New Delhi, Jun 22 (KNN) In the series of pre-budget consultations, Finance Minister Nirmala Sitharaman and her entire team met the representatives of MSMEs on Friday.

Federation of Indian Micro, Small & Medium Enterprises (FISME) presented a 10-point agenda before the Finance Minister asking for a review of regulatory and promotional policies in view of ‘geo-political turmoil’.

President FISME Sandeep Kishore Jain highlighted the need for Performance Linked Incentive (PLI) Scheme for MSMEs.

“A key metric like job creation, which is demonstrably stronger in MSMEs, seems absent from PLI considerations. FISME proposes MSME specific sector-agnostic PLI focusing employment”, President FISME emphasized.

He congratulated Finance Minister for having announced replacement of Insurance Surety in place of Bank Guarantees but pointed out scant progress at ground as only a few agencies accept them in place of BGs.  

FISME asked for sensitization of procurement agencies and also General Insurance companies.

Attracting the attention of policy makers towards MSMEs affected by a series of disruptions in global supply chains due to regional conflicts and wars such as Russia-Ukraine, Israel-Gaza and Red Sea crisis, FISME demanded review of SMA classification.

The SMA classification in Banks is triggered and a red flag raised even if principal/ interest payments get delayed by 30 days.  Once an account figures in SMA, the account becomes a pariah for both inside as well as outside the bank bringing even the normal banking operations to a grinding halt. This is creating false alarms and even resulting into forced closures. 

FISME also demanded a disaster support mechanism for MSMEs in international trade.

Pointing out that by 2030, Asia's share of global GDP will increase to around 60%, FISME suggested change of course for trade promotional efforts from West to Asia. 

On Bank Loan Rating (BLR) from RBI/ SEBI approved rating agencies, FISME commented that though it was an advisory but followed as a rule.

“Rating Agencies judge listed company’s ‘Return on Investment (ROI)’ and assign A, B, C type of ratings to inform the uninformed retail investor. The same agencies were suddenly mandated to rate MSMEs for short term ‘Solvency’ with the same yardstick. The results have been disastrous. MSME’s typically scored BBB- which meant higher interest rates and demand for additional collateral security.” Sandeep Jain noted.

He also highlighted how QCO on CRGO steel demonstrated poor consultations.  Imposition of QCO on CRGO- a key ingredient for power transformers, resulted in a severe shortage of the raw material and shooting-up its prices although CRGO is not even manufactured in India. 

On the perennial problem of delays in payment of suppliers, FISME has suggested to bring in The Payments Act.

“Payment is not the ‘essence’ in the Indian Contracts Act.   As a result payments are delayed by buyers with impunity. The old British act that we still follow, has since been amended and replaced in Britain with a new Late Payment of commercial Debt Act. The merit of bringing in ‘Payment Act’ in India may be investigated to instill transparency in procurement both in public and private domains, reduce litigation and significantly improve cash flow of businesses- big or small”, FISME posited. 

To create ease of doing business at ground and rein in regulatory excesses, FISME has proposed extensive Multi-Tiered Grievance Redressal and Feedback Mechanism.  

The Multi-Tiered Mechanism should have Accessibility, Multi-Tiered Approach, Data-Driven Policymaking and Transparency & Accountability.

(KNN Bureau)