Agriculture credit disbursal target of Rs 11 lakh crore in the Union Budget this year can enrich the rural India provided adequate facilities are set up to value-add the farm products and ensure an effective market. Whereas considering the price factor of today, in order to process their produces, larger investments than eligible under the MUDRA scheme shall be called for. How can this be achievedIJ The MSMEs (Micro, Small and Medium Enterprises) have been constantly suffering from inadequate and delayed funding. Even with best of intentions, the Government has not been able to bring in a tangible change in the funding of the MSMEs.
Realising this, the Government launched the MUDRA (Micro Units Development and Refinance Agency) in 2015 to strengthen the Micro Enterprises to start with. It has already led to sanction of a Rs.4.6 lakh-core credit for Micro Enterprises; and even in this budget, the Government has set a target of Rs 3 lakh-core lending under this scheme in 2018-19. MUDRA loans have successfully exceeded the target in all the previous years. With this, the Micro Enterprises in rural India are deemed to have been sufficiently funded though the eligibility under this scheme is maximum up to Rs 10 lakh.
Fortunately with changes in the criteria for classification of the MSMEs on February 7, 2018, enterprises having an annual turnover up to Rs 5 crore as Micro, between RsRs 5 crore to Rs 75 crore as Small and between Rs 75 crore to Rs 250 crore as Medium Enterprises, we can now revise the upper limit of the MUDRA loan eligibility to Rs 5 crore to match the limit sets for Micro Enterprises and directly disburse to the Micro Enterprises besides Micro Finance Institutions and NBFCs. Necessary amendments as required can be made accordingly for disbursement of the Rs 3 lakh-crore target set for MUDRA loan this year.
In Nabarangpur district of Odisha, maize production has crossed 6 lakh tonnes. The farmers are facing the problem of plenty as they are unable to either process or market the produce. Hence, they are forced to sell their produce in less than the Minimum Support Price (MSP).
Similar examples are available for many other farm produces. Especially, the situation becomes grave when the produce is perishable. The only remedy is to set up processing plants which can immediately procure the produces and process for the market so that the farmers are protected and the economy grows.
Be it for vegetables, turmeric, maize, shrimp or any other farm product, the cost of setting up of processing units for these products may vary from Rs 1 crore to about Rs 50 crore and above. Such investments cannot be covered under the present MUDRA scheme unless the limit is enhanced to about Rs 5 crore and disbursed directly to the Micro Enterprises. So far, the funding under the present MSME scheme have been a failure due to various reasons and the sector continues to suffer
Further, reduction in tax rate to 25% for companies with a turnover up to Rs 250 crore allowed in this budget, though is an initiative to boost the MSMEs, only about 1% of performing MSMEs will benefit since this reduction was already available in the last budget for companies with a turnover up to Rs 50 crore.
The Finance Minister has admitted that the MSMEs have been a long ailing sector though they cover 99% of taxpaying companies. They are the largest employer next to the farming sector and contribute about 42% of export. This is the scenario even with about 50% of the MSMEs either sick or suffering from incipient sickness. Provided these industries are revived, India can become an economic superpower within a decade.
In order to achieve this, we need to focus on rehabilitation of the potentially-available sick MSMEs. Many of these units have been suffering for reasons beyond their control. This is a burning issue which must be resolved immediately in the benefit of the country. The RBI has a rehabilitation policy which does not practically function. The revival and rehabilitation framework for MSMEs remains only in paper though the MSMEs form 80% of industries in the country.
Association viewpoints:-
1. MUDRA scheme to be amended to fund the MSMEs directly up to Rs 5 crore and to the MSMEs whose turnover does not exceed Rs 5 crore.
2. The Gazette notification framework for revival and rehabilitation of MSMEs must be implemented in its true spirit. All potentially-viable sick MSMEs must be rehabilitated with need-based funding.
3. A massive drive must be carried out district wise through the DICs for implementation of the RBI guidelines for rehabilitation and revival of such units.
4. SlIIC and SlIIC (State level Inter Institutional Committee) must meet at least once in a month and decide on a case-to-case basis implementation of the framework for revival and rehabilitation of MSMEs and the policy on restructuring and rehabilitation of SMEs.
5. SlIIC should be vested with statutory powers and their decision must be binding on all agencies.
The MSMEs have been seriously hit by demonetisation, GST, etc., besides its perennial funding issues. Practically, no sops have been provided to the MSMEs in this budget also. If the MSMEs are liberally and directly funded as suggested above through the MUDRA scheme, both the agri sector target of Ra 11 lakh crore and the MUDRA target of Rs 3 lakh crore can be utilised in the best possible manner protecting the farmers, the Micro Enterprises and contributing to the economic growth of the nation.
(The writer is working chairperson of EFCAI, a former chairman, Odisha Assembly of Small and Medium Enterprises. Email: efcai12@gmail.com)