Rs 10,000 Cr Worth of Payment Delays by Large Companies to MSMEs Kills the Growth Aspiration

The biggest of Indian companies are holding on Rs 10,000 crore due to Micro and Small enterprises (MSEs) against supplies made by them.

Of these more than Rs 4000 crore is held up in only one company, a Public Sector Enterprise. There are at least seven more Companies in the large sector who owe more than Rs 100 Crore to the MSE suppliers.

The fact has come to light through the research conducted by Knowledge and News Network (KNN) which studied the balance sheets of top 2700 non-MSME companies in India.

“Slow growth and delays by large buyers have crippled the MSME sector and is the biggest cause of sickness,” said Dr Sangam Kurade, President FISME - the leading federation of micro, small and medium enterprises (MSMEs).

“We have repeatedly highlighted to authorities that while there is law which prohibits delay in payments due to MSEs, the law is routinely flouted by large companies,” he added.

The issue has been flagged by the Reserve Bank of India, who has also mentioned about the widespread sickness in the MSMEs due to held up payments.

In fact, Government is already aware about the burgeoning overdue of the MSMEs from the large enterprises and widespread sickness in the sector due to the same.

In 1993, Government enacted the Delayed Payment Act with a provision for small scale industries to charge penal rate of interest on outstanding payments if the same are delayed beyond the agreed or stipulated period of time.

The Act had been further amended to make the stipulations more stringent and finally it was included as a section in the umbrella MSME Development Act 2006. The 2006 Act stipulates publishing of the overdue payments to the micro and small enterprises in the Annual Reports of all registered Companies.

To get factual data about the real amount withheld by the large sector, KNN research team studied latest available annual reports of more than 2700 Companies and derived the overwhelming figure of Rs 10,000 crore of overdue to the micro and small enterprises.

Another interesting fact is most of the Companies holding Rs 100 Crore and above of MSE payments are so called blue chip Companies in both the private and public sector and majority of them are in manufacturing business. So much is to advance ‘Make in India’, the cherished dream of our PM.