Number of MSMEs shut in FY23 so far doubles from FY22. Here’s why

Credit and finance for MSMEs: The total closures since July 2020 have accounted for only 0.11 per cent of the 1.61 crore MSMEs registered on the Udyam portal.

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Due to closure, a number of MSMEs had also withdrawn their Udyam licenses.

Credit and finance for MSMEs: The number of Udyam-registered MSMEs closed in the current financial year has nearly doubled from the last financial year’s count, showed official data. From 6,222 MSMEs shut during FY22, the count has jumped to 12,307 as of March 9 in FY23 while only 175 units were closed between July 1 (when the Udyam portal was launched) and March 31 in FY21, taking the total number of MSMEs closed to an all-time high of 18,704. The data was shared by the minister of state in the MSME ministry Bhanu Pratap Singh Verma in the Rajya Sabha in a written reply to a question on the revival of sick units.

Maharashtra had the highest number of casualties with 4,871 Udyam-registered MSMEs shut since July 2020 followed by Tamil Nadu (2,326), Uttar Pradesh (1,568), Gujarat (1,558), Rajasthan (1,297), Bihar (1,075), and more. 

The reasons for closures, however, were not known to the government. “Factors contributing to shutdown are not captured on Udyam Registration Portal,” Verma had said in his earlier response. Ishita Ganguli Tripathy, Additional Development Commissioner, Ministry of MSME had also told FE Aspire last year that while the closure of MSMEs is certainly a concern for the government for which necessary steps and studies have been undertaken, the reason for closure is not always mentioned by the units.

Also read: Over 6,000 MSMEs registered on Udyam portal shut during FY22: MSME Ministry

However, a survey conducted by SIDBI in late 2021 to assess the impact of change in MSME classification in 2020 on the sector and losses suffered by MSMEs due to the Covid pandemic reported that 67 per cent of MSMEs were temporarily shut for up to a three-month period during Covid in FY21. Another study conducted by the Khadi and Village Industries Commission (KVIC) during the year noted that 88 per cent of the beneficiaries of the government’s Prime Minister Employment Generation Programme (PMEGP) were negatively affected due to Covid-19. Among these 88 per cent beneficiaries, 57 per cent of units were shut down for “some time” during the Covid period. 

Comments from the MSME ministry weren’t immediately available for this story. 

Also read: Over 15,000 MSMEs shut since FY20; 54% in current fiscal so far: Govt data

Importantly, the total closures since July FY21 have accounted for only 0.11 per cent of the 1.61 crore MSMEs registered on the Udyam portal. On the other hand, 400 units registered on the Udyog Aadhaar Memorandum portal (before the Udyam portal was launched) were closed between 2016 and 2019, representing only 0.004 per cent of the total 1.02 crore MSMEs registered on the portal. The data on total UAM registrations was published in the MSME ministry’s FY21 annual report. 

Due to closure, a number of MSMEs had also withdrawn their Udyam licenses. According to the data shared in July last year, 9,141 Udyam enterprises had cancelled their registrations due to shutdown while 5,510 enterprises withdrew their registrations because they didn’t require it any further. Moreover, 3,911 registrations were revoked due to the ‘change of owner’ in the business. Lastly, 15,597 enterprises had cancelled their licenses due to ‘other’ reasons. 

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First published on: 14-03-2023 at 13:38 IST
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