THE ECLGS SAGA
help revive MSMEs. “Even if the government front-loads the expenditure on the `100-lakh-crore National Infrastructure Pipeline, it will come as a huge stimulus to MSMEs,” he adds.
Non-deposit taking NBFCs (non-banking financial companies) have stepped in to fill the loan void. “We have seen business owners of groceries, pharmacies, restaurants, mobile shops looking for fresh loans. MSMEs are increasingly reaching out to digital lenders and NBFCs for faster turnarounds and fulfilment of working capital requirements,” says Arun Nayyar, CEO of NeoGrowth Credit Pvt Ltd, a digital lender that focuses on MSMEs.
The MSME industry, however, feels that the government’s credit guarantee schemes aren’t enough to assuage the pains inflicted upon small units by the pandemic. The NIBM report said while the ECLGS scheme focused on short-term liquidity issues, it failed to address the longerterm viability of MSMEs.
Overdue Dues
“The need of the hour for small and medium businesses is a moratorium for a period of six months for all loans and clearance of MSME dues and relaxation of eligibility criteria under the ECLGS,” says K.E. Raghunath, Convenor, Consortium of Indian Associations. He warns that urgent intervention is needed to save over 60 per cent MSMEs from “death”.
Pending dues, which industry estimates peg at `5 lakh crore, from the Central and state governments, public sector enterprises and other entities is also one of the key hurdles for small and medium scale businesses.
According to data from the MSME ministry’s Samadhan portal, out of a total 81,332 applications filed with the Micro and Small Enterprises Facilitation Council (MSEFC) for release of dues, only less than a tenth (7,671) have been cleared, with a total payable of `22,030 crore. And of that amount, just approximately `1,402 crore, or a little over 6 per cent, has been paid.
A closer look at the data reveals central ministries have disposed of a mere `20.6 crore out of dues worth `353.33 crore cleared by the MSEFC, while central departments have disposed of `70 crore out of `553 crore and central public sector enterprises have cleared only `229 crore out of `3,161.41 crore. The railway zones and divisions have cleared a shade under 10 per cent of a total of `287 crore. State governments and PSUs have been just as tardy, disposing only of `200 crore out of the `5,653 crore payable.
And while revealing the pains of collecting receivables, industry experts point out that this data on the Samadhan portal reflect only those cases where a small business even opted for a reconciliation. The reality is that a minuscule number of MSMEs approach the MSEFC as it is akin to taking a customer to court and eventually losing that business.
Little wonder then that the country’s central bank itself has raised red flags on these slippages. In its July Financial Stability Report, the RBI said that despite the restructuring schemes launched in 2019 and 2020, the “stress in the MSME portfolio of the public sector banks remains high.”
The report says while non-performing assets (NPAs) in the MSME portfolio at PSBs have dropped to 15.9 per cent this March from 18.2 per cent last March, the cases in the ‘Special Mention Account’ (SMA) category have risen. While the SMA-0 (payments overdue by up to 30 days) category have grown to 10.6 in March 2021 from 6.9 per cent a year back, those in the SMA-1 (31 to 60 days overdue) category have jumped to 9.2 per cent from 5.7 per cent.
“Given the elevated level of debt of the stressed cohort, the implications of business disruptions following the resurgence of the pandemic could be significant,” the RBI report said.
Or, in the simpler words of PHDCCI’s Aggarwal, “a death blow to small industries.” Like Bahl’s mobile chargermanufacturing business.
THE MSME INDUSTRY FEELS THAT THE GOVERNMENT’S CREDIT GUARANTEE SCHEMES AREN’T ENOUGH TO ASSUAGE THE PAINS INFLICTED UPON THE SMALL UNITS BY THE PANDEMIC