The union minister for Micro, Small and Medium Enterprises explains why this sector remains at the core of Prime Minister Narendra Modi's Make In India initiative.
The National Democratic Alliance (NDA) government at the Centre has put a lot of emphasis on privately-owned small businesses and are trying to introduce new schemes and programmes to help and assist entrepreneurs. Union Minister for Micro, Small and Medium Enterprises Kalraj Mishra tells Business Today's Anilesh S. Mahajan why this sector remains at the core of Prime Minister Narendra Modi's Make In India initiative and how it could change the employment landscape of India over the next few years. Excerpts:
Q- Time and again, Prime Minister Narendra Modi has talked about the need to create more jobs, and the role of MSMEs in achieving this goal. After more than a year in office how far have you succeeded in overcoming the hurdles?
A- The most common complaints from entrepreneurs have been limited access to capital, power, and delays in clearances related to pollution, environment, labour, etc. We were aware of these problems and have devised several schemes and programmes to address such issues, including the credit, infrastructure, technology and marketing needs of start-ups. Some of the important steps we have taken in the last one year include the launch of several schemes such as the Credit Guarantee Scheme (CGS), Credit-linked Capital Subsidy Scheme (CLCSS), Cluster Development Programme (CDP) and the National Manufacturing Competitiveness Programme (NMCP). We are also talking to various stakeholders, including other central ministries, state governments, and private and public banks, to streamline the mechanism of granting loans, and simplifying labour laws and other related procedures to facilitate the setting up of these small businesses.
Q- What is the objective of the Credit Guarantee Fund Trust (CGFT) established by the MSME ministry? How can a small entrepreneur get the benefit?
A- Availability of bank credit without the hassles of collaterals and third-party guarantees is a major step towards supporting first-generation entrepreneurs and help them realise their dreams of setting up a business of their own. The CGS strengthens the credit delivery system and facilitates flow of credit to the MSME sector. To operationalise the scheme, we, along with Small Industries Development Bank of India (SIDBI), set up the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE). For obtaining a collateral-free loan, new or existing MSMEs engaged in the manufacturing and services sectors - excluding retail trade, educational institutions, agriculture, self-help groups, and training institutions - should approach banks or other financial institutions that are member lending institutions (MLIs) of CGTMSE. The MLIs will use their commercial discretion and after due diligence would say whether a proposal is viable or not. Thereafter, they can seek guarantee cover from the CGTMSE and if the proposal satisfies the basic norms laid down under the CGS, the CGTMSE will extend the cover.
Q- In the last Budget, Finance Minister Arun Jaitley had introduced the National Infrastructure Investment Fund (NIIF) with a mandate to invest in equities of infrastructure companies. Can we see a similar fund to give equity support to MSMEs?
A- SIDBI has launched the Make in India Soft Loan Fund for Micro, Small and Medium Enterprises (SMILE) on August 18, 2015. The objective of the scheme is to provide soft loans, in the nature of quasi-equity, and term loans on relatively soft terms to MSMEs to meet the required debt-equity ratio for establishment of an MSME and for pursuing opportunities for growth of existing MSMEs.
Q- Experts say social sector schemes, such as the Mahatma Gandhi National Rural Employment Guarantee Scheme (MNREGS), should be extended to SMEs, especially those in the rural sector or catering to the rural sector. What are your thoughts?
A- There are no such plans at the government level. The Ministry of Rural Development is working on MNREGS. If they ask for our inputs we will give. At present, the scheme does not allow spending for the MSME segment.
Q- What have you done to encourage agri-based businesses. How will food parks benefit MSMEs?
A- We have started two programmes to encourage agro-based entrepreneurs - ASPIRE (A Scheme for Promotion of Innovation, Rural Industry and Entrepreneurship) and PMEGP (Prime Minister's Employment Generation Programme). ASPIRE was launched in March to set up a network of technology centres and incubation centres to accelerate entrepreneurship and to promote start-ups for innovation and entrepreneurship in agro-industry, with a total outlay of Rs 210 crore. It envisages setting up of livelihood business incubators, technology business incubators and assists start-ups by giving credit through the fund of funds managed by SIDBI for agri-based food parks.
PMEGP is a major credit-linked subsidy programme implemented by the MSME ministry. It is aimed at generating self-employment opportunities through establishment of micro-enterprises in the non-farm sector by helping traditional artisans and unemployed youth. General category beneficiaries can get margin money subsidy of 25 per cent of the project cost in rural areas and 15 per cent in urban areas. For beneficiaries of special categories, such as scheduled caste, scheduled tribe, and women, the margin money subsidy is 35 per cent in rural areas and 25 per cent in urban areas. The maximum cost of projects is Rs 25 lakh in the manufacturing sector and Rs 10 lakh in the services sector.
Q- What is the ministry doing to encourage India's traditional cottage industries?
A- The ministry's SFURTI (Scheme of Fund for Regeneration of Traditional Industries) scheme is aimed at enhancing competitiveness of traditional khadi and village industries, including cottage industries, through replacement of equipment, providing them with common facilities, product development, and other support services. It also strengthens cluster governance for their sustainability. It was launched in 2005/06. The scheme has now been revamped and from June and 13 clusters have been accorded in-principle approval, while 17 clusters have got final approval.
Q- The ministry has skill mapped over 600 districts in India. What is the objective? How will this help small entrepreneurs?
A- The objective behind skill mapping of 640 districts across 36 states and Union Territories is to develop a database on the industry clusters, products of these clusters, skill development needs according to the products manufactured, the name of suggested training programmes, including duration, number of institutions capable of giving that training in the area, the training capacity of these training institutes annually, total capacity of clusters to give employment to trained persons, list of engineering colleges, polytechnics, ITIs both in government and private sector, and courses, intake capacity and machinery available. Small entrepreneurs can plan their requirements for skilled manpower and the training provider can organise skill development programmes. This will ensure availability of skilled personnel in the small scale sector at the district level.
Q- Is the ministry tying up with any private organisation to use this skill map?
A- We are working on it. Currently, industry associations are vetting skill mapping data.
Q- Is the ministry planning any initiative to increase skill development activities?
A- We are conducting skill development programmes for the entire value chain of manufacturing, starting from village industries to state-of-the-art manufacturing sectors, such as engineering and auto components, among several others. We have set a target of training 1.5 crore youth by 2022. During 2014/15, we have trained 8.37 lakh persons. The 18 tool rooms and technology development centres under the ministry are providing both long- and short-term training to more than one lakh youth at present. However, the present training capacity is much less than that required for making our MSMEs globally competitive. Fifteen new tool rooms are being set up with assistance from World Bank during the 12th Five Year Plan.
Q- What steps has the ministry taken to make it easier for small entrepreneurs to operate?
A- We are implementing a number of schemes and programmes for the benefit of the MSME sector and facilitating the promotion and development by giving access to credit, infrastructure development and technology upgradation, etc. Apart from the major schemes mentioned earlier, the Prime Minister's Employment Generation Programme is also key to the ministrys scheme of things. We have recently launched a web portal Digital Employment Exchange for industries. We have also launched various schemes for promotion of innovation, entrepreneurship and to provide help for the agro industry.
For ease of doing business, the requirements for micro, small and medium enterprises is very different from other large enterprises. Land, municipal services and building permissions are primarily state subjects. Registration of an enterprise through Entrepreneur Memorandum I (intention to set up) and Entrepreneur Memorandum II (actual commencement) was seen as a cumbersome process. We have tried to replace it with the Udyog Aadhaar Form, a one-page on-line filing system. This has also been suggested by various expert panels, including the K.V. Kamath Committee, that was appointed by the government recently.