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Do lakhs of MSMEs no longer want benefits of MSME registration? Here’s what govt data suggests

Ease of Doing Business for MSMEs: As of January 3, 2022, 60,65,339 were microenterprises registered on the Udyam portal followed by 3,14,332 small and 34,102 medium enterprises, according to the government data.

Ease of Doing Business for MSMEs: There are currently lakhs of enterprises in the MSME sector, considered the backbone of the Indian economy, that perhaps might not want benefits offered by the government to Udyam-registered MSMEs, 

according to experts. The inference was drawn based on the available data by the Ministry of MSME. Let’s understand this below step-by-step:

There was a total of 21,96,902 enterprises that had filed for Entrepreneurs Memorandum (EM-II) between 2007 and 2015, as per data from the MSME Ministry’s 2020-21 annual report. From September 2015 onwards, with the introduction of the new online registration portal called Udyog Aadhaar Memorandum (UAM), there were 1,02,32,451 (1.02 crore) registrations till June 30, 2020, when it was replaced with the latest portal Udyam Registration. India, otherwise, had 6.33 crore unincorporated MSMEs as per the National Sample Survey (NSS) 73rd round, conducted by National Sample Survey Office during 2015-16.

Former MSME Minister Nitin Gadkari had announced the revised guidelines on July 2 last year for MSMEs to reinstate retail trade (street vendors were also allowed to register) and wholesale trade under the MSME category. As of November 29, 5,33,404 registrations of retail and wholesale trades were recorded on the Udyam portal. This data was shared by MSME Minister Narayan Rane in Lok Sabha in reply to a question during the winter session.

The overall registration count on the Udyam portal was around 64.10 lakh as of December 31, 2021, which included retail trade and wholesale trade count. However, the share of new registrations, which could be new MSMEs altogether and/or those that were unregistered, and MSMEs switching from UAM or EM-II registrations on the Udyam portal, wasn’t known.

Importantly, the government had extended the validity of the EM-II and UAM registrations (obtained before June 30, 2020) from March 2021 to December 2021. The Reserve Bank of India (RBI) had clarified last year that existing EMs II

and/or UAMs of MSMEs would remain valid till March 31, 2021, even as MSMEs were required to register on the Udyam portal before March this year to avail various benefits by the government including incentives such as Priority Sector Lending.

“It is expected that existing EM Part-II and UAM holders would be able to migrate to the new system of Udyam Registration, which was launched on 1st July 2020, and would avail the benefits of government schemes, thereby paving the way for strengthening MSMEs and leading to their faster recovery, boost to their economic activity and creation of jobs,” MSME ministry had said in a statement 

on the extension provided. However, it hadn’t issued any notification or statement on further extension of the validity.

According to experts, if it is assumed that all 58.7 lakh Udyam portal registrations (retail and wholesale trade registrations excluded) as of December 31, 2021, were existing MSMEs that switched from EM-II/UAM registrations, it meant that 57 per cent (of over 1 crore MSMEs) had moved to Udyam portal while rest 43 per cent (43.55 lakh) hadn’t registered. However, Udyam portal data likely included new registrations as well, hence, the share of existing MSMEs registering on the portal might be below 57 per cent.

“I believe sufficient time was given to businesses to get onto Udyam portal till December 2021. After all, it was the entrepreneurs’ choice to register as MSME on the portal or not. If they didn’t register despite benefits offered by the government then it suggests that they were not interested in it. On the other hand, it could also be a matter of duplicity in registrations under UAM/EM-II and hence the actual registrations on Udyam might be right. However, if we remove the duplicity issue, then it is a concern as to why those businesses have not registered. Benefits under Udyam portal might not be very effective for these 

enterprises and hence, they are comfortable with a regular business registration to operate,” Anil Bhardwaj, Secretary-General, Federation of Indian MSMEs (FISME) told Financial Express Online.

Among overall benefits of registering on the Udyam portal also included freedom from renewal of registration, any number of activities including manufacturing or service could be added to one registration, MSMEs could register themselves on Government eMarketplace (GeM)                                                         and             also             simultaneously onboard TReDS platform. Registration was also intended to help MSMEs in availing benefits of government schemes such as Credit Guarantee Scheme, Public Procurement Policy, etc. MSMEs can register on the portal free of cost and without any documents except their Permanent Account Number and Aadhaar details.

“There must be many new enterprises under the MSME ambit post revision of the MSME definition who didn’t register on the portal. MSMEs who didn’t register on the Udyam portal might not be considered MSMEs henceforth and would not be eligible for MSME benefits. However, MSMEs haven’t benefitted much from government sops. The biggest challenge for many MSMEs has been to raise 

collateral-free loans. Also, those who don’t want to sell to the government via public procurement, don’t have to register on the portal. Moreover, MSMEs have been wary of sharing investment and turnover details through the portal,” Mukesh Mohan Gupta, President, Chamber of Indian Micro, Small & Medium Enterprises (CIMSME) told Financial Express Online.

As of January 3, 2022, 60,65,339 were microenterprises registered on the Udyam portal followed by 3,14,332 small and 34,102 medium enterprises, data showed. However, it is important to note that the 64 lakh registrations came in 18 months (July 2020-December 2021) in comparison to over 1 crore UAM registrations that were recorded in nearly 5 years. “The pandemic has underscored the need to move to a digital platform. This move hasn’t been easy and a lot of adjustment has been required. For some MSMEs, this has become the only mode of surviving. We are getting a good response on the Udyam portal. If you look at the earlier model, it had taken around five years to reach 10 million (registrations), here in 14-15 months, we are reaching almost 6 million,” MSME secretary BB Swain had said at a virtual CII event in November last year.