The Hindu Business Line : Delayed payments dog TN small industries

Chennai, Aug. 25 The problem of not being paid on time for their products or services is often regarded as the single largest hurdle faced by the small industries.

An example for this is thrown up by the records of the third meeting of the Micro and Small Enterprises Facilitation Council (MSEFC), which took place here last week.

The council took up 39 cases of delayed payments worth Rs 35.50 crore. The meeting was able to settle Rs 8 lakh that very day, but the average of Rs 1 crore a unit speaks loudly of the enormity of the problem.

The MSEFCs are councils established by the Tamil Nadu Government in July 2007, under the provisions of the Micro, Small and Medium Enterprises Development Act, 2006 of the Government.

Three regions

In Tamil Nadu, MSEFCs have been set up for Chennai, Tiruchi, Madurai and Coimbatore regions.

The third meeting of the Chennai council was chaired by the State’s Industries Commissioner, Mr G Santhanam.

Industry representatives such as Mr C.K.Mohan, Vice-President, Tamil Nadu Small and Tiny Industries Association (TANSTIA), and Mr DE. Ramakrishnan, President, Industrial and Financial Reconstruction Association for Small and Tiny Enterprises (IFRASTE), Chennai, were present.

There have been measures such as Prompt Payment Act earlier, but they failed to deliver because the small unit, which depends upon its larger debtor for its sustenance, dare not take the debtor to the courts.

alternative measure

The MSEFCs have come up as an alternative measure, where the emphasis is more on suasion rather than litigation. As such, the experiment is being watched keenly by both the industry and policy makers.

It is against this context it would be worthwhile to watch how the 39 cases taken up by the MSEFC will be settled. The councils do have some powers. They have been vested with legal powers to act on delayed payments to micro and small enterprises, by providing alternative dispute resolution services with jurisdiction to act as an Arbitrator or Conciliator in respect of disputes arising between the supplier Micro & small enterprise located within the council’s jurisdiction and a buyer located anywhere in India.

According to the provisions of the Act, buyers failing to make payment to the suppliers (micro and small enterprises) within 45 days of acceptance of the goods so supplied, are liable to pay along with the principal amount, compound interest with monthly rests to the supplier units, at three times of the Bank Rate (6 per cent, at present) as notified by the Reserve Bank of India.

The council is hopeful of concrete action. In a statement, it has called upon the small units affected by delayed payment to approach it for help.

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