June 21, 2021 8:36:31 pm
Maharashtra has the dubious distinction of having the highest number of pending cases in the country related to disputes involving payment for micro medium small enterprises (MSMEs). Of 20,463 applications filed by the MSMEs, 8,589 are pending as of date.
Timely payment from companies that outsource their works to MSMEs is one of the fundamentals of business for the sector. In case of delayed payment, most MSMEs face problem in raising funds to service their loans or pay for raw materials or their employees. Financial insolvency is a major concern as the sector battles pandemic-related lockdown and restrictions.
Data from the dashboard of MSME Samadhan, a delayed payment-monitoring system, show that Maharashtra had filed 20,463 applications, of which 8,589 are pending. Delhi, with 6,345 pending of 7,864 applications, has the second highest pendency in the country. District-wise, Pune has the fifth highest pendency in the country.
MSMEs, as per the law, are entitled to payment of their dues within 45 days of submission of the jobs. Delayed payment can entitle MSMEs to get compound interest thrice the existing bank rates from their companies.
In case of failure of companies to comply with the same, MSMEs can approach the MSME Facilitation Council for resolution. The state government also has the power to set up such a council at division or district levels to resolve the problems. The MSME Samadan platform lists the cases, which have come up before the central council.
Meanwhile, MSMEs warn of financial distress if cases of delayed payment are not resolved soon. Abhay Bhor, president of the Forum of Small Scale Industries Association, talked of around 35 percent units in Chakan and Pimpri-Chinchwad areas going towards financial insolvency.
“SMEs do not have enough bandwidth to follow up their cases. The MNCs have their head offices outside the country and thus, it becomes difficult to follow up on their cases,” he added. Bhor said around Rs 100 crore worth of payment is delayed in Pimpri-Chinchwad and Chakan alone.
Prashant Girbane, director general of the Mahratta Chamber of Commerce Industries and Agriculture, promoted the idea of Trades Receivable and Discounting System (TReDs) platform for a workable solution to this problem.
“The TReDs platform ensures re-encashment of receivables within a week at an affordable 6-8 percent annualised interest cost, eliminating credit risk by shifting the liability from MSMEs to the intermediary financial institution. TReDS platforms have seen transactions worth more than Rs 39,000 crore since its inception in 2017,” he added.
Girbane suggested that the platform can be scaled up by mandating all corporates with a turnover of Rs 250-plus crore and all central public sector enterprises register on the platform.
“All corporates with a turnover of Rs 500-plus crore and all central public sector enterprises are mandated to register on the TReDs platform. However, just about 20 percent have done so,” he said. More awareness in the MSMEs need to be registered on the platform as less than 1 percent of all the MSMEs are now registered on the platform.
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