CPSEs slower approach towards bill discounting
Credit and Finance for MSMEs
The MSME Ministry mandated all companies with a turnover of Rs 500 crore and above and (CPSEs) Central Public Sector Enterprises to get themself registered on the RBI-regulated (TReDS) Trade Receivables Discounting System in November 2018. This move was intended to be a game-changer in solving the liquidity crunch faced by multiple MSMEs due to payment delays by all their corporate and government buyers.
Three years yet the public sector firms are still refraining from using the TReDS platform introduced by the Government.
Slow transaction growth
While we can see a small growth in transaction volumes from last year by CPSEs, it is not matching with the government’s directives.
In late 2020, then MSME Secretary A.K. Sharma wrote to corporates to onboard TReDS and start transacting to ensure timely payments to MSMEs. The letter said, “Many corporate companies are yet to join or transact. You all are requested to onboard your company on the TReDS and start transacting.”
An MSME promoter
Confirmed on condition of anonymity that many CPSEs buyers penalise them by extending their clearance date if they insist on passing their invoices on the TReDS platform as requested by the government. Several other industry spokespeople also acknowledged it to be common amongst the public sector firms.
Partner at Rajat Chemical Industry also a Member of CII National MSME Council Rajata Mehra, said that the problems of payment delay with private firms have improved with the introduction of new government initiatives such as the filing of half-yearly returns by corporates with MCA on their dues to MSMEs. However, the problem in public sector enterprises of payment delays is yet to be resolved.
Adoption by CPSEs
Last year, the former Union Minister Nitin Gadkari said that there are payments worth more than Rs 5 lakh crore to the MSME sector from various government agencies, public sector undertakings and other major industries.
Unless the public sector enterprises start transacting on TReDS to clear their payments to MSMEs on time, the benefits of TReDS will be limited. “The success of TReDS entirely depends on the public sector as there is cost as well as risk-reward ratio benefit involved for MSMEs here,” said Mehra.