FAQs: SME Development Bill, 2005 FAQs: SME Development Bill, 2005

FAQs: SME Development Bill, 2005

What is the SME Development Bill, 2005?

The SME Development Bill, 2005, is a legislative measure introduced in the Lok Sabha on May 12, 2005. It aims to facilitate the promotion, development, and enhancement of the competitiveness of small and medium enterprises (SMEs) in India.

What are the key objectives of the bill?

  • Classify enterprises as small or medium.
  • Empower the central and state governments to take steps to promote SMEs.
  • Streamline inspection procedures.
  • Improve procedures to address the problem of delayed payments to small enterprises.

How does the bill classify enterprises?

The bill classifies enterprises based on their investment in plant and machinery or equipment:

  • Small Enterprises: Investment in plant and machinery up to ₹5 crores for manufacturing/production of goods, and up to ₹2 crores for services.
  • Medium Enterprises: Investment in plant and machinery more than ₹5 crores but less than or equal to ₹10 crores for manufacturing/production of goods, and more than ₹2 crores but less than or equal to ₹5 crores for services.

What measures does the bill propose to promote SMEs?

The bill proposes several measures to promote SMEs, including:

  • Skill development programs.
  • Marketing assistance.
  • Infrastructure facilities.
  • Credit facilities specified in guidelines issued by the Reserve Bank of India (RBI).
  • Preference policies for procurement of goods and services from small enterprises by government ministries, aided institutions, or public sector enterprises.

What is the role of the National Small and Medium Enterprises Board?

The National Small and Medium Enterprises Board is established under the bill to make recommendations to the central government on policies and programs for the development of SMEs. The board consists of ministers, secretaries of specified central and state ministries, chairpersons of specified entities, an RBI officer, ten members from associations of small enterprises, and one person each from the field of economics and industry appointed by the central government.

How does the bill address the issue of delayed payments to small enterprises?

The bill repeals the Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993, and introduces improved procedures to address the problem of delayed payments to small enterprises. It defines the "appointed day" as the day following the expiry of thirty days from the day of acceptance or deemed acceptance of goods or services by a buyer from a supplier.

What are the implications of the bill for state governments?

State governments may notify that certain acts, such as the Employers' Liability Act, 1938, the Weekly Holidays Act, 1932, the Employment Exchanges (Compulsory Notification of Vacancies) Act, 1959, and the Apprentices Act, 1961, do not apply to SMEs employing less than 50 persons.

When did the bill come into force?

The SME Development Bill, 2005, came into force on May 18, 2006, after being passed by the Lok Sabha and receiving the President's assent.