Delay in payments, power cuts, pricey land add to MSMEs’ woes

Jaipur: MSMEs account for over 40% of the country's exports and contribute more than 26% to the GDP. Rajasthan's economy heavily relies on them as they occupy over 90% of the state's industrial footprint, with over 26 lakh MSMEs. Always tested on the edge during economic downturns or pandemics like Covid-19, challenges for the industry's poorer cousins are on the rise.
Besides MSMEs' perennial struggle to access credit, get skilled manpower, and deploy the latest tech, they are now confronted with newer challenges.Delays in consent to operate approvals, payments by govt departments and PSUs against goods supplied, unreliable power supply, and hurdles in land conversion and a higher compliance burden have added to their woes.
On MSME day, TOI looks at their predicament and what the govt can do to get the best out of them.
Compliance burden, skilled people shortage: Protecting margins and paying salaries is MSMEs' constant battle for survival, says Gaurav Rungta, ex-chairman of CII-Rajasthan. He says increasing levels of compliances (over 360) not only divert them from core industrial activity but also raise the operational cost in a business that fights for margins to stay afloat. To reduce the gap of skilled worker shortage, Rungta says both the industry and govt need to address the issue together as MSMEs alone cannot afford to do it.
Delayed payments, access to capital: Most MSMEs are working capital-intensive businesses. If their customers, especially govt departments and PSUs, delay payment over disputes, they get pushed into a tight corner. Ravi Modani, who provides working capital to MSMEs through his NBFC 121 Finance, says small businesses often fail to make the cut to secure capital from scheduled banks. However, access to short-term funds for MSMEs has improved. They can tap options like factoring finance, trade credit, cash credit, BNPL, purchase finance, business loan, or personal loan for business purposes.
High land cost, warehousing status, power cuts: The major headwind for MSMEs comes from costlier land, says Suresh Agarwal, president of the Federation of Rajasthan Trade and Industry. He says large companies get cheaper land through customised packages, and MSMEs buy expensive land through auctions, which needs to change at the earliest. Agarwal also wants RIICO to give industrial status to warehouses as they have been declared so by other departments of the state govt and the Centre as well. The impact of RIICO's reluctance to give industrial status to warehouses has huge investment ramifications. Power costs and cuts too have been a big worry for the MSMEs.
Technology adoption: Technology improves productivity gains, which in turn increases margins, but MSMEs think many times over before committing investment in technology. Rungta says this is where the govt should play a role as MSMEs do not have surplus cash to invest in tech, research, and development.
“Tech is a must for MSMEs to stay competitive and future growth. That's why there should be a dedicated govt fund. If MSMEs succeed, they will also fulfill the govt agenda of generating jobs,” says Rungta.