MP SMEs face liquidity crunch

Sector blames faulty policies of the Centre for current state.

Small and medium enterprises (SMEs) in Madhya Pradesh are feeling the heat of liquidity crisis. The SMEs have blamed faulty policies of the Centre and said SMEs can withstand the crisis, but are hit hard by low-to-nil credit, higher interest rates coupled with callous neglect of banks towards SMEs and poor policies.

The worst sufferers are those who supply goods to large-scale industries and are now turned down by them (large industries) due to the liquidity crisis. “The SMEs sector in the state has been growing fast till date in the face of all odds, but bankers do not extend credit to them. With the global crisis and liquidity crunch in the Indian market, the SMEs are now increasingly turned down by bankers for loans even at higher rates,” said Ranjan Mimani, chairman, SME Council, Confederation of Indian Industry, Madhya Pradesh Chapter.

SMEs here are aggressive in domestic as well as foreign market in engineering goods, auto-components, medicines, packing and processing. Most of them are vendors to large-scale industries and now have no fresh orders. “Even if they want to grow, the interest rates are as high as 48 per cent. What the bankers do with the public money, when they offer 4-10 per cent interest rates and charge 13.5 per cent-40 per cent interest rates? Is there any other business that ensures more than 150 per cent profit? Why our financial institutions and banks are poorly managed and highly paid?” asks Dr Radha Sharan Goswami, president, MP Small Scale Industry Organisation.

He also said, “If the Centre reduces interest rates, relaxes labour laws and improves power situation by reducing tariff, the SMEs can ensure the nation that no industry will be fired or sacked as it had happened in case of Jet Airways. When the central government talks of revival of SMEs, it is like spraying freshener on dying small leaves. In contrast, SMEs should be on prime agenda of the central government.”

The bankers have stalled all sanctions, which they had promised to SMEs, as a result the growth of the SMEs sector in the state has come to a grinding halt. “The bankers have stalled two of the cases that they have already sanctioned,” said Satish Malik, an SME promoter and ex-president, Govindpura Industrial Association.

The sector is also facing payment crisis as large industries, which are their buyers, have frozen payments. “The central government has made rules that SMEs can make complaints if their payments are stalled for more than 90 days. But who will complain against his own vendor in a tight market? The SMEs sector is moving at fast pace now it will come down at similar pace. It cannot sustain on its own,” said Gautam Kothari, president, Pithampur Audyogik Sangthan.

SMEs dependent on the large industries are suffering the most, he said adding: “When SMEs are under tight squeeze, export orders are shirking, the central government is planning to rub salt on wound by planning to cut facilities available on exports.” The SMEs in Madhya Pradesh manufacture everything from engineering goods to candies, surfactants to milk powder, painkillers to pacemakers.