Credit and Finance for MSMEs: MSEFCs are essentially dispute settlement units established by state governments in their respective geographies to address delayed payments cases filed by MSMEs. Businesses have to file applications for delayed payments against the buyer before the concerned MSEFC of their state or city.
Credit and Finance for MSMEs: Of the total 855 delayed payment applications involving Rs 355 crore filed by MSMEs against central ministries so far, ministries of Railways, Atomic Energy, Electronics and IT, Petroleum and Natural Gas, and Information & Broadcasting had a majority share. In the top five bracket, while 195 applications (Rs 95 crore) were filed against Railways ministry, 67 (Rs 98 crore) and 64 applications (Rs 32.85 crore) were filed against Atomic Energy and Electronics ministries respectively. 56 applications (Rs 6.30 crore) were filed against Petroleum ministry and 48 (Rs 4.63 crore) were filed against Information & Broadcasting, data from the government’s delayed payment monitoring system MSME Samadhaan at the time of filing this report showed.
“There are a lot of issues. One of them is the sheer bureaucratic approach by all government organisations. Another challenge is that most MSMEs are not well versed with digital platforms and government processes etc. MSMEs have already been suffering due to the delayed payments issue leading to working capital crunch. While the government had made a policy for buyers to clear MSME payments in 45 days, but if MSMEs are not paid in that period then it would never be going to solve this issue for MSMEs. MSMEs are helpless in this case even as we see payments eventually getting cleared after more than the specified period as the government has taken measures to encourage buyers to clear payments,” Sanjiv Layek, Executive Secretary, World Association For Small And Medium Enterprises (WASME) told Financial Express Online.
Email sent to MSME Samadhaan for comments didn’t elicit an immediate response.
Importantly, out of 194 applications against the railways ministry, only seven were disposed by MSE Facilitation Councils (MSEFC) while 36 were rejected and 46 were mutually settled. The disposal rate was better for other ministries. Out of 67 cases against ministry of atomic energy, seven were disposed by MSEFCs, 18 were rejected, and 27 were mutually settled. Likewise, 14 applications were disposed out of 64 applications against electronics and IT, 12 were rejected and five were mutually settled. For petroleum and natural gas ministry, five applications were disposed and 15 were mutually settled but eight were rejected. Further, 17 applications were disposed with respect to ministry of information and broadcasting, 15 were rejected and four were mutually settled.
Overall, 81 out of 855 applications against all central ministries were disposed by MSEFCs so far while 170 were rejected and 188 were mutually settled. Interestingly, only 13 applications were pending, according to the data with respect to 34 ministries available on the portal.
“Payments are delayed from many government departments and PSUs. For instance, the Tamil Nadu electricity board — Tamil Nadu Generation and Distribution Corporation takes more than a year to clear payments. Likewise, most PSUs take a minimum of 90-120 days for payments. We have been facing around a 120-day delay in payments. This is the time government should release all payments pending immediately while banks are also not supporting significantly,” Ramesh Babu, Partner, Navamani Electricals told Financial Express Online.
MSEFCs are essentially dispute settlement units established by state governments in their respective geographies to address delayed payments cases filed by MSMEs. Businesses have to file applications for delayed payments against the buyer before the concerned MSEFC of their state or city. After examining the case, the respective MSEFC issues directions to the buyer unit for payment of due amount along with interest as per the provisions under the MSMED Act 2006. According to MSME Samadhaan, every reference made to MSEFC has to be decided within a period of 90 days from the date of making such a reference. In fact, as a deterrent, the Department of Expenditure had in July last year had issued an Office Memorandum for buyers to pay penal interest of 1 per cent per month if they delay MSME payments beyond the prescribed duration.
While the government can urge buyers to pay MSMEs on time, it cannot force them to do so. “The Ministry has taken up the subject vigorously with the Central Ministries, Central Public Sector Enterprises (CPSEs) and State Governments and the Corporate entities. But, 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,” former Minister of State for Finance Anurag Singh Thakur had said in a written reply to a question in the Lok Sabha in February this year.