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Nearly Rs 2,000 crore left unspent on MSME schemes in FY21 due to Covid: Govt

Credit and Finance for MSMEs: The share of unspent amount by the MSME Ministry out of the total amount allocated had increased from less than 1 per cent in FY19 to less than 4 per cent in FY20 before it climbed steeply to 25 per cent in the last financial year.

Most of the MSME-related schemes had reported underspending in FY21.

Credit and Finance for MSMEs: Out of Rs 7,572.20 crore earmarked in the Budget 2020-21 for the MSME Ministry, Rs 1,924.7 crore was left unspent due to the adverse impact of the pandemic, according to the government. While the MSME Ministry was able to deploy Rs 5,647 crore in actual expenditure however “schemes off-take in the financial year was impacted and thus at the revised estimate (RE) stage, the budget outlay for the Ministry was revised to Rs 5,664.22 crores,” said Minister of Finance for MSME Bhanu Pratap Singh Verma in a written reply to a question in Rajya Sabha on underspending on MSME schemes during the Covid year.

“The schemes being implemented by the ministry are all demand-driven,” the minister said on Monday. Financial Express Online had reported in February that the share of unspent amount by the MSME Ministry out of the total amount allocated had increased from less than 1 per cent in FY19 to less than 4 per cent in FY20 before it climbed steeply to 25 per cent in the last financial year.

“The reason that amount left unspent due to Covid is not even counter-intuitive. In fact, the MSME sector was seeking help from the government and the latter had even redefined MSMEs. One reason could be that since some MSMEs were 

not able to operate in full capacity or were temporarily shut due to Covid restrictions, they couldn’t avail the credit subsidy from the government,” KR Shyam Sundar, Professor, Human Resource Management, XLRI Jamshedpur told Financial Express Online.

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Most of the MSME-related schemes had reported underspending in FY21. For instance, Development of Khadi, Village & Coir Industries was allocated Rs 1525.94 crore allocated while the amount spent was Rs 947.52 crore, according to the data shared by MSME Minister Narayan Rane in Lok Sabha last month. Similarly, Prime Minister’s Employment Generation Programme (PMEGP) and other credit support schemes were allocated Rs 2,800 crore while Rs 2,413.21 crore was spent, the Marketing Promotion Scheme was allocated Rs 103.63 crore but spent Rs 14.49 crore, Entrepreneurship and Skill Development Programme was allocated Rs 611.92 crore while only Rs 164.38 crore spent; etc.

“Underspending could be due to reasons such as some MSMEs might have lost eligibility due to adoption of capital-intensive technologies to substitute labour. This in fact happened in some southern states like Tamil Nadu and Karnataka, as I have been told. However, not all MSMEs have suffered due to Covid. Also, some MSMEs might have suspended production operations due to inadequate recovery of demand, including export demand,” M H Bala Subrahmanya, Professor – Department of Management Studies, Indian Institute of Science – Bangalore had told Financial Express Online.