NEW DELHI: Industry body PHDCCI has asked the government to direct central Public Sector Undertakings (PSUs) to clear all pending payments of Micro, Small and Medium Enterprises (MSMEs) to help the sector tide over financial woes.
In a representation to MSME Minister Narayan Rane, the chamber said the sector is facing the problem of delayed realisation of their bills and receivables, particularly from their large corporate buyers and government organisations, for a long time.
As a result of these delays, MSMEs face financial hardships and liquidity constraints which lead to severe pressure on their working capital management, and many of them turn into 'Non Performing Assets' (NPAs).
This severely affects the sustainability of their operations, it said in the representation.
"The government should direct all CPSUs to make payment of their entire overdue bills in 30 days and take steps to provide adequate funds to those CPSUs which report lack of financial resources to meet their payment obligations. The chamber also made a case for relaxation in classification of MSMEs' accounts in NPAs."
"Government supplies are high value in nature and since purchases by PSUs and government departments are on behalf of government of India, their payment is guaranteed and risk-free," PHDCCI said in the representation.
"It is therefore desirable that relief be granted to such units whose bills and receivables are stuck with government organisations and private companies from classifying their bank borrowing into NPAs," it said.
PHDCCI said there are apprehensions that if the problem of delayed payments of MSMEs' bills is not resolved, it might lead to large number of MSME accounts being referred by banks to the National Company Law Tribunal (NCLT) for insolvency proceedings under the Insolvency and Bankruptcy Code.