MSME needs serious attention
Micro, Small & Medium Enterprises aka MSMEs need attention, not subsidy, not lip service but serious attention. MSME is the backbone of the economy. Most workers find work here.
Before COVID, MSME was struggling, COVID posted on price increase, MSME was pushed to the brink. The Government, Center/State needs to take a closer look at the MSME sector and find out what can be done to encourage entrepreneurship and ensure that MAKE IN INDIA succeeds.
While the focus is on the ease of doing business it takes forever to translate into reality. The issue for MSME owners is that they have to do everything and if they are freed from “non value adding activity (NVA)” they can give more time to grow and make their business successful. A successful MSME is not only profitable for the owner, it provides jobs and above all it contributes income to TAX. Thus, it is in the interest of the Government to ensure that MSMEs thrive so that they have more funds for infrastructure construction or for welfare schemes.
An example of NVA is the filing of returns, now with GST, the time taken to file returns is less, it becomes more complicated and the rules change regularly. This prevents the business from focusing on its core activity that actually contributes to tax revenue. Can the Government simplify things?
One rule that causes heart disease in MSME, is the fact that if your seller does not pay GST or pays but does not offer his return on time, then the buyer cannot take credit unless it is seen on its portal, it seriously affects cash flows. If a seller defaults, it should be the responsibility of the Government. MSME does not have the bandwidth to police each supplier for compliance.
Strangely, there is money and Government chasing startups with no sales, no assets and no profit. For MSME finance is a big problem, banks should lend to this sector of priority but bent for one reason or another. Newspapers are full of stories where startups have raised money based on valuations but there are no celebrations of entrepreneurs creating value, ensuring that every bank loan is paid off even at exorbitant rates. of interest. The narrative must change if we are to guide our youth toward value creation and non -appreciation.
The Government authorized emergency loans to MSMEs to offset the impact of COVID, how many banks and how much was last given to MSMEs. Many, are left high and dry for one reason or another. The MSME Act mandates that MSMEs be paid within 45 days, but this is violated and to claim the interest the MSME needs will take the customer to court. Interest must be made automatically if payment is delayed beyond 45 days.
There is a need for MSMEs to embrace digital technology. Post GST a non-digital environment for operations is not feasible. However, there is so much value and efficiency that an MSME can get from a digital environment, but not many can afford to buy SAP, the leading Enterprise Resource Planning (ERP) software. MSMEs should be encouraged and given incentives to make change and here the Government will encourage startups to make apps, data analysis software, ERP, etc. tailored for each MSME sector. This will open up ways for startups and also provide MSME options for cheaper digital solutions.
Electricity is a major resource and many MSMEs are affected in productivity due to losses, the generator is expensive. Can the powers that be look at solar as an option. Solar is capital intensive and beyond the reach of MSME. The OPEX model where service providers invest and charge a fixed rate, which is lower than the current electricity rate is only available for large consumers. Can the Government use the MSME roof to generate power and ensure that the OPEX model is available to the MSME? A step like this is on the horizon, can it become a reality quickly?
Like GST, which is subject to multiple taxes, the same concept can be applied to the aggregation of all permits under one roof. Now, one has to deal with various Government departments, e.g .: Factory Inspectorate, Labor Dept., Industries Dept., Statistics Dept., Pollution Control, Registrar of Companies, Fire Dept., etc. Could there be a platform where a Company uploads the required information and all departments automatically get the information they need. This will replace a lot of data retrieval and compilation. Where required documents can be digitally signed using Aadhar authentication.
Elimination of duplication of jurisdiction. A good example, denotifying industrial estates, means that when you get permission from GIDC, it will be considered panchayat permit. Panchayat fees are also collected by the GIDC and paid to them. This is a big step in the ease of doing business. Recently, a company operating out of industrial estate had issues with a panchayat member. Agencies working on different purposes are easy to spot, instead of helping and assisting the Company to expand rapidly, not the skin of elected members who have delayed the project despite granting TCP clearance. In such cases the Government must act, pay fees to the local body but give powers to an agency to clear a project, a la Investment Promotion Board.
GIDC has land for auction without taking, can they build galas of 100 sqm each, with electricity connection and offer it to traders to start, without having to rent a minimum of 600 sqm and then will build etc. This will start a lot of young people into entrepreneurship.
If there is a will, the Government will surely make a way. The new Government is making the right noises, one wants them to be translated into action and the MSME to feel the attention. The MSME will respond immediately by adding the income to the TAX. Jai Hind.
(The author prefers to write than chat on a balcao.)