Ease of Doing Business for MSMEs: Even as prices for different raw materials have increased multifold since Covid struck last year, the number of MSMEs supported under the government’s Raw Material Assistance (RMA) scheme had dropped in financial year (FY) 2020-21 from the preceding FY20, showed official data. From 2,842 units offered credit support worth Rs 5,244 crore in FY21, the number declined to 2,699 units along with the drop in credit support of Rs 4,398 crore, according to the data shared by MSME Minister Narayan Rane in Rajya Sabha recently. Covid-induced lockdown last year had led to a halt in manufacturing and production activities, putting MSMEs and other manufacturers out of business for months.
The drop in MSMEs supported under the scheme last year indicated that despite unlocking of activities post-August last year, businesses found it challenging to resume operations. However, the situation seems to have changed significantly in the current FY. As of November 26, 2021, already 2,445 units had got support worth Rs 3,083 crore under the RMA scheme. Implemented by MSME Ministry’s National Small Industries Corporation (NSIC), the scheme offers “credit support to MSMEs for procurement raw materials from the bulk manufacturers with whom NSIC has partnered with and other suppliers identified by MSMEs as well,” Rane said. The key raw materials made available by NSIC includes steel, aluminum, copper, zinc, polymer, bitumen, emulsion, cement etc.
Since April last year, the per kilogram prices for multiple raw materials have jumped. Till October this year, aluminium alloy had jumped 154 per cent from Rs 106 to Rs 270, copper had increased 119 per cent from Rs 355 to Rs 779, kraft paper had increased 110 per cent from Rs 20 to Rs 42, engineering plastic had also moved up 100 per cent from Rs 70 to Rs 140, etc., as per data from All India Council of Association of MSMEs (AICA).
In contrast, the SC/ST units supported in FY21 had increased from FY20. Rs 65.53 crore credit was provided in FY21 to SC/ST entrepreneurs, up 10 per cent from Rs 59.50 crore in FY20, and 12.5 per cent from Rs 58.23 crore in FY19 despite Covid-related challenges. The data was shared by Rane in Rajya Sabha in July this year. The scheme provides credit support up to 180 days for MSMEs to avail economics of purchases like bulk purchases, cash discounts, etc.
“We have 15 dedicated offices for SC/ST entrepreneurs providing support from handholding to marketing etc., through a dedicated team. We have engaged with retired bankers as well to help expedite the bank credit process for entrepreneurs. The scheme provides raw materials at affordable and competitive prices for MSMEs so that the end product is also competitive in the market. We aggregate requirements of MSMEs and then negotiate for bulk discounts with manufacturers which are passed on to MSMEs,” Ravi Kumar, Chief General Manager, NSIC had earlier told Financial Express Online.
Manufacturing MSMEs having Udyam Registration certificate or previous Udyog Aadhaar Memorandum (UAM) can apply for the RMA scheme, according to NSIC. A limit is sanctioned for procurement of material on credit based on the raw material requirements of the unit, its financial position, and available security of equivalent value in the form of a bank guarantee. The limit for a single unit engaged in manufacturing is up to Rs 10 crore and Rs 6 crore to unit engaged in service activities. However, for a group of units, the limit is Rs 20 crore in manufacturing and Rs 15 crore in service activities. The validity of the limit sanctioned under the scheme is one year which can be renewed for another year.