Stimulus effect: Industry lobby writes to Sitharaman, wants startups included in MSMEs

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The Startup Association of India has requested Finance Minister Nirmala Sitharaman that startups be included in the micro, small and medium enterprises (MSMEs) category, which will allow them to benefit from the measures announced by the government for small businesses.

The minister had on May 13 shared the first details, with focus on MSMEs, of the Rs 20 lakh crore package Prime Minister Narendra Modi had announced a day earlier to give a boost to the economy ravaged by the coronavirus and the lockdown.

“In the circumstances, startups (as defined by the DPIIT) should be allowed to come within the definition and ambit of an MSME,” association chairman Mahendra Swarup said in a letter to the minister.

Moneycontrol has seen a copy of the letter that was sent on May 14.

The new definition of MSMEs released by the government on May 13 should be permanent and not changed after the Covid19 crisis was over, he said.

The Department for Promotion of Industry and Internal Trade defines startups as companies that have been around for less than 10 years, with an annual turnover of less than Rs 100 crore working towards improving product processes or services that can create wealth and employment.

MSMEs have a different definition, which has now been revised to raise investment and turnover limits.

For a micro enterprise, the investment limit has been increased to Rs 1 crore with a turnover of less than Rs 5 crore. Small enterprises can now have an investment of up to Rs 10 crore and turnover of up to Rs 50 crore. Medium units will be those with investments of up to Rs 20 crore and turnover of less than Rs 100 crore.

The new definition has also done away with the manufacturing and services distinction.

“Earlier, the criteria for manufacturing units and service units were different. Now those distinctions between manufacturing and service MSMEs are being removed,” the minister said.

Sitharaman also announced Rs 3 lakh crore collateral-free automatic loans for businesses, including MSMEs.

This move, she said, would benefit 45 lakh small businesses. The loan will have a four-year tenure and will offer a 12-month moratorium on interest payments.

Sitharaman said Rs 20,000 crore subordinate debt will be provided to stressed MSMEs, which would benefit two lakh businesses.

The association, which represents more than 2,000 startups in India, also has reiterated its request for about setting up a category two Alternate Investment Fund of Rs 25000 crore to support the fledgling sector and help it survive the economic downturn.

The details of the fund were laid out by the association in a letter addressed to the Union commerce minister on April 14.