Ease of Doing Business for MSMEs: Micro, small and medium enterprises (MSMEs) looking to accelerate their recovery beyond the pre-pandemic levels have high hopes from the Union Budget 2022. Since Covid, small businesses have been manoeuvring through the challenges including the shipping container crisis, coal shortage, rising prices of raw materials across industries, and more to stay afloat while the government’s credit schemes have provided relief to some units. However, rising inputs-costs-related complexities still persist. Here’s what MSMEs want from the upcoming budget for a better 2022-23 as Finance Minister Nirmala Sitharaman reportedly seeks inputs from various sectors’ experts.
“The biggest recommendation is certainly with respect to the increase in raw material prices and the anti-dumping duties on it. Essentially artificial jacking up of prices by domestic manufacturers is a big issue,” Anil Bhardwaj, Secretary General, Federation of Indian Micro, Small, and Medium Enterprises (FISME) told Financial Express Online. The federation represents 740 associations in the country.
According to the All India Council of Association of MSMEs (AICA), which represents over 200 associations, prices have jumped up to around 150 per cent. For instance, aluminium alloy has risen 154 per cent from Rs 106 per kg in April 2020 to Rs 270 per kg in October 2021. Likewise prices for mild steel plate, copper, CRCA sheet, pig iron, kraft paper, engineering plastic have increased 82 per cent, 119 per cent, 95 per cent, 53 per cent, 110 per cent, and 100 per cent respectively during the said period. “To achieve Atmanirbhar Bharat, we need to reduce raw material prices to pre-Covid levels to compete locally and internationally,” R Ramamurthy, member, AICA told Financial Express Online.
AICA has also urged for a separate banking policy for MSMEs to dedicatedly focus on ease in application and disbursement of credit for eligible small businesses. An increased working capital limit for MSMEs and reduction in GST rates are other recommendations. “We are also seeking a reduction in GST to 12 per cent across sectors for the economy to boom. A chunk of working capital secured by MSMEs also goes towards paying higher GST that hurts their businesses. Also, more skill development needs to happen for MSMEs by the government to compete in international markets. MSMEs generally have to skill their own people,” said Ramamurthy.
Along with the reduction in GST rates, enterprises with a turnover below Rs 40 lakh have also sought freedom from mandatory GST registration for selling goods online. This is particularly meant for millions of sellers and artisans doing business via e-commerce. “Inability to handle GST compliance costs has disabled millions of self-employed women/self help groups and artisans from selling their produce online especially during the Covid pandemic. It is crippling. Both the offline and online sellers should be allowed to sell without GST registration below the prescribed threshold,” said FISME.
On the other hand, the industry body Confederation of Indian Industry (CII), in its pre-budget memorandum has made recommendations around easing credit access for MSMEs. This included expediting the implementation of the Fund of Funds scheme announced by the government last year, creation of a fund of funds scheme for technology adoption with a focus on the fourth industrial revolution, and reviving the Credit Linked Capital Subsidy Scheme (CLCSS), for technology upgradation, which was discontinued after March 31 2020. The government had last year announced the Fund of Funds to infuse Rs 50,000 crore equity in MSMEs but it is yet to be operationalised.
However, there still doesn’t seem much scope for MSMEs in the budget, believed Madan Sabnavis, Chief Economist, Care Ratings. “Covid was the time when the government had already intervened in all possible ways to help all possible sectors including MSMEs. Whatever facilitation had to be done in terms of receivables, procurement etc., the announcement for them has already been made. So, in policy approach for MSMEs, steps have been taken including for the credit access part,” Sabnavis told Financial Express Online.