With the government all set to source 20 percent of its procurements from micro, small and medium enterpries(MSMEs),the MSME ministry is pushing for tax concessions to venture capitalists (VCs) and private equities (PEs) for increased funding.

According to MSME secretary Dinesh Rai, a cabinet note on the mandatory 20 percent procurement for government departments and public sector undertakings (PSUs) has already been moved and the proposal is likely to be cleared within a month.

“Even Ministry like Defence, which was earlier objecting to the proposal has now agreed to source 20% of its total procurements from MSMEs for which a Cabinet note has already been circulated and is expected to be approved by the government in next 30 days”, Rai said at an ASSOCHAM organised conference here last Thursday.

On the issue of encouraging increased investments from VCs and PEs, the secretary said that a meeting between the officials of the MSME and finance ministries and the revenue department is in the offing.

Income tax rebates and other tax concessions for MSME investors will be discussed at the meeting, Rai said.

Following the banks' continued perception of high risk exposure regarding investments in MSMEs, the sector is now looking towards VCs and PEs who have traditionally invested in the infrastructure sector.

Both decisions were taken at a National Board of MSMEs meeting last Wednesday.

Another significant decision reached at the meeting was on the increase of celing of priority sector lending limits of banks to almost 60 percent, Rai informed. The current ceiling stands at 45 percent.

He also added that the ciruclar on the RBI directive to commercial banks on no collaterals for loans upto RS 10 lakh to MSMEs as opposed to the earlier RS 5 lakh is to be issued soon.

Planning Commission member Arun Maira, who was alos present at the conference, blamed the government saying that it did not pay the required attention to the sector even though it contributed  almost 45 percent of India's total exports and employed a significant number of people.