Gadkari asks India Inc to clear outstanding payments to MSMEs

Union Minister Nitin Gadkari on Tuesday asked India Inc to clear huge outstanding payments to micro, small and medium enterprises at the earliest in order to ease the distress in the sector and inject liquidity into market. In a discussion with senior industry members of Ficci via video conferencing, the MSME minister exhorted the industry to clear pending dues owed by them to the units.

The minister assured the industry of full cooperation from the government in restarting their enterprises after the lockdown is lifted.

"I would like to request you, major industries also have huge outstanding dues of MSMEs. We were earlier considering framing a law entailing stringent rules regarding such payments. However, now is not the right time for this. We do not wish to go down that road," the minister said.

Gadkari said the government is aware of difficulties faced by MSMEs and realises their importance to the economy. He called upon the industry to work in tandem with government and the banking sector.

Highlighting the importance of liquidity in the market, the minister informed that he is striving to increase credit guarantee to MSMEs to Rs five lakh crore from the present level of about Rs one lakh crore, wherein 75 per cent of the advances granted by financial institutions are guaranteed under the Credit Guarantee Scheme.

"We have insured loans given to MSMEs by paying a premium of 1.5 per cent to banks on loans amounting to a total of Rs 1 lakh crore and taken 75 per cent guarantee while the banks have to bear 25 per cent of the collateral. Obviously, we are trying to reduce the collateral limit. We will also ask the finance ministry to increase the limit of the quantum of loans to Rs 5 lakh crore from Rs 1 lakh crore, so that it is easier for MSMEs to avail credit," he said.

He assured that the issues raised by the industry especially by MSMEs will be taken up with relevant ministries and departments.
The government's endeavour was to protect MSMEs, which contribute 29 per cent to the country's GDP (gross domestic product), from coronavirus-induced crisis, he added.

"We have decided to raise (turnover) limits for MSMEs. An order to this effect should hopefully be out in 8-10 days, which will naturally enhance their coverage," Gadkari said.

The Union Cabinet had in 2018 approved changes in the basis of classifying micro, small and medium enterprises from 'investment in plant & machinery/equipment' to 'annual turnover'.

The MSME ministry had said that section 7 of the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 will be amended to define units producing goods and rendering services in terms of annual turnover.

Under the new definition, a micro enterprise will be defined as a unit where the annual turnover does not exceed five crore rupees; a small enterprise will be defined as a unit where the annual turnover is more than five crore rupees but does not exceed Rs 75 crore; and a medium enterprise will be defined as a unit where the annual turnover is more than seventy five crore rupees but does not exceed Rs 250 crore.

Observing that this was a difficult time from an economic standpoint, the minister said he believes this could turn out to be a "blessing in disguise" for India's micro, small and medium enterprises (MSMEs)".

Citing the examples of countries like Japan and US who desire to shift their investments out of China and set up industries elsewhere, Gadkari said India was the only nation which can take an advantage out of this situation.

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"We have insured loans given to MSMEs by paying a premium of 1.5 per cent to banks on loans amounting to a total of Rs 1 lakh crore and taken 75 per cent guarantee while the banks have to bear 25 per cent of the collateral. "Obviously, we are trying to reduce the collateral limit. We will also ask the finance ministry to increase the limit of the quantum of loans to Rs 5 lakh crore from Rs 1 lakh crore, so that it is easier for MSMEs to avail credit," Gadkari said.