‘Delayed payments major issue for MSMEs’ | SupportBiz

Policy Notes

‘Delayed payments major issue for MSMEs’

Sudarshan Sareen, National President, All India Confederation of Small and Micro Industries Association (AICOSMIA), in an exclusive interaction with SupportBiz, highlighted the challenges and opportunities that the MSME segment is facing in India.

This holds a special significance when the Union Budget 2013 is just around the corner.

Edited excerpts:

What are the  major challenges faced by Indian MSMEs?

There are several challenges that the MSME sector is facing presently. These challenges are serious in nature, and are affecting the  sector negatively. Among  these, the provision of Non-Performing Assets (NPA) has been extremely  tough on  the MSMEs in the country. The three-month period of NPAs  is  too short for any MSME, making it impossible for  it  to meet the expected performance metrics. We, at AICOSMIA, have urged the government to amend the  provisions for NPA. We have requested  the extension of NPA timelines; we believe that the period must be extended to about one year from three months.

Delayed payment is another  major issue  being faced by Indian SMEs.  How do you look at this?

Delayed payment is, indeed, a big problem for MSMEs, and  is  the major reason for the failure of MSMEs. Delayed payments result in cash flow crunches, which then lead to financial downturn  of the  concerned businesses.  Often,  delayed payments end up making  the concerned MSMEs  sick units.

Government agencies  have been working on this,  coming up with guidelines and policies  to help MSMEs in dealing with this problem. The Ministry of MSME has taken up this issue very seriously, too.  However, there is a  considerable lack of proper execution of guidelines and policies introduced by  government agencies.

According to you, what is the impact  of complex and stringent labour laws  on MSMEs?

All of us know that China is doing very well  at  the global level, and that the country’s capabilities   for international-level business have  scaled great heights over the past two decades. This is  largely because the legal framework  in China is  very much in favour of its MSMEs.  On the other hand, in India, the scenario is different.  For instance, there is no special consideration for MSMEs in the labour laws. The labour laws are the same for both large  and small organizations. In  such conditions, micro and small units   have to suffer,  as they work on thin margins, and the availability of labour becomes an issue. Inspection by  local agencies in the name of complex labour laws keeps  small entrepreneurs worried,  annoying them  at times.  We want special consideration  to be given to MSMEs in  labour laws. Also,  there is  the need to come up with some new guidelines  to ensure that the interest of MSMEs  is protected.

What are your expectations from the upcoming Union Budget?

We  are working  on preparing a  list of recommendations for the Union Budget 2013, which we will send to the concerned policy makers.   It will mostly cover the  issues faced by MSMEs in India, which we have discussed already.  However, we will also  draw attention  to the area of skill development for MSMEs.