Mysuru, Dec 2 (IEBusiness) The Karnataka Small Scale Industries Association (KASSIA) expressed concern that Micro, Small and Medium Enterprises (MSMEs) in tier-II and tier-III cities and rural areas were faced with more difficulties and challenges than those in major cities.
Despite Governments announcing a number of benefits and giving priority from time to time for its support, the MSMEs face serious challenges for survival.
Some of the critical issues that hamper their development were absence of access to easy finance and credit instruments, serious regulatory constraints, lack of access to modern and affordable technology, lack of basic infrastructure, lack of access to modern marketing and distribution networks, shortage of skilled labour and inflexible and archaic labour laws, according to KASSIA sources here.
Though the problems had been raised by KASSIA and other MSME associations, besides studies by various institutions also highlighted the plight of the enterprises, the problems continue to haunt the sector, making it difficult for running the operations profitably.
KASSIA President Basavaraj S Jawali said frequent changes in policies and procedures in allotment of land and inadequate supply of power and water were causing havoc to the development of MSMEs in the State. What is worse is that the input costs over which nobody has any control in the free market environment have constantly gone up, making a large number of MSMEs completely unviable. On the other hand, MSMEs have no control over the price of their products as it is dictated by the large industry buyers, including multinational corporations, which more or less operate in a buyers market, the KASSIA office-bearers said at the press meet.
The MSMEs were constantly subjected to immense pressure from the buyer and the free market, which was expected to bring greater opportunities to them and a larger arena for their goods has thrown up unexpected challenges putting their survival at stake, they said.
Mr Jawali said a large number of applications from MSMEs had been kept pending by both KSSIDC and KIADB since many years. Some of the applications were pending for more than 10 years. The government must take steps to clear these applications for land allotments to encourage investments and projects which benefits the State as well as the people.
KASSIA also demanded for upgradation of infrastructure in industrial estates/areas as the plots developed by KSSIDC and KIADB lacked proper infrastructure such as roads, drinking water, drainage, street lights, and so on.
It also sought loans at 4 per cent interest to MSMEs for reducing the mortality rate in the initial phase and help them establish and sustain. KASSIA sought that the subsidised funding available to SMEs should be increased to a maximum of Rs 5 crore, the KASSIA release said.
The Mysore Industries Association (MIA) pointed out that less than 10 per cent of entrepreneurs take loan from banks and almost 90 per cent of the businessmen in the MSME sector were forced to take loan from moneylenders who are registered non-banking finance companies.
The high-interest rates charged by such firms were also a factor in most of the units tottering on the brink of closure as they fail to cut their loss. “Despite the efforts of the Reserve Bank of India and public sector banks to expand their clientele base, only 7 per cent to 10 per cent of self-employed persons, petty business men and SMEs take bank loan and instead take it from lenders and pay exorbitant interest rates,” Suresh Kumar Jain, Secretary of MIA said.
He told uni that the MSMEs depend on non-banking finance companies due to reasons such as the guarantee of the availability of the finances and timely release as against delay and red tape in banks and other government financial institutions. But the flip side is the high rate of interest that eats into their wafer thin margins and the failure to clear it erodes their profits sending the unit into the brink of closure. High processing fee and foreclosure charges of up to 5 per cent levied by the non-banking firms were other factors contributing to the loss.
There are nearly 40,000 registered MSMEs in Mysuru region of which 20 per cent are sick and 20 per cent are anticipating sickness while another 25 per cent have already shut operations, according to Mr. Jain. He said only 35 per cent of the industrial units were functioning well and some of them had even expanded from micro to small and small to medium industry. But such success stories are a handful against the number of failures, Mr. Jain said.\\\\
Though the State government has an ambitious project to rehabilitate sick industries, it is pertinent to note than only two MSMEs have benefited from the scheme in the last 5 years in the entire State.
The Mysore District Micro, Small and Medium Enterprise Association (MDMSMEA) has sought the intervention of the Reserve Bank of India (RBI) to crack down on foreclosure charges levied by non-banking financial companies. There is also a case to regulate the rate of interest levied by them.