Increase excise duty exemption limit: Micro, small and medium enterprises

The Micro, Small and Medium Enterprises (MSME) sector, the backbone of Gujarat's robust economy, has pinned its hopes on the central government's budget for financial year 2011-12 for better growth prospects.

The sector wants Union finance minister Pranab Mukherjee to increase the limit of excise exemption limit to Rs3 crore along with reforms in labour laws, expedite implementation of a dedicated MSME stock exchange along with doubling the service tax limit.

MSME units get service tax exemption up to a turnover of Rs1.5 crore. The sector demands that the central government should double the limit to Rs3 crore, said Atul Kapasi, president of Gujarat State Small Industries Federation (GSSIF).

The MSME sector has been consistent when it comes to registering a higher growth rate as compared to the manufacturing sector. It has been considered as the backbone of the economy as it provides employment to more than 43 million people in the country. It also has around 45-47% contribution in manufacturing output and constitutes nearly 40% of the export of the country.

Many a times, small entrepreneurs can neither get credit from banks nor come up with an initial public offering (IPO) because of their small size. As a result, the central government has announced to start a dedicated stock exchange for the MSMEs.

Although in talks for a long time, nothing concrete has come out yet. "The central government should expedite the process so that promising MSME units could raise money from the market," felt Kapasi. The sector faces many problems when it comes to dealing with banks. Players in the sector allege that although the Reserve Bank of India has issued several guidelines and launched various schemes for the benefit of the sector, banks do not follow them strictly.

The central government should increase interest subsidy to MSME sector and also direct banks to provide soft loans to the sector, said Jaimin Vasa, president of Gujarat Chemical Association. Vasa added that RBI should also direct the banks to strictly adhere to these schemes.

Talking in the same line, Kapasi said that more sick units should be covered under nursing scheme. As there is no specific policy or guideline from RBI with regard to revival of sick MSME units, banks declare only 10-15 units as viable of out more than 2000 sick units, and out of that, only a few are covered for nursing, said Kapasi.

Moreover, the MSME sector also expects the central government to increase time period for declaration of non-performing assets to 180 days from the present 90 days. Kapasi also demanded that credit guarantee fees under credit guarantee scheme must be axed for MSME units.

The sector also wants the government to increase service tax exemption limit to Rs20 lakh from present Rs10 lakh.