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What SMEs expect from the new government
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Bikky Khosla | 25 Mar, 2014
The general election is ahead and a new government is to be formed at the center within a few weeks. What measures do you expect from the next government to promote the small and medium enterprise sector? I asked this question to some entrepreneurs I met recently and almost all of them viewed that high credit cost is the biggest concern for them. While rising input costs are eating up their profits, high costs of borrowing have worsened the situation for them. In this scenario, they feel the new government should make an immediate and arduous effort in this direction.
According to latest data published by the Reserve Bank of India, bank credit grew at 14.65 percent year-on-year to Rs 5,937,249 crore in the fortnight ending March 7, as against Rs 5,178,577 crore in the same period last year. In contrast, deposits stood at Rs 6,657,109 crore during the same period last year. During the previous fortnight ending February 21, deposits grew at 16 per cent year-on-year to Rs 7,605,171 crore while credit grew at 14 per cent year-on-year to Rs 5,861,736 crore. This data clearly shows lack of business opportunities and support the concern of the industry regarding lack of finances.
Although our overseas shipments had witnessed several months of growth before falling for the first time in eight months in February, the exporters are suffering no less due to lack of finances and high borrowing costs. Exporters' association FIEO has repeatedly pointed out the need to take some urgent measures to address this issue. Recently, it has also recommended the RBI to consider providing export credit in foreign currency at LIBOR + rates in the background of the recent decline in exports and rupee's return to a volatile mode. I feel this suggestion is worth consideration.
Besides a solution to high credit costs, what our SMEs have long been asking for is reduced regulatory burden on the sector. Here, what I think most required is political will and efficient administration. In addition, the new government to be in place after the general elections should make every effort to materialize the implementation of the proposed Goods and Services Tax (GST), which alone, if implemented, will make a big difference in drastically lowering the red tape and tariff hurdles the industry has to deal with at present.
Considering the current economic situation and dull global demand, I also hope that the next government would provide some kind of incentives to the manufacturing companies to facilitate their growth. The sector has not been performing well for quite some time now and it requires urgent nourishment. At the same time they should also pay attention to the long-term needs of the sector, particularly in terms of infrastructure and investment. Of course this will take time, but the earlier the process begins the better it is. Roads, ports, distribution channels, power supply, land -- all these must be made available for the sector to keep our economic growth intact in the long-run.
I invite your opinions and suggestions.
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What SMEs expect from new government
SHRIDHAR N.V | Wed Apr 23 05:16:48 2014
Non issuance of C FORMS ( MINIMUM 2 YEARS AND SOME TIMES MORE THAN 4 YEARS) has resulted in blocking up of manufacturer's funds in VAT OFFICE. It is like this: Manufacturer borrows from ONE CENTRAL GOVERNMENT agency called BANK and GIVES IT TO a STATE GOVERNMENT agency called VAT OFFICE AND PAYS THE INTEREST TOO. This amounts to the manufacturers borrowing on behalf of the STATE GOVERNMENT AND PAYING THE INTEREST ALSO. This means the manufacturers are paying a TAX ON THEIR BORROWINGS FOR THE STATE GOVERNMENT. Further the banks do not consider this amount( STUCK UP AMOUNT --NON PERFORMING ASSET )FOR LENDING PURPOSES. As a tiny industry this amount is a considerable percentage ( sometimes more than 100% of the bank limits ) and are hard pressed for funds and it hampers their growth. This requires a serious attention by the policy makers industry/trade associations and also the BIG CORPORATE CUSTOMERS
who are unable to provide the C FORMS IN TIME.
What SME s expect from new govt.
Ratan Poddar | Mon Mar 31 17:09:40 2014
My concern is else where.
Govt. is increasing taxes on regular basis.
The price of fuel has gone up substantially. Indian cost competitiveness is slowly narrowing as a result sales will go down.
We need reduction in price of fuel which will reduce cost of all inputs and make it affordable. Price increase w.r.t.last year for all items are to be seen.
Soon India will be major importer.
Indian industry has to focus on import substitutes. Accordingly Govt. has to give support to industries on import substitution.
High cost of borrowing money from banks
Chitra Seethapathi | Sat Mar 29 12:32:25 2014
I am a small scale women entrepreneur: I borrowed a sum of Rs 2,00,000 from UCO bank/karaikal:when i wanted to raise it up to Rs 5,00,000 bank manger told me to register the process with the nearby registrar ...it took me to spent around Rs 35,000 regarding stamp fee,documentation charges,legal/valuation etc. to get additional amount of Rs 3,00,000 i spent around Rs 35,000 which i feel nothing but a burden on my interest in my efforts:hell with ruling mad governments!
Increase central excise limit for SMEs
Bikash Mohapatra | Wed Mar 26 16:33:30 2014
The cost of Raw materials has gone up about 100%, but the Excise limit is not increasing accordingly.It is very difficult for the small & tiny units to compete with the large units, because the large units are getting discounts on their purchase in volume. So Central Excise limit should be minimum 5crores instead of 1.5crores for SMEs & tinny sector units to improve sales, by which they can avail more CC limit from the Banks.
Case of No majority of any party in Lok Sabha
Vinay Dhoble PUNE | Wed Mar 26 08:45:39 2014
Can any one tell of getting absolute majority in LS by any alliance in forthcoming election. It will be the biggest tragedy if no party or stable alliance do not get majority then minor regional parties with their win of few seats will start bargaining and will make crores of Rupees in bargain. This plan is now getting surfaced gradually by all such parties with their single principle of earning money whatever happen to country.
Expectations of SMEs post 2014 elections
Sanjay Jobalia | Wed Mar 26 08:07:03 2014
There is nothing one could disagree with the article. However I fail to understand why anything for the betterment of SMEs starts and ends with cheap & easy finance.
As if there is nothing else that is desired by SMEs
I would want the following to be considered.
1) There are hardly any firm guidelines in place about recovery of payments of due payments of SMEs from their clients.
2) Apart from interest payments which has been provided in the MSME act, there should be a penalty levied on anyone who willfully defaults the payments of SMEs
3) There are instances where a large or multinational unit enters in an agreement to buy back products made by SME for a period of 3-5 years & based on it the SME invests in adding capacity. In many cases it has been observed that after the SME partner has invested the money, the buyer renegotiates the rates. Since the SME has borrowed funds he has no choice but to agree. This is outright exploitation of SMEs
Some form of association should be formed to prevent any such exploitation of SME members
There is also a need to spread the awareness of MSME act and who are eligible & what benefits they can have and what are their rights. In a place like Mumbai not many I have found the know the procedure for SME Registration
SME Expectation
Lalit | Wed Mar 26 07:20:00 2014
Reforms in initiating an SME , what is known as single window clearance.
Rebate for 3 years in taxes and other levies irrespective of location.
Loan up to one crore
Pavan Kumar | Wed Mar 26 05:59:08 2014
Loan up to one crore must be sanctioned to the SMEs and also the traders without any complications like mortgage the property etc.
Seeking Govt.Support
Ravi | Wed Mar 26 05:44:46 2014
Dear Sirs,
I am not thinking in a negative way. But,experience... why should we anticipate and keep such a big hope on Govt. Moreover as Rajeev Gandhi told through the Govt's schemes and implementations out of one rupee the beneficiary is getting only 15 paise.
You are telling Roads, ports, distribution channels, power supply, land- all these must be made available if this is not mere dream what else ? There are distribution channels have you ever experienced their service or collect the experiences from anybody?.
Most of the SSI, MSME units are facing the main problem with the credit outstanding at their buyer's accounts that all are accumulating in a tricky way has no remedy. We are getting the payment after six months or more by the time the profit will eating up by subsequent expenses like interest and others. If Govt could not find a remedy for these it will be like the stories of farmers pledged their Ration Cards. No small units can come up or even survive.If a unit denied such business there is no other scope to run the unit as the Govt. supports are in paper only. Most of the cases they are providing continuous orders, but with the borrowed money it is difficult to run the business. Most of us finding difficult to shift from such companies as we have to get a good amount from such companies and they are giving orders then and there out of which again they are retaining a lion portion of amount with them.
Govt. increasing taxes on regular basis
Ratan Poddar | Wed Mar 26 05:17:42 2014
My concern is elsewhere.
Govt. is increasing taxes on regular basis.
The price of fuel has gone up substantially. Indian cost competitiveness is slowly narrowing as a result sales will go down.
We need reduction in price of fuel which will reduce cost of all inputs and make it affordable. Price increase w.r.t.last year for all items are to be seen.
Soon India will be major importer.
Indian industry has to focus on import substitutes. Accordingly Govt. has to give support to industries on import substitution.
Interested points...
Nitish Mittal | Wed Mar 26 04:57:40 2014
Hello,
I know what you people feel about support to traders who do export from India or China as they already have minimum margin but increased cost due to bank and export regulations.
Please note a fact that many of the Indian manufacturers do not know how to export and they need traders who could do export on there behalf, it is regular practise in China due to language barrier over there.
Open for suggestions.
Please also confirm how to get registerd in MSME in Delhi.
Thanks and Regards,
For Mittal Merchandisers Co. (Delhi)
Nitish Mittal
(Properitor)
Skype ID- mittal.merchandisers
Landline - 011-27836020
Mob - 91-9717935685 91-9717935685
www.mmcfixings.com
Good article
Vijay Vedantam | Wed Mar 26 04:24:39 2014
Good article!!!!!
Apart from the concerns highlighted like high cost of funds, a concerted effort should also be made to fight corruption as projects tend to get delayed unless palms are greased. Also, unprecedented power cuts and unsupportive government policies have led to closure of SMEs, especially in the manufacturing sector.
The business and industry chambers should come together to resolve the problems of SMEs in particular, and the industry in general.
Simplify tax system for SME and make more productive
Giridhar Rao | Wed Mar 26 01:15:21 2014
We request The new government should simplify, combine all taxes and bring under one tariff administrative cost has become very expensive, most technocrat entrepreneur find it difficult need to depend on good experienced intelligent, accounts person due to BPO culture it has become expensive to get good experienced person to meet all complicated statutory requirement.many Major and MNC company who outsource the job to SME only interested in cost cutting does not want to include cost for administrative expenses they only consider the material and labour cost when requested they only say to manage all other expenses in Gross profit. SME plays big role in generating more employment but
many technocrat entrepreneur cannot manage complicated tax system,they spend most of the time on non productive work.the government should encourage SME and remove all complicated and simplify where they can be managed efficiently and be more productive and become more competitive in global market.
High Burden on SME's
Sreedhara | Tue Mar 25 16:44:21 2014
I do understand the external environment making a big impact on survival of SME's, This is high time that govt should pay attention to the demands especially to reduce the high input / capital costs for our own survival, please do not neglect SME's of our country please
There are many employees / Families who depend on SME's for thier livelihood
Thanks
What SMEs expect from the new government
Ravindra Raghuwanshi | Tue Mar 25 15:53:58 2014
Unavailability of continuous power is also a critical issue. In places like Kanyakumari, Kerala many units are working only night shift.
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