Why in the News?

Parliament passed the Micro, Small and Medium Enterprises Development (Amendment) Bill, 2026 — the Rajya Sabha cleared it on 3 August 2026, and the Lok Sabha passed it on 7 August 2026. The Bill was moved by Union MSME Minister Jitan Ram Manjhi and now awaits Presidential assent.

Introduction

The Bill amends the Micro, Small and Medium Enterprises Development Act, 2006, which governs the classification, registration, and protection of MSMEs, including safeguards against delayed payments from buyers.

Basic Details

  • Ministry: Ministry of Micro, Small and Medium Enterprises (MSME).
  • Base Act: Micro, Small and Medium Enterprises Development Act, 2006.
  • Introduced: Rajya Sabha, 28 July 2026.
  • Passed: Rajya Sabha on 3 August 2026; Lok Sabha on 7 August 2026.

Important Provisions

  • Classification Overhaul: Removes the fixed investment and turnover thresholds from the Act itself. It instead empowers the Central Government to classify enterprises as micro, small or medium by notification, based on investment in plant and machinery or equipment, and turnover.
  • Voluntary Registration: Makes filing the Udyam registration memorandum voluntary for all MSMEs, including medium manufacturing enterprises for whom it was earlier mandatory. Registration will run through a digital platform notified by the Centre or States.
  • Mandatory TReDS Settlement: Requires every central public sector enterprise to settle MSME invoices through the Trade Receivables Discounting System (TReDS). Central and State Governments may extend this requirement to other public entities.
  • Mediation and Arbitration Timelines: Mediation before a Facilitation Council must conclude within 90 days. If it fails, the dispute must be referred to arbitration within 30 days, with an award due within 90 days of completed pleadings.
  • Interim Relief on Pending Disputes: Courts must order at least 50% of the awarded amount to be paid to the MSME supplier. This applies where an application to set aside a Council's order or a mediated settlement has been pending for over six months.
  • Decriminalisation of Offences: Replaces criminal fines for false registration information and undisclosed dues with a graded system of warnings and rising penalties. The first violation draws a warning, later violations a monetary penalty that escalates by 10% every three years.
  • Adjudication Structure: The Central Government will appoint the Development Commissioner as the adjudicating officer, with appeals lying before the MSME Secretary.

Significance

  • Tackles Delayed Payments: Directly targets delayed payments, long the single most-cited grievance of India's MSME sector, through binding mediation-arbitration timelines and the TReDS mandate for CPSEs.
  • Compliance Ease: Eases compliance by making registration voluntary and digital for most MSMEs.
  • Ease of Doing Business: Decriminalising procedural lapses aligns the law with the broader ease-of-doing-business agenda.