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MSME Ministry in favour of raising investment cap for SMEs

NEW DELHI: Micro, Small and Medium Enterprises (MSME) Minister K H Muniyappa is in favour of increasing the investment cap to $ 2 million in small and medium units, from which global retailers have to source 30 per cent of items under the multi-brand retail policy. 

As per the current 
FDI policy, multi-brand retailers must procure 30 per cent of their products mandatorily from small and medium enterprises (SMEs) with an investment in plant and machinery not exceeding $ 1 million. 

"This will help the units to grow further," Muniyappa told PTI at the launch function of an SME-focused news agency - 
Knowledge and News Network (KNN). 

Department of Industrial Policy and Promotion, in a draft Cabinet note, had proposed increasing the investment cap to $ 2 million. It had also said that multi-brand retailers should continue sourcing items from SMEs without a time cap even after they cross the investment limit and can no longer be considered small and medium. 

The MSME ministry, however, said there must be a time limit for the retailers to continue sourcing from units that have grown beyond the investment limit. 

It stated that "a three-year period from the day an MSME outgrows the investment limit of $ 2 million would provide required space to equip itself to independently supply the retailer without being covered under the 30 per cent procurement." 

Retail giants such as 
Walmart, Tesco and Carrefour have asked the government to relax the mandatory sourcing condition and instead make it a 'preferable' requirement, as in the case of single-brand retailing. 

The Ministry is not in favour of diluting this norm. "Not preferable, it is a must. We are proposing it (30 per cent mandatory sourcing) should be a must," Muniyappa has said.