Ease of Doing Business for MSMEs: Gujarat had slipped to the 10th rank in last year’s Ease of Doing Business rankings from the top in 2015. However, MSMEs are hopeful of further reforms in the state under Bhupendra Patel-led government.
Ease of Doing Business for MSMEs: Micro, small, and medium enterprises (MSMEs) in one of the richest states of India – Gujarat have their expectations set for the newly sworn-in Chief Minister Bhupendra Patel. For the uninitiated, the 59-year-old first-time MLA Bhupendra Patel is the 17th Chief Minister of Gujarat who comes from the dominant Patidars community in Gujarat. He had earlier served as the Chairman of Ahmedabad Urban Development Authority from 2015 to 2017 and before that, he was the Standing Committee Chairman of Ahmedabad Municipal Corporation.
Patel holds a diploma in Civil Engineering and has been a real estate developer. Gujarat had slipped to the 10th rank in last year’s Ease of Doing Business rankings from the top in 2015. However, MSMEs are hopeful of further reforms in the state under Bhupendra Patel-led government.
“Much like the entire country, Gujarat is also driven by the service sector. While there is an industrial policy in the state but there is no separate service policy yet. So, this is one area where we want the government to pursue as it would help MSMEs and other businesses to enhance growth. Moreover, with the expansion of the MSME definition, focus on micro units have been narrowed as more businesses have come under the MSME ambit while a lot of micro and small enterprises, which haven’t raised any credit in their life, have not been able to benefit from the ECLGS scheme,” Pathik Patwari, owner of roofing sheets manufacturer Nexus Infratech told Financial Express Online. Patwari is also the Senior Vice President at the Gujarat Chamber of Commerce and Industry.
“At least the state government under the new CM should take some steps for financial support to micro and small businesses or come up with some interest subsidy where it becomes compulsory for banks to lend to these entities,” Patwari added.
The increase in the cost of raw materials including steel, iron ore, plastics, copper, aluminum, etc., post-Covid had impacted the working capital of MSMEs across India and consequently their businesses too even as the demand had also declined. For instance, pig iron, steel, and copper saw up to 50 per cent rise in prices while cement and PVC pipes witnessed an increase between 50-100 per cent. The price jump had rendered MSMEs ineffective in production and revenue generation.
“The mood among MSMEs is good as the Covid situation has improved a lot in the state. However, MSMEs have concerns around the rising cost of raw materials. Chemical and pharma are doing well but the core engineering sector has certain challenges. The cost of steel, cement, etc has gone up. What government can help with is reserve certain quantities of basic raw materials even if there is a good export price. MSMEs are not getting adequate raw materials to manufacture products. We hope the new CM is proactive,” Abhishek Gangwal, Managing Director, HPS Gases, and President, Federation of Gujarat Industries told Financial Express Online.
Among the other key asks is a policy around industrial accidents wherein the promoter is not directly responsible yet he is made liable for it. Gangwal said as most MSMEs are owner-driven, the owner has to run from pillar to post if something unfortunate happens in the company or factory even if he/she is not the reason for the incident.
“So, we need a proper policy to ensure that the promoter doesn’t have to bear the actions that also impact the business,” Gangwal added.
Vadodara-based Ashok Patel who runs AB Industries, which manufacture anesthesia and critical care ventilators, said the government procurement of healthcare equipment from MSMEs is not enough even as the government had earmarked 25 per cent of their purchases to be from micro and small enterprises every year.
Importantly, the healthcare-related procurement from MSMEs across India had reportedly increased post-Covid, however, small businesses are seeking preference.
“Central and Gujarat governments are the biggest buyer of medical devices but there is no preference given to the MSMEs sector as the latter has limitations in terms of technology, unlike large enterprises. So, problems MSMEs face is a lack of exposure to the latest technology and methodology. They also don’t have the capacity to develop technology on their own. There must be some preference in procurement for local businesses. For instance, if a hospital needs 100 ventilators, then at least 20 per cent should be purchased from local industry. The government is not buying enough from MSMEs,” Patel told Financial Express Online.
In terms of compliance, MSMEs are looking at a reprieve from Professional Tax of Rs 80-200 per employee they have to deduct and pay to the government. In Gujarat, the tax has to be paid within 15 days if the employee count is more than 20 staff members and quarterly if there are less than 20 employees.
“The government can provide relaxation in terms of removing Professional tax or subsidising various stamp duties. This is among the compliance burdens for small businesses. We don’t want the government to go revenue negative and hence, they can get it covered in other formats like Corporation tax, Property tax by increasing their respective tax slabs,” said Patwari.