RBI stresses on timely approvals for MSMEs

To ensure time-bound regulatory clearances for the MSME (micro small and medium enterprises) sector in Odisha, the Reserve Bank of India (RBI) has pitched for inclusion of the single window mechanism under the ambit of Public Service Guarantee Act of the state government.

"Single Window System for regulatory clearances for MSME is already in place which needs to be activated. It may be covered under Public Service Guarantee Act of the state government which may help time-bound clearances for the start-up of the projects", the RBI, Bhubaneswar office suggested in report on "The State of MSME sector in Odisha: Issues, Challenges and Way Forward".

In a survey conducted on 269 entrepreneurs from various sectors, across 12 districts, about 58 per cent of the respondents complained about the delay and cumbersome process in getting land, electricity, water connectivity and other infrastructure related inputs.

However, 37 per cent of the entrepreneurs were satisfied with the process except for the power supply. Only five per cent of them had made their own arrangement for land, power etc.

Stressing that a simplified and time-bound clearance from IDCO (Odisha Industrial Infrastructure Development Corporation) will encourage new entrepreneurs, regional branch of the central bank has suggested for creation of a special cell and vertical in the state PSU for giving focused attention in dispensing of MSME related cases.

No objection certificates (NOCs) from IDCO for mortgage of the land is a major constraint for recourse to bank finance as land on which the plant and machine is installed is treated as primary security. This needs to be addressed on priority basis, it said.

For addressing the issue of infrastructure in tribal areas, the report stated that the state government may contemplate creation of industrial estates and marketing hubs by using government land in these districts to create facilitatory environment for the MSME sector.

On improving the credit recovery climate, RBI has pointed out that Odisha Public Demand Recovery Act (OPDR) needs to be relooked in line with states like Uttar Pradesh and Madhya Pradesh. Scrutiny of 14 specialised MSME branches in the 12 districts covered in the RBI study indicated that during the last three years the percentage of gross NPAs (non-performing assets) in the MSME sector has increased over the years. In 2011-12, the stressed assets of the MSME branches were 4.5 per cent which increased to five per cent and 5.5 per cent in 2012-13 and 2013-14 respectively. However, the percentage of gross NPAs varied across the banks.

"Majority of bankers were of the view that the recovery climate in the state is not conducive and ineffective. The joint recovery drives involving the bankers and administration were quite ineffective", the report rued.

On the marketing front, only 42 per cent of entrepreneurs surveyed in the study had successfully marketed their products, while 58 per cent found it difficult to get proper marketing linkage. Further, 17 percent respondents had received government help in marketing, whereas 76 percent were deprived of such support. A meagre 7 per cent entrepreneurs did not require any government support.

RBI noted that the higher tax structure is a key issue for the MSME sector in Odisha which rendered the indigenous product less competitive vis-à-vis other states. "Accordingly, the products of local MSMEs become costlier and bulk buyers prefer to source similar products from other states", it observed.

About 83 per cent of surveyed entrepreneurs had availed bank loans whereas 17 per cent could not avail bank credit. Out of those who didn't avail bank loans, about one third opined that it was very difficult to get loans due to complex procedures.

RBI stressed on creation of online platform to host information like product directory, rate charts, and delivery mechanism about various MSME products of the state by the industry associations in collaboration with other stake holders like district industries centres (DICs) or MSME Department.

The same will facilitate marketing the products in domestic as well as international markets. Delivery mechanism should also be strengthened to make timely delivery of the products with proper quality assurance, the apex bank said in its suggestions for the entrepreneurs and industry associations.