Micro, Small and Medium Enterprises (MSMEs) sector is in a decline as number of sick MSME units is on the rise in the country for past few years. The government blames it on economic slowdown.
“Number of sick MSMEs in the country at the end of March 2013, March 2014, and March 2015 was 2.22, 4.68 and 4.74 lakhs respectively”, MSME Minister Kalraj Mishra said in Lok Sabha on July 25. He quoted from the data compiled by the Reserve Bank of India (RBI) from the scheduled commercial banks. The Minister was replying to a question by Prem Singh Chandumajra, Shiromani Akali Dal (SAD) MP from Anandpur Sahib, Punjab.
The share of manufacturing output of MSMEs increased marginally from 33.22 per cent in 2012-13 to 33.27 per cent in 2013-14, while it reached 33.40 per cent in 2014-15, according to the data compiled by Central Statistics Office (CSO) and Minister of Statistics and Programme Implementation (MOSPI).
Uttar Pradesh has highest number of sick MSMEs followed by Gujarat and Maharashtra. There are about 52.13 lakhs registered MSMEs in India as per the data of Udyog Aadhaar Memorandum (UAM), Enterprise Memorandum (EM) II and SSI on September 22, 2016.
Main Reasons
The main reasons for sickness are inadequate and delayed credit, obsolete technology, marketing problems, infrastructural constraints, managerial deficiencies, the Minister said.
Delayed payments from large companies have been a big problem for MSME sector. As per a study by FISME, more than Rs 10,000 cr of payment to micro and small enterprises is being held by the big companies beyond the designated time of 90 days for payment. Speaking to SMEpost.com, many MSMEs raised the issue but didn’t know how they could retrieve their stuck payments.
Obsolete technology is one of the many reasons for sick MSMEs. Quality Council of India raised this issue too in a report and said that MSMEs in India are battling with obsolete technology, unskilled manpower, funding.
Marketing problems faced by MSMEs are a big concern. Potential demand of their goods remains under developed. Units face tough competition from large companies when it comes to marketing.
Infrastructural constraints are failing MSMEs in India thanks to unavailability of adequate infrastructure. MSMEs fail to compete in global market due to this. This sector needs proper facilities at every level with fair prices.
Managerial Deficiencies are hampering the growth of MSMEs in country. Many studies have found that even basic management functions like planning, organizing, staffing, directing and controlling are not properly practiced in most of the MSMEs. Most SMEs do not have clear plans for future development, production process, marketing, financial activities etc. Non-performing assets (NPAs) of MSMEs have been growing too, experts claim.
Remedial Measures
Government has taken some steps to alleviate their sufferings. “Ministry, under section 9 of the MSME Development Act 2006, has notified a ‘Framework for Revival and Rehabilitation of Micro, Small and Medium Enterprises’.
“Under the framework for revival and rehabilitation of MSMEs, any enterprise can seek revival and rehabilitation benefit through a Committee constituted by banks with representatives from State Governments, experts, regional or zonal head of the bank and officer in charge of MSME credit department of the bank. RBI has also issued revised guidelines for revival and rehabilitation of MSMEs vide their letter on March 16, 2016,” Mishra said.
The government has granted Rs 3,000 crore as budgetary allocation for 2016-17.
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