Expenditure on freebies should generally not exceed 1% to 2% of the revenue. States like Andhra Pradesh, Madhya Pradesh and Punjab are spending more than 15% of their revenue in freebies. Food subsidy alone for the country touched Rs 2.87 lakh crore in 2022-2023. Over 81 crore beneficiaries are getting free food grain under the Center’s new integrated food security scheme from January 1, 2023. It is also estimated that spending on social welfare schemes shall reach Rs 400 lakh crore for fiscal 2024. The total cost of freebies in Karnataka alone amounts to Rs 65,082 crore a year.
Even if a part of these freebies is routed through our MSMEs, it can create permanent source of income for our work force. The funding issue of a MSME can be resolved, the GDP will increase and so also the per capita income.
Recently, in an interview, Agriculture Minister Ranendra Pratap Swain rightfully stated that we need integrated farming to increase the earnings of our farmers. Such earnings can be grossly enhanced though value addition of the farm products processed by a MSME.
By and large farming is not a “standalone profit generating” sector. It is difficult for a paddy farmer to survive by selling paddy in the local market; whereas, if the same paddy is sold to a rice miller who can process and brand the product for either domestic or export sales, he will be able to pay a higher price to the farmer.
Similarly, a shrimp farmer instead of selling the shrimp in the local market can earn a higher price by selling to a sea food processing unit. Such earnings can still be enhanced if the sea food processing unit can further value add the fish into different products, like fish paste, fish powder and fish fillet etc.
From the above, we can realize how MSMEs can play a vital role in our economy! It can generate employment, provide value added products to the market and also pay revenue to the Government. Hence it is important that MSMEs should have easy and timely access to funds and also labour force, especially skilled labour.
Presently, any MSME sourcing funds has to satisfy the bank or FI, on about a 30 point check list for sanction, out of which at least 50% requirements are irrelevant which can be discarded. Similarly today a fresh B Tech Engineer or a MBA qualified job seeker is available at a lower salary than a skilled labour. Even an unskilled labour is difficult to find since they are complacent with the freebies available and tend to relax at home instead of going to work.
The address of RSS joint general secretary Krishna Gopal was pertinent. He stressed on the importance of the MSMEs in meeting the job gap by creating about 90% of our industrial jobs against large industries creating about 3%. So MSMEs should be nourished to provide easy access to finance and availability of labour force. He also said that a protected market should be available for MSMEs. If a spade is being manufactured by TATA or a branded brush being sold by large industries, how can a MSME survive and provide jobs. The large industries mostly depend on automation, in such case what will our work force do?
Realizing such difficulties, Principal Secretary for MSME Saswat Mishra has within a short period of time brought in various schemes for growth of MSMEs in Odisha and also has resolved many long pending issues. As a result, Odisha has been recognized as the best State for MSME promotion and development in the country. Fortunately, Principal Secretary Industries Hemant Sharma has also been extending excellent cooperation to the department of MSME and bringing large scale industries to our State, beneficial for employment generation at large.
1. In order to boost the MSME activities in the country, all State Finance Corporations (SFCs) and State Industrial Development Corporations (SIDCs) must be revived through induction of funds and with other supports as required.
2. Out of the total investments made in freebies, about 10%, should be spent for the handicapped, disabled and physically or mentally challenged section of the society.
3. The remaining 90% of investments in freebies should be used to boost our MSMEs through revival of SFCs and SIDCs in all districts.
4. Out of the funds presently used for freebies, MSMEs need to be provided soft loans and capital investment subsidies along with employment generation subsidies.
5. The SFCs and SIDCs must be empowered to assist all MSMEs in resolving their issues in any other departments such as Energy, Forest and Labour etc. as in a Single Window Scheme.
6. Whether the bank, SFCs or SIDCs responsible for funding MSMEs, they must follow a simple system of appraisal which should be pragmatic and relevant. It should not work with a concept of mistrust for rejecting applications. The Government must protect genuine bank officials in case the project becomes NPA under unavoidable circumstances.
7. In case of any industrial sickness, in the first place, the matter should be discussed in Sub SLIIC (State Level Inter Institutional Committee) and then in SLIIC before initiating legal action in NCLT or, DRT or in any other legal forum.
8. Unnecessary and needless compliances must be identified and dissolved to provide time to the promoters to focus on core business.
9. The necessity of renewal of working capital for MSMEs every year must be re-examined and discontinued since it is time consuming and insignificant today with online tracking of all transactions by banks.
If the above suggestions are carried out in true letter and spirit, India can, not only surpass the $ 5 Trillion Economy before 2027 but can also ensure inclusive growth by mitigating the gap between the rich and the poor which is a matter of great concern for India these days
(The writer is Working Chairperson, EFCAI and ex-Chairman, Orissa Assembly of Small & Medium Enterprise; Mob: 9437057659;