Tuesday, Mar 31 2020 | Time 13:44 Hrs(IST)
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States » South


MSME has big chance to grow under new GOI law for procurement by bulk purchasers: Expert

Mysuru, Dec 30 (UNI) The Law enacted by the Government of India to expedite payment to micro, small and medium enterprises (MSME) by bulk purchasers seems to have little impact on the fortunes of the micro and small enterprises as there is very little awareness among entrepreneurs in Karnataka.
MSME tend to be ancillary units to the medium and large industrial units and supply components that are outsourced from them. They tend to be bogged down by delayed payments that in turn stretch indefinitely. This often leads to the closure of many of the smaller units.
Though the Micro, Small, Medium Enterprise Development Act, 2006, (MSMED-2006), was introduced by the Centre to bail out ancillary units from such a situation, there is very little awareness among entrepreneurs that they are protected by law against delayed payment by bulk buyers.
Mr Suresh Kumar Jain of Mysore Industries Association (MIA) told uni that there are more than 40,000 micro and small units in Mysuru district alone and their numbers spread across Mysuru, Mandya, Chamarajanagar, Mandya, Hassan, Chikkamagaluru, Dakshina Kannada and Udupi districts could be in excess of 2.5 lakh units. “Though a majority of them report financial duress because of the delay in payments, there are only 25 cases registered to initiate recovery under the Act,” he added.
“This is a clear indication of a lack of awareness that the entrepreneurs are protected by law against delayed payment which has forced many units to shut down,” said Mr. Jain.
The Act clearly stipulates that the MSME Facilitation Council will assist the enterprises in the recovery of their dues from medium and large industries, PSUs, State and Union government departments, towards the supplies made to them.
The protection clause was introduced on recognising that the delayed payment directly affects the fortunes of the small units as it dries up the supply of working capital requirement and eventually results in their closure.
Stakeholders from the micro and small units said a majority of them have been affected by delay in payments due to them as it affects their ability to repay the loan.
“Our properties get attached by the financial institutions due to delay in payment by the larger enterprises but we are forced to continue our supplies to them as we risk being shunned in favour of other suppliers,” they added expressing their helplessness in initiating legal action against bigger players.
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