AP Inc rues lack of incentives for SMEs
They also blame high interest rates and power shortage for the plight of the small and medium enterprises in the State Hyderabad: Representatives...
They also blame high interest rates and power shortage for the plight of the small and medium enterprises in the State Hyderabad: Representatives of various industries bodies, who spoke at the one-day conference on 'Revitalising the SMEs' organized by The Hans India on Monday, were categorical in saying that small and medium enterprises lacked adequate incentives despite their pivotal role in the country's economic growth. They also cited inadequate power, high interest rates and lack of access to easy credit as the prime reasons for the poor performance of SME sector in the State as well as across the country. "Many IT companies such as Infosys and TCS have begun their journey as SMEs and grown into multi-billion dollar entities now. But unfortunately, governments are not focusing on SMEs now and there are no incentives to start a small or medium enterprise," J A Chowdary, Co-Chairman, Andhra Pradesh State Council, Ficci, said. Speaking at the inaugural session of the conference, Chowdary, who is also Executive Chairman of TalentSprint, lauded the efforts of former Prime Minister P V Narasimha Rao, which fuelled phenomenal growth of IT industry in the country. "IT sector has now become $100 billion industry primarily because of his initiatives like STPI. Nearly 99 per cent of IT companies in the country are SMEs, but big giants walk away with all the incentives that government provides," he explained. Stating that India is home to 28.7 million SMEs that employ close to 60 million people, K Ramadevi, President, ALEAP, has lamented that this crucial sector which plays pivotal role in the country's economic growth has been neglected. "Though we have proactive government policies, the lack of proper implementation is hampering the growth of SME sector. Besides, high interest rates of 14 per cent have also become bane for us," she said. She underscored the need for reducing interests on the loans given to SMEs. "There are some overseas institutions which are ready to extend finance to SMEs at 0.5 per cent interest rate. Government should work out a strategy in consultation with industry bodies to facilitate such funds to the SMEs in the State," she suggested. She also underscored the need for more number of exclusive MSME clusters in the State. "Such clusters should be equipped with incubation and skill development centres," she added. APK Reddy, President, FSME-AP, found fault with the government for encouraging new industrial units when there was no adequate power to the existing ones. "AP has 7 lakh SMEs that employ over 40 lakh people. Unfortunately, 90 per cent of them are sick now on account of power crisis that crippled the industrial sector for the past two years. Most of the units operated just 45 per cent of their production capacity," he pointed out. He also said new NPA norms had become bane for the industries now. "NPA period reduced to three months from six months, scores of SMEs have turned into NPAs. The fact that nearly 1924 units have become sick between January and June this year indicates how grim the situation is," he explained. J Nageswara Rao, President, Fapsia, said though there is abundant potential for the growth of SMEs in the country, this crucial sector which contributes nearly eight per cent to the GDP is the most neglected segment. Underscoring the need for support the SME sector, he urged the government to set up separate SLBC (state level bankers' committee) for SMEs on the lines of the existing one for the agriculture. "This way, the government can conduct periodical review on the progress and problems of the SME sector in the State," he reasoned. He also sought for an exclusive ministry for SMEs in the State. Rao stated that interest charged on bank loans to SME sector should be less than 10 per cent. "Banks are currently charging 14.5 per cent which is very high," he said. Srinivas Ayyadevera, President, Fapcci, said all the SME entrepreneurs have great ideas, they lack technical expertise to preserve and monetise their intellectual property rights (IPRs). "We, Fapcci, have created IPR cells. It will be useful for SME sectors if all the industry bodies set up similar cells," he said. P Soudamini, President, COWE, called for special incentives for women entrepreneurs. "Women entrepreneurs face problems due to lack of access to credit and market. Therefore, they should be included in the four per cent quota allocated for SC/ST industrialists in the procurement of materials by Union Government," she said. Govt to appoint committee on SMEs' problems Hyderabad: Small Scale Industries Minister G Prasad Kumar on Monday said that the State government would soon appoint an expert committee to study the problems faced by small and medium enterprises (SMEs) in the State and recommend corrective measures. Inaugurating the one-day conference on 'Revitalising The SMEs' organized by the The Hans India here, he said the government is keen to support the SME sector. "The Chief Minister N Kiran Kumar Reddy has also shown enormous interest to strengthen the SME sector which is providing employment to lakhs of people," he said. The Minister, while pointing out that he couldn't make any major announcement as election code was in force, said that he will appoint the expert committee once the election code is lifted. "We will also try to get more budget from the central government and use those funds to extend support to the SMEs," he added. Earlier, K Ramachandra Murthy, Editor-in-Chief, The Hans India, in his welcome address, said power cuts and lack of finance had impacted SMEs adversely. "SMEs are facing myriad problems. The Hans India has taken the initiative to bring the entrepreneurs and industry bodies on to a common platform through the conference to highlight their problems and find solutions," he said. We are also honouring successful SMEs with The Hans India SME Excellence Awards, he added. SMEs told to submit accounts on time To avoid entering banks' default list Hyderabad: The bankers and the financial institutions have asked the small and medium enterprises (SMEs) to be more transparent in their records and disclose their financial problems well before they turn as non-performing assets. Speaking at a technical session on "Finance and Credit flow", BK Sivaram, General Manager, State Bank of Hyderabad said, "If the SMEs submit their financial records before they become NPAs, it would be easy for the bankers to reschedule the loan and save the company." He said that the banks are ready to take corrective measures only when they get the balance sheets of the unit submitted well in advance, however, most of the SMEs tend to delay submitting the balance sheets, and may be because they depend on the financial consultants, he pointed out. For instance, company's delay in presenting the balance sheets for 60 to 70 days, where a particular loan turns NPA, if the payment is not made in 90 days, as per RBI norm, he added. Further highlighting the flaws in their way of accounting, Sivaram said that the value of stocks submitted to banks differs with amount shown in the balance sheet. This would always create problem for the bankers while evaluating the financials of the company in sanctioning additional working capital. He felt the problems are created by the entrepreneur himself, may be due to lack of banking and financial knowledge and proper guidance. Hence, he suggested the entrepreneurs to be in constant contact with their bankers and obtain their guidance in finance matters. Sivaram also suggested to the SME association to develop contingency fund in order to help financially weak members in meeting their short-term financial requirements. While KV Kannan, General Manager, Andhra Bank, said, the trade associations should insist the government to see that the big corporate and public sector companies to pay their purchases from SMEs in 15 to 20 days credit. "As of now, most of the SMEs are able to get the receivables only after 90 days credit, which is reason for most of the SMEs turn defaulters," he pointed out. He also felt that the SMEs should expose their problems to bankers to get remedial measures before the loan turn NPA. "Banks have got some limitations and we have to follow regulations laid by the banking regulator," he said. Replying to a query Kannan said there is no dearth of funds for supporting SME entrepreneurs, but they have to follow the stipulated regulations. But he contended that even they are small, they should have financial discipline to excel in the business and in the process get support from bankers. B Sivaram, Deputy General Manager, National Small Industries Corporation, explained the financial schemes such as raw material supply, where the company will buy the raw material in bulk and supply to SMEs in small quantities. "We extend finance for purchase of raw materials by charging low interest rate at 12.95 per cent, which is lower than the bank interest," he said. He further said, "We will pass on the benefits such as discounts etc, received from the suppliers and there is no stock inspection and easy documentation." He wanted the SMEs to avail the facility and get benefit. APSFC Chief General Manager, Chengala Rayalu said that the corporation is now exteding moratorium on loans up to a period of 1 to 2 years depending on the project, and Rs 1 crore loan will be sanctioned by the branch manager level only. The Corporation, which maintains low NPAs, is offering loans to services and manufacturing units besides extending special focus to SC/ST entrepreneurs. "In deserving cases, we will reschedule the loans and even extend moratorium by one more year," he pointed out. The corporation is providing loan to the extent of 75 per cent, while the promoter has to bring in 25 per cent, he said.