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Delayed-payment cases by small businesses jump nearly 100% in 12 months; resolved cases double

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Reserve Bank of India, RBI, RBI Policy, RBI Monetary Policy Committee, MPC meet, policy rate, Repo rate, UPI, money transfer, digital payment, NEFT, RTGSReserve Bank of India, RBI, RBI Policy, RBI Monetary Policy Committee, MPC meet, policy rate, Repo rate, UPI, money transfer, digital payment, NEFT, RTGSThe amount payable in the number of cases filed increased 125 per cent.

Credit and Finance for MSMEs: Even as the Modi government intends to resolve the delayed-payment challenge for small businesses, the number of cases filed in the MSE Facilitation Councils (MSEFCs) by micro and small enterprises (MSEs) has nearly doubled over the past 12 months. From 13,091 delayed-payment cases filed against the respective central ministry, department, CPSE, or state government, as of April 27, 2020, since the launch of delayed payment monitoring system MSME Samadhaan on October 30, 2017, the number has jumped 96 per cent to 25,705 applications as of April 13, 2021, according to the government data. The amount payable in the number of cases filed also increased 125 per cent from Rs 4,112 crore to Rs 9,250 crore during the said period, data from MSME Samadhaan showed. Nonetheless, the number of resolved cases has also more than doubled from 3,145 involving Rs 598 crore to 6,643 involving Rs 1,075 crore.

“While the challenge of delayed payments will continue to exist but it has been resolved to a great extent over the past few years as the government has enhanced focus on ensuring MSMEs don’t face such problems. The issue persists because often buyers are reluctant of paying on time while sellers too hesitate in pushing them for payments as they fear their future orders might get rejected by buyers. While payment is delayed but it is never lost. Buyers know that now somebody is watching them,” Vishwa Nath, Co-Chair, Industry Affairs Committee, PHD Chamber of Commerce and Industry told Financial Express Online.

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MSEFCs are dispute settlement units established by state governments in their respective geographies to resolve issues around delayed payments faced by small businesses. MSMEs can file applications for delayed payments against the buyer before the concerned MSEFC of their state. The MSEFC after examining the case issues directions to the buyer unit for payment of due amount along with interest as per the provisions under the MSMED Act 2006. According to MSME Samadhaan, every reference made to MSEFC has to be decided within a period of 90 days from the date of making such a reference. The Department of Expenditure had in July last year issued an Office Memorandum asking buyers to pay penal interest of 1 per cent per month for delayed payments beyond the prescribed duration.

However, the government cannot force buyers to clear MSME dues. “The Ministry has taken up the subject vigorously with the Central Ministries, Central Public Sector Enterprises (CPSEs) and State Governments and the Corporate entities. But, it is to be noted that the Central Government cannot issue any directions to, or force, State Governments or State PSEs to pay the dues,” MoS Finance Anurag Singh Thakur had said in a written reply to a question in the Lok Sabha in February this year. The MSME Ministry had written to 500 corporates as well in September and another 2,800 such businesses in October to clear pending MSME dues in the respective month.

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