👍👍👍Disposal of delayed payment cases by micro, small industries at 5-year low

Clipped from: https://www.business-standard.com/industry/sme/disposal-of-delayed-payment-cases-by-micro-small-industries-at-5-year-low-123042400924_1.html

The government in the Budget announced that buyers would be allowed to claim a tax deduction for payments made to MSMEs only after they make a payment to them

The data on the MSME Samadhaan portal showed 139,290 applications regarding cumulative delayed payment of 35,369 crore were filed by MSEs until April 22, 2023

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The disposal to delayed payment cases involving micro and small enterprises (MSEs) hit a five-year low in FY23. Only 1,097 cases involving Rs 358 crore were settled during last financial year — 74 per cent less than 4,188 cases (involving Rs 768 crore) disposed of by Micro and Small Enterprises Facilitation Councils (MSEFCs) in FY22, according to official data.

MSEFCs are set up by state governments for settling disputes regarding delayed payments to MSEs. The central government launched the MSME Samadhaan scheme under which MSMEs that faced more than a 45-day delay in payment could approach MSEFCs in a bid to fast-track the settlement of dues.

The data reviewed by Business Standard showed 29,252 applications involving Rs 7,094 crore were filled by MSEs in FY23 against central ministries, departments, central public sector enterprises, state governments, and others. The number of applications filed during last financial year was down 15 per cent from 34,515 pleas involving Rs 7,656 crore filed in FY22. The share of applications disposed of in FY23 was 3.75 per cent against 12 per cent a year ago.

The Gujarat MSEFC witnessed the sharpest decline in disposal of cases in FY23 – down 94 per cent YoY; the other poor-performing MSEFCs were of Maharashtra (down 81 per cent), Haryana (down 76 per cent), Uttar Pradesh (down 70 per cent), and Delhi (down 46 per cent). 

A senior government official said the Ministry of Micro, Small and Medium Enterprises has been regularly following up with state governments for disposal of such cases in time, but their establishment and process for discharge of functions have to be decided by state governments. “The ministry is urging states to set up more MSEFCs for quicker disposal of cases related to delayed payments as it negatively affects their working capital required for day-to-day operations,” he added. 

The data on the MSME Samadhaan portal showed 139,290 applications regarding cumulative delayed payment of 35,369 crore were filed by MSEs until April 22, 2023. But only 9.6 per cent of cases have been mutually settled, whereas 19 per cent of cases have been disposed of by councils; 26 per cent of cases were rejected by them because of various reasons, such as ineligibility and lack of documents.

Anil Bhardwaj, secretary general of the Federation of Indian Micro and Small & Medium Enterprises (FISME), said the effectiveness in the resolution of applications is “very low” at present. The portal has been a facilitative mechanism but MSEFCs lack legal backing in ensuring time-bound resolution of complaints. “There are disparities in the performance of MSEFCs among states: Tamil Nadu has an effective council, whereas Uttar Pradesh’s performance has been abysmally low,” he added.

PHD Chamber of Commerce and Industry (PHDCCI), an industry body for MSMEs, has made representation to the MSME ministry and the finance ministry, pointing out the facilitation councils currently take much longer than the prescribed 90 days to resolve cases and many delayed payment cases are not accepted for resolution due to technical reasons like the absence of registration under Udyam and the law of limitation. 

It recommended that the provisions for the disposal of cases by facilitation councils should be amended to avoid delays and for timely enforcement of their decisions. In this regard, the government can consider giving quasi-judicial status to these facilitation councils, making their decisions legally binding.

Industry bodies have also requested the MSME and finance ministries to include medium enterprises, as well, under the delayed payment framework as this shall incentivise MSEs to upgrade their status to medium enterprises and avail of the benefits for them.

The government in the Budget announced that buyers would be allowed to claim a tax deduction for payments made to MSMEs only after they make a payment to them.