OSSIA opposes Centre’s move for MSME tag for retail

The Orissa Small-Scale Industries’ Association (OSSIA), the oldest apex body for MSMEs in Odisha, has strongly opposed the Central Government’s policy decision to include retail and wholesale trades under the MSME banner. 

Initially, the definition of micro, small and medium industry was changed to MSME and subsequently service providers were brought under the ambit of MSME which resulted in pushing the manufacturing sector into the back footRecently, the definition of MSMEs were redefined on the basis of turnover and investment on plant and machinery whereas earlier it was based on investment on plant and machinery only, said OSSIA president Smarajit Mohanty on Sunday.

“Now bringing the retailers and wholesalers into the MSME fold will further reduce the importance of the manufacturing sector. Inclusion of retailers and wholesalers will only increase the volume of MSME and enable the Government to showcase the increase in number of MSMEs, Mohanty added.

This move of the Government will make it difficult for them to carry out a realistic census of different sectors under MSME and identify the issues of different sectors and frame a common policy for the sector, he said. Government has clarified that registration under Udyam and coming under the banner of MSME, retailers and wholesalers would  be entitled and restricted  to priority lending by financial institutions only, which will enable their revival, he said.

“But from our past experience what we have observed is that when manufacturing and service sector were clubbed together under the banner of MSME, Banks preferred to finance service providers(specially vehicle financing) than financing manufacturing sector as the felt it to be more secure lending  and by financing the service sector, they could convince the Government that they were honouring the target of Government for MSME financing, which resulted in the manufacturing sector being deprived of adequate financing which resulted in  their becoming NPAs” he said.  So we can’t rule out the possibility of the manufacturing sector being neglected in matters of extending institutional financing as in the banking sector it is safer to finance retailers, wholesalers than financing a manufacturing unit.

In matter of procurement of goods through GeM platform also the manufacturing sector is in very disadvantageous position as the manufacturers find it extremely difficult to register themselves as OEM and avail benefits like exemption from EMD, procurement preferences and when they are registered as traders, they have to compete with big players by paying EMD which most of the manufacturing units cannot afford. The slogan of “Vocal for Local” and “Make in India” would be defeated. So this attempt on the part of the Government to include around 2.5 crore retailers and wholesalers under MSME banner is highly alarming as the Government has tried to bring the manufacturing sector, a sector which contributes towards 30% GDP and highest employment generation, at par with retailers and wholesalers.

This will result in the manufacturing sector losing its sheen and importance. As such MSME sector is under tremendous stress due to various reasons like Covid -19 pandemic, exponential rise in input costs specially raw materials, a staggered supply chain, erosion of working capital due to rise in raw material cost which will lead to this sector being wiped out.This action of  Government would totally dilute MSME scenario and Make in India will be restricted to a slogan only.  “We are not opposed to extending benefits to retailers and wholesalers if Government desires so, as they also are a part of our supply chain, but it should not be at cost of manufacturing sector. This benefit could be extended to them by announcement of a totally different scheme which may be routed through commerce department,” he said.

“We appeal to our State Government, which is being led from front by our visionary Chief Minister, to understand this sinister design behind this move of Central Government and use his good office to get this decision reversed,” said Mohanty.