MSME”s- Local ko Vocal- Government policies to assist MSME’s (Tourism Sector)

Well unlike previous sections wherein we usually discuss the recent or upcoming legal issues in the country today our focus will be mainly on Micro Small Medium Enterprise’s (hereinafter to be referred as MSME’s) and the government policy (especially Rajasthan Government) so as to encourage MSMEs. Recently Hon’ble PM Narendra Modi coined the term “Local ko Vocal” highlighting the importance of local manufacturing, products, and service. In fact in pursuance of the PM idea, Ministry of Home Affairs has issued an order wherein CAPF’s canteens have been directed to sell only indigenous products from 1^st June. It is apposite to say that like the whole world Indian economy is also going through some hard times due to COVID-19 pandemic thus Government of India had announced Rs. 20 Lakh Crore to help bring the struggling economy back on its feet. It is pertinent to mention here that out of the above-said amount government announced Rs. 3 lakh crore as an Emergency Credit Line Guarantee Scheme (ECLGS) to help MSME’s to recover from the effects of COVID-19 pandemic, apart from the above-mentioned scheme government also amended the structure of MSMEs so as to provide the benefit of the ECLGS to the maximum number of MSME.

It is submitted here that government has enacted the Micro Small and Medium Enterprises Development Act, 2006 (hereinafter to be referred to as the act of 2006) to promote and enhance the MSME. Generally, MSME’s are divided into two parts firstly Manufacturing enterprises the one engaged in the manufacturing and production of goods, and secondly, Service enterprises that are engaged in providing services. Earlier according to section 7(a) an enterprise engaged in manufacturing shall be micro if the investment amount does not exceed 25 lakh, small enterprise when the investment amount is between 25 lakh to 5 crore and medium enterprise when the investment amount is between 5 crores to 10 crores. Similarly in the case of an enterprise engaged in providing services an enterprise shall be micro if the investment amount does not exceed 10 lakh, small enterprise when the investment amount shall be between 10 lakh to 2 crore and medium enterprise when the investment amount shall be between 2 crores to 5 crores. However, considering the “Atmanirbhar and Local ko Vocal “ ideology government has revised the definition of MSME under section 7(a), so that more number of MSME’s can avail the benefit of various government schemes and can overcome the effects of COVID-19. The picture clearly depicts in tabular format the old and revised amendment done under section 7(a).

                          Pic: Comparison of the old and revised classification of MSME

Apart from increasing the ambit of MSME’s government has also introduced ECLGS scheme which is a part of Rs. 20 Lakh Crore package announced by the government to cope up with the struggling economy caused by the effects of COVID-19 pandemic.

·         Purpose of the scheme- Under the scheme MSME's will get emergency credit from the bank, NBFC’s. The interest rate under this shall be 9.25% from the bank and 12% for the loan taken from NBFC’s and most importantly 100 percent guarantee coverage will be provided by National Credit Guarantee Trustee Company (NCGTC).

·         Eligibility –  All those MSME’s having turnover of up to 100 Crore and the outstanding credit of the same should be up to 25 Crore as on 29^th February would be eligible under the scheme

·         Credit – There is a credit limit on the scheme as an MSME can avail 20% of the outstanding amount

Apart from the above-said scheme government of India has directed all it's concerned department and the CPSEs to pay the receivables to MSMEs within next 45 days. Some of the schemes with regard to the tourism industry are given below.

1.   Scheme- Publicity and Marketing

·         Nature of assistance-  Support for marketing/publicity activities

·         Eligibility- Trade and industries organizing tourism and related events

·         How to apply- To Publicity, Events and IT, Ministry of Tourism

 

2.   Scheme – Stand-Alone Restaurants

·         Purpose/Description- Approval of restaurants to ensure standardized world-class services.

·         Nature of assistance To independent restaurants with more than 30 seats.

·         Eligibility- Operating SMEs.

·          How to apply To Regional Director, India Tourism Office, Ministry of Tourism, New Delhi.

 

Simultaneously there are various other schemes from state government (State of Rajasthan) so as to assist the MSME’s in this economy, some of the scheme are

1.   RFC Major Loan scheme- Scheme for Hotel/ Restaurant/Tourism Related Activities

·         Purpose- Land, building, furniture& fixtures, kitchen appliances, plant & machinery, equipment, and other related essentials.

·         Eligibility- For setting up hotels/ motels with a minimum of 10 rooms/restaurants and other tourism-related activities in places of tourist attraction in the State.

·         Loan Amount- Maximum Rs.8 cr. in case of HUF/ Proprietorship/ Partnership concerns and Rs.20 cr. in case of, Companies/ Cooperative Societies (with net worth not exceeding Rs.30 cr.).

·         Repayment Period- Up to 10 years, including 6 to 18 months moratorium period, depending upon cash generations of the project.

 

Unlike other sectors the government has not announced any relief package to the tourism sector per se, however, anyone related to the tourism industry can avail the benefit of various government schemes through MSMEs. A follow-up article will be coming soon wherein we will dissect the important provisions of the Micro, Small and Medium Enterprises Development Act, 2006 and how can a small enterprise can avail the benefit of the act.  For any assistance with regard to the MSMEs, you can directly email your queries to legal@lawregime.com.