Procurement From and Payment to MSMEs on the Rise

Nirmala Sitharaman reviewed the situation about payment to the MSMEs and expressed satisfaction and appreciation on the excellent work done by the MSME Ministry.

The Union Minister of Finance, Nirmala Sitharaman reviewed the situation about payment to the MSMEs and expressed satisfaction and appreciation on the excellent work done by the Ministry of MSME. As part of Prime Minister of India's vision, the Finance Minister had announced the Atma Nirbhar Bharat package in May, 2020, it was also stated that the MSME dues should be paid in 45 days.

Since the month of May 2020, regular follow-up and concerted efforts have been made by the Indian government, particularly by the MSME Ministry for payment of these dues. Particular focus was placed on Central Public Sector Enterprises (CPSEs) and the Central Government Agencies for payment of dues to MSMEs. As a result, over INR 21,000 crore of MSME dues have been paid in the past 7 Months since May 2020 by the Central Govt Agencies and CPSEs. The highest level of Procurement was achieved in October of over INR 5,100 crore and payment of over INR 4,100 crore. Going by the reports received in the first 10 days for November 2020, this level of performance is expected to be surpassed as Procurement of about INR 4,700 crore and payment of about INR 4,000 crore have already been reported. Following table provides details in this regard:

Efforts made in respect of clearing MSME dues include several rounds of letters written to the GoI Ministries and CPSEs by the Secretary, MSME, followed by personal talks and persuasions. The efforts of the MSME Ministry found strong support from the PMO and Cabinet Secretary, who wrote letters to the CPSEs and Government agencies. An on-line reporting system was developed by the Ministry for the CPSEs and Government of India Ministries to report details of total transactions, total payment as well as pending dues at the end of every month.

Report of seven months (May-November, 2020) indicates that:-

  • Procurement by Central Government Agencies and CPSEs from MSMEs is on the rise and in fact, it has gone up by almost 2.5 times since May 2020;

  • Payments to MSMEs have also gone up proportionately;

  • The pendency of payment has gone down in terms of percentage against procurement value;

  • The report for October had shown maximum transactions since May;

  • However, reports in December show better trends in November as per just 10 days of reporting.

The Ministry of MSME has complimented the Indian governments ministries, departments and the CPSEs for their support to the MSMEs. This support was important particularly in the months of September and October. Because with these cash flows, the MSMEs were supposed to produce goods and services which could be particularly sold during the festival time. MSME Ministry had requested the Corporate sector to help the MSMEs during the festival season because the earnings during these festivals would sustain many MSMEs for the whole year. This support has also helped many MSMEs and Village Industries to do better business than even the previous year.

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