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Delayed payments for MSMEs: Amount involved in pending applications nearly doubled in FY22

Credit and Finance for MSMEs: For the current financial year 2022-23, the pending amount had already touched the Rs 2,311-crore mark as of July 27.

Credit and Finance for MSMEs: The amount involved in pending applications for delayed payment cases by MSMEs in the financial year 2021-22 nearly doubled from the amount stuck pre-Covid. According to the government data, pending delayed payment applications involved Rs 5,685 crore in FY22 to be paid by MSME buyers including large organisations, government departments and public sector units. This was up 97 per cent amid the pandemic from Rs 2,887 crore stuck in pending applications filed in FY20. In comparison to FY22, the amount pending during FY21 stood at Rs 5,747 crore.

Sharing the data in the Rajya Sabha, Minister of State (MoS) for MSMEs Bhanu Pratap Singh Verma, noted that for the current financial year 2022-23, the pending amount had already touched the Rs 2,311-crore mark as of July 27. “The Ministry has taken up the subject with the Central Ministries, CPSEs and State Governments for the clearance of pending dues to MSEs. The Government has taken many steps to get the dues payable to the MSMEs cleared by public sector units of State & Central Governments & is also following up with the State Governments & UTs for timely disposal of such cases,” Verma said. 

A recent study by the non-profit entity for promoting entrepreneurship Global Alliance for Mass Entrepreneurship (GAME) and analytics company Dun & Bradstreet (D&B) had said the problem of delayed payments for MSMEs is estimated to have Rs 10.7 lakh crore, amounting to 5.9 per cent of India’s gross value added (GVA), locked up annually. In fact, around 80 per cent of the annual delayed payments amount is owed to micro and small enterprises. 

In June this year at an event organised by Financial Express, Chief Economic Advisor V Anantha Nageswaran had also slammed buyers for delaying payments. “There are multiple ‘creative excuses’ used by public and private enterprises to delay supplier payments and hence most micro and small businesses face the problem of getting bank finance at reasonable rates,” Nageswaran had said while he encouraged banks to ‘think about’ how to ensure large companies pay MSMEs on time for the latter’s working capital needs.

In terms of the recourse left with MSMEs in cases of delayed payments, the government has Micro & Small Enterprises Facilitation Councils set up across states that essentially direct buyers to clear MSME dues. “The Ministry of MSME has also been urging States/UTs to set up more Micro & Small Enterprises Facilitation Councils for quicker disposal of cases related to delayed payments. So, far 113 MSEFCs have been set up, with more than one MSEFC having been set up in Delhi, Jammu & Kashmir, Karnataka, Maharashtra, Punjab, Rajasthan, Tamil Nadu, Telangana and U.P,” said Verma. 

As far as recovery is concerned, dues of Rs 1,32,280.72 crore have been paid to MSME vendors by various government buyers between May 2020 and July 27, 2022, MoS noted.