Hit by Covid, small & micro items await Rs 8.7 lakh crore in pending dues

A vital drawback confronted by the Micro, Small and Medium Enterprises (MSME) sector is delayed funds. It’s the smallest institutions — the micro and small items — which have been hit the toughest post-Covid with their pending dues touching Rs 8.73 lakh crore, nearly 80 per cent of the overall pending for your complete MSME sector till 2021.

Delayed funds, as share of gross sales, has seen a pointy spike from 46.16 per cent in 2020 to 65.73 per cent in 2021 for the “micro” section and from 28.85 per cent to 31.10 per cent for “small” items, in accordance with a report by the Bengaluru-based Global Alliance for Mass Entrepreneurship shared with the Union MSME Ministry.

However, the rise in delayed funds as a share of gross sales has been a lot decrease for “medium” section items, up from 24.02 per cent in 2020 to 25.20 per cent in 2021.

Micro items are these with investments as much as Rs 1 crore and turnover of lower than Rs 5 crore. For small items, the funding restrict is at Rs 10 crore and a turnover is pegged at lower than 50 crore. A unit is termed medium if it has investments of as much as Rs 20 crore with a turnover of lower than Rs 100 crore.

Delayed funds — from clients within the personal sector, authorities departments and public sector undertakings — are an obstacle to the revival of smaller items.

A Crisil report confirmed that greater than 1 / 4 of India’s MSMEs misplaced market share of over 3 per cent as a result of pandemic. And half of them suffered a contraction of their incomes margins due to a pointy rise in commodity costs throughout 2021 fiscal, in contrast with 2020. This is exacerbated by delayed funds.

“It is easy to ascertain the payment owed to the government sector but not to the private sector and there are reasons. One, we cannot ask the private sector to share a list and, second, the MSME units, too, would not want to complain about their clients to avoid hurting their working relationship,” mentioned a senior authorities official.

The authorities, in 2020, had requested each PSUs and the highest 500 firms to clear their dues to items within the sector. This was executed as a part of the federal government’s plan to make sure sufficient liquidity for MSME items together with a credit score facility for the sector below the Emergency Credit Line Guarantee Scheme (ECLGS) scheme.

Despite varied diktats from the Centre, the worth of delayed funds to the MSME sector has elevated to Rs 10.7 lakh crore till the top of calendar 12 months 2021, in accordance with the report.

About 81 per cent of the overall quantity is owed to small and micro enterprises: Rs 4.29 lakh crore to small enterprises and Rs 4.44 lakh crore to micro enterprises.

Highlighting the severity of the issue, the report says, median debtor days past the legally really useful 45-day interval for micro enterprises in 2020-21 was 6.5 months (195 days), in comparison with two months (68 days) for small enterprises; and 1.5 months (47 days) for medium enterprises.

Nitin Gadkari, then minister for MSME, had flagged means again in mid-2020 that state and Central governments, their ministries and PSUs, and main industries mixed owed an estimated Rs 5 lakh crore to MSMEs.

According to info from the Ministry of Statistics and Programme Implementation, the share of MSME in India’s manufacturing output throughout FY’20 was 36.9 per cent and the share of export of specified MSME-related merchandise to all-India exports throughout FY21 was 49.5 per cent, as per info from Directorate General of Commercial Intelligence and Statistics.