Govt accounts for nearly 94% of Rs 1,819 cr dues payable to MSMEs: CII poll

Topics MSME | CII | Coronavirus

Nitin Gadkari had hinted at a television interview last week that all state and government departments along with the private sector owe MSMEs an estimated Rs 5 trillion.
After a public controversy about the quantum of funds owed by the government to Micro Small and Medium Enterprises (MSMEs) nationwide, the Confederation of Indian Industry (CII) has now said its members are owed upwards of Rs 1,819 crore.

"While there are several estimates of amounts due to MSMEs from the Government and Public Sector Undertakings (PSUs), a quick poll by CII of MSMEs indicated that about 450 firms reported delayed payments worth Rs 1,819 crore. Of this, public sector or government departments including state departments owe MSMEs Rs 1,709 Crore, while the private sector also owes about RS 110 crore to MSMEs," said Chandrajit Banerjee, Director General, CII. 

Last week, MSME Minister Nitin Gadkari had hinted at a television interview last week that all state and government departments along with the private sector owe MSMEs an estimated Rs 5 trillion. The figure given by Gadkari was circulated widely on social media and touted by critics as the government's own admission of massive pending dues. Later, Expenditure Secretary TV Somanathan clarified on Friday that dues from 26 top Central PSUs to MSMEs was Rs 773 crore as on March 31.

Now, the sample CII poll has revealed that pending claims remain a massive burden on an industry struggling with acute lack of liquidity. Thirty-two per cent of the outstanding to MSMEs have been delayed for more than two years and about Rs 895 crore is stuck in disputes. These need to be resolved soon to save the MSMEs from solvency, Banerjee, added.

Out of the total delayed payments, manufacturing and services contracts account for Rs 153 crore and Rs 723 crore respectively, while those for multiple sectors account for Rs 930 crore. Among services, engineering, procurement and construction (Rs 92 crore), Information Technology & ITES (47 crore) and Engineering contracts (35 crore) figure among top pending categories. 

The Micro and Small Enterprises Facilitation Council on Saturday warned that the delay in payments for supplies received from MSMEs would invite heavy penalty against defaulting buyers. “In case the buyer fails to make payment as required under Section 15 of the Micro Small and Medium Enterprises Development Act, the buyer is liable to pay compound interest with monthly rests to the supplier for delayed period beyond 45 days, on the on the amount, payable at three times the bank rate notified by Reserve Bank of India as provided under Section 16 of the MSMED Act, 2006,” a circular issued by MSEFC Chairperson Anoo Malhotra said on Saturday.

Way Forward

CII has suggested that government monitor payment delays by Central PSUs closely through a portal for complaints and ensure necessary funds are provided for this purpose. This is currently done through the MSME Samadhaan portal which acts as the platform for settlement of disputes after MSMEs affected by delayed payments file applications for redressal. As of Monday showed Rs 11,014 crore accruing to MSMEs.

The industry body also wants all PSUs and government departments, across the country must be encouraged or mandated to register themselves on the Trade Receivables Electronic Discounting System (TReDS), the online electronic institutional mechanism for facilitating the financing of trade receivables of MSMEs through multiple financiers.platform. 

CII has also pushed for the immediate clearance of all pending GST refunds as well as all incentives under various central and state schemes that remain due to MSMEs, should be released immediately. Banks should provide additional reconstruction term loans to MSMEs impacted by the lockdown, with the government offering a guarantee upto 20 per cent of the default. 

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