Sections of Karnataka’s MSMEs have petitioned the state government ahead of the budget on Friday to come up with a policy for the latter to procure goods and services from them, on the lines of the Central policy.
In a pre-budget memorandum, the Federation of Karnataka Chambers of Commerce & Industry (FKCCI) had written to the chief minister, requesting a policy that would provide special concessions, like reservation for procurement from MSMEs and an exemption from having to pay Earnest Money Deposits (EMD) while competing for government tenders.
As per the Central policy 25% of all the purchases by all the government departments have to be from MSMEs. Out of this 25%, 4% is reserved for MSME owned by Scheduled Castes and Scheduled Tribes and 3% is reserved for MSMEs run by women.
HR Jairam, chairperson of the MSME Expert Committee under Bangalore Chamber of Industry and Commerce (BCIC) told ET that a similar scheme is put in place by the government of Karnataka with preference for Karnataka based MSMEs. “We also request that MSMEs get payments on priority. The state government could also have an arrangement with banks to make payments within 45 days. This will greatly benefit the MSME ecosystem in Karnataka,” he said.
Even with Income Tax rules clearing MSMEs’ bills within 45 days, getting paid on time is a hassle in an already cash-strapped sector, Srinadh Bhandari, Chairman of the Energy Panel under Karnataka Small Scale Industries Association (KASSIA) told ET. “While there are channels to appeal delayed payments, we find that most of the backlogs come from banks not paying up on time,” he said.
