According to the official data, the number of delayed payment applications submitted by micro and small businesses (SMEs) against central public sector units and departments decreased by 11.7% to 31,192 in the calendar year 2022 from 35,347 in the calendar year 2021. These applications’ total cost decreased by 9%, from Rs 7,849 crore to Rs 7,128 crore. In contrast, MSEs submitted 31,614 applications totaling Rs 9,693 crore in payment in 2020, demonstrating the impact of Covid on trade and transactions in 2021, according to data from the MSME Dashboard from the delayed payment monitoring portal Samadhaan.
Although MSE Facilitation Councils, which are essentially dispute resolution organizations set up by state governments in their respective geographies to address delayed payments cases filed by small businesses, saw a decline in the number of applications they disposed of or cleared in 2022, indicating fewer disputes were resolved. Data shows that out of all applications submitted, 1,056 applications with dues of Rs 71 crore were resolved by councils across India in 2022, compared to 3,815 applications with Rs 580 crore cleared in 2021 and 6,232 applications with Rs 1,500 crore resolved in 2020.
In the current fiscal year, there are 113 such councils, up from 79 in FY20. The fact that several states and UTs have many councils is significant. Examples include Delhi, Jammu and Kashmir, Karnataka, Maharashtra, Punjab, Rajasthan, Tamil Nadu, and Telangana. In a follow-up response to a question in the Lok Sabha in December 2022, minister of state for MSMEs Bhanu Pratap Singh Verma disclosed the facts.
Although there are no official estimates of the total amount stuck in delayed payments to small businesses by their clients, over 1.30 lakh applications submitted by MSEs since the launch of the Samadhaan portal in October 2017 totaled Rs 33,190 crore at the time this report was filed, of which 21,955 applications involving dues worth Rs 4,166 crore were disposed.
However, a report released in June 2022 by the non-profit organization for entrepreneurship promotion Global Alliance for Mass Entrepreneurship (GAME) and analytics firm Dun & Bradstreet (D&B) found that delayed payments to MSMEs account for Rs 10.7 lakh crore annually, or 5.9% of India’s gross value added (GVA). The research stated that “India must guarantee that its economic players are credible and trusted and that purchasers make timely payments to MSMEs if it is to become a $5 trillion or even $10 trillion economy.”
The delayed payment dilemma has mostly affected MSEs as a result of a power imbalance between small suppliers and powerful purchasers. For instance, MSEs are due around 80% of the yearly sum for delayed payments.