New Delhi, June 22 (KNN) In the series of pre-budget consultations, Finance Minister Nirmala Sitharaman and her entire team met representatives of MSMEs on Friday.
The Federation of Indian Micro, Small and Medium Enterprises (FISME) presented a 10-point agenda before the Finance Minister seeking a review of regulatory and promotional policies in view of ‘geopolitical turmoil’.
FISME President Sandeep Kishore Jain highlighted the need for Performance Linked Incentives (PLI) Scheme for MSMEs.
“A key metric such as job creation, which is significantly stronger in MSMEs, seems to be missing from the PLI considerations. FISME proposes the specific sector-agnostic PLI for MSMEs with a focus on employment,” he pointed out. President FISME.
He congratulated the Minister of Finance for announcing the replacement of Insurance Guarantees in place of Bank Guarantees, but noted little progress on the ground as only a few agencies accept them instead of BGs.
FISME requested the sensitization of procurement agencies as well as General Insurance companies.
Drawing policymakers’ attention to MSMEs affected by a series of disruptions in global supply chains due to regional conflicts and wars such as the Russia-Ukraine, Israel-Gaza and Red Sea crises, FISME called for a review of the SMA classification.
SMA classification is activated in Banks and a red flag is raised even if principal/interest payments are 30 days late. Once an account appears in the SMA, the account becomes unfavorable both inside and outside the bank, stopping normal banking operations as well. This is creating false alarms and even resulting in forced shutdowns.
FISME also called for a disaster relief mechanism for MSMEs in international trade.
Noting that by 2030, Asia’s share of global GDP will rise to around 60%, FISME suggested a change of course for trade promotion efforts from the West to Asia.
On Bank Loan Rating (BLR) by RBI/ SEBI approved rating agencies, FISME commented that though it was advisory, it was followed as a rule.
“Rating agencies judge the listed company’s ‘Return on Investment (ROI)’ and assign A, B, C ratings to inform the uninformed retail investor. The same agencies were suddenly mandated to rate MSMEs for ‘ short-term solvency’ by the same metric, MSMEs typically scored higher interest rates and collateral security, noted Sandeep Jain.
He also highlighted how the QCO for CRGO steel demonstrated poor consultation. The imposition of QCO on CRGO – a key component for power transformers, resulted in a severe shortage of the raw material and its prices rising, although CRGO is not even produced in India.
For the permanent problem of delays in the payment of suppliers, FISME has suggested to introduce the Payments Act.
“Payment is not ‘of the essence’ in the Indian Contract Act. As a result, payments are delayed by buyers with impunity. The old British Act, which we still follow, has since been amended and replaced in Britain by a new Late Payment Act of commercial debt.The merit of bringing the ‘Payments Act’ in India can be investigated to inculcate transparency in procurement in both public and private domains, reduce litigation and significantly improve the cash flow of businesses – large or small”, FISME submits.
To create ease of doing business in the field and curb regulatory excesses, FISME has proposed a comprehensive Grievance Redressal and Multi-level Feedback Mechanism.
The multi-level mechanism should have accessibility, multi-level approach, data-driven policy making and transparency and accountability.
(KNN Bureau)
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