The existing Industrial Enterprises Act 1992 has categorised industries into four categories, but does not have the micro-enterprises category.

The bill, which was recently endorsed by the Cabinet, has defined micro-enterprise as an institution having fixed capital of up to Rs 200,000, apart from real estate property, has involvement and management of an entrepreneur and comprises of nine workers, including the entrepreneur him/herself, and has annual transaction of less than Rs 2 million.

It should consume 10KW or less electricity, petroleum or other oil to run industrial equipment and machinery. A micro enterprise should be based on traditional skills and technologies, based on local technology, and make use of local resources. Industries involved in hand loom, pedal loom, traditional sculpture, handicraft products, handmade iron utensils, handmade jewellery and utensils, thanka and pauwa art, traditional music and costumes, ceramic products and handmade-brick industries, among others, have been classified as micro enterprises.  “Small and micro enterprises (SMEs) make around 90 percent contribution to the gross domestic product (GDP) of industries. However, the majority of such industries are operating as informal sector,” said Yam Kumari Khatiwada, joint secretary and spokesperson for the Ministry of Industry (MoI).

“The Act has defined micro enterprises and has come up with several encouraging provisions to bring such industries under the government.”

However, industries manufacturing arms and ammunitions, explosives, security printing like currency and coin, cigarette, beedi, tobacco, cosmetics, and products having tobacco as the main raw material, liquor industries, industries involved in the mining of sand and stones, enterprises manufacturing equipment for radio will not get the status of micro enterprises even if they are compatible with the Act provisions. To encourage formal registration, the proposed Act has stated entrepreneurs will not have to make any payment while registering micro enterprises. The Act envisions waiving off income tax for micro enterprises for the first five years from the date of commercial operation. For those micro enterprises that are currently in operation, the provision will be applicable for a period of five years from the date of the Act’s implementation.

“It is difficult to bring such industries under the government’s registration. That’s why the proposed Act has made a provision of free registration,” Khatiwada said, adding apart from the free registration, such enterprises will be registered easily without much bureaucratic hassles.

The Act has also hiked the Capital requirement for other types of industries. It has not mentioned the capital requirement for cottage industries, but has put in place a capital requirement of up to Rs 100 million for small-scale industries, Rs 100-250 million for medium-scale and more than Rs 250 million for large-scale industries.