The Finance Minister announced stimulus package to boost liquidity availability to MSMEs with 100% Government Guarantee. This was a signalizing initiative to boost sentiments of MSMEs who have been facing the impact of COVID-19 lockdown. A major boost that would build sentiments of MSMEs are payment of dues to MSMEs.
While there are several estimates of amounts due to MSMEs from the Government and PSUs, a quick poll by CII of MSMEs to whom payments are pending indicated that about 450 MSMEs reported delayed payments worth Rs. 1,819 crores of which Public Sector/ Government Departments including State Departments owe MSMEs Rs 1,709 Crores and the private sector also owes about R S 110 crores to MSMEs, said Mr. Chandrajit Banerjee, Director General, CII.
The sample CII poll revealed that about 32% of the outstanding to MSMEs have been delayed for more than 2 years and about Rs 895 crores are stuck in disputes. These need to be resolved soon to save the MSMEs from solvency, Mr. Banerjee added.
Out of the total delayed payments amount, manufacturing contracts account for Rs 153 crores, services contracts account for Rs 723 crores and multiple sectors accounted for Rs 930 crores.
Almost Rs 723 crores are delayed payments from services sector areas including EPC contracts (Rs 92 crores), Engineering contracts (35 crores), IT & ITES (47 crores), and other services (Rs 113 crores).
Appreciating the FM’s announcement to release all payments immediately, Mr. Banerjee said, CII suggests measures to alleviate the issue of pending payments to MSMEs including tax refunds and incentives;
One, the government should monitor payment delays by CPSUs to MSMEs closely through a portal for complaints and ensure necessary funds are provided and utilized for this purpose.
Two, all PSUs and Government Departments both at the Central and State Government levels must be encouraged or mandated to register themselves on TREDS.
Three, in addition, to overcome the delays in payments to MSMEs due to disputes all pending GST refunds, should be cleared immediately
Four, all incentives due to MSMEs under various central and state schemes should be released immediately.
Five, banks should provide additional reconstruction term loans to MSMEs impacted by the lockdown, with the Government of India offering a guarantee up to 20 percent of the default.
