New machinery safety rules: Will it hurt small manufacturers hard?

New safety rules for machinery and electrical equipment, set to kick in from August 2025, could hurt India's small manufacturers hard, industry experts said, calling for more preparation time.

The heavy industry ministry introduced the Machinery and Electrical Equipment Safety (Omnibus Technical Regulation) Order, 2024, in August saying it will help align Indian safety practices with global standards.

But industry experts said the move is likely to impact over 50,000 types of machinery and electrical equipment produced by more than 150,000 manufacturers and take up compliance costs.

The regulation imposes strict safety standards on machinery and electrical equipment produced or imported into India.

Challenge for MSMEs

The regulation is expected to hit micro, small and medium enterprises (MSMEs) the hardest, as most MSMEs adhere to ISO 9001, a management-focused standard that does not address safety concerns in manufacturing.

For smaller firms, adapting to the three tiers of machine safety standards, as stipulated by the regulation, within the one-year deadline poses a major challenge, experts said.

"The 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," said Ajay Srivastava, founder of Global Trade Research Initiative (GTRI), a think tank.

"Many smaller firms lack access to the advanced machinery or technology needed to meet these new safety standards, further exacerbating the challenge," he added.

Regulatory burden

Srivastava said while export-oriented machinery is exempted under the regulations, the new order provides little relief as most Indian companies produce for both domestic and export market, requiring full Bureau of Indian Standards (BIS) certification across their entire product range. In fact, it increases the regulatory burden.

While India exported engineering products worth $35.76 billion during April-July 2024, registering a 4.08% annual growth, their imports stood at $46.57 billion, rising by 8.17% annually in the same period, according to commerce ministry data.

Concerns of the MSME sector

Meanwhile, the MSME sector has raised concerns about the new regulations with the government, while also seeking an extension of the deadline.

“We are in discussions with senior officials from the ministry of heavy industries, highlighting the significant challenges these rules are posing for the sector," said Rajnish Goenka, founder- chairman of the MSME Development Forum, a lobby group.

"The MSME sector is already in a neglected state, and these regulations could push it further backwards," he added.

A spokesperson of the ministry of heavy industries didn't respond to emailed queries by livemint.com.

Long-term benefits

According to the Small Industries Development Bank of India (SIDBI), MSMEs contribute to about 30% of the country's Gross Domestic Product (GDP) and over 45% of exports, which in volume terms stands next only to agriculture.

The order has long-term benefits for businesses despite the challenges in the short run, other experts said.

"Following enhanced safety standards, businesses will not only improve operational efficiency but also qualify their products for global markets, paving the way for growth and international opportunities," said Mukesh Mohan Gupta, president of the Chamber of Indian Micro Small & Medium Enterprises.

(By arangement with livemint.com)