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Budget move not enough: MSMEs

business Updated: Mar 19, 2012 20:53 IST
Debobrat Ghose
Debobrat Ghose
Hindustan Times
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The finance minister has proposed the setting up of a Rs 5,000-crore fund with SIDBI to help micro, small and medium enterprises (MSMEs). But small entrepreneurs are not smiling.


“Announcement is good, but it’s not clear at what cost and condition a small entrepreneur will get loan and moreover at present, the lending rate is as high as 16-17%,” said Sanjay Bhatia, co-chairman, FICCI MSME committee.

People of his ilk have since long complained of lack of access to credit and problems in getting loans from commercial banks, which demand collateral and personal guarantees.

“Access to credit for smaller units didn’t find a mention,” said president, Federation of Indian Micro and Small & Medium Enterprises, VK Agarwal.

“The budget seems to have relied heavily on external commercial borrowings (ECBs) as a route to funding private initiatives, whereas we have been asking the government to let MSMEs get the benefit of cheap overseas fund by allowing financial intermediaries to access ECBs of suitable size,” he said.

The budget also proposed exemption of capital gains tax on sale of residential property, if the sale consideration is used for subscription in equity of a manufacturing SME company for purchase of new plant. “The move has become too restrictive... it should be good enough to be eligible for exemption if the company is a bona fide manufacturing unit,” said Agarwal.

“Considering the inflation, rising cost and increase in excise duty to 12%, the excise exemption limit should have been raised from Rs 1.5 cr,” said Bhatia.