The Micro, Small & Medium Enterpries Development Act, 2006 Dated 16-06-2006

Need For A New Law

• SSIs earlier dealt with only in two sections of I (D&R) Act, 1951
• Different issues relating to SSIs dealt under multiple laws
• Need for a single legislation pointed out by different committees and voiced by industry associations
• Absence of any statutory consultative and recommendatory body
• Most of the policies (like purchase preference policy, registration of SSI, ect.) without statutory basis
• Need to define the MSME concept
• Need to simplify registration process
• Need to promote services sector
• Need to strengthen existing law on delayed payments
• Need to facilitate closure

Salient Provisions of MSMED Act, 2006

1. Classification of Enterprises (Section 7(1))

Concept of 'Enterprises' as against 'Industries'

• Enterprises classified broadly into:
  
  1. Enterprises engaged in the manufacture / production of goods pertaining to any industry; &
  2. Enterprises engaged in providing / rendering of services.


• Manufacturing enterprises defined in terms of investment in plant and machinery and further classified into:
  
  1. Micro Enterprises - investment upto Rs.25 lakh
  2. Small Enterprises - investment above Rs.25 lakh & upto Rs.5 crore
  3. Medium Enterprises - investment above Rs.5 crore & upto Rs.10 crore


• Service Enterprises defined in terms of their investment in equipment and further classified into:
  
  1. Micro Enterprises - investment upto Rs.10 lakh
  2. Small Enterprises - investment above Rs.10 lakh & upto Rs2. crore
  3. Medium Enterprises - investment above Rs.2 crore & upto Rs.5 crore

2. Filing of Memoranda by MSMEs (section 8)

• Process of two - stage registration of Micro & Small Enterprises dispensed with & replaced by filing of memoranda.
• Filing of memorandum optional for all Micro & Small Enterprises.
• Filing of memorandum optional for service sector Medium Enterprises.
• Filing of memorandum mandatory for manufacturing sector Medium Enterprises.

3. Credit (Setion 10)

The Policies and practices in respect of credit to the MSMEs shall be progressive and such as may be specified in the guidelines or instruction issued by the Reserve Bank of India, with the aims of :

• Ensuring smooth credit flow to the MSMEs,
• Minimising sickness among them and
• Ensuring enhancement of their competitiveness.

4. Procurement Policies (Section 11)

Central Government or a State Government to notify preference policies in respect of procurement of goods and services, produced and provided by MSEs, by its Ministries, departments or its aided institutions and public sector enterprises (non-statutory till now).