Centre directs 36% of defaulter CPSEs to join TReDS platform

The finance ministry has directed 92 operating central public sector enterprises (CP­SEs) that have not onboarded the trade receivables discounting system (TReDS) despite the government’s mandate to do so.

TReDS is an institutional mechanism set up in order to facilitate the discounting of invoices for micro, small, and medium enterprises (MSMEs) from CPSE and corporate buyers through multiple financiers. Invoice discounting on TReDS involves three participants — MSME supplier, corporate/CPSE buyer, and financier. The invoice is uploaded by either buyer or supplier depending on the method of discounting and is approved by the other party. Once the invoice is approved, the financiers on the platform start to bid on the invoice. The supplier accepts the bid and the discounted amount is credited in its account.

“Ninety-two operating CP­SEs (out of 255) which have no onboarded TReDS platform were directed to do so,” the Dep­artment of Public Enter­pr­ises (DPE) has said in a report.

The revised parameters of MoU (Memorandum of Unde­rstanding) released by the DPE earlier this month has allocated five marks for effective use of the TReDS platform in timely payment to medium and small enterprise vendors of CPSEs. The MoUs parameters are used to evaluate the performance of CPSEs which can in turn impact the perks of their employees and management.

The government had mandated in 2017 that all CPSEs get registered on the TReDS as delayed payments by public and private organisations results in shortage of working capital for the MSMEs in their regular business operations. There are currently three TReDS based portals: RXIL (Rece­ivables Exchange of India), M1Xchange, and Invoicemart.

Last month, Finance Minister Nirmala Sitharaman said the Centre would take adequate measures to clear pending dues to MSMEs and would ensure that the central government departments and CPSEs make payments to the MSMEs in 90 days.

Anil Bhardwaj, secretary-general of the Federation of Small and Medium Enter­prises, said the CPSEs engaged in the infrastructure sector were the main players who delay large payments to MSMEs. “The government needs to strictly make the private companies with annual turnover of more than Rs 500 crore register on the portal,” he said.

The share of CPSEs in total transactions performed on RXIL — the largest TReDS portal — was abysmally low at 12.47 per cent. On the M1xchange portal, it was less than 5 per cent.

The number of CPSEs registered on the RXIL platform is 110, whereas more than 50 CPSEs have registered on the M1xchange. However, only 23 CPSEs have performed at least one transaction on the RXIL platform. Of the 23, only 14 are currently active. There are 7 CPSEs, which have performed transactions worth more than Rs 50 crore on the RXIL platform.

Among the CPSEs, Bharat Petroleum Corporation, Oil and Natural Gas Corporation, and Hindustan Petroleum Corporation are the biggest players transacting on the TReDS platforms.

Ketan Gaikwad, managing director and chief executive of RXIL, said CPSEs try to avoid payment cycles, which expl­ains their low participation.

“To help TReDS realise its full potential, PSEs should begin transacting on the TReDS platform in order to clear their payments to MSMEs on time,” he said.  

Sundeep Mohindru, chief executive officer of M1xch­ange, said the push to CPSEs (from the government) so far has been for registration and not for conducting transactions on the TReDS platform. “Currently, PSUs take longer than private companies in ap­proving the invoices,” he said.