Committee findings on mismanagement of MSME Ministry should serve as a wake-up call for Modi government

Modi government has been very liberally distributing promises of help but not money. The MSME sector is a case in point. It is struggling for its survival even as the Union Ministry of Micro, Small, and Medium Enterprises itself is deprived of sufficient funds for smoothly running itself, its schemes and projects.

A department related Parliamentary Standing Committee has not only pointed out the inadequate allocation of funds, but also warned that it “would jeopardize the smooth functioning of the Ministry and successful implementation of its schemes/projects.”

It noted in its latest report that only Rs 21422 crore have been allocated for 2022-23 against the projected Rs 24979.6 crore, i.e. only 85.76 per cent, which is a shortfall of Rs 3557.6 crore. The SME division has been allocated Rs. 200 crore, that is 96.15% of their demand.

Allocation to both DC-MSME and ARI Division has been curtailed substantially as DC-MSME has got 88.99% whereas ARI Division got only 72.73% of the projected amount.

The budget allocation for the Ministry of MSME, the committee said, “apparently appears to be a significant increase” from budget estimate of Rs 15,699.65 for 2021-22 to Rs 21,422 crore for 2022-22. However, Rs 15,000 crore has been earmarked for Guaranteed Emergency Credit Line Scheme (GECL) leaving behind Rs 6,422 crore only as actual allocation for development of other schemes/projects of the Ministry, the lowest allocation as compared to past several years since 2017-18 spread up to 2020-21.

The committee was also unhappy over non-utilisation of the allotted funds. The Ministry was allocated Rs 15699.65 crore for the financial year 2021-22 but it spent only Rs 12,071.84 crore up to January 31, 2022, which was only 76.89 per cent.

The SME division utilized only Rs 146.6 crore up to January 31, 2022, out of Rs 208.65 crore as per revised estimate for 2021-22. The actual expenditure was thus only 70.26 per cent.

Similarly, the ARI division utilized only Rs 2519.76 crore out of Rs 4202.73 crore, which was only 59.95 per cent. DC-MSME spent only 83.32 per cent of the revised estimate.

The Committee found the present GST regime defeating the very purpose of digitizing process due to requirement of separate hard copies to be provided by the MSMEs for claiming refund, resulting in tremendous strain on their cash flows.

Since a number of MSME oriented products are presently being imported, which can be manufactured in India, the committee found it even against the vision of ‘Aatmanirbhar Bharat’.

The committee observed that AE upto 7.2.2022 in respect of important schemes under KVIC such as Khadi Vikas Yojana, Gramodyog Vikas Yojana, Khadi Grant (Est. Expenditure) and PMEGP are only 54.48%, 56.12%, 65.72% and 60.5% of RE 2021-22.

The committee was quite surprised to note that AE in respect of Mission Solar Charkha upto 7.2.2022 is zero and the entire RE allocation of Rs. 5.04 crore was unutilized.

The committee noted that the BE for SFURTI Scheme for FY 2022-23 is Rs. 334 crore but the Actual Expenditure as on 31.02.2022 is Rs. 200.20 crore as against RE of Rs. 406.02 crore for FY 2021-22, which means the Ministry spent 49 per cent only.

These schemes are targeted at creating employment and livelihood opportunities in the country and therefore underutilization of funds would adversely affect employment prospects, the committee observed.

It also noted that employment generated in FY 2021-22 was much less vis a vis employment generated in FY 2019-20 & 2020-21.

The committee was also concerned about dismal performance of PMEGP which is one of the flagship Schemes of the Ministry of MSME, which is capable of generating large-scale employment for youth. However, out of the total number of applications received under the Scheme, around 36% were rejected by the banks, only 25% got sanctioned, and a meagre 18% got disbursements.

During the course of committee meetings, members had raised the issue of banks’ lukewarm and unfriendly response towards borrowers, which often deter them to approach the banks for loans.

The committee observed that the actual Interest Subsidy Eligibility Certificates issued and funds released by banks are not very encouraging and creates gap in working capital requirement and actual fund availability.

The committee noticed that overall credit gap in the MSME Sector is in the range of Rs. 20 lakh crore to Rs. 25 lakh crore. A large chunk of micro enterprises is operating in an informal sector and therefore they are not eligible for formal credit offered by financial institutions and these micro enterprises are often deprived of benefits announced by the government under various schemes meant for MSMEs, it observed.

The committee also observed that there is no updated data about MSMEs in the country.

Further, there is lack of data about manufacturing activities in the country. In the absence of adequate and granular data, the policies and guidelines that the government frames often misfire.

(IPA Service)

Views are personal