Small and medium-sized enterprises (SMEs), often referred to as Micro, Small, and Medium Enterprises (MSMEs), are the backbone of any economy. These businesses play a vital role in creating jobs, fostering innovation, and promoting economic growth. However, a significant challenge that many MSMEs face is delayed payments from government buyers, including central ministries, departments, public sector units, and other government entities. These delays can severely impact the cash flow and sustainability of these enterprises.
In recognition of the issue, the government has taken several measures to address the problem of delayed payments to MSMEs. Despite these efforts, a substantial number of grievances from small business owners remain unresolved, leading to concerns about the effectiveness of these initiatives.
Here is an overview of the measures implemented by the government to prevent payment delays to MSMEs and ensure they receive their dues in a timely manner:
- Setting Up Facilitation Councils: Under the provisions of the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006, the government has mandated the establishment of Micro & Small Enterprises Facilitation Councils in States and Union Territories. These councils are designed to deal with cases involving delayed payments to MSMEs. By creating these councils, the government aims to provide a structured platform for MSMEs to seek redressal for their payment-related issues.
- Samadhaan Portal: To streamline the process of filing grievances and monitoring outstanding dues to MSMEs, the government launched the Samadhaan portal on October 30, 2017. This online platform allows MSMEs to file complaints regarding delayed payments and provides a way for them to keep track of the money owed to them. The Samadhaan portal represents a significant step towards transparency and accountability in the payment process, making it easier for small businesses to seek resolution for their payment disputes.
- Encouraging More Facilitation Councils: Recognizing the need for a speedy resolution of cases related to delayed payments, the government has encouraged States and Union Territories to set up additional facilitation councils. The objective is to enhance the capacity for resolving payment disputes and ensuring that MSMEs receive their dues promptly.
- Special Sub-Portal: In June 2020, the government took further steps to support MSMEs by creating a special sub-portal within the Samadhaan Portal. This sub-portal was established in response to the AatmaNirbhar Bharat announcements and is dedicated to reporting dues and monthly payments by central ministries, departments, and public sector enterprises to MSMEs. It offers a centralized platform for both buyers and suppliers to manage and monitor their financial transactions.
- Trade Receivables Discounting System (TReDS): The government directed Central Public Sector Enterprises (CPSEs) and companies with an annual turnover of Rs 500 crore or more to participate in the Trade Receivables Discounting System (TReDS). TReDS is an electronic platform designed to facilitate the discounting of trade receivables of MSMEs through multiple financiers. This initiative aims to expedite the payment process, ensuring that MSMEs have access to their funds when they need them.
- Mandatory Reporting: To further improve transparency and accountability in the payment process, companies that procure goods or services from MSMEs and delay payments beyond 45 days from the date of acceptance are required to submit a semi-annual report to the Ministry of Corporate Affairs. This report must detail the outstanding payment amounts and provide reasons for the delay. By making this information available, the government can closely monitor payment practices and take corrective action where necessary.
- Budget 2023 Provisions: The 2023 budget introduced a significant measure by allowing deductions under Section 43B of the Income Tax Act. Under these provisions, businesses can claim deductions for expenditures only when payments are made to MSMEs on time. This initiative incentivizes timely payments and encourages companies to settle their dues promptly.
These government initiatives represent a concerted effort to improve the payment process for MSMEs, safeguard their financial health, and ensure they receive their dues without undue delays. However, despite these measures, it is essential to monitor their effectiveness and address any remaining challenges to create a more supportive environment for small businesses in the country.