The Hindu Business Line : SSI sector wants dues settled within 30 days

AS the Parliamentary Standing Committee on Industry is examining the Small and Medium Enterprises Development Bill, 2005 - it has 45 days more to submit its report - the SSI units are hoping for one crucial amendment to the original Bill - reduction in time allowed for payment of dues to SSIs to 30 days from 75 days.

The SSI sector has always maintained that one of its larger problems is collection of dues from its customers, who are typically large-scale units.

In 1993, a Delayed Payment Act was brought in to address the problem, which said that companies should disclose their dues to SSI units in their annual reports. The Act did a little to help SSIs.

In 2000, the Administrative Staff College of India, Hyderabad, was asked to prepare a draft for a new Small and Medium Enterprises Development Bill. Subsequently, the Bill was twice introduced in the Lok Sabha, but was allowed to lapse.

The third attempt was made early this year, but due to protests from SSI associations that the Bill was inadequate, it was referred to the Standing Committee in May.

Among the provisions of the Bill is one that says thatpayments to SSIs should be made within 75 days of the payments falling due, failing which an interest rate of `nine per cent plus bank rate' would be levied over the period of delay.

The SSI sector wants the time limit to be further brought down to 30 days. SSI units have their own loans to repay the banks and have to do that out of fund inflows. Any overdue beyond 90 days would turn their accounts to NPAs. If their customers have 75 days' time to pay their dues, the SSIs' working capital would be affected, says Mr D.E. Ramakrishnan, President, Industrial and Financial Reconstruction Association for Small and Tiny Enterprises.

Mr Ramakrishnan for one could never understand the rationale behind clubbing `small' and `medium' units - his organisation has called for an exclusive legislation for small and tiny enterprises.

The SSI sector believes that the Bill does not tackle the other big problem it faces — timely availability of adequate bank credit. An appropriate change in the language used by the Bill in this regard is another expectation of the Standing Committee. The Bill says that the credit facilities to SMEs "shall be progressive" and "may be specified in the guidelines or instructions issued by the Reserve Bank, from time to time." The wording is too vague and should be made more specific, SSI units feel.

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