What are Micro, Small and Medium Enterprises (MSME) and how MSME (Manufacturing) are different from MSME (Services)?

  In accordance with the provision of Micro, Small & Medium Enterprises Development (MSMED) Act, 2006 the Micro, Small and Medium Enterprises (MSME) are classified in two Classes:
(a) Manufacturing Enterprises- The enterprises engaged in the manufacture or production of goods pertaining to any industry specified in the first schedule to the industries (Development and regulation) Act, 1951) or employing plant and machinery in the process of value addition to the final product having a distinct name or character or use. The Manufacturing Enterprise are defined in terms of   investment in Plant & Machinery.
(b) Service Enterprises:  The enterprises engaged in providing or rendering of services and are defined in terms of investment in equipment.

            The limit for investment in plant and machinery / equipment for manufacturing / service enterprises, as notified, vide S.O. 1642(E) dtd.29-09-2006 are as under:

Manufacturing Sector


Investment in plant & machinery

Micro Enterprises

Does not exceed twenty five lakh rupees

Small Enterprises

More than twenty five lakh rupees but does not exceed five crore rupees

Medium Enterprises

More than five crore rupees but does not exceed ten  crore rupees

Service Sector


Investment in equipments

 Micro Enterprises

Does not exceed ten lakh rupees:

Small Enterprises

More than  ten lakh rupees but does not exceed two crore rupees

Medium Enterprises

More than two crore rupees but does not exceed five core rupees

 How is the value of plant & machinery computed?

 In accordance with the M/o MSME (earlier M/o SSI) Notification no. S.O. 1642(E) dtd.29-09-2006 while computing the value of Plant and Machinery, the original Value of the machinery is to be taken in to account. The components, to be excluded while computing the value of Plant and Machinery, are detailed in the said notification.

What are the main contents of the “Promotional Package” for Micro, Small & Medium Enterprises  of Ministry of MSME?

  PROMOTION OF MICRO AND SMALL ENTERPRISES” announced by Shri Mahabir Prasad, Minister of Small Scale Industries and Agro And Rural Industries In Lok Sabha on 27 February 2007 and on 2nd March 2007 in Rajay Sabha, provides for Credit Support, Fiscal Support, Support for Cluster Based Development ,Technologies and Quality Upgradation Support,Marketing Support, Supports for Entrepreneurial and Managerial Development Empowerment of Women owned Enterprises Strengthening of Prime Minister’s Rozgar Yojana (PMRY), Strengthening of data base for MSME sector.

For detail see “Promotional Packages”

How many items are reserved for manufacture in SSI Sector?

 As on date, 20 items are reserved for excusive manufacture in the Small Scale Sector. See List of Reserved items.

What is the Price & Purchase Preference Policy?

The Price & Purchase Preference Policy is Government's effort towards providing marketing avenues for small-scale units. Under the Price Preference Policy, the Director General of Supplies & Disposals, which is the Central Purchasing Organisation of Government of India provides a number of facilities to SSIs under its Government Stores Purchase Programme. These include reservation of certain products for exclusive purchase from the SSI sector and price preference up to 15% in case of selected items, which are produced in both large scale as well as small-scale units. Under the Single Point Registration Scheme of NSIC, SSI units registered with NSIC can avail the following benefits:-

  1. Availability of tender sets free of costs.
  2. Exemption from payment of earnest money deposit.
  3. Exemption from payment of security.
  4. Price preference upto 15% over the lowest quotation of the large scale units.

Under the Purchase Preference Policy, 358 items including 8 handicraft items are reserved for exclusive purchase from SSIs. For details of this policy, please see List of Items Reserved for Exclusive Purchase from SSIs
      Draft Purchase Policy under the provision of MSME Act, 2006 has been circulated for comments. Your comments are also welcome. Draft purchase Policy attached.

How can Micro and Small Enterprises market its products?

 A market survey or a market assessment must be made before setting up a project. The prevailing price, the level of competition and the quality of your product must be seen and examined before deciding to set up a unit. Experience has shown that SSIs do well in markets in the following conditions:-

  1. Where markets are local and the unit can cater to local tastes
  2. As part of a larger chain whereby the SSI product is used by a larger unit.
  3. Where the SSI is able to meet a specific requirement for a specific scheme commonly known as niche requirements.

Any SSI unit must try to place itself in any of these three categories. It must also register with NSIC under its Single Point Registration Scheme to take advantage of Government's Price and Preference Policy. In some States, the Small Industries Development Corporation plays an active role in promoting SSI units. SSIs can also join together and form a consortium to market their products jointly.
To attain global standards “bar coding” should be adopted. To facilitate adoption of bar coding my micro and small enterprises the Government has launched a support scheme.
See “Detail Bar Coding


 How to participate in International Exhibitions through O/O DC (MSME) ?

 O/O DC (MSME) participates in a limited number of international exhibitions every year. For this purpose, Office of DC (MSME) books space, and selected SSI units are given the facility of free display space and free shipment of their exhibits from Mumbai to the fair and back. To get selected for participation, the unit must be registered and be producing goods, which are export worthy. A team of SISI Officers of your State who will recommend participation of your unit assesses export worthiness. Preference is given to units, which are ISO-9000 certified. You may also attend the fair in your individual capacity after availing shipment from O/O DC (MSME) at your own cost or through financial assistance under the Market Development Assistance (MDA) scheme of the Ministry of Commerce. O/O DC(MSME) has also launched its own scheme called MSME-MDA to encourage MSME entrepreneurs to participate more actively in international exhibitions.

What is the role of associations in the MSME Sector ?

 Associations articulate the views of the MSME sector. The Micro, Small and medium Enterprises Act, 2006 has further strengthen the role of association in policy framing and execution by providing them the membership in Advisory Committee and in the National Board for MSME constituted under the provisions of MSMED Act, 2006. The participation in Advisory Committee make these associations participative and co-part in decision making. The NBMSME also provide them the platform to raise issues, which are agitating their members or those, which are of concern to the sector and give suitable recommendations to the Government for development and promotion of MSMEs.
            The MSMED Act,2006 also provides for membership to MSE associations in MSEFCs, created by respective sates/Uts, having sub-juiced ………..to ………disputes concerned delayed payments.

            MSME associations are also members in all leading committees of autonomous bodies attached to Mo MSME. Even at state /UT level, MSME Associations  are member of state level advisory committees, created to facilitate promotion and development of MSME sector at state level.

            The Government by way of upholding many supporting measures under private partnership (PPP), mode, provide these associations an opportunity to directly involve themselves in promotion and development of MSMEs. With an objective to strengthen associations the Government launched a new scheme for “Capacity Building”, Strengthening of database and advocacy by Industry/ Enterprise” in accordance with the commitment of “Promotional Package.”
Detailed Scheme “Capacity Building

FAQs on issues related to Delayed payments to MSEs

What is appointed day?

Appointed day is the day after the expiry of the period of fifteen days from the day of acceptance or the day of deemed acceptance of any goods or any services, by a buyer, from a supplier.

Date from which interest on delayed payment is payable?

(i) Where there is no agreement – from the appointed day;
(ii) Where the date agreed upon is 45 days or less than 45 days – from the date as agreed upon in writing;
(iii) Where the date agreed upon is more than 45 days – 45 days from the date of acceptance;

Date from which interest on delayed payment is payable?

The buyer is liable to pay interest on delayed Payment (Principal amount) at a rate three times of the bank rate notified by RBI, compounded with monthly rest. MSEFC should not award any interest rate other than this.

What is the time limit for the MSEFC to decide the case?

90 days from the date of making such reference to MSEFC.

What is the status of cases of delayed payment which took place prior to promulgation of MSMED Act, 2006?

Prior to promulgation of MSMED Act, 2006, the issues related to delayed payments to SSI were dealt in the then “The Interest on Delayed Payment to Small Scale and Ancillary Industrial Undertakings Act, 1993 (as amended in 1998)”. However, any action taken under the Act of 1993 shall be deemed to have been done under the corresponding provisions of MSMED Act, 2006. Thus, if any case was pending in Industrial Facilitation Council prior to 2 October, 2006, the same may continue in the Micro & Small Enterprises Facilitation Council, which has been constituted after the implementation of MSMED Act, 2006.

What is pre-requisite to file a complaint in MSEFC of any state/UT?

The supplier unit (MSE) must have filed an Entrepreneurs Memorandum (EM) Part-II with the DIC of the concerned state/UT where the unit is located.

What is the tenure of MSEFC?

MSEFC should be reconstituted as soon as the term of the previous one expires and a notification in this regard should be issued by the state Govt./ UT administration. Copy of this notification should be forwarded to Policy Division of Office of the DC(MSME)

What the MSEFC should do just after receiving the petition from the supplier?

Just after receipt of the petition of the supplier, the MSEFC should initiate the process to conduct the conciliation either itself or through the assistance of any institution or centre, in accordance with the provision provided in sub-section (2) of section 18 of the MSMED Act, 2006.

What after conciliation?

Where the process of conciliation initiated as above is not successful, the Council either itself takes up the arbitration or may refer it to an institution providing alternate dispute resolution services for such arbitration.

What is the jurisdiction of MSEFC?

The MSEFC has the Jurisdiction to act as an arbitrator or conciliator in a dispute between the supplier located within the jurisdiction of MSEFC which is normally the State or UT and the buyer located anywhere in India.

Constitution/Reconstitution of MSEFC?

A copy of the notification related to Constitution/Reconstitution of MSEFC should be sent to MSME Policy Division, Office of Development Commissioner (MSME) 7th Floor, A Wing, Nirman Bhavan, New Delhi-110011.

Quarterly Reports relating to settlement?

The report relating to settlement of cases filed before MSEFC and status of implementation of awards passed by MSEFC, in prescribed format, should be forwarded to MSME Policy Division, Office of Development Commissioner (MSME) 7th Floor, A Wing, Nirman Bhavan, New Delhi - 110011 with the endorsement to Director, MSMEDI of the State concerned.

Award within 90 days?

The details of those awards which have exceeded the time limit of 90 days from the date of application along with reasons for the pendency should be placed at the website of the Directorate of Industries dealing with MSEs in the State/UT.

Annual Statement of Accounts of the Companies?

While auditing the Annual Statement of Accounts of the Companies, the statutory auditors, must specifically point out in their report, about the dues and its duration, in respect of suppliers of MSE status.


What are the addresses and phone number of MSME-development Institutes?

  See complete list

What is the reservation policy for MSME?

  See write up on Reservation Policies