News: Legal prop for small, medium industries

(TT 29/09/2006) New Delhi - A new micro, small and medium enterprises act will come into effect from October 2. The act will give statutory safeguard to purchase preference of goods and services produced by micro, small and medium enterprises and incorporate stronger legal provisions to check the delay in payments to them.

The act also empowers state governments to exempt small and medium enterprises that employ up to 50 people from the provisions of existing labour laws. The government expects this to facilitate the graduation of small enterprises to medium ones.

The policy being introduced on the birthday of Mahatma Gandhi, keeping in mind his love for cottage industries, gives prominence for the first time to micro enterprises with fixed investment in plant and machinery of Rs 25 lakh. For small enterprises, the investment ceiling has been raised to Rs 5 crore, while for medium enterprises it has been fixed at Rs 10 crore.

It will introduce a new category of “service enterprises” which will have lower investment limits for the micro (Rs 10 lakh), small (Rs 2 crore) and medium (Rs 5 crore) categories than that stipulated for the “manufacturing” units.

The act will also give a statutory basis to ensuring the smooth flow of credit to these enterprises within the guidelines of the RBI. A fund for the development of micro, small and medium enterprises will be created under the act and all central government allocations for these enterprises will go into this fund.

The act provides for the creation of a national board for micro, small and medium enterprises to be headed by the central minister for small-scale industries and comprise 46 members which will include MPs, representatives of state governments, associations of small industries and trade unions.