Trying times for Ernakulam’s MSMEs

A host of issues are creating a ‘crisis-like situation’ in the micro, small and medium enterprises sector

From bureaucratic red tape to too much centralised design and control, Ernakulam district’s micro, small and medium enterprises (MSMEs) have struggled throughout their lives, from the formation of the State to the post-flood scenario.

As the largest metropolitan region in the State, Ernakulam is also its commercial capital. Though not endowed with rich natural resources, the district has succeeded to a great extent in leveraging its natural gifts and increasing urban opportunities to create and survive on industrial units that have always been an example of sturdy enterprises. According to figures from the District Industries Centre, there are 25,751 industrial units in the district.

Material shortage

However, “MSMEs in the district are going through a crisis-like situation,” says Mohammed Ashraf, president of the district unit of Kerala State Small Industries Association.

“If it was a severe shortage of labour during the months of the general elections in the country, it is now a shortage of materials and difficulties associated with marketing, in the months immediately following the elections,” he said.

Delayed payments

Besides, the most difficult phase, he says, is what appears to be a continuously contracting economy. The slowdown in business as a whole has resulted in delayed payments. There are even larger companies which are making payments only after 100 to 120 days now unlike the previous period in which they took a maximum of 90 days for payments.

The floods had hit the MSMEs in the district hard, says Sojan Joseph, an industrialist and president of Edayar Industries Association. The Edayar industrial area was among the worst hit in the 2018 floods. Most of the 320 units sustained significant losses during the floods. Though the government has promised a subsidy of ₹2 lakh on a fresh loan of ₹10 lakh, industrialists are unwilling to go in for fresh loans in the face of the losses they sustained, says Mr. Sojan.

Problems had been mounting for MSMEs even before the floods, says K.A. Joseph, veteran industrialist. There is more tension and uncertainty in the sector after the massive floods last year, he adds, pointing out that the government has turned a blind eye to the calamity that hit the units in the district. The only help has been an offer of interest subsidy. But that too has not benefited the most needy.

With the kind of turnover and business volumes these days, most MSME units are averse to taking fresh loans on which the subsidy was promised, he says.

Another problem facing industrialists is the lack of space available for new units even at a time when not many units are being opened. “Besides, local bodies too are not encouraging them,” says Mr. Joseph.

A key problem blocking the growth of the MSME sector is too much of centralised control, says P.M. Mathew, Director of the Institute for Small Enterprises Development. He says most of the schemes for the MSME sector are designed Centrally. For example, the cluster development programme is a centrally designed programme. These programmes are to be implemented by local bodies, which often do not have the expertise to do that, he adds.

Local bodies often display a lack of understanding of the trials and tribulations of an entrepreneur when trying to set up an industrial unit, says Dr. Mathew. They should become more friendly and understanding of enterprises and the need for making business easy, he adds.

Another point he raises is the need for providing services to entrepreneurs. There are some government outlets now that provide support to entrepreneurs or answer their queries. But more such outlets are needed to provide backing in areas like training and marketing, he says. There are also many parallel programmes for MSMEs that are run simultaneously by local bodies and institutions like the District Industries Centre. These programmes should be merged to make them more cost-effective and efficient, he adds.

Power charges

The recent hike in electricity charges has not hit the industrial units too hard, maintains industrialist Shaji Sebastian. He says the average hike in power charges has been between six and eight per cent for the low-tension (LT) category of consumers. However, the duty collection is at the rate of 10%, which is too high for the category, he claims.

The government should provide some incentive to MSMEs, he said pointing out that there was a time when the units were treated on par with power consumers in the agricultural sector. However, power charges have gone up and LT consumers are now paying electricity charges almost the same as high-tension consumers, he adds.

Technical glitches

There are also several technical problems associated with the new initiatives, says a former bureaucrat associated with the Industries Department. For instance, he says the process of submitting online applications for subsidies is time- consuming.

He says the Industries Department should be able to offer easy exit to industrialists if they want to exit business. Now, entrepreneurs using spaces of industrial estates and areas find it tough to stop their business if they want to.

However, the Industries Department says that every complaint will be addressed. For instance, says a senior official, there was a problem with the single-window clearance portal, which is linked to several other departments.

The problem of delay in submitting applications and making payments are being addressed, adds the official.

The department is also concerned about the post-flood scenario, says the official, pointing out the interest subvention scheme and the concession on acquiring new machinery.

There has been a delay in providing the interest subvention. The issue has been taken up with the district-level bankers’ panel, the official adds.

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Printable version | Jun 4, 2020 6:09:37 PM | https://www.thehindu.com/news/cities/Kochi/trying-times-for-districts-msmes/article28816572.ece

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