Executive
Summary and Recommendations
Executive
Summary
The
proximate cause of the establishment of the Committee was the Word Bank’s Doing
Business Report which ranked India amongst the countries ranked at the bottom
of various sub-indices.
Recommendations
The
Section presents the recommendations made by the Committee. The Recommendations
are classified in
various
headings, namely, (a) legal reforms (b) regulatory architecture (c) boosting
efficacy of regulatory process (d) enabling MSMEs, and (e) addressing state
level issues.
Legal Reforms
1) Review
of laws and regulations:
It
is recommended that the Government of India as also the State Governments
examine the content of all laws and rules which impact on the ease of doing
business, and cause appropriate changes therein to reflect the requirements of
modern day trade and commerce.
2) Encouraging
arbitration to resolve contractual disputes:
It is important that the judicial authorities
are appreciative of the need for quick resolution of disputes that are brought
up before them. Therefore, it is recommended that there should be a mechanism
to dis-incentivise use of civil courts for resolving contractual disputes, so
as to encourage arbitration as a preferred manner of resolution. Further, it is
also recommended that appropriate measure may be taken up to create a large
pool of persons trained in the process of arbitration who could be approached
by contending parties to take up their matter.
Regulatory Architecture
3) Carving
out clear mandate for a new regulatory authority:
Before
setting up a new regulatory organisation, adequate thought should go into the
need for such an organisation, the
ability
to man that organisation appropriately and to invest it with functional
autonomy. Setting up a new regulatory organisation should not be a kneejerk
response to a specific situation or context, but a well thought-out
disengagement plan of the Ministry or Department concerned to move away from
writing out and implementing regulations.
4) Appointments
in and supervision of regulatory authorities:
The appointment of persons to head regulatory
organisations should be attempted in a far more transparent manner. It
is
recommended that there should be a transparent system in which the Head of the
regulatory organisation and his Board level colleagues appear before an
appropriate Parliamentary Committee once in six months to report on the
developments of the previous six months and the broad plan of action for the
next six months.
5) Autonomy
of regulatory authorities: Genuine functional autonomy would
also have to be reinforced with financial autonomy by putting in place a system
where regulatory organisations are not dependent on government departments for
financial support by way of handouts.
6) Self
evaluation by regulatory organizations:
The
Committee recommends that each regulatory organization should undertake a
self-evaluation of itself once in three years, and put-out the conclusions in
the public domain for informed discussion and debate.
Boosting Efficacy of Regulatory Process
7) Ensuring
effective consultation through a two-stage process:
It
is recommended that each government organisation/ department which has the
responsibility of writing regulations should undertake a two-stage process of
consultation, wherein a revised draft is put up for consultation after the
first round of stakeholder consultation. This would ensure that the avoidable
situations of misinterpretation of the regulations do not exist.
8) Allocating
priority to systemic issues:
To
boost the effectiveness of regulatory apparatus, it is recommended that
enforcement bandwidth of a regulatory body need to be optimally used to deal
with cases of systemic importance on a priority basis.
9) Putting
in place consent mechanism for matters of low significance:
It is recommended that regulatory
authority may put in place a settlement or consent mechanism, with adequate safeguards,
where cases which have no systemic impact are dealt in a summary manner. This
would help in dealing with large volume of matters of systemically unimportant
matters.
10) Drafting
regulation:
It
is necessary to ensure that simplicity and clarity should inform the content of
regulation, leaving no part of it open to
different interpretations by
different persons.
11) System
of advance ruling:
It
has been noticed that in a number of cases different authorities have written
different, often conflicting, rules and Regulations governing identical
activities, thus creating avoidable confusion in the regulated space.
Therefore, it is recommended that every organisation tasked with the writing of
regulations should have a provision for an advance authority for rulings.
12) Setting
up regulatory review authority:
It
is necessary to address the existing body of regulations (the stock) in terms
of contemporary relevance, clarity and continuity. This task is best
accomplished by creating a Regulation Review Authority in each organisation
that is empowered to write rules and regulations. Every organisation, which
writes regulations or other forms of supporting legislation, should have a
Regulation Review Authority to continuously examine the stock of existing
regulations and to weed out those that do not have any continuing use. The
Regulation Review Authority should be within the organisation that writes
regulations in order to have a better sense of understanding the context.
13) Reviewing
the proposed regulations:
The
internal Regulation Review Authority can also be given the task of reviewing
draft regulations that are in the pipeline in order to ensure that unnecessary
regulations are not given effect to. Every regulatory authority, ministry
or department of the Central or State
Government involved in the writing of regulations should have within it a Regulation
Review Authority also tasked with the preview of intended regulations. Such a
body is best equipped to undertake the regulatory impact assessment, which
should be a condition precedent to the writing of regulations.
14) Regulatory
Impact Assessment (RIA): A
regulatory
impact assessment of every proposed regulation should precede the public
consultation process.
Enabling MSMEs
15) Setting
up a overarching body to enable policy and process coordination for MSMEs:
To
address the problem of lack of coordination in terms of policy formulation and
statutory enforcements among various Central and State Governments, an
overarching body can be set up at the highest level to identify and address key
issues impeding business facilitation and to interface with relevant Ministries
and Departments in order to address identified key impediments in a time-bound
manner.
16) Single
window mechanism:
It
is necessary to have single window channels of compliance to help small
business entities and also a hassle free tax payment regime. As regards the new
entrants to the business environment, there should be facilitation centres to
help deal with the complexities of filling cumbersome forms and dealing with
other procedural issues.
17) Time
bound decision making:
The granting of permissions or the decision
not to grant permissions should be taken within a prescribed time period
failing which there should be a provision for deemed permission. It is
necessary that for every approval to be accorded there should be an outside
time limit, with stipulation that if an approval is not accorded or a final
decision of rejection is not communicated during that time period, there will
be a presumption of approval.
Addressing State Level Issues
18) Information
facilitation through nodal point:
It
is recommended that each State Government appoints a nodal person and a nodal
office, which can be the single point contact for persons intending to obtain
information on the procedural and substantive conditions to be fulfilled for
setting up a business.
19) Incentivising
regulatory reforms amongst states:
With
an urgent need being felt to accelerate the process of simplification of
regulations and consequently expediting the necessary approvals, the Committee
recommends that State Governments that make significant progress in this matter
should be appropriately incentivised.
20) Building
in appellate process by design:
There
should be built into the system an appellate process where a person aggrieved
by an order of rejection may, as a matter of right, approach a superior
authority for reconsideration of the matter on merits.
| Factsheet of MSME | ||||||||||||||||||||||||
· Micro Enterprises:
o Investment in Plant and Machinery upto Rs 25 Lakhs (Manufacturing sector)
o Investment in Plant and Machinery upto Rs 10 Lakhs (Service Sector)
· Small Enterprises:
o Investment in Plant and Machinery Rs 25 lakhs to Rs 5 crore(Manufacturing sector)
o Investment in Plant and Machinery Rs 10 lakhs to Rs 2 crore (Service sector)
· Medium Enterprises:
o Investment in Plant and Machinery Rs 5 crore to Rs 10 crore (Manufacturing sector)
o Investment in Plant and Machinery Rs 2 crore to Rs 5 crore (Service sector)
· MSME sector contributes around 9% of GDP.
· MSME sector accounts for around 30% of the total exports and around 45% of the manufacturing output.
ü As per the Fourth All India Census of the Micro, Small and Medium Enterprises, Total number of Enterprises of the MSME: 361.76 Lakh
ü Total Employment in MSME: 805.24 Lakh
ü Total output of the MSME: 1077212.86 crore*
ü Total investment in the Plant and Machinery: 199664.21 crore*
(*Excludes activities under wholesale/retail trade, legal, educational & social services, hotel & restaurants, transports and storage & warehousing(except cold storage)
Number of MSME
· As per the Fourth All India Census of the Micro, Small and Medium Enterprises,2006-07
Total Number of MSMEs: 361.76 Lakh
Number of the Registered Enterprises: 15.64 Lakh
Number of the Unregistered Enterprises: 346.12 Lakh
Ø As per the Fourth All India Census of the Registered Micro, Small and Medium Enterprises,2006-07
Number of Micro Enterprises: 14.85 Lakh (94.94%)
Number of Small Enterprises: 0.77 Lakh (4.89%)
Number of Medium Enterprises: 0.03 Lakh (0.17%)
Employment in MSME
Ø As per the Fourth All India Census of the Registered Micro, Small and Medium Enterprises,2006-07
Total Employment of MSMEs: 805.24 Lakh
Employment in Registered Enterprises: 93.09 Lakh
Employment in Unregistered Enterprises: 712.15 Lakh
Ø As per the Fourth All India Census of the Registered Micro, Small and Medium Enterprises,2006-07
Employment in Micro Enterprises: 65.34 Lakh (70.19%)
Employment in Small Enterprises: 23.43 Lakh (25.17%)
Employment in Medium Enterprises: 4.32 Lakh (4.64%)
Details of Employment in the Micro, Small and Medium Sector of the Unregistered Sector are not available.
Important Schemes Implemented By M/O MSME
CREDIT GUARANTEE SCHEME
Ø Launched on 30 August 2000
Ø Operated by the Credit Guarantee Fund Trust for MSEs (CGTMSE)
Ø Provides guarantees to Member Lending Institutions for loan sanctioned without collateral
Ø Maximum up to 85% of sanctioned loan guaranteed
Ø Collateral free loan up to Rs.100 lakhs per borrowing unit covered under the Scheme.
Ø Corpus size: Rs. 2295.30 crore
Ø A composite all-in Annual Guarantee Fee of 1% per annum of the credit facility sanctioned (0.75% for credit facility up to Rs.5 lakh and 0.85% for above Rs.5 lakh and up to Rs.100 lakh for Women, Micro Enterprises and Units in NER including Sikkim)
Ø During 2013-14, Rs.74.99 cr. have been released under this scheme. Cumulatively, Rs.13.79 lakh proposals have been approved for guarantee cover for a sanctioned loan amount of Rs.74.99 crore.
Credit Linked Capital Subsidy Scheme (CLCSS)
Ø Launched in October 2000 to facilitate technology upgradation of MSEs
Ø SIDBI and NABARD act as the Nodal Agencies and operate through Primary Lending Institutions.
Ø Additional Nodal Banks/Agencies - SBI, Canara Bank, BOB, PNB, BOI, Andhra bank, SBBJ & TIICL operate directly.
Ø Provide 15% capital subsidy on eligible institutional loan up to Rs.100 lakh.
Ø Coverage : 51 Products/Sub-sectors.
Ø Since inception of the scheme 26452 units benefited under CLCSS and Rs.1490 cr. subsidy disbursed.
Ø BE (2013-14) – Rs.387.75 crore
Ø Expenditure as on date – Rs.387.22
Performance and Credit Rating Scheme
Ø The rating under the scheme serves as a trusted Third Party Opinion on the capability and credit worthiness of Micro and Small Enterprises.
Ø Under this scheme, rating fee payable by Micro and Small Enterprises is subsidised for the first year upto 75% of the fee
Ø Since inception of the scheme, more than 82,000 units has been rated under the scheme.
Ø BE under the scheme for 2013-14 : Rs.74.99 crore.
Ø Expenditure as on date – Rs.74.99 crore.
.
MSE Cluster Development Programme
Ø Diagnostic Study Reports (DSRs): To map the business processes in the cluster and propose remedial measures, with a validated action plan.
GoI grant of maximum Rs. 2.50 lakh will be provided for preparation of DSR for one cluster. For the field organizations of the Ministry of MSME, this financial support will be Rs.1.00 lakh.
Ø Soft Interventions (SIs): Technical assistance, capacity building, exposure building, exposure visits, market development, trust building, etc. for the cluster units.
Maximum limit for project cost would be Rs.25.00 lakh per cluster. GoI grant for the soft interventions will be 75% of the sanctioned amount of the project cost. For NE & Hill States, Clusters with more than 50% (a) micro/village (b) women owned (c) SC/ST units, the GoI grant will be 90%.
Ø Hard Intervention/Common Facility Centres (CFCs): Creation of tangible “assets” like Testing facility, Design Centre, Effluent Treatment Plant, Training Centre, R&D Centre, Raw material Bank/Sales Depot, product Display Centre, Information Centre, any other need based facility.
The GoI grant will be restricted to 70% of the cost of project of maximum Rs.15.00 crore. GoI grant will be 90% for CFCs in NE & Hill States, Clusters with more than 50% (a) micro/village (b) women owned (c) SC/ST units.
Ø Infrastructure Development (ID) :Development of land, provision of water supply, drainage power distribution, non-conventional sources of Energy for common captive use, construction of roads, common facilities such as First Aid Centre, Canteen, other need based infrastructural facilities in new industrial (multi-product) areas/estates or existing industrial areas/estates/clusters.
The GoI grant will be restricted to 60% of the cost of project of Rs.10.00 crore. GoI grant will be 80% for projects in NE & Hill States, industrial areas/estates with more than 50% (a) micro/village (b) women owned (c) SC/ST units.
Ø BE under the scheme for 2013-14 : Rs.53 crore.
Ø Expenditure as on date – Rs.21.90 crore.
Prime Minister’s Employment Generation Programme (PMEGP).
¨ A credit linked subsidy scheme of the Ministry, implemented through KVIC, DICs and State KVI Boards with KVIC as the Nodal Agency at the national level.
¨ Any individual above 18 years of age is eligible.
¨ With an attractive quantum of subsidy (up to a maximum of 35% of project cost for special category in rural areas, including weaker sections), the scheme has become very popular.
¨ The maximum cost of the project is Rs. 25 lakh in the manufacturing sector and Rs. 10 lakh in the service sector.
¨ Margin Money Subsidy of 25% of the project cost is given in rural areas and 15% in urban area for general category people.
¨ Lower beneficiary’s contribution of 5% for special category including weaker section of society and women, as against 10% for general category.
¨ Since inception a subsidy of Rs.5166.71 crore has been released by the Ministry.
¨ 2,35,826 projects have been financed under the scheme generating an employment of 21.39 lakh.
¨ For 2014-15, Rs.1418 cr. have been provided for the scheme.
Marketing Development Assistance Scheme
(A).BAR code
Ø The basic objective of granting financial assistance to the MSEs is to enhance their competitiveness by motivating and encouraging them to use Global Standards in Bar Coding. The objective is to be achieved through use of Bar-coding by maximum number of MSEs and getting benefits like inventory control, wide acceptability of products in the domestic and world markets, higher efficiencies, lower costs, better quality assurance and greater acceptance of their products by local as well as international buyers.
Ø To promote adoption of Bar Code by MSEs, 75% of annual recurring fee to MSEs for first three years w.e.f. 01.06.2007 is reimbursed as subsidy. This is in addition to reimbursement of 75% of the one time registration fee for Bar Coding w.e.f. 1st January,2002. Motivating and encouraging MSEs for use of bar codes through conducting seminars on Bar Code, etc.
(B) International Trade fair/ exhibitions
Ø To encourage Small & Micro exporters in their efforts at tapping and developing overseas markets.
Ø Reimbursement of 75% of air fare by economy class and 50% space rental charges for Micro & Small manufacturing enterprises of General category entrepreneurs.
Ø For women/SC/ST/NER Entrepreneurs, Govt. of India will reimburse 100% of space rent and economy class air fare.
Ø The total subsidy on air fare & space rental charges will be restricted to Rs.1.25 lakh per unit.
Ø During 2013-14, Rs.6 cr. have been provided for Bar Code and participation in International schemes.
Ø Till date 131 units are benefitted.
National Manufacturing Competitiveness Programme (NMCP)
Ø The National Manufacturing Competitiveness Programme (NMCP) is the nodal programme of the Government to develop global competitiveness among Indian MSMEs.
Ø The Programme was initiated in 2007-08.
Ø There are ten components under the NMCP targeted at enhancing the entire value chain of the MSME sector as given below:
Lean Manufacturing Competitiveness Scheme for MSMEs
Ø Under the Lean Manufacturing Competitiveness Scheme, MSMEs are being assisted in reducing their manufacturing costs, through proper personnel management, better space utilization, scientific inventory management, improved process flows, reduced engineering time and so on.
Ø The scheme is initially approved for 100 mini clusters, up-scaled and approved for 500 mini clusters after successful implementation of Pilot Phase.
Ø BE allocation for 2013-14: Rs 15 crore.
Ø Expenditure as on date – Rs.0.82 crore
Promotion of Information & Communication Tools (ICT) in MSME sector
Ø The main objective of the scheme is to encourage and assist potential MSME clusters to adopt ICT tools and applications in their production & business processes, with a view to improve their productivity and competitiveness in national and international markets.
Ø BE allocation for 2013-14 : Rs. 18 crore.
Ø Expenditure as on date – Rs.0.07 crore
Technology and Quality Upgradation (TEQUP)Support to MSMEs
Ø The objective of this component of NMCP is to sensitize MSMEs about the benefits that could accrue from usage of energy efficient technologies, reduction in emissions of Green House Gases, improve the acceptance of their products by product quality certification, thereby making them globally competitive.
Ø BE allocation for 2013-14 : Rs. 20.50 crore
Ø Expenditure as on date – Rs.1.05 crore
Support for Entrepreneurial and Managerial Development of SMEs through Incubators
Ø This component aims at nurturing innovative business ideas (new/ ingenious technology, process, products, procedures, etc.) which could be commercialized in a year.
Ø BE allocation for 2013-14 : Rs10.50 crore.
Ø Expenditure as on date – Rs.1.55 crore
Design Clinics scheme for MSMEs
Ø The activities under the scheme are; organizing seminars, workshops in MSME clusters including design projects of MSME units.
Ø BE allocation for 2013-14 : Rs.14 crore.
Ø Expenditure as on date – Rs.5.00 crore
Enabling Manufacturing Sector to be Competitive through Quality Management Standards (QMS) and Quality Technology Tools (QTT)
Ø The scheme, “Enabling Manufacturing Sector be Competitive through Quality Management Standards (QMS) and Quality Technology Tools (QTT)” is aimed to improve the quality of the products in the MSME sector and inculcate the quality consciousness in enterprises in this sector.
Ø The major activities are (i) Introduction of Appropriate Modules for Technical Institutions; (ii) Organizing Awareness Campaigns for MSEs; (iii) Organizing Competition-Watch (C-Watch); (iv) Implementation of Quality Management Standards and Quality Technology Tools in selected MSMEs; (v) Monitoring International Study Missions.
Ø BE allocation 2013-14 : Rs. 10 crore.
Ø Expenditure as on date – Rs.0.41 crore
Marketing Assistance and Technology Up-gradation in MSMEs Scheme:
Ø Marketing Assistance and Technology Up-gradation in MSMEs is a strategic initiative for adoption of Modern Marketing techniques by MSMEs consistent with the requirement of global market.
Ø It involves eight sub components for which Government of India funding assistance will be available through Technology Upgradation in Packaging, Skill Upgradation/ Development for modern marketing techniques, Competition studies, Special component for North Eastern Region, New markets through State/District level local exhibitions/Trade fairs, Corporate Governance practices, Marketing Hubs & Reimbursement to ISO 18000/22000/27000 certification.
Ø BE allocation for 2013-14: Rs 5.00 Crore
Ø Expenditure as on date – Rs.0.02 crore
Building Awareness on Intellectural Property Rights for the Micro Small & Medium Enterprises (MSME)
Ø The scheme has been launched to enable Indian MSMEs to attend global leadership and to empower them in using affective the tools of IPR of innovative projects.
Ø The major activities under the scheme are Awareness/Sensitization Programmes on IPR, Pilot Studies for Selected Clusters/Groups of Industries, Interactive Seminars/Workshops, Assistance for Grant o
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