Small-scale industrial units in a quandary

LN Revathy Coimbatore | Updated on June 16, 2020

Small-scale industries (SSI) that have been supplying to government enterprises, particularly the Railways, have sought the release of security deposits for deferred supplies.

A large number of units in this region are contracted for supplies to the Railways. And a good number of such suppliers are likely in deep trouble.

“We have been supplying for almost a decade and quite comfortably. But now, we are confronted with a host of issues — tight liquidity, deferment of order, paucity of labour, bills pending payment for over 90 days and above all in being unable to avail the relief package for MSMEs as the government notification stipulates that it would be applicable only to firms that have already obtained bank loans,” said M Raveendran, President, Coimbatore Compressor Industries Association.

Highlighting the plight of the suppliers in the post lockdown weeks, he said: “We were gearing up to complete the pending supplies for the fiscal ended March 2020, when due to the sudden announcement of the lockdown, the process had to be halted abruptly. This resulted in a pile-up of inventory for close to three months.”

Explaining the paucity of working capital, he said: “We had in the meantime requested the (Railway) Board for re-fixing the delivery date for pending supplies; we had already remitted a security deposit in the form of a Fixed Deposit / bank guarantee for many of our existing orders. In the process, our working capital got locked. Instead of giving a delivery period extension, the Zonal Railways resorted to purchase order modification, including instances of deferment by a year (after April 2021).”

Raveendran added: “We are unable to get the security deposit in respect of proportionate quantities supplied as the Board has, vide a circular, stated that “returning part-amount would not be possible if the remittance was by way of an FD or bank guarantee”.

Notwithstanding the idle inventory and tight liquidity, some migrant workers had started to head home.

And in the midst of all these worries, unit owners say that they have not received payment for supply of “non-stock items”.

Asked to explain, an SSI entrepreneur, preferring anonymity, said: “We had supplied some spares in mid-March. Due to the lockdown, the consignee was unable to send the ‘non-stock’ document to the accounts department in Chennai. Incidentally, when spares are used immediately on receipt, the (non-stock) documents are sent through a Railway staff to the administrative office.”

This reluctance to send such bills via an email (in the digitisation era) is causing undue delays in settlement, he said. “On the one hand, the Centre is insisting that all departments settle suppliers’ bills within 45 days, while on the other, the Railways is continuing with this age-old practice. Suppliers are victimised,” he said.

Published on June 16, 2020

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