Defence MSMEs claim armed forces cancelled orders

The Federation of MSME Vendors and Defence and Aerospace today alleged that ordnance factories supplying vital defence equipment, including guns, to the armed forces had cancelled orders worth thousands of crores placed with the Micro, Small and Medium Enterprises (MSME).

The move, the federation alleged, would lead to huge losses and large-scale entrenchment of workers.

Addressing a press conference here, Neeraj Raizada, the federation's president, also claimed that the government had slashed the budget of the MSMEs from Rs 16,000 crore in 2017-18 to Rs 10,000 crore in 2018-19.

The federation hinted that the MSMEs could be replaced by foreign suppliers.

The charges come in the backdrop of a parliamentary panel's findings that the three services were reeling under severe shortage of funds, a charge Defence Minister Nirmala Sitharaman rejected yesterday.

The ordnance factories manufacture vital defence equipment and supply weapons to not only the three armed forces, but also to the paramilitary forces.

Vinod Jolly, the vice president of the federation, said the MSMEs provide vital supplies of parts to ordnance factories and every year before March orders are placed for the next financial year.

"We get to know about the possible orders between December to February every year and get an official order by March. We, accordingly, placed our orders for raw materials. But over the past one month, several MSMEs have been getting letters from the ordnance factory board that their orders have been cancelled," Jolly alleged.

The move would have a cascading effect on the MSMEs, which would not only lead to a loss of a specially cultivated industry catering to the defence needs, but will also to large-scale retrenchment of skilled manpower, the federation claimed.

Further, the NPAs of the banks would increase as several MSMEs have taken money banks, it claimed.

"It is very surprising that a government which claims to be pro-MSME has taken such a decision. We are really very surprised because in a meeting held between the federation and Secretary, Defence Production, we were assured that the share of defence orders from the private sector, including the MSMEs, will rise by 5 per cent every year," he said.

"On the other hand, this decision will wreak havoc on us," Raizada claimed.