Micro, Small & Medium Enterprises aka MSMEs need attention, not subsidy, not lip service but serious attention. MSME is the backbone of the economy. Majority of the workforce finds employment here.
Before COVID, MSME were struggling, post COVID with the spiraling prices, MSMEs are being pushed to the brink. It is imperative that the Government, Centre/State look at MSME sector closely and find out what can be done to encourage entrepreneurship and ensure MAKE IN INDIA succeeds.
While the focus is on ease of doing business it is taking forever to translate into reality. The issue for MSME owners is they have to do everything themselves and if they can be freed of “non value adding activity (NVA)” they can give more time to growing and making their business successful. A successful MSME does not just make money for the owner, it provides jobs and more importantly it contributes TAX revenue. So, it is in the Government’s interest to ensure MSME flourishes so that they can have more funds to build infrastructure or for welfare schemes.
An example of NVA is filing returns, today with GST, the time taken to file returns is lesser, it is getting more complicated and rules change regularly. This prevents business from focusing on its core activity which actually contributes to tax revenue. Can the Government make things simple?
A rule that is causing heartache to MSME, is the fact that if your seller defaults on paying GST or pays but does not file his return on time, then the buyer cannot take credit unless it reflects in his portal, this severely impacts cash flows. If a seller has defaulted, it should be the Governments responsibility. MSME does not have the bandwidth to police each supplier for compliance.
Strangely, there is money and Government chasing startups who have no sales, no assets and no profit. For MSME finance is a huge problem, banks are supposed to lend to this priority sector but baulk for one reason or another. The newspapers are full of stories where startups have raised money based on valuations but no celebrations of entrepreneurs who have created value, who have ensured every bank loan is repaid even if at exorbitant rates of interest. The narrative must change if we are to guide our youth towards value creation and not valuations.
The Government sanctioned emergency loans to MSME to blunt the effect of COVID, how many banks and how much was finally given to MSME. Many, were left high and dry on one pretext or another. The MSME Act mandates paying MSMEs within 45 days, but this is breached and to claim the interest MSME has to take the customer to court. The interest should be made automatic if payment is delayed beyond 45 days.
There is a need for MSMEs to embrace digital technology. Post GST a non-digital environment for operating is not feasible. However, there is so much value and efficiency a MSME can derive from a digital environment, but not many can afford SAP, the top Enterprise Resource Planning (ERP) software. MSME should be encouraged and incentivised to make the shift and here the Government can encourage startups to make apps, data analysis software, ERP, etc tailor made for each MSME sector. This will open avenues for startups and also give MSME options for cheaper digital solutions.
Power is a key resource and many MSME take a hit in productivity due to outages, a generator is expensive. Can the powers that be look at solar as an option. Solar is capital intensive and out of reach of MSME. The OPEX model where service providers invest and charge a fixed rate, which is much lower than current power rate is available only for big consumers. Can the Government use MSME roof to generate power and ensure OPEX model is available to MSME? A move like this is on the horizon, can it be made a reality fast?
Like GST, which has subsumed multiple taxes, can the same concept be applied to combining all permissions under one roof. Today, one has to deal with various Government departments, eg: Factory Inspectorate, Labour Dept., Industries Dept., Statistics Dept., Pollution Control, Registrar of Companies, Fire Dept., etc. Can there be one platform where a Company uploads the information required and all departments automatically get the information they require. This would replace the multitude of returns and data compilation. Where required the documents can be digitally signed using Aadhar authentication.
Elimination of duplication of jurisdiction. A good example, industrial estates were denotified, this means that once you get permission from GIDC, it is deemed to be permitted by the panchayat. The fees payable to the panchayat are also collected by GIDC and paid to them. This was a huge step in ease of doing business. Recently, a company which was operating outside the industrial estate had issues with a panchayat member. The agencies working at cross purposes is easy to see, instead of assisting and helping the Company to expand quickly, it was no skin of the elected members back that the project was delayed despite TCP giving clearance. It is in such cases that Government should act, pay the fees to the local body but give powers to one agency to clear a project, a la Investment Promotion Board.
The GIDC has land for auction with no takers, can they build galas of 100 sqm each, with a power connection and offer it to entrepreneurs to start, without having to lease minimum 600 sqm and then build etc. This will kick start a lot of youth into entrepreneurship.
If there is a will, Government will surely find a way. The new Government is making the right noises, one wishes that these get translated into action and MSME feels the attention. MSME will respond by adding to the TAX revenue immediately. Jai Hind.
(The author prefers to write rather than chat in a balcao.)
