The economic slowdown over the last few years cast a shadow over the Micro, Small and Medium Enterprises (MSMEs) in Uttar Pradesh during 2015.

In terms of sick units, Uttar Pradesh brought the curtain down on year just ended with 84,063 such units as per RBI data cited in Parliament by Minister of State for MSMEs, Giriraj Singh.

The data compiled by Reserve bank of India and Ministry of MSME shows that currently out of 3.64 crore MSMEs in the country, 5.37 lakh units are sick, and Uttar Pradesh has the dubious distinction of leading the list.

According to Singh, the principal reason for MSMEs falling sick is delay in payments from bigger companies.

Singh also said that the ministry has established Micro and Small Enterprise Facilitation Councils to help MSMEs overcome the issue of delayed payments.

According to experts, the non-performing assets (NPAs) of MSMEs have been growing at the consistent rate of 5-6%.

“The loan sizes of MSMEs are somewhere in the range of Rs 1-2.5 crore. While lending to MSMEs has increased, at the same time NPAs too have increased,” a senior bank official told SMEpost.com.

The official further said that units in manufacturing, real-estate, chemicals, textile and services sectors have been the most affected.

The Ministry of MSME has already notified a ‘Framework for revival and Rehabilitation of MSMEs’, said Giriraj Singh in Lok Sabha.

Under this, any enterprise can seek revival and rehabilitation benefits through a committee constituted by the banks with representatives from state government, experts, regional or zonal head of the bank.

UP is home to over 3 million MSMEs across verticals, including product and region specific industrial clusters spread across the state.

No wonder, global IT major Microsoft set its eyes on the large Micro, Small and Medium Enterprises (MSME) base in Uttar Pradesh, targeting to cover 20,000 units under its Cloud technology.

National Bank for Agriculture and Rural Development (NABARD) has estimated the rural credit potential of almost Rs 1,78,000 crore in Uttar Pradesh during 2016-17.

The projected outlay of Potential Rural Credit Plan is almost 25 per cent higher than the corresponding figure of a little over Rs 1,43,000 crore for the current fiscal.  This implies higher credit flow to the rural economy and capital formation in the farm and allied sectors.

To boost and reward innovation in public and private sectors, Uttar Pradesh government took a significant decision during the year to set up an Innovation Fund with initial corpus of Rs 50 crore.

The fund would provide financial assistance to innovation and research in the fields of governance, services, natural resources management, social sector, education and health.

The innovation fund would support new projects aimed at improving productivity, simplification of work culture, improving technologies related to Micro, Small and Medium Enterprises (MSME), enhancing transparency and accountability, disaster management, making services consumer friendly and improving quality in different sectors.

For the current financial year 2015-16, the fund would be provided Rs 50 crore and the corpus would be increased in future depending on the need.

Under UP development agenda 2015-16, it has been decided to include both public administration and the unorganized sector in supporting innovation.

To encourage innovation and accelerate inclusive development, a high level State Innovation Council would also be reconstituted.

An Innovation Cell would be formed in the state planning department to facilitate release of funds under the innovation council and innovation fund.  The Cell would function as the secretariat for the council.

UP Science and Technology Council and UP Dr. A.P.J. Abdul Kalam Technical University would be authorized to sanction projects worth Rs 10 lakh under the innovation fund.

Projects worth over Rs 10 lakh would have to get clearance from the innovation council, as per the state cabinet decision.

The government is of the opinion that innovation is not the preserve of technology and could happen at the level of general public as well and the innovation fund would support such projects.

Another important development during the year was the objection raised by the  micro, small and medium enterprises (MSME) industry in Uttar Pradesh to the retrospective implementation of the Payment of Bonus Amendment Bill 2015. On December 23, Parliament passed the Bill amending the Payment of Bonus Act, by which more employees have become eligible for bonus.

Micro, Small and Medium Enterprises (MSME) chamber, Indian Industries Association (IIA), claimed that although the amendment was in the interest of workers, the employers, especially MSMEs, would find it difficult to implement it as they had not provisioned for this expense.

IIA President Manish Goel warned that a retrospective implementation would have ‘disastrous consequences’ on MSMEs as they would be required to pay additional bonus to those who had already been paid by way of ex-gratia or performance bonus.

While the government could afford to pay retrospectively by imposing taxes, the industries have no such means to collect money, especially the MSMEs, which are 26-30 million in India, he underlined.

The IIA has written to Prime Minister Narendra Modi seeking roll back of retrospective implementation from April 1, 2014. Besides, similar letters have also been written to the President and the concerned Cabinet Ministers.

Meanwhile, the association is networking with industry chambers in other states to put pressure on the Centre to roll back its decision for the retrospective clause.

The industry has also pointed towards unanimity amongst political parties in passing the amendment as the government had not discussed and sorted out the issue of the cut-off date of implementation, although it had held tripartite meetings with the representatives of the government, industry and central trade unions.

The IIA maintained that the passing of amendment on the last day of the Rajya Sabha’s Winter Session also indicated that no party could consider the practical aspects and consequences of retrospective implementation for industries, especially MSMEs.

Recognizing the crucial role played by the small and medium enterprises in the state’s economy, Uttar Pradesh Government has decided to replace the District Industries Center (DIC) in all 75 districts with the District Industries and Enterprise Facilitation Center’ (DIEFC). DIEFC will act as a facilitator for the Small and Medium Enterprises in the state.

UP’s MSME and Export Promotion Minister Nitin Agarwal has issued directions to restructure the center in a way that invokes entrepreneurship and brings more medium and small-scale industries to UP.

DIEFC is likely to hold weekly meetings in all the districts to facilitate the entrepreneurs interested in setting up medium and small scale industries. Officials from different departments will come together to address the issues faced by the industrialists in the state.

Image Courtesy : Livemint