OPINION: HARMFUL PROVISIONS in the Union Budget 2013-2014 against Micro and Small Enterprises

The Union Finance Minister stated as below in his Budget Speech while presenting the Union Budget 2013-2014 in the floor of the Parliament on the 28th February, 2013:
“Too many of them (MSME) do not grow because of the fear of losing the benefits associated with staying small or medium.  To encourage them to grow, I propose that the benefits or preferences enjoyed by them will stay with them for upto three years after they grow out of the category in which they obtained the benefit.  To begin with, I propose that the non-tax benefits may be made available to a MSME unit for three years after it graduates to a higher category.”
This proposal will drive the Micro and Small Enterprises to a very tight corner.  Therefore, FASII has taken up with the Union Finance Minister as follows:
(1)     Taking advantage of this proposal, the Medium and large units may invest in plant and machinery below Rs.5 crores and register them as a Small Scale Enterprise. Thereafter within a short span, the Medium and large units could shoot up their investment in Plant & Machinery beyond Rs.5 crore and continue to corner the benefits of the Micro and Small Enterprises for a period of three years.  It is perceptible that the period of three years is not a brief period.
(2)     Further, it is known that one medium scale enterprise (whose investment in plant and machinery is above Rs.5 crore and below Rs.10 crore) is equal to minimum 20 micro enterprises(whose investment in plant and machinery is below Rs.25 lakhs).  As such, one medium enterprise can gobble-up the benefits meant for 20 micro enterprises.
It is quite simple and easy for a medium enterprise to consume the benefits of the micro and small enterprises at a time when the fund-position is precarious with the government.
(3)     The provision will also enable the medium and large enterprises to toss-down the micro and small enterprises in seizing the benefits under schemes like 20% Procurement Policy and others.
In the circumstances, FASII has requested the Union Finance Minister to cross-out this provision in the interest of the existing and surviving Micro and Small Enterprises.
(The author is National President of FASII.)