Madhya Pradesh Government’s Initiatives for MSMEs
Madhya Pradesh is situated in central India and it is country’s second largest state by area. Almost 30% of the area is covered by forests, and is home to a large tribal population. For a long time till 2003, the economy was lagging and considered as one of the sickest economies in India. However, the situation started to change after 2005 due to state government’s focus on attracting investments and promoting small scale industries. Now, it has the second highest growing economy at 10.19%. Experts suggest that MP has become a second most favourable state after Gujarat in terms of attracting bigger industries. In recent years, the state government has been successful in attracting industries to set up their plants. Last year, in Global Investors Summit 2014 held in Indore, investors pledged to invest 80,000 crore in MP. The main characteristics of the investments made in MP is that they are concentrated heavily into resource based industries. MP is rich in mineral resources and it has the largest reserves of diamonds and copper in India. The government’s friendly industry policy has attracted the big industries but it has to an extent not succeeded in providing an inclusive growth for all the sections of society. For example, nearly 68% of population is still employed in agricultural sector.
It has been well proven that economic development of a country is directly linked to industrial development. Small scale industries have played a significant role in all the developed economies and its relevance becomes more acute due to Indian government’s inconsistent financial support to states. Small scale industries help a state in three ways: 1) economic growth, 2) job creation and 3) Poverty reduction. The government has a huge responsibility to provide a business friendly environment and most importantly to encourage entrepreneurs. A large part of any state’s economic growth depends upon the condition of business environment and its commitment to medium and small scale industries. Since the last five years, Indian state governments are keen to promote small scale industries and various schemes have been launched by states such as Maharashtra, Andhra Pradesh, Gujarat and Tamil Nadu. Now, other states are also providing similar schemes to boost up small scale industries.
Madhya Pradesh government since the last decade has been very supportive of inclusive growth through special focus on Micro Small Medium Enterprises (MSMEs). The Industrial Promotion Policy (IPP) 2014 provided a special attention to MSMEs.
The steps taken by MP government can be summarized in following points:
- Skill development programs to fill the gap of skilled manpower required for MSMEs.
- Development of Clusters.
- Promotion of establishment of new vendor units nearby mother units.
- Number of ineligible industries have been reduced from 52 to 19.
- Marketing assistance.
- Promotion of sub-contracting to develop local vendors.
Fiscal assistance to MSME under IPP 2014:
- Capital Subsidy: A MSME unit will get 15% of subsidy subject to ceiling of INR 15 lakh.
- Interest Subsidy:
- Micro scale industry unit will be eligible for 5% interest subsidy subject to ceiling for ceiling of INR 3 lakh for 7 years.
- Small scale industrial unit – 5% with annual ceiling of INR 4 lakh for 7 years.
- Medium scale industrial unit – 5% with annual ceiling of INR 5 lakh for 7 years.
- Entry Tax Exemption: For 5 years the MSMEs will exempted from entry tax.
- VAT & CST Assistance: Eligible enterprises will be reimbursed 50% of their VAT and CST for a period of 7 years.
- Electricity Duty Exemption: All eligible units having ‘High Tension (HT)’ connection by any DISCOM in the state by 3rd March 2019 shall be exempted from electricity duty provided that they fulfil the terms and conditions.
Apart from special incentives provided to MSMEs, the state government is also keen on promoting entrepreneurship. Recently, MP’s Chief Minister has launched a program focused on this regard named as “Mukhya Mantri Yuva Swarozgar Yojna Scheme for Madhya Pradesh” available from 1 April 2015. The objective of this scheme is to promote entrepreneurship in MP without submitting collateral security. It can be a boost for young business persons who were before not able to start a business due to lack of funds.
The main features of this scheme can be summarized below:
- State government will provide 20% of the project cost as Margin Money. The government will provide INR 10,000 on one shot basis for project cost up to INR 50,000.
- Up to 75,000 interest amount will be paid by state government for the investment of INR 50,000 to 25, 00,000.
- Entrepreneurs don’t have to submit collateral security if their accounts are covered under CREDIT GUARANTEE FUND TRUST FOR MICRO AND SMALL ENTERPRISES (CGFTMSE).
- Banks have to sanction loans in one month if the applicants come under this scheme.
The priority will be given to ITI/Diploma/Engineering holders and persons belonging to SC/ST/OBC groups under this scheme. The age limit to get benefited under this scheme is 18 to 40 years.
This scheme is a right step in the direction of promoting MSMEs and entrepreneurship and it can be made a success only if the government implements at his top priority.
For more information and to apply for this scheme visit at http://www.mprojgar.org/Advertisement_Forms/Frm_UtilityforPDF_N.aspx