UP MSE Facilitation Council has 200 cases piled for disposal

New Delhi, June 21 (KNN) The MSME Facilitation Councils in Uttar Pradesh, which have been set up by the MSME Ministry for quick disposal of delayed payment cases, still have 200 cases registered complaints pending involving Rs 1000 crore of payment being stuck.

The micro, small and medium enterprises (MSMEs) face a major hurdle of delayed payments from PSUs leading to drought in their working capitals.

According to a World Bank Group report, 35 percent or one in three MSMEs receive payment only after 90 days or more. While larger corporations can alleviate the adverse effects of delayed payment, managing cash flows is a struggle for MSMEs due to the nature of their businesses.

The consequence of delayed payments is that at any given point in time, 15-20 per cent of an MSME's cash flow remains locked up - or not liquid - which in turn affects their business.  Manufacturers and service SMEs alike face this challenge in across all Indian states.

To mitigate this challenge, MSMED Act,  2006 had a provision to mandate  payment within to MSMEs otherwise interest of 3 times the current bank rate charged from buyers.

Facilitation Councils have been set up in all the states under union MSME Development  Act 2006 to address the  problem caused by delays in payments due to Micro and Small Enterprises (MSEs) by their large buyers as well as Government agencies and PSUs. 

In UP also the Facilitation Council has been set up by the State government, is housed in Department of Industries and its meetings are Chaired by the Commissioner Industries. The multi-member Councils are quasi-judicial bodies and their verdict could only be challenged in higher courts. The councils are supposed to dispose of the cases within 90 days of filing.

However, Manish Goel, President, Indian Industries Association, highlighted that even after setting up of a facilitation centre in UP, there has been no meetings as such in past five months and hence no filing up of complaints has taken place.

Even the already 200 registered complaints are not being disposed leading to around Rs, 1000 crore of the industry being stuck, he added.

He emphasised that UP is just one example and other states also face this problem of inefficient workings of these Councils leading to slow improvements in this situation.

Talking to KNN on the issue of delayed payment, Surendra Chandra, Joint Commissioner, MSME Facilitation Council, UP, said, “Facilitation council has been receiving many complaints from MSMEs regarding delayed payments and in two scheduled meetings every month we resolve their complaints. After many investigations, we see that at least 30% cases, PSUs or buyers tend to delay payments deliberately.”

When questioned about this “deliberate” nature of PSUs he said, “This is due to the fact that some PSUs return the supplies as they are sub-standard products. If MSME supply poor quality products then definitely the buyer has the right to return the supplies, ask for replacement and only after that they make payment. But some MSMEs don’t accept this fact and come to us with complaints of delayed payments.”

He, however, admitted to the fact that PSUs delay MSMEs’ payments leading to huge financial crunch for these small enterprises and they deal with such complaints immediately and try to dispose them off within 6 months.

He further added, “In most cases, PSUs are ordered to disburse payment within stipulated time. But PSUs also have the freedom to approach district level courts if they are not satisfied with our judgement. We, at council have enough authority to take judgement and we make sure that MSMEs do not suffer due to these delayed payments.”

Under the Public Procurement Policy every Central Government Ministries, Departments and Public Sector Undertakings shall procure minimum of 20 per cent of their total annual value of goods or services from Micro and Small Enterprises. The 20 per cent public procurement clause became mandatory from April 1, 2015. (KNN/ TL)