Small is social: Micro units get some credit

The budget has announced a Rs 5,000 crore venture fund for micro, small and medium enterprises (MSMEs) with SIDBI to enhance availability of equity to these units.
In his budget, the FM tried to address the problems of access to affordable credit to the MSME sector as a majority of the units are unorganized and financial institutions are reluctant to lend to it in the absence of collaterals.
Two SME exchanges have been launched in Mumbai recently to enable these enterprises greater access to finance.
Saying that MSMEs are the building blocks of the country’s economy, the FM admitted that these units rely primarily on loans from banks and informal sources to raise capital.
The government has approved a policy which requires ministries and central PSUs to make a minimum of 20% of their annual purchases from MSEs with the aim to promote market access to the sector, which is a major employer in the country. Of this, 4% will be earmarked for procurement from MSMEs owned by SC/ST entrepreneurs.
Among other measures, the turnover limit for compulsory tax audit of accounts as well as for presumptive taxation is proposed to be raised from Rs 60 lakh to Rs 1 crore for MSMEs.
The FM also proposed to exempt capital gains tax on sale of a residential property, if the sale consideration is used for subscription in equity of a manufacturing MSME company for purchase of new plant and machinery.
Mukherjee said the MSME sector is a fertile ground for production of low-cost medical devices and reduced basic customs duty to 2.5% with concessional CVD of 6% on specified parts, components and raw materials for the manufacture of some disposables and instruments. The full exemption from basic customs duty and CVD was extended to specified raw materials for manufacture of coronary stents and heart valves. But these concessions would be subject to actual user condition.
Budget 2012
Budget News 2012