Thursday

03


February , 2022
MSMEs seeking government help
23:38 pm

Kishore Kumar Biswas


More than 15 industrial associations of MSME units staged a protest in Tamil Nadu January 17, 2022. This protest has attracted the attention of many observers in India. The main demand of the protestors was adequate government attention to help the MSME sector which has been working under severe stress in the recent past – particularly due to the ongoing pandemic.

In Tamil Nadu, members and office bearers of more than 15 industrial associations led by the Districts Tiny and Small-Scale Industries Association (MADITSSIA) staged a demonstration, joining the nationwide protest in front of Madurai Collectorate on January 17, 2022. Summing up the peril of most MSME units in India, the Hindu, on January 20, 2022 quoted MS Sampat, President, MADITSSIA, “If we lock our units, the banks may take legal action. Hence, in a bid to prevent such a situation, many units, despite bleeding, are functioning.” 

Sampat also said that public sector undertakings such as National Small Industries Corporation and Small Industries Development Corporation must play a key role in resuscitating the sector.

Rising demand for setting up materials bank for MSMEs

One of the major problems has been the rising cost of production materials. Quite a large number of MSME organizations around the country have been talking about this. This has raised the cost of production but it is not possible for them to pass on the increased cost to the consumers because of two reasons. One, consumers are not in a position to pay higher prices for the products and secondly, rising prices always drag down the quantity of sold items. At the same time, investment of the production units goes up if input costs rise. In this situation, the demand for setting up a materials bank for MSME s on the lines of the well-known concept of land bank has been attracting attention.

Some of the major demands

Some of the important demands of the different business organizations to the government include steps to be taken by the government to check the rising prices of inputs or raw materials. Secondly, the MSMEs supply inputs or various semi-finished or finished products to big industrial units. But price realization after sales is delayed for many months. Although there is a time limit for payments, it is not adhered to in most cases. So the government should make laws that guarantee timely repayments. Thirdly, more firms should be included under projects-based loan guarantee schemes. Fourth, there is a need to take steps to increase the opportunity of availing bank or NBFC credit and to guarantee availability of cash in the market. Fifth, the government should extend or facilitate loan restructuring facilities to the ailing MSMEs. Sixth, ensuring payments of dues of MSMEs in the Insolvency and Bankruptcy Code is very important. Seventh, the due shares of MSMEs in the Make in India and “Atmanirbhar Barat’ projects must be ensured.

Hitanshu Guha, President, Federation of Associations of Cottage and Small Industries, West Bengal informed BE, “The problems being faced by the MSMES have already had the due appreciation of the Indian government. The pandemic that swept over the world and our country too has affected all and sundry, but the problems of the MSMEs, which were already in distress, have further manifested. The following salient points, in specific, are quite significant. Input costs have increased considerably.  Steel prices galloped causing immense problems to almost every industry. There are units in which steel consists of about 80% of the raw material costs. Steel is the basic raw material of most of the MSMEs and the price of CR Steel was `38000 per ton in 2019-20.  The same steel price during 2020-21 stood at '83000 per ton - an increase of about 250%.”

Income of the poorest fifth plunged by 53%

One of the most important factors for the revival of the economy of India has been the revival of private consumption. This is because this sector contributes as much as 57% of the total expenditure of the economy. In the pandemic phase, this segment’s expenditure has been much lower. As a result, the purchasing power of the common people has gone down.

Recent research published in The Indian Express onJanuary 24, 2022 observed that income of the poorest fifth plunged by 53% in the last five years - between 2015-16 to 2020-21. At the same time, income for those at the top 20% surged by 39%. Actually, this new observation supports the K shaped recovery of the economy. So, if the MSME sector revives, it may help reverse the rising inequality in the economy by enhancing the income of the low- and middle-income group and whence private consumption may tend to revive to an extent. So the government should give attention to reviving the MSME sector for the betterment of the economy.   

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