SMEs ignorant about stimulus packages

Blame poor implementation and lack of information

A large number of small and medium enterprises (SMEs) are mired in the slowdown, but a majority of them, especially the micro ones, have said they are not aware of the steps being taken by the government to help SMEs recover from the crisis.

Those who know about the schemes have said these were not being implemented properly, and blamed the implementing agencies.

The Federation of Indian Chambers of Commerce and Industry (Ficci), an industry body which recently conducted a survey among SMEs across the country, stated that 73 per cent of the enterprises said they did not know of any steps that had been announced under the stimulus packages to support their sector.

A cross-section of SMEs, which have spoken to Business Standard earlier, also felt the same way. Industry associations state they can only create awareness, and that the problem is poor implementation and lack of information about the schemes.

“There is a serious problem with information dissemination at the ground level,” said the industry body.

Further, of those who were aware of the incentives, a majority indicated that these measures have not really enabled them to regain the business momentum. This is a cause for concern, as it appears that the benefits of the stimulus packages are not percolating down.

H E Farooq Ahmed, executive director, South India Shoe Manufacturers Association, which has members from various leather clusters (including Ambur, Ranipet, Chennai) in the state, said, “The government is doing its best to implement the schemes, but the problem is with the implementing agencies.”

For instance, according to him, the Central government has introduced a scheme to support the implementation of lean manufacturing in SMEs. The aim was to bring down the cost of processing, labour and raw material. Under the scheme the government will reimburse 80 per cent of the training cost incurred by these units.

While describing the scheme as among the best introduced by the government to help SMEs recover from the crisis, Ahmed said, the agencies were not implementing this scheme properly and they lack enthusiasm.

He further added that if SMEs implemented lean management they would be able to bring down overall costs by at least 15 per cent.

Ficci’s survey noted that 59 per cent of the respondents indicated that high cost of financing is a persistent problem. This is particularly bothersome as 90 per cent of the participants reported they were dependent on banks for funding their operations.

Further, 62 per cent of the participants said banks did not encourage financing in the SME sector and 97 per cent of the respondents said the cost of finance had gone up over the last one year. Amidst the existing situation, which is already difficult, the support from banks is most critical.

A majority of enterprises in the leather and engineering clusters in Tamil Nadu, who were aware of the incentives, indicated that these measures have not really enabled them to regain the business momentum. The interest subvention announced for SME exporters is not reaching the intended beneficiaries, they added.

“Though the government in the budget had set up a refinancing facility of Rs 4,000 crore for the SME sector to make credit readily available, SMEs across sectors are still finding it difficult to raise funds,” said R Srinivasan, a leather exporter from Chennai.

“Financial accommodation by banks at lower interest rates is the single most important demand,” said A Sakthivel, president of the Tirpur Exporters Association, which represents the textile industry in Tirupur, a key textile hub.