The Micro, Small, and Medium Enterprises (MSME) sector plays a pivotal role in India’s economy, contributing significantly to employment and GDP growth. However, this sector faces numerous challenges, particularly related to financial stability and delayed payments. At Shiva Consultancy Group, we understand the importance of addressing these issues to ensure sustainable growth for MSMEs. The Indian government has implemented a series of measures aimed at mitigating these challenges, ensuring that MSMEs receive the support they need.
Tackling Delayed Payments
One of the most pressing issues for Micro and Small Enterprises (MSEs) is the delay in receiving payments from buyers, which can severely impact cash flow and operational efficiency. To combat this, the government established the Micro & Small Enterprises Facilitation Councils (MSEFCs) under the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006. These councils are operational across various States and Union Territories, providing a platform for MSEs to resolve disputes related to delayed payments.
The SAMADHAAN Portal, launched on October 30, 2017, serves as a critical tool in monitoring outstanding dues owed to MSEs. This online platform enables MSEs to report payment delays and track the status of their claims. Following the Aatma Nirbhar Bharat initiative, a dedicated sub-portal was added on June 14, 2020, to facilitate the reporting of dues and monthly payments by Central Ministries, Departments, and Public Sector Enterprises to MSMEs.
The Ministry of MSME has also called for the establishment of additional MSEFCs to expedite the resolution of payment-related cases. Currently, 159 MSEFCs are operational, with several states, including Delhi, Jammu & Kashmir, Karnataka, Kerala, Maharashtra, Punjab, Rajasthan, Tamil Nadu, Telangana, Uttar Pradesh, and West Bengal, hosting multiple councils.
Enhancing Financial Access: The Trade Receivables Discounting System (TReDS)
To provide MSMEs with easier access to working capital, the government mandates that Central Public Sector Enterprises (CPSEs) and companies with an annual turnover of Rs. 500 crore or more register on the Trade Receivables Discounting System (TReDS). TReDS is an electronic platform that facilitates the discounting of trade receivables of MSMEs through multiple financiers, thereby reducing the time to receive payments.
Additionally, companies sourcing goods or services from MSEs must submit returns to the Ministry of Corporate Affairs if payments exceed 45 days from the date of acceptance or deemed acceptance. This regulation promotes transparency and ensures timely payments to MSEs.
Financial Support and Technological Advancement
The government has introduced several financial schemes to bolster the MSME sector:
- Prime Minister’s Employment Generation Programme (PMEGP): This initiative offers a credit-linked subsidy ranging from 15% to 35% of the project cost for establishing new micro-enterprises in the non-farm sector.
- Self Reliant India (SRI) Fund: A substantial Rs. 50,000 crore equity infusion aimed at providing growth capital to eligible MSMEs, fostering innovation and expansion.
- Credit Guarantee Scheme for Micro and Small Enterprises: This scheme provides guarantees to banks and financial institutions for loans sanctioned to MSEs, covering amounts up to Rs. 5 crore without the need for collateral security or third-party guarantees.
Recognizing the need for technological advancement, the Ministry of MSME has established new Technology Centres (TCs) and Extension Centres (ECs) across India. These centers offer a range of services including technology support, skill development, incubation, and consultancy. Such initiatives are designed to enhance the competitiveness of MSMEs, enabling them to navigate both domestic and international markets effectively.
These comprehensive measures, outlined by the Union Minister of Micro, Small and Medium Enterprises, Shri Jitan Ram Manjhi, are a testament to the government’s commitment to fostering a vibrant and resilient MSME sector. At Shiva Consultancy Group, we remain dedicated to supporting MSMEs through strategic consultancy and tailored solutions, helping businesses overcome challenges and achieve sustainable growth.