Credit and Finance for MSMEs: The Department of Expenditure had issued an Office Memorandum in July last year asking buyers to pay a penal interest of 1 per cent per month for delayed payments beyond the prescribed duration.
The share of disposed applications by MSEFCs out stood at only 8.9 per cent in the past 12 months.
Credit and Finance for MSMEs: Even as the Modi government has been urging buyers to clear MSME dues on time, the number of delayed payment applications filed by micro and small sellers has jumped 88 per cent in the past 12 months, according to the government data. From 37,465 applications involving Rs 9,901.31 crore filed as of March 4, 2020, the number has increased to 70,451 applications involving Rs 19,557.91 crore, showed data available with the MSME Ministry’s delayed payment monitoring system MSME Samadhaan. Importantly, the jump in the number of applications disposed by MSE Facilitation Councils (MSEFC) has been higher at 109 per cent from 3,012 applications to 6,306 applications during the said period. The amount involved in applications disposed was Rs 972 crore as of March 4, 2021, up 66.7 per cent from Rs 583.27 crore as of March 4, 2020. However, the share of disposed applications by MSEFC out of total applications filed stood at only 8.9 per cent.
MSEFCs are dispute settlement units established by state governments in their respective geographies to resolve issues around delayed payments faced by small businesses. According to the MSME Act, 2006, MSEFC of a state after examining the case filed by the MSE unit issues directions to the buyer for payment of due amount along with interest. Every application filed to MSEFCs has to be decided within a period of 90 days from the date of making such a reference.
The MSME Ministry had initially written to 500 corporates in September last year followed by reaching out to more than 2,800 entities to settle MSME dues on priority. The government had also reminded Central Public Sector Enterprises (CPSEs) and other companies to join the bill discounting platform TReDS as buyers to help ease working capital stress among MSMEs. Finance Minister Nirmala Sitharaman had in May last year as well asked government bodies to clear pending MSME dues within 45 days. Moreover, the Department of Expenditure had also issued an Office Memorandum in July asking buyers from MSMEs to pay a penal interest of 1 per cent per month for delayed payments beyond the prescribed duration.
However, the government couldn’t force at least state government or public sector enterprises to clear dues of small enterprises. “It is to be noted that the Central Government cannot issue any directions to, or force, State Governments or State PSEs to pay the dues,” MoS Finance Anurag Singh Thakur had said in a written reply to a question in the Lok Sabha recently. Meanwhile, the applications rejected by MSEFCs so far stood at 12,359 involving Rs 2,620.44 crore up from 6,346 rejected cases involving Rs 1,447.17 crore. Separately, 6,298 cases have been mutually settled between MSE and its buyer involving Rs 926.05 crore, as of March 4, 2021.