Small, medium industries in Tamil Nadu face closure, thanks to GST

Thousands of small and medium industries in Tamil Nadu are facing closure rendering thousands jobless due to a number reasons, including the imposition of the Goods and Services Tax (GST), a government report has said.

If one goes by the numbers provided by the state government — the Micro, Small and Medium Enterprises (MSME) have reduced by 49,329 units while employment in the sector has gone down by 5,19,075 persons during 2017-18.

According to the Policy Note 2018-19, tabled in the Tamil Nadu Assembly, the number of registered MSME units in the state came down to 2,17,981 units last fiscal from 2,67,310 units in 2016-17.

The number of persons employed in the MSME sector came down to 13,78,544 in 2017-18 from 18,97,619 persons in 2016-17. The investment in the MSME sector too, fell down to ₹25,373.12 crore in 2017-18 from ₹36,221.78 crore.

The fall in numbers is drastic and was never seen in the MSME sector in Tamil Nadu.

According to the Policy Note, out of the 10,073 MSME's that signed a Memorandum of Understanding (MoU) with the state government at the Global Investors Meet in 2015, as on March 31, a total of 5,358 enterprises have started production, with an investment of ₹6,182.03 crore.

Industry officials list out reasons like delayed payment by corporates; issues connected to GST; lack of orders; and shunning by banks and others.

In addition, the industrial investment climate is also not favourable in the state with several big industrial projects having gone to Andhra Pradesh in the recent past.

"Delayed payment by big corporates for the goods supplied is a major issue faced by the MSME sector. Further the drying up of orders, procedures connected with the GST are some of the major hurdles faced by the MSME units," K. Gopalakrishnan, Managing Partner, Trans Gears and a past President of Tamil Nadu Small and Tiny Industries Association (Tanstia) said.

He also said the real estate prices have gone up to such a level that entrepreneurs will not be able to get a decent return on their investment.

"One of the major problems is the attitude of the bankers. Laden by non-performing assets (NPA), the bankers are avoiding lending to MSME units. In addition, they also demand collateral for loans even though the schemes do not insist on that," Gopalakrishnan added.

According to him, there are several units that keep their shutters open without activity.

Terming the closure of 49,329 units as a major achievement of the AIADMK government in the state PMK founder S. Ramadoss said the closure and the reduction in the employment numbers in the MSME sector in last one fiscal is a very serious issue and cannot be brushed aside.

"During the last 12 years the sector has not seen such a large scale closure of MSME units," Ramadoss said.

Citing the absence of major industrial investments Ramadoss alleged that corruption in the government is one of the reasons for the investors to shun Tamil Nadu and locate their units to other states.

He said neighbouring Andhra Pradesh has attracted mega investments to the tune of ₹25,000 crore from industries like Kia Motors, Bharat Forge, Ashok Leyland, Apollo Tyres and others.

“In 2017, Tamil Nadu got investments worth just ₹1,574 crore,” said Ramadoss.

The absence of new investments in turn impact the MSME units and others as there would not be any fresh orders/clients to cater to.

According to the Tamil Nadu government investment proposals worth about ₹45,000 crore are under finalisation stages and MoUs for these projects would be signed soon.

While the major chunk of the proposed investments consist a petroleum refinery projects worth ₹28,800 crore, the other projects include an automobile manufacturing ( ₹2,500 crore), glass and glass fibre manufacturing ( ₹2,000 crore), two- wheeler manufacturing plant including research and development ( ₹1,000 crore), four auto-component projects ( ₹1,800 crore) and others.