Manufacturing micro-enterprises in debris
MSMEs are in no better situation, says Yerram Raju, Director, Telangana Industrial Health Clinic
Hyderabad: Micro-enterprises in manufacturing, the last link in the supply chain who receive raw materials from the SMEs or directly, are virtually in debris, says a Micro, Small and Medium Enterprises (MSME) expert.
In an email to the HansIndia.com, Yerram Raju, Director, Telangana Industrial Health Clinic said, "As businesses think of starting amidst lockdown restrictions, several surveys in India like Skoch Inclusion Survey (carried out month after month for the last three months); CII survey, Care, Crisil have come to the same conclusions as that of ITC survey which said that the micro-enterprises do not have cash in hand."
They engage very few labours and most of them from the homestead or close relatives. Their receivables are locked with debtors who are evading payment citing their own suffering. They do not even commit when they are likely to pay back.
"Small enterprises are in no better situation though they can afford to be because the labour left them, and a few enterprises mention to me that they need cash payment for the locked period and also a guarantee of Rs 1 lakh upfront for re-engagement."
They must find this money only on the olive branch, credit of extra 10-20 per cent of their working capital, out of the moratorium of principal and interest for the next six months!
The new Atma Nirbhar Package of 20 per cent additional working capital for which RBI guidelines are yet to be received is still in delivery pains. With Equity markets down, SMEs dare not go to market for raising it even though SEBI has relaxed the norms for entry.
Product markets - products that the MSMEs have been producing - are also in uncertain territory. Demand has shrunk bitterly. Supply chains are choked. Several buyers with little cash in their hands, are trying to be austere.
Credit has become cheaper, no doubt. But its access is still luring the MSMEs. Export markets as revealed by the ITC study, are no better and in fact, worse. At least in India, if not today, at least tomorrow, the markets will pick up.
The problem with MSMEs is that they have no single voice. There are numerous associations of theirs with most of them carrying leaders who are self-centred. If leaders are appeased, the voice of MSMEs gets subdued. They keep crying everywhere and make noise too everywhere, but they are not in one voice.
They manufacture nearly 7000 products in different volumes. There are product-based associations and just members joining for common expression of problems and resolution.
Academicians, informed surveys etc continue to voice for them but they cannot insist on timely resolution of common problems. A simple thing like cash-flow based working capital recommended by the U.K. Sinha Committee has not been ordained by the RBI still.
The announced Fund of Funds with a Mother Fund and Daughter Fund is also in uncertain territory. No one knows as to who will become eligible and how it will be delivered.
This is supposed to provide Equity route for firms. Solutions are known. Problems are known. But there are not on 'V' curve for recovery.
On an optimistic note, Raju said, "I am hopeful, sooner than later, the MSMEs will be far lesser in number; the perverse incentives have almost stopped paving the way for vertical growth; with the announcement of sub-ordinated debt ( equity) to the stressed enterprises for revival and restructuring may soon find standard operating procedures for delivering the product - this would mean that the banks will become such equity partners; and the MSMEs broadly would realize that they should gather equity as they progress in businesses henceforward."