'Personally monitoring' MSME dues is repaid in 45 days: Nirmala Sitharaman

The issue of the government dues to micro, small, and medium enterprises (MSMEs) is a critical one, said Finance Minister Nirmala Sitharaman during question hour today in parliament. 

In her reply to a question on the issue from a Lok Sabha member, Sitharaman added,

“The issue has been reviewed over the past year from the point of view of the central government and the various departments which owe money to the MSMEs, inclusive of Public Sector Undertakings (PSUs) and it has been decided by the Central government that these payments will be made as per the standard rule within 45 days.”

Sitharaman retweeted that the Central government has taken the position that any pending payment to MSMEs will have to be given in 45 days and that she is personally monitoring it. 

According to a Reserve Bank of India report, MSMEs face problems of delayed payments because of low bargaining power not only from corporates but also from PSUs and the government agencies, both Central and State which adversely affects their working capital cycle/requirements and ultimately affects their operational efficiency. 

Earlier this year, Ex-MSME minister Nitin Gadkari had also said that delayed payment is the major problem faced by the MSMEs, and that a law should be made to clear all dues within the time frame of 45 days. He added that the Indian government is making a proposal to introduce legislation, mandating PSUs to settle the dues within the said time frame. 

In the parliament, Sitharaman also emphasised the use of the Trade Receivables Discounting System (TReDS) platform which RBI introduced in 2014 where these MSMEs payments can be discounted.

TReDs is an electronic platform where receivables of MSMEs drawn against buyers (large corporates, PSUs, Government Departments, etc.) are financed through multiple financiers at competitive rates through an auction mechanism. 

Sitharaman also clarified in her speech that dues to MSMEs payments are not restricted to the Central government but from the state governments and state-owned PSUs also and those in regards to the goods and services tax (GST).

For GST payments, Sitharaman concluded that the GST council will take the final call on the same.