MSME Sector on Upswing as Reports show Rise in Procurement and Payment

The Union Minister of Finance, Smt. Nirmala Sitharaman reviewed the payment situation made to the MSMEs and expressed appreciation on the excellent work done by the Ministry of MSMEs on Thursday. The Finance Minister had announced Atmanirbhar Bharat package as part of the Prime Minister’s vision in May 2020 which stated that the payment of the MSME dues should be within 45 days. 

The Government of India regularly followed-up and made concerted efforts, especially the Ministry of MSME since May 2020 for the payment of these dues. There was a particular focus on the Central Public Sector Enterprises and the Central Government Agencies for paying off these dues to the MSMEs. As a result, there was a payment of over Rs.21,000 crore of MSME dues by the Central Public Sector Enterprises and the Central Government Agencies in the past seven months since May 2020. 

In October 2020, the reports showed achievement of the highest level of procurement of over Rs.5,100 crore and payment of over Rs.4,100 crore. The reports of the first 10 days of November 2020, indicate the possibility of surpassing the level of performance of October. The first ten days of November have already recorded the procurement of over Rs.4,700 crore and payment of over Rs.4,000 crore.

The efforts put in to clear the MSME dues include many rounds of letters written to the Government of India Ministries, MSME and the Central Public Sector Enterprises followed by personal talks and persuasions. The Prime Minister’s Office and Cabinet Secretary extended their support for the efforts made by the Ministry of MSMEs by writing letters to the government agencies and Central Public Sector Enterprises. 

The Central Public Sector Enterprises and the Government of India Ministries developed an online reporting system for reporting details of the total transactions, total payment and pending dues at the end of every month. 

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The online reports of seven months, i.e. from May 2020 to November 2020, indicate a rise in procurement by the Central Government Agencies and the Central Public Sector Enterprises by almost 2.5 times since May 2020. They also show a proportional increase of payments to MSMEs and decrease in pendency of payment in terms of percentage against procurement value. The maximum transactions since May are reported in October however the reports of the first ten days of November are showing better trends than October.

The Ministry of MSME applauded the Government of India Ministries and the Central Public Sector Enterprises for giving their support to the MSMEs. The support extended by them was necessary in September and October since the MSMEs were supposed to produce services and goods to be sold during the festival times with the cash flows received by them. 

The Ministry of MSME also sent requests to the corporate sector for helping MSMEs during the festival season as the earnings during these festivals will sustain many MSMEs for the whole year.  The support extended by these corporate sectors helped many MSMEs and Village Industries to achieve better business as compared to the previous year.

Overall, the online reports suggest a rise from May 2020 till November 2020 in the procurement and payment to MSMEs. The MSMEs were able to achieve this due to the support of the Government of India Ministries, the Central Public Sector Enterprises and the corporate sector. There is an expectation of a further increase in procurement and payment in December 2020. With this rise shown in the reports, we can see an upswing in MSMEs, which will result in a positive impact on the economy of the country.

For any clarifications/feedback on the topic, please contact the writer at mayashree.acharya@cleartax.in

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