The Central Government has widened the definition of micro, small and medium enterprises (MSMEs). On June 1, 2020, it has notified the criteria for classification of micro, small and medium enterprises, which is as below:
(i) A micro-enterprise, where the investment in Plant and Machinery or Equipment does not exceed Rs 1 crore and turnover does not exceed Rs 5 crore rupees;
(ii) A small enterprise, where the investment in plant and machinery or equipment does not exceed Rs 10 crore and turnover does not exceed Rs 50 crore;
(iii) A medium enterprise, where the investment in plant and machinery or equipment does not exceed Rs 50 crore rupees and turnover does not exceed Rs 250 crore.
The revised definition of MSME will be in effect from July 1, 2020. It is assumed that the revised definition of MSME will benefit approximately 5500 pharma MSME in the country.
The industry welcomes the revision since on May 13, 2020, Nirmala Sitharaman, Union Minister of Finance, had made an announcement to increase of investment limits for MSMEs, with additional criteria of turnover.
However, the industry has also requested the government to take some more steps to help companies avail the benefits without losing its MSME status.
Some of the benefits the MSME sector enjoys are:
1. Priority in Government tenders
2. Subsidy in bank lending interest
3. Preferential payment terms from govt and large companies
4. Subsidies in exhibitions participation domestic as well as international
5. Special provision under various laws
SV Veeramani, Chairman and Managing Director, Fourrts Laboratories said, “The revision in criteria for the classification of MSME is long pending and a welcome move. With this revision, the MSME sector will certainly be getting benefitted without apprehensions for expansion.”
But, he also pointed out a clause which will have an adverse impact on the industry, “Having both, the criteria of investment and turnover is complicated, for e.g; if a company fails in one of the two criteria they will lose MSME status. It will be good if it can be modified to a single criteria, preferably on turnover since investment is always high in the pharma MSME sector.
Kuldeep Gupta, Secretary-General, FIDMI, and Director, Vivek Pharmachem also said, ” The turnover clause is asserted, it should be “or” because some industry has high-value products with investment less than Rs 10 crore with a turnover of Rs 300 crore. Then, they will be called as large Industry, which is not justified.”
Suresh Pareek, Managing Director, Ideal Cures said, “It is a good move by the government to further widen the definition of micro, small and medium enterprises (MSME). With the revised limit of investment and turnover, the sector will grow further with much more efficiency and will witness more investments in terms of the companies’ expansion plans.”
However, he proposed, “I also request the government to consider making micro and small enterprises category separate from MSMEs and also design some incentive policies favouring them.”
Vinod Kalani, President, Rajasthan Pharmaceutical Manufacturers Association, (Jaipur) and Working President, Federation of Pharma Entrepreneurs (FOPE) said, “We welcome the move, it was certainly a long-awaited step for MSMEs. We hope that post-implementation, all will be benefitted from the revision of the MSME definition.”
Viranchi Shah, National Vice President, IDMA-GSB opined, “This settles the long-standing industry demand of revising the definition of MSME. In the pharma industry, the basic investment is higher than in other industries, many companies were not able to avail of MSME benefits as per earlier definition. This will also enable many pharma companies to take benefits of several initiatives announced by the government in the wake of COVID-19.”
Mahesh Doshi, President, Indian Drugs Manufacturers Association (IDMA) too appreciated the move and said, “With this revised definition of MSME, the Indian pharma industry will be very comfortable. And with this, the industry will be in a position to make more investment for facility up-gradation to meet global regulatory requirements and compete in the global pharma market.”
Nipun Jain, Chairman, Small & Medium Pharma Manufacturers Association said, “This amendment and classification is more apt. Capital Investment in Pharma starts from Rs 10-20 cr because of strict regulations. Earlier they were at risk of losing MSME status and benefits. Now pharma MSMEs are assured that they will be able to avail benefits under the new definition.
BR Sikri, Chairman, FOPE and Vice President BDMA stated, “The earlier definition of MSME was announced in 2006, and in the span of 14 years a lot of things have changed. Considering that fact, the pharma industry was expecting that the government will equally take care of micro and small category of industries. And therefore, we think that the government should make separate provisions for micro, small as well as medium companies instead of merging all three categories together. The FOPE members expect that the government should give relief to small scale industries, as it has done for medium enterprises.” He also stressed, “Globally, the situation has changed significantly, in terms of product range and supply chain particularly, therefore the government should also consider changing its policy for the small scale category.”
SR Vaidya, Chairman, MSME Committee, IDMA requests the government to separate the pharma MSME from MSMEs of other sectors. Explaining his rationale, he said, “Due to COVID-19, suddenly this sector has gained importance in our country. Needless to say, this sector is the ultimate solace to the individual who lives in a village, remote areas in our country. At the same time, the Indian pharma industry caters even to the global world at large, in terms of economical medicines which are exported in huge quantities every year. Now that it’s important that the government should recognise the industry’s importance in comparison to other MSME industries and distinguish it from others MSMEs to augment its potential for production of medicines for the country as well as for the world.”