Government Regulatory Framework for MSMEs - Micro, Small And Medium Enterprises | Entrepreneurship & Small Businesses - B Com PDF Download

Government Regulatory Framework for MSMEs

The govt. has two roles to play regulatory role and protective role. Govt. regulates as well as protects small business. It plays the regulatory role by imposing certain restriction and formalities on small business. It provides assistance and support to small business.

Measures Taken By The Government For The Promotion Of MSMEs
Some of the measures taken by the government are as follows:

Administrative Framework: Administrative mechanism for SSI is being looked after by the Department of Small Scale Industries, Agro and Rural Industries within the Ministry of Industry. With the Department there is Small Industries Development Organization (SIDO) headed by a department commissioner. SIDO has 27 small industries service institutes, 31 branch institutes, 37 extension centres, 18 field testing centres, four production centres and two footwear training centres. To provide different services and support to village and small entrepreneurs under a single roof, 422 Districts Industries Centres (DIC) have been set up to cover 431 districts out of the total of 436 districts of the country. National Institute of Small Industries Extension Training (NISIET) conduct research and training programmes and provides consultancy services. National Small Industries Corporation (NSIC) deals with marketing including Government purchases and supplying machinery on hire purchase.

Policy Instruments: Policy instruments adopted by the government to encourage the growth of SSI comprise:
(1) Financial incentives.
(2) Fiscal incentives.
(3) General incentives.
(4) Special incentives in backward areas, and
(5) Reservation of items for SSI.

(1) Financial Incentives: SIDBI provides direct assistance, among others for specialized marketing agencies, industrial estates, acquisition of machinery/ equipment, both indigenous and imported, seed capital scheme and National Equity Fund Scheme, bills rediscounting and direct discounting scheme. State and Local Government provides financial subsidies like interest rate and capital subsidies, and water and electricity subsidies and subsidies for the acquisition of land.

(2) Fiscal Incentives: These comprise investments allowance, tax holidays, additional depreciation for new plant and machinery and state and local Governments provide exemption from electricity tariffs.

(3) General Incentives: These include, among other things, reservation of items for exclusive purchases from SSI, price preference over medium and large units in public sector purchases and scheme for Self- Employment to Educated Unemployed Youths (SEEUY).

(4) Special Incentives in Backward Areas: Some of the schemes which are operational are concessional finance scheme, transport subsidy scheme, intrest subsidy scheme and income tax incentives, etc.

Reservation Of Items: As per the policy certain items have been exclusively reserved for manufacturing in the MSME sector. The objective is to protect MSMEs engaged in the manufacturing of such items from the competition of medium and largescale units.

Statutory Boards: Govt. has setup six exclusive boards, namely,
(1) Khadi and Village Industries Board.
(2) Handloom Board
(3) Handicrafts Board
(4) Coir Board
(5) Seri Culture Board, and
(6) Small Scale Industries Board.

Establishment Of Industrial Estates: Industrial estate is place where the required facilities and factory accommodation are provided by the government to the entrepreneurs to establish their industries there.

Setting Up Of National Manufacturing Competitiveness Council (NMCC): The NMCC suggest a three-pole structure, “one of the effective measures for accelerating manufacturing growth in this segment lies in promoting growth poles or industrial clusters, referred to in the PURA(Provision of Urban Amenities in Rural Areas) context, in the 05- 06 union budget speech. The growth poles can cover all three elements of the cluster approach-industrial clusters, artisan clusters and agro-based clusters,” The NMCC also suggests that the time is right for exploring mechanisms of how Indian MSMEs could tie up with MSMEs in developing countries for technology as well as trade.

Penalities For Delayed Payments To MSMEs: The Govt. has enacted the interest on delayed Payments Act for the benefit of MSMEs. The Act prescribes that the customers of MSMEs should make the payments within 120 days of accepting the goods.
Delays beyond this would attract interest at 11/2 times the prime lending rate of the SBI.

Prime Minister’s Rozgar Yojna (PMRY): It was launched on 2nd October 1993, with the objective of creating one million jobs in 5 years by giving loans for the creation of tiny and micro enterprise.

Industrial Cluster Development:  An industrial cluster can be defined as a sectorial and geographical concentration of enterprises, especially Micro, Small and Medium Enterprises (MSMEs), which have common opportunities and face similar threats.

Assistance to MSME exports: Following are the assistance to MSME exports:

(a) MSMEs are helped in participating in trade exhibitions. The Govt. would meet the expenses in this regard on space rent, handling and clearing charges, insurance and shipment charges etc.
(b) MSMEs are given triple weightage for being recognized as Export Houses, Trading Houses, Star Trading Houses and Super Star Trading Houses.
(c) Capital Goods Zero Duty Scheme is extended to MSMERs without any conditions.
(d) Marketing Development Assistance is given to MSMEs to facilitate market research, publicity etc.

Other Schemes: Important schemes are briefly discussed as below.

(a) Integrated Infrastructural Development Scheme: Under this scheme the Central Govt. would contribute Rs 5 crore in the ratio of 2:3 for the development of industrial infrastructure in rural and backwards areas. The objective of the scheme is to promote the location of MSMEs in rural and backward areas and facilitate linkage between agriculture and industry.

(b) Marketing Development Assistance Scheme: MDA is a new scheme launched in August 2001. This scheme provides following five types of assistance:
1) Assistance to individuals for participating in overseas trade fairs and exhibitions.
2) Assistance to individuals to go on overseas study tours or as a member of a trade delegation going abroad.
3) Assistance for production of publicity material for overseas publicity.
4) Assistance to small industry association to conduct sector- specific market studies abroad, and
5) Assistance to SSI Associations to initiate/contest anti- dumping cases.

(c)Trade Related Entrepreneurship Assistance And Development For Women: TREAD is a scheme for giving trade- related assistance to women entrepreneurs in the form of Loans, grants, trade- related training and information, counseling and extension services.

(d) Preferential Govt. Purchases: It is made compulsory for various govt. departments and agencies to buy their requirements of a number of items from the constituents of the MSME sector.