NOCs not needed for setting up or expanding certain units: SME policy envisages Rs10m guarantee-free loan

ISLAMABAD: The federal government Wednesday while announcing a number of incentives under the new Small and Medium Enterprises (SMEs) policy, has said that under the policy, no-objection certificates (NOCs) are no longer required for setting up or expanding for certain industries.

Addressing a press conference along with Federal Minister for Information and Broadcasting Fawad Hussain Chaudhry, Minister for Industries and Production Khusro Bakhtyar shared details of the new SMEs policy that citizens can now get a loan of up to Rs10 million without any guarantee to start their businesses.

The minister said the policy is aimed at extending facilitation and incentives to promote the growth of small and medium enterprises. He said that an estimated five million businesses are under SMEs of which one million is manufacturing sector, while large scale manufacturers are around 3,500 to 4,000 units are operating in the country, which is just four to five percent of the total industry.

He said that the government has divided SMEs in three categories, which include lower risked business such as transport, service sector and wholesales sectors, which will require no NOC, while medium-risk enterprises including light engineering leather and auto parts industry will get deemed approval within 30 days period, if NOC is not provided to such an entrepreneur within 30 days, it will be considered approved, while in high-risk businesses such as explosives an entrepreneur after setting up an unit as per set guidelines will have inform the concerned quarters for approval.

Stressing the need for supporting and promoting the SMEs, the minister said that an SME-led economic growth is inclusive, sustainable and addresses the structural issues in the Pakistan’s economy by widening production and exports base and increasing the pace of new enterprise creation.

Tarin to hold meeting with SME policy stakeholders today

He said the federal cabinet has approved a new SME (Small and Medium Enterprise) policy. He also announced that women entrepreneurs get 25 percent tax exemption on applying for loans.

The minister also asked the Sindh government to become part of the project for the betterment of the people who want government assistance in establishing their businesses. He said that the federal government, while joining hands with commercial banks has allocated Rs23 billion for such loans.

Bakhtyar said that under the SME policy, “Asaan Finance Scheme” is being introduced to ensure access of capital to the industries. He said loan up to Rs 10 million will be provided without any collateral for the establishment of 30,000 new businesses.

He said a land of 4,200 acre has been allocated, which will be provided to the entrepreneurs on easy installments. Under the SME policy, productive businesses will be given 57 to 83 percent special exemptions in taxes.

He said special exemption in taxes will be given to women entrepreneurs in order to ensure their greater participation in businesses.

The minister for industries and production said that an amount of 30 billion rupees has been allocated for Small and Medium Enterprises Authority for a period of five years. He said a proper mechanism has also been established for implementation of the SME policy.

Following are the salient features of the new SMEs policy: (i) SMEs are the backbone of the economy as there are a total of 5.2 million SMEs in Pakistan, representing over 99 percent of the total business in Pakistan, employ over 78 percent of the non-agriculture labor force and contribute 40 percent to GDP and 25 percent to exports.

(ii) For the first time in Pakistan an All-inclusive SME Policy is launched by the Government that addresses ALL issues that hinder SME sector development in Pakistan together with a robust implementation mechanism.

Even before approval of the SME policy by the cabinet, key initiatives on SMEs, ie, access to credit, lowered tax regime and regulatory simplifications have been launched. The main features of the SME Policy include:

New tax regime for SMEs on the cards

(iii) Reducing Governments Regulatory Interference: Inspector Less Inspection Regime. No NoC for startups and expansion for Low Risk businesses.

Time-Bound approval/NoC issuance (Max 30 days) for medium/high risk SMEs. Self-declaration by SMEs on regulatory compliance and E Inspection portal to monitor and self-verification of onsite inspections visits.

(iv) Tax facilitation: Tax liability reduced by 60% to 83% for manufacturing sector SMEs of annual revenues of up to 250 million. Tax Return form simplified to one page.

Currently the tax reduction is available to manufacturing sector SMEs to be extended to IT & ITEs and selected service sector in near future.

(v) Access to Finance: Collateral free lending scheme that will benefit about 30,000 SMEs launched that will provide loans up to 10.0 million with lowered interest rates of nine percent.

Venture Capital regulations will be reviewed to support growth of this sector for providing equity finance to startup SMES including those in the IT and ITES sector.

(vi) Dedicated Industrial Infrastructure for SMEs: Allocation of 4,200 acres (19,500) plots for SMEs in the industrial estates on easy installment. Plug n play infrastructure will be developed to provide utilities-ready infrastructure.

(vii) Market Access: regulations are being revised to allow greater SME participation in the Public sector procurement of goods and services.

TDAP will provide increased SME participation in international trade fairs and exhibitions.

Federal Minister the Information Minister Fawad Hussain Choudhary said it is important to strengthen the country’s industrial base to steer it out of economic woes.

He said the SME policy has been prepared in consultations with all the relevant stakeholders aiming at putting the country on the track of economic and industrial development.

Copyright Business Recorder, 2021