In a blow to micro and small enterprises (MSEs), the government on Friday permitted big companies to foray into the remaining 21 items reserved for the exclusive manufacture by the small and micro industries.
The only conditions slapped on the industrial houses for manufacturing these items -- including pickles and aluminium utensils -- are that they will have to obtain the industrial licence and export a minimum of half of the annual production within maximum three years.
A notification (Press Note No 6 of 2009) issued by a Joint Secretary of the Department of Industrial Policy and Promotion says the licensing for the manufacture of the items reserved for micro and small enterprises will be mandatory, with or without foreign direct investment.
The industrial undertaking will have to also secure prior approval of Foreign Investment Permission Board if the foreign investment is more than 24 per cent in the equity capital.
These industries will now be guided like other large enterprises as far as FDI is concerned.
"The present policy on FDI in MSE permits FDI subject only to the sectoral equity caps, entry routes and other relevant regulations," according to Press Note 6 issued by the Department of Industrial Policy and Promotion.
However, if non-medium and small enterprises manufacture any of the 21 items, including pickles, aluminium utensils, reserved for MSEs, any FDI above 24 per cent will require the Foreign Investment Promotion Board's approval.
The new note replaces press note 18 of 1997 which stipulated that for foreign collaboration, maximum equity participation for small scale units was 24 per cent.
There are about 2.61 crore (26.1 million) ) units in the MSME sector employing 5.97 crore (59.7 million) people.
Even while vowing to promote small entrepreneurs, the United Progressive Alliance government inflicted the first blow on them in 2006 by enacting the Micro, Small and Medium Enterprises Development Act with the excuse of promoting them.
The micro and small entrepreneurs earlier used to enjoy reservation of 114 items that the bigger enterprises cannot manufacture, but the enactment of the Act saw their number falling to 21 and even that little reservation gets wiped out with the latest notification.
The official excuse to the phased deletion of products from the list of items reserved for the exclusive manufacture by the micro and small enterprise is that it will facilitate investments for technological upgradation and higher productivity.
The enterprises having plant and machinery of less than Rs 25 lakh (Rs 2.5 million) are treated as micro enterprises and those with investment up to Rs 5 crore (Rs 50 billion) are small enterprises.
