Challenges and Problems New

8/8/2019 Challenges and Problems New

1/26

Challenges and problemsfaced by MSMEs


2/26

Introduction:

y The term small and medium-sized businesses or SMBs is predominantly usedin the USA and then EU has started standardized the concept.

USA

Micro --


3/26


4/26

Contribution to economy:

y In Indian economy, the MSME sector is the second largest contributorin terms of GDP after agriculture sector. It provides almost 80-90 % ofemployment to the Indian population and has 45% share in productionand 35% in exports. In the year 2006, the MSME Act generated huge

employment opportunities for the common people.

y The major advantage of the sector is its employment potential at lowcapital cost. As per available statistics, this sector employs an estimated31 million persons .

y Indian SMEs are making tremendous progress in Industry, Service,Retail, IT, Agro and Food Processing, Pharmaceuticals, PrecisionEngineering and Manufacturing Sectors.


5/26

The Government portfolios on MSMEs:

y Measures for promotion and development:

Programmes for development of skills in the employees, management

and entrepreneurs, provisioning for technological upgradation,providing marketing assistance or infrastructure facilities.

y Credit Facilities:Credit facilities are provided to minimize the incidence of sicknessamong and enhance the competitiveness of such enterprises.


6/26

Cont.

y Procurement preference policy:

Procurement policies in respect of procurement of goods and services.

y Funds:

Grants are made by the Central Government under section 13.


7/26


8/26

Issues faced by MSMEs:

y Inadequate industrial infrastructure :

1. Land or space has been converted into Engineering Medical/Management institutes and

2. Also for the song of SEZ(exports).

3. Moreover, MSMEs are expected to buy the land at market rates. Sothe land is being very much unafforable.

y Access to Electricity:

1.Inadequate electricity

2. Adverse effect on productivity and competitiveness.


9/26


10/26

Cont.

y VAT in UP:

1. VAT has been suddenly raised for Transformers, Cables &conductors, switchgears etc have been hiked from 4% to 12.5%.

2. incentive for them to buy these products from other states at CST

rates i.e. 2%.


11/26


12/26

Cont.

y Payments delayed:

1. By large buyers of MSMEs and even Government/ PSUs; almost heldup during recession.

y Impediments in Exports:

1. In claiming refund of taxes

2. Makes exports uncompetitive

3. Hardly 0.5% of MSMEs are in exports.

y Government/ Public Procurement:

1. In India the public procurement (Central govt.) is less than 1%.


13/26

Cont.

y Commodity Crash:

1. suffered heavy losses in imports.

y Access to funds for new projects/ start-ups:

1. loan proposals are not acknowledged or are not disposed; but delayedat branch level.


14/26

Cont.

1. Banks continue to discourage Credit Guarantee cover in lieu ofcollateral

2. Banks have deposited more money under SLR/CRR than what isrequired instead of lending

y Interest Rates and service charges:

1. higher charges for all types of chargeable services particularly non-fund based limits such as bank guarantees

2. RBI

instructions not passed out to MSMEs.

y Excess Collateral:


15/26


16/26

Cont.

y Third party credit rating:

1. Credit Rating requirement under BASAL II for loans portfolio aboveRs. 10 cr has unnecessarily burdened SMEs.

y Taxation:1. Location based Tax breaks create distortions in economy. Have

induced artificial un-competitiveness for MSMEs

2. Stamp Duties

3. FBT is a retrograde step in direction of tax reforms and has proved tobe the biggest nuisance tax


17/26

Suggestions to the above issues:

y Earmarking of space in SEZs for MSMEs without export obligations.

y Support collective SME initiatives for distribution of electricity ingeographical concentrations, industrial areas and clusters.

y VAT rates of products consumed by industry should not be tinkeredowing their cascading effect.


18/26

Cont.

y Clear instructions need to be issued to Government Departments andPSUs for timely payment with penalty clauses for noncompliance.

y An advertisement campaign for sensitizing buyers as well as auditors

on the provisions against delayed payments.

y Need a comprehensive long-term SME export support promotionprogramme to increase SME participation in exports from currentlevels of 0.5% of registered SMEs.


19/26

Cont.

y As promised through the MSMED Act, there is a need to set-aside 20%of all public procurement for Micro and Small enterprises.

y E-procurement should be encouraged.


20/26

Cont.

y Invite foreign SME dedicated funds and provide them suitable fiscalincentives for equity providers.

y RBI should constitute a Committee for issuing guidelines on extent of

collateral requirement.


21/26

Cont.

y Location based Tax breaks should be immediately revoked

y High stamp duties on transfer of property and on commercialtransactions should be minimized.


22/26


23/26

Cont.

yMaterial handling Equipments:

AS/RS include rack structure, storage, and retrieval machines, and pick

and deposit transfer station.

y Standardisedpackagingmaterial:

I. Active and Smart Packaging -Technology that controls the oxygenand moisture content in the food packet.

II. Green Packaging -Some of the available green packaging solution in

the market are Polypropylene and High barrier tray, FoamedPolypropylene and High barrier tray etc.


24/26

Cont.

y Waste management and Lean manufacturingpractices:

I. Networked material flow.

II. WMC (Waste Management Circle).

III. Defect deduction using Computerised Condition Monitoring (CM).


25/26

Quick Facts:

y Indian SMEs providing IT solutions to remain unfazed by US policy onoutsourcing.

y The power shortage and under utilization of the production capacitywould not be any major problem for the SMEs based at Kanpur. This is

to due to the proposal of theII

A to setup the power plant under PPPmodel to serve the problem.

y Indian Government and MSMEs initiative for lean manufacturingimplementation and can get the grant for the same.


26/26

Challenges and Problems New

Documents

Transcript of Challenges and Problems New