Public sector undertakings, central and state owned, together account for nearly 40 percent of the total payments owed to micro, small, and medium enterprises (MSMEs), data on the government’s Samadhaan delayed-payment monitoring portal shows.
The quantum of delayed payments to MSMEs stood at Rs 7.34 lakh crore (inflation-adjusted) as of March 2024, down from Rs 8.27 lakh crore in 2023 and the peak estimate of Rs 10.7 lakh crore in 2022, a report has said.
The Global Alliance for Mass Entrepreneurship (GAME), Federation of Indian Micro and Small & Medium Enterprises (FISME), and C2FO launched the Delayed Payments Report 3.0 titled 'MSME's Access to Finance and Timely Payments'.
Though lower, the money remains a major challenge for India’s 6.4 crore MSMEs, representing over 4.6 percent of the country’s GVA and constraining working capital, credit access, and MSME growth, a report said.
“We do appreciate that the issue of delayed payments is an important one and the efforts cannot be slackened at this stage and we need to keep at it,” V Anantha Nageswaran, chief economic adviser (CEA) to the government, was quoted saying in a release.
Procurement blues
Procurement processes may not always be transparent, making it difficult for MSMEs to understand the criteria and requirements for bidding contracts, a report has said.
An excessively tedious participation process poses severe barriers to MSMEs’ participation in public procurement tenders. The lack of transparency creates challenges for MSMEs in participating in the procurement process, the report said.
The imposition of a three-year PSU experience requirement for government tenders poses a significant challenge for new entrepreneurs, limiting their ability to participate in government tenders and secure contracts meaningfully, it said.
The report said the government has increased the lending target for scheduled commercial banks and Non-Banking Financial Companies (NBFCs) to MSMEs by Rs 1.54 lakh crore, aiming for a credit flow of Rs 5.75 lakh crore in 2024–25.
The target has subsequently been increased to Rs 6.21 lakh crore and Rs 7 lakh crore for 2025–26 and 2026–27, respectively.
Over the last two financial years, outstanding loans grew 9.2 percent at public sector banks, 25 percent at private banks and 39 percent at NBFCs.
Status of Mudra loans shows that the growth of loans to MSMEs stood at 20.1 percent year-on-year in FY24. Public sector banks reported 3.4 percent NPAs on Mudra loans, compared with only 0.95 percent for private sector banks.
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