Hit by Covid, small and micro units await Rs 8.7 lakh crore in pending dues

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Late payments are a critical issue facing the micro, small and medium enterprise (MSME) sector. It is the smallest establishments – micro and small units – that have been the hardest hit post-Covid with their pending dues reaching Rs 8.73 lakh crore, almost 80% of the total pending for the entire service sector. MSME until 2021.

Late payments, as a percentage of sales, increased sharply, from 46.16% in 2020 to 65.73% in 2021 for the “micro” segment and from 28.85% to 31.10% for “small” units, according to one report. by the Global Alliance for Mass Entrepreneurship based in Bengaluru, shared with the Union Ministry of MSMEs.

However, the increase in late payments as a percentage of sales was much lower for units in the “medium” segment, rising from 24.02% in 2020 to 25.20% in 2021.

Micro units are those whose investments can reach Rs 1 crore and turnover less than Rs 5 crore. For small units, the investment limit is Rs 10 crore and a turnover is set at less than 50 crore. A unit is termed as medium if it has investments of up to Rs 20 crore with turnover of less than Rs 100 crore.

Late payments — from private sector customers, governments and public sector companies — are holding back the revival of small units.

A Crisil report showed that more than a quarter of Indian MSMEs lost more than 3% market share due to the pandemic. And half of them suffered a contraction in their profit margins due to a sharp rise in commodity prices in fiscal 2021, compared to 2020. This situation is exacerbated by late payments.

“It is easy to determine the payment due to the public sector but not to the private sector and there are reasons. Firstly, we cannot ask the private sector to share a list and secondly, MSME units would also not want to complain about their clients to avoid damaging their working relationships,” a senior government official said. .

The government, in 2020, had asked both PSUs and the 500 largest companies to pay their dues to units in the sector. This was done as part of the government’s plan to ensure sufficient liquidity for MSME units as well as a credit facility for the sector under the Emergency Credit Line Guarantee Scheme (ECLGS).

Despite various dictates from the Centre, the value of late payments to the MSME sector has increased to Rs 10.7 lakh crore till the end of calendar year 2021, according to the report.

About 81% of the total amount is due to small and micro enterprises: Rs 4.29 lakh crore to small enterprises and Rs 4.44 lakh crore to micro enterprises.

Underlining the seriousness of the problem, the report states, the median number of debtor days beyond the legally recommended 45-day period for micro-enterprises in 2020-2021 was 6.5 months (195 days), compared to two months (68 days) for small businesses; and 1.5 months (47 days) for medium enterprises.

Nitin Gadkari, then minister for MSMEs, had reported in mid-2020 that state and central governments, their ministries and PSUs, and major industries combined owed around Rs 5 lakh crore to MSMEs.

According to information from the Ministry of Statistics and Program Implementation, the share of MSMEs in India’s manufacturing output in FY20 was 36.9% and the share of exports of specific products related to MSMEs in all India exports in FY21 was 49.5%. , according to information from the General Directorate of Commercial Intelligence and Statistics.

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