MSME Minister Nitin Gadkari on Thursday expressed serious concern over non-payment of nearly Rs six lakh crore dues to micro and small industries by government and private undertakings, and said the Centre is working on an action plan to ensure the payments within three months.
Responding to a discussion on the working of the Ministry of Micro, Small and Medium Enterprises (MSME) in Rajya Sabha, Gadkari also announced that the government will revamp khadi and village industries within three months and make it more export oriented.
The minister said all banks -- scheduled, private, cooperative and NBFC -- are now allowed to lend money to the MSME sector and all loans sanctioned and disbursed under various schemes will be monitored through a central portal in his ministry.
"Government undertakings procure products but do not pay for three-four months. MSMEs are on the verge of collapse. Passing a legislation is easy.... There are 20,000-22,000 cases. As per my estimates, big industrialists, state government, central government undertakings owe Rs 5.5 lakh crore to Rs 6 lakh crore to small industries," Gadkari said.
"This is a serious situation. We are in discussion with the Finance Ministry and we will find out some solution to it.... We have to give their payments within three months," he added.
While six lakh industries have been restructured under the RBI-appointed UK Sinha committee on MSMEs, the minister said, a proposal to create a "Fund of Funds" of Rs 10,000 crore has been approved by the Finance Ministry and the Cabinet nod will be sought on it.
In addition, the Finance Ministry has approved a proposal for a "Distressed Asset Fund" of Rs 10,000 crore and the Ministry will send it for the Cabinet nod, he added.
On the Khadi and Village Industries Commission (KVIC), the minister said he will revamp it in three months and the commission will be strengthened professionally.
The ministry will appoint a financial consultant to study and suggest methods to strengthen KVIC.
"A three-member committee under the Chairmanship of Secretary will be set up and we will revamp KVIC in three months and make it export oriented," the minister said.
Acknowledging challenges faced by the sector, Gadkari said the government believed in turning "challenges into opportunities."
Earlier funding under MSME was limited to only scheduled banks but now all banks, NBFCs and cooperative banks can lend to them.
About credit flow in MSME, he said by February 2020, Rs 50,532 crore has been disbursed in 50,532 loans sanctioned.
Due to a number of steps to promote khadi, sale of its products has increased to about Rs 4,500 crore this fiscal as against Rs 3,215 crore in the previous fiscal, he said.
To promote MSMEs, the ministry has created a "Bank of Ideas" and a ranking system for states will be approved.
Highlighting the sector's achievement, the minister said there are 6.3 crore units which produce about 8,000 products and employ over 12 crore people.
The MSME sector accounts for 33 per cent of the manufacturing output and 45 per cent of the total exports of the country, he said.
On some members' concern over decline in budget for the sector, he said the Ministry's budget allocation has grown to Rs 7,572.20 crore in 2020-21 from Rs 3,007.42 crore in 2015- 16.
Under Prime Minister Employment Generation programme, in the current year, 58,000 units have been approved so far with subsidy of Rs 1,712 crore.
The minister added that after review of non-sanction of loans with bank officials, "almost 22,000 proposals are to be disbursed in March 2020."
He added that banks had rejected 11 per cent proposals, saying it fell out of service area and another 11 per cent as targets were reached.
Emphasizing the need for setting up clusters, the minister said that the government is providing Rs 5 crore grant for setting up such clusters involving 500 persons which can boost local economy.
Earlier, Congress member Jairam Ramesh suggested that those not making payments above Rs 1 crore to MSMEs should be "named and shamed" by putting a defaulters list on the website.
Lauding Gadkari for "non-toxic brand of politics" and "dynamism", the senior Congress leader praised the minister and expressed faith in his ability to revamp the sector.
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