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Fresh steps for MSMEs likely amid inflation, credit worries

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15th January, 2022 09:56 IST
MSME players argue that anti-dumping duty and quality control measures announced by government have resulted in domestic players raising prices and adding to the woes, with some of the associations demanding suspension of some of the levies.
NEW DELHI: The government is expected to come up with fresh measures for micro, medium and small enterprises (MSMEs) in the Union Budget, amid concerns over a constant rise in commodity prices, problems in accessing credit and payment delays.

For most units, the biggest concern is rise in input prices, with steel and other metal costs often going up within a matter of weeks and ending up upsetting the calculations. But it isn't just metals, polymers, textiles and other sectors have been hit too, said industry players.


MSME players argue that anti-dumping duty and quality control measures announced by government have resulted in domestic players raising prices and adding to the woes, with some of the associations demanding suspension of some of the levies. "There is an increase in turnover due to higher raw material prices, but profitability is affected," said K E Raghunathan, convenor of the Consortium of Indian Associations.


Apart from lower margins, MSMEs also have to contend with the absence of adequate bank credit. "The Emergency Credit Line Guarantee Scheme has been a huge support for small businesses. There should be a mechanism to allow for an automatic increase in the credit limit after factoring the higher cost of inputs, instead of businesses being asked to undertake excessive amount of paperwork," said Anil Bharadwaj, secretary general of Federation of Indian Micro and Small & Medium Enterprises (FISME).

Baldevbhai Prajapati, president of Laghu Udyog Bharti, also points to reluctance of banks to lend to new units that are set up. He adds payment delays as a key area of concern. "It often takes over 90 days to receive payments, but banks recognise an account as an NPA within 90 days," he says, while arguing for a special dispensation of MSMEs.

There is already a proposal to provide further guarantee to promoters as many of them are unable to bring the additional security required for debt restructuring. FISME has proposed that bank branches should be empowered to decide on loan recast, going beyond benchmark norms such as inventory, receivables and margin requirement.

In fact, bankers have also flagged the issue to the finance ministry, which in turn is discussing additional steps for loan restructuring for MSMEs with the RBI.

Although the government had pushed Trade Receivables Discounting System (TReDS) as the solution to the payment problem, some of the biggest names in India Inc have either not registered on the platform or do not use it, said Bharadwaj. Besides, state public sector companies, including power companies, are not mandated to join.

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Owners say MSMEs hit by COVID-19 restrictions, workers become unemployed

Industry owners said the government has done little to help them during these harsh circumstances and has imposed restrictions without looking at the MSMEs from their perspective.On one hand, industry owners fear that labourers would leave for their villages. They also face a challenge in paying salaries, electricity and water bills, rents while the production and hence income is lower than usual.

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