and technology development. Contribution of companies to the capacity building via EDCs must be eligible for corporate social responsibility (CSR) spending,” the report said.