MSME
MSME SAKSHAM WEEKLY NEWSLETTER

This Weekly E- Newsletter (The Friday Journal) aims to increase awareness regarding various news / updated and activities that have been taken place for the MSMEs and to provide information about the various schemes and programmes along with latest updations from time to time. It is a digital tool used to share relevant and valuable information with the Readers.

MSMEs are an important sector for the Indian economy and have contributed immensely to the country’s socio-economic development. MSMEs produce and manufacture a variety of products for both domestic as well as international markets. MSMEs have played an essential role in providing employment opportunities. MSMEs have driven India to new heights through requirements of low investment, flexible operations, and the capacity to develop appropriate native technology.

This newsletter has been released with an aim to educate MSMEs on various facets of business development.

  • MSME in India

The Ministry of Micro, Small and Medium Enterprises implements various schemes for the growth and development of MSME sector in the country in areas of credit support, new enterprise development, formalization, technological assistance, infrastructure development, skill development and training and market assistance to MSMEs. The schemes/programmes inter alia include Prime Minister’s Employment Generation Programme (PMEGP), Credit Guarantee Scheme for Micro and Small Enterprises (CGTMSE), Micro and Small Enterprises-Cluster Development Programme (MSE-CDP), Entrepreneurship Skill Development Programme (ESDP), Procurement and Marketing Support Scheme (PMS) and National SC/ST Hub (NSSH).

Our newsletter is an attemppt to provide brief about the developments in MSME Sector on weekly basis.

Our Special Corner

  • What is MSME-1 form to tackle delayed payments challenge? All you need to know

The issue of delayed payments has been among the biggest challenges faced by MSMEs that inhibit businesses’ working capital flow and competitiveness in the market to tap new opportunities and fulfil orders. According to the data available on the government’s Samadhaan portal to monitor delayed payment issue, 1.68 lakh complaints have been filed by enterprises since October 2017 (when the portal was launched) involving nearly Rs 40,000 crore payment delayed, of which 33,262 cases involving Rs 5,812 crore have been disposed so far.

In order to track dues outstanding by companies and address the late payment issue faced by MSMEs, the government in January 2019 introduced the MSME return form or MSME-1 form.

Companies who have purchased goods or services from an MSME and payment to the latter is due beyond 45 days from the date of acceptance or deemed acceptance of the goods or services need to file the half-yearly MSME-1 return form citing the reason for the delay and the amount due. Such companies are called ‘Specified Companies’ under Section 405 of the Companies Act, 2013.

The return has to be filed by October 31 for the April to September period and again by April 30 for the period October to March every year. Failure to file the form invites a penalty of Rs 20,000 by the company and every involved in default. Subsequent failures lead to Rs 1,000 per day and up to Rs 3 lakh.

Among the details required to fill the form are Corporate Identity Number (CIN), PAN, supplier (MSME seller) details including name and PAN, date from which the amount is due, amount due details, and reason for the delay in payment.

In the case of a Section 8 company and if the designation is selected as company secretary, then either the membership number or PAN is required. (Source: Click Here)

  • MSME Schemes:

The government has introduced many schemes to encourage the micro and small industries. Through many schemes, the Central government is boosting the credit availability for the MSMEs. MSME (Micro, Small and Medium Enterprises) schemes are initiatives launched by the Government of India to support and promote the growth and development of small businesses in the country.

  • Let us have a brief discussion on “‘MSME Ministry launches 3 sub-schemes under RAMP programme; makes ZED scheme free for women”

MSME Minister Narayan Rane on Wednesday launched three sub-schemes under the ministry’s existing RAMP ((Raising and Accelerating MSME Productivity) programme to encourage the adoption of sustainable technology in business, boost the circular economy and address delayed payments issue.

The MSME Green Investment and Financing for Transformation Scheme (MSE GIFT Scheme) will help enterprises adopt green technology with interest subvention and credit guarantee support while the MSE Scheme for Promotion and Investment in Circular Economy (MSE SPICE Scheme) is the first-ever scheme in the government to support circular economy projects which will be done through credit subsidy and support MSME sector towards zero emissions by 2070, the ministry said in a statement.

The key objectives of RAMP are to accelerate centre-state collaboration in MSME promotion and development, enhance the effectiveness of existing schemes of the MSME Ministry for technology upgradation, strengthen the receivable financing market for MSMEs, enhance the effectiveness of CGTMSE, promote guarantee for greening initiatives of MSEs and women-owned MSEs, and reduce cases of delayed payments to MSEs.

Moreover, the ZED scheme of the ministry, which aims to promote manufacturing without any negative impact on the environment, has now been made completely free for women-led MSMEs. In addition, the government will guarantee payment of 100 per cent financial support for the certification cost under the scheme.

The schemes were launched during the 2nd meeting of the National MSME Council chaired by Rane. The minister asked all states and union territories to work towards the promotion and development of the MSME sector.

For eligibility, application process and other process, please get in touch with us.

  • Trade Receivables Discounting System (TReDS) – Part 22

Trade Receivables electronic Discounting System (TReDS) is an online electronic platform and an institutional mechanism for factoring of trade receivables of MSME sellers. It enables discounting of invoices through an auction mechanism to ensure prompt realization of trade receivables.

“Govt, RBI looking to integrate GSTN with TReDS via account aggregator”

The government and Reserve Bank of India (RBI) are looking to integrate GSTN (Goods and Services Tax Network) with TReDS (Trade Receivables Discounting System) platforms to enable direct sanctions of MSME invoices.

Integration will ensure that e-invoices raised by MSMEs on GSTN can come directly to the TReDS portal, thus negating the need for any additional activity or documentation, industry players said, adding that it could greatly improve the working of TReDS platforms over a period of time.

It will also lead to faster loan underwriting and sanctions as sourcing directly from the GST platform will provide more assurance and comfort to financiers with respect to the genuineness of invoices. In addition, it will help build an alternative credit database, especially for MSMEs with weak or minimal credit history.

“Discussions are coming to the conclusion that invoices can come through the GST platform, but through AA (account aggregator) model. GSTN will be registered as FIP (Financial Information Provider) and TReDS platforms as FIU (Financial Information User) and so they will get all the invoices,” a source said.

In February 2021, the Standing Committee on Finance headed by Jayant Sinha had recommended the integration of TReDS platform with GSTN e-invoicing portal to allow real time sharing of data through a single window of access to authenticated invoices.

Better integration

“Now there are discussions on integration with all digital public infrastructure including GSTN, Udyam platform for registration and the government e-marketplace (GeM) portal. Either these will happen directly with the TReDS platforms if the government allows it, or then through an account aggregator,” a person in the know said.

Such integrations will also help the government track the invoices being created, and the sanction and rejection rates, thus encouraging more central PSU companies to participate in TReDS.

  • MSME Corporate News:
  1. How fintech startups may address supply-chain financing gap for MSMEs

A time of the year approaches where approximately 312 million online shoppers are set to bolster the growth of India’s e-commerce, generating a staggering 3 lakh crore trade business in 2023. The festive season begets a major opportunity for India’s micro, small and medium enterprises (MSMEs), and brings with it several great complexities related to managing working capital and inventory. Amidst surging demand for products and services during the festive season, MSMEs can often struggle to find the elbow room needed for capitalising on the potential to improve their cashflows. According to industry experts, an estimated 45% of such businesses need access to working capital during the festive season, a period characterised by requirements for additional inventory, labour and marketing.

Addressing this critical challenge for MSMEs, technology-enabled financial service companies are bolstering access to credit with supply-chain financing and other various tailor-made working capital products, reducing reliance on traditional lending channels, while providing businesses with greater financial autonomy and flexibility. The additional support provided by fintech lenders is critical in enabling these businesses to attain growth during a time when there is an uptick in sales and revenue.

During the festive season’s three-month timeframe, consumer durable businesses generate almost half of their annual sales, while apparel businesses see up to 40% of their annual sales come in on an average. This year, the manufacturing industry and e-commerce sector are expected to generate the foremost demand for working capital. Owing to the significant surge in exports observed over the year, along with 31% of the 633 million Indian MSMEs engaged in the sector, manufacturing stands out for its working capital requirements.

  • MSME closures are still high amid the emergence of new growth avenues  

The number of MSMEs (micro, small and medium enterprises) shutting down their operations in the post-Covid period continues to rise amid the opening up of newer growth opportunities via several programmes of the Central government.

As per the Udyam Registration portal, the total number of MSMEs that closed their operations between July 1, 2020, and December 12, 2023, stood at 32,477.

The country had over 6.25 crore MSMEs in 2016, but the number has dwindled to 3.25 crore as per Udyam portal.

“More than 60 per cent of the conventional micro-enterprises, which were engaged in business activities for more than 10 years have perished. It is very evident from the data provided by the MSME Ministry that the number has come down to 3.25 crore units despite revised reclassification,” points out K E Raghunathan, National Chairman – Association of Indian Entrepreneurs.

Several changes

India has been going through a complete transformation in the last eight years in terms of doing business. The government brought in several changes – cashless (digital) transactions, documented services, unified taxation, e-commerce marketing, global standards, stringent labour laws, and social security mandates among others.

“All these have shaken up the conventional entrepreneurs who were not used to such regulations. Also, most of the micro units could not cope with the sudden shift to cashless transactions spurred by demonetisation. Nearly 30 per cent of the units exited because of this. Then, the GST, with over 700 amendments, has suddenly made them focus more on documentation rather than real business. There is hardly any MSME entrepreneur without getting any notice from authorities, he adds.

While the operating environment is completely different now for the MSMEs, new growth avenues have also opened up for MSMEs.

Raghunathan says the emerging sectors such as electric vehicles, drones, defence and aerospace, robotics, sophisticated electronic gadgets, and mobile phones have not provided any opportunities for conventional entrepreneurs. The central government’s PLI schemes also provided very limited opportunities for local MSMEs to transform and get adapted.

However, a report by UBS Securities India states that more than 100 MSMEs are among the PLI beneficiaries in sectors such as bulk drugs, medical devices, telecoms, white goods, and food processing.

  • ONDC and Meta to digitally upskill five lakh MSMEs

ONDC and Meta on Tuesday announced a partnership to help small businesses by educating them to build conversational buyer and seller experiences on WhatsApp through Meta’s business and technical solution providers.

To start, over the next two years, five lakh MSMEs will also be digitally upskilled through the Meta Small Business Academy.

T Koshy, MD & CEO of ONDC, said, “Today, for any business to grow, it is critical for them to market themselves and reach a wider audience. Our partnership with Meta will not only digitally upskill these businesses but will also enable them to connect with a customer base far and wide. We are confident that our collaborative efforts will pave the way for millions of small businesses by providing them with the right impetus for growth.”

As part of the partnership, Meta will also support Sahayak, ONDC’s WhatApp chatbot, in enhancing the services offered on the bot as the single point of seller communication and customer communication for ONDC.

Earlier this year, Meta launched the ‘WhatsApp Se Wyapaar’ program to upskill 10 million traders across 29 states in 11 Indian languages on the WhatsApp Business app.

Today, there are more than 200 million users of the WhatsApp Business app across the world, and more than 60% of people on WhatsApp in India message a business account.

MSME-focused non-banking financial company (NBFC) U GRO Capital has raised $30 million (around Rs 250 crore) through Non-Convertible Debentures (NCDs) from Dutch entrepreneurial development bank FMO, the company announced on Tuesday. The INR-denominated NCDs issuance was fully subscribed by FMO. 

Shachindra Nath, Founder and Managing Director, U GRO Capital, said, “We share a common vision of financial inclusion with impact funding organizations and are excited to collaborate with FMO to meet the diverse financial needs of India’s underserved MSMEs. Impact investors are critical funding partners in enabling us to bridge India’s massive credit gap in the MSME sector.”

Over the past five years, U GRO Capital said it has provided credit to more than 80,000 small businesses. Earlier this year, the Investment Fund for Developing Countries (IFU), a Danish development finance institution providing risk capital for private sector investments in developing and emerging markets, had around Rs 240 crore in U GRO Capital.

Aleksandra Gazy, Senior Investment Officer, FMO said, “MSME Finance is a key driver for financial inclusion, and U GRO Capital’s mission to solve the small business credit need is in line with our vision of promoting inclusive and sustainable prosperity. We are confident that together we will positively impact the lives of MSME borrowers.”

  • MSMEs meet political leaders, explain their demands on electricity charges

The Tamil Nadu Industrial Electricity Consumers Association has met leaders of various political parties and submitted its demands related to power charges for Micro, Small and Medium-scale Enterprises (MSMEs) and also sought their support for the human chain planned across the State on December 27.

J. James, co-ordinator of the Association, said all the leaders assured their support to the protest by the MSMEs. The units, which mostly fall under LT III B tariff category, objected to levy of peak hour charges and steep hike in demand charges when the Tamil Nadu Electricity Regulatory Commission held a meeting here before announcing the new tariff.

The government said that it would not collect peak hour charges till meters were installed for it. It should withdraw the peak hour charges. On rooftop solar energy, it said that networking charges would be reduced 50%. Other States were incentivising MSMEs that invested in solar energy. Industries were taking bank loans and installing rooftop solar energy. But Tangedco collected networking charges from the units for power generated for captive use.

More than 400 industrial associations in Tamil Nadu had taken part in the protests held since September this year, he said.

He has contributed in ICAI, ICSI and MCCI and other various Newsletters. He is also a speaker at various platforms including seminars / webinars.