MSME Policy

The MSME sector, which is among the most vibrant and dynamic in the country, plays a decisive role in influencing the nation’s fortunes - be it in terms of employment generation, the standard of living or inclusive growth. It contributes to nearly 8% of the country’s GDP, 45% of the manufacturing output and 40% of the exports. Its scope for employment is second only to agriculture. Getting to the context, the Micro, Small and Medium Enterprises - MSME Policy is an initiative of the Andhra Pradesh Government that seeks to generate employment opportunities for at least 3.5 lakh people and attract investments of at least Rs. 15,000 crores by 2020. It encompasses a holistic package of interventions that includes incentives, capital and interest subsidies, seed capital assistance, incentives on land and power, monetary aid for skill development and quality improvement, and marketing assistance. Most importantly, the policy strives to cater to the development of these enterprises, bolster their competitiveness and constitute a legal framework for the recognition of both manufacturing and service entities.

Classification of MSME

MSMEs, particularly in the manufacturing sector, are classified based on the terms of investment in plant and machinery as per the MSMED Act, 2006. To make it precise:

An entity is classed as Micro if its investment is within the range of Rs. 25 lakhs.
An entity is classed as Small if its investment is above Rs. 25 lakhs but not more than Rs. 5 crores.
An entity is classed as Medium if its investment ranges above Rs. 5 crores but is confined to Rs. 10 crores.

Policy Objectives and Target

Through this policy, the Andhra Pradesh Government seeks to facilitate inclusive growth and development of MSMEs by providing a conducive ecosystem and attracting new investments into the sector. Its targets include:

Increasing the competitiveness of the sector to make Andhra Pradesh one of the most preferred destinations for MSMEs.
Attracting new investments worth Rs. 15,000 crores into the sector by 2020.
Creating additional employment opportunities for 3,50,000 people by the year 2020.

Vast Incentive Structure

The scheme proposes the following incentives to the sector in the time-frame of its operations.

Stamp Duty

The policy proposes the reimbursement of stamp and transfer duty incurred by the industry on purchase or lease of land meant for industrial use. Moreover, stamp duty on lease of land/shed/buildings/ mortgages and hypothecations would be reimbursed. Such reimbursements would be processed within six months of the date of the transaction.

Tax Reimbursements

The policy offers micro and small industries with a complete reimbursement of net VAT/CST/SGST for a five -year period spanning from the date of commencement of commercial production. Medium industries, on the other hand, would be offered reimbursement of 75% of net VAT/CST/SGST for a seven-year period that spans from the date of commencement of commercial production or up to the realization of 100% fixed capital investment, whichever is earlier.

Power

Andhra Pradesh is among the states selected for the centrally-sponsored “power for all” scheme, which would provide the State with round-the-clock quality and reliable power. Besides this, the policy proposes reimbursement of fixed power cost at Rs. 1 per unit for five years from the date of commencement of commercial production. This is also applicable to open access units. The subsidy isn’t applicable for units generating power from captive power plants.

Fixed Capital subsidy

An investment subsidy of 15% on fixed capital investment, subject to a maximum of Rs. 20 lakhs is provided for micro and small enterprises.

Seed Capital assistance

First Generation Entrepreneurs may avail seed capital assistance to set-up micro enterprises at the rate of 10% of the cost of machinery, which would be deducted from the eligible investment subsidy.

Skill Upgradation

The policy outlines that the Andhra Pradesh Government would create a model that would aid in the development of skilled manpower and improving employability in the State. The model so created would enable the state to identify the quantum requirement of skilled workforce along with the required industry-specific skill sets and provide courses at different levels of education. The Government would reimburse part of the cost involved in skill upgradation and training of local manpower. It may be noted that such reimbursements are limited to a sum of Rs. 5000 for every ten persons in micro and twenty persons in small and medium industries.

Benefits Concerning Land

The Government would reserve 15% of the total area of land for MSME industries in any two developed industrial parks of APIIC (Andhra Pradesh Industrial Infrastructure Corporation) in every district, which wouldn’t be less than 40 acres of developed land in such districts.
25% of land conversion charges would be reimbursed for industrial use with a cap of Rs. 10 lakhs.
A rebate of 25% would be provided for land costs, limited to Rs. 10 lakhs in industrial estates/parks.
Out of the total land allotted for MSMEs in its plots/industrial estates, 15% would be earmarked for Scheduled Caste Entrepreneurs (SCs), 5% for Scheduled Tribe entrepreneurs, 20% for Backward Classes, 5% for Minorities and 10% for Women Entrepreneurs.

Quality Improvement/Clean Production Interventions

The policy encourages MSMEs to undertake quality improvement interventions such as the relevant upgradation of existing technologies and installation of new technologies for quality control, environment-friendly productions, the performance of water and energy audits, quality certifications, and the likes of it. For the implementation of these measures, MSMEs may avail the assistance of recognized associations. The Government would provide a grant of 50% limited to Rs. 1 lakh for water audits and Rs. 2 lakhs for energy audits to micro and small enterprises.

Comprehensive Marketing Support

The policy envisages full-fledged government support for market development activities and places significant emphasis on the domain. Assistance would be rendered to MSME associations for funding market studies, market creation efforts, quality improvement efforts, and the dissemination of information to MSMEs.

Quality Certification/Patent and Trademark Registration

A subsidy of 75% would be rendered for expenses incurred for quality certification/patent registration, limited to a sum of Rs. 5 lakhs for MSMEs. As for trademark registration, the rate of subsidy would be 50% of the cost of application or Rs. 25,000, whichever is less.

Other Measures at a Glance

Here’s a brief on various other measures promulgated by the policy:

MSMEs would be awarded both at the state and district levels based on the factors of - growth in production and profit, quality improvement measures, environment improvement measures, employment generation and innovation and productivity.
Dedicated MSME parks would be established in each district up for up to 25 acres with common infrastructure like roads, industrial water supply, power and effluent treatment plant.
An MSME Facilitation Desk would be in place to offer a one-stop solution to all MSME related queries/grievances.