Syllabus: GS3/ Economy
Context
- The Global Trade Research Initiative (GTRI) report stated that the new safety regulations for machinery and electrical equipment will affect domestic production by the MSME segment.
Background
- Recently the Machinery and Electrical Equipment Safety (Omnibus Technical Regulation) Order, 2024, was introduced by the Ministry of Heavy Industry (MHI), which is set to take effect on August 28, 2025.
- These regulations bring in stringent safety standards for machinery and electrical equipment manufactured or imported into India, aimed at aligning Indian safety practices with global norms.
- The new rules are expected to have far-reaching consequences for the Micro, Small, and Medium Enterprises (MSMEs), which make up 90 per cent of the estimated 1,50,000 manufacturers that will be affected.
Key points of new safety norms
- The norms introduce three levels of stringent safety standards for machinery and electrical equipment manufactured or imported into India.
- These regulations apply to both machinery and their parts or subassemblies.
- It will require manufacturers to comply with the safety and conformity standards set forth by the Bureau of Indian Standards (BIS).
- The regulations cover more than an estimated 50,000 types of machinery, including key industrial equipment like pumps, compressors, centrifuges, cranes, transformers, and switchgear, which fall under 463 tariff lines or product categories.
- In FY 2024, India’s imports in these tariff lines amounted to $25 billion, with China accounting for 39.1 percent of that value.
- India also exported $17.7 billion worth of machinery in the same period.
What are the concerns?
- Though the export-oriented items have been exempted from the order that mandates prior approvals from the Bureau of Indian Standards (BIS).
- However it offers only little relief to the 1.5 lakh such equipment manufacturers as they supply to both domestic and export markets.
- Currently, most MSMEs adhere to ISO 9001 norms that don’t address safety concerns explicitly.
- On the other hand the new norms are highly technical and the lack of implementation guidelines from BIS will make compliance even more difficult for producers.
- Financial and technical barriers will pose significant hurdles for MSMEs, with compliance costs ranging from ₹50,000 to ₹50 lakh depending on the type of machinery and the standards required.
Concluding remarks
- The government should delay implementation and help the industry prepare. Without support, most MSMEs may struggle to comply and be forced to close.
- A phased approach, with extended timelines for compliance and support from industry bodies will be essential to ensure the benefits of these new safety standards are fully realized without unduly burdening smaller businesses.
| What are MSMEs? – MSMEs or Micro, Small, and Medium Enterprises are businesses that are defined by their investment and turnover levels. – They are considered an important sector of the economy as they create jobs, generate income, and promote entrepreneurship. Contribution of MSMEs – Contribution in Economy: MSMEs are often called the backbone of the Indian economy; they account for more than 11 crore jobs and contribute around 27% of India’s GDP. – Employment Generation: The sector consists of around 6.4 crore MSMEs , with 1.5 crore of them registered on the Udyam portal and employs around 23% of the Indian labor force, making it the second-largest employer in India after agriculture. – Output and Exports: They account for 38.4% of the total manufacturing output and contribute 45.03% of the country’s total exports. |
Source: TH
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