SMEs hit badly as big firms delay payments

New Delhi: The trampled economy has badly hit the small and medium enterprises (SME) as big customer firms are unable to make the payments on time.

"If you want to delay payment, you can have many reasons. Big companies have always delayed payments by 90-180 days. The economic slowdown has now put them in a tighter spot as the priorities of this sector are pushed too far below the ladder," said Prithvi Raj, who runs a small packaging firm, Bharat Printing and Packaging in Bangalore.

Around 20 percent of India's 13 million SMEs supply goods and services to bigger companies, as a result such a delay is costing many of the suppliers, their jobs as they are forced to leave the business. As per the associations of SMEs, in most cases payments are made after six months, and sometimes after a year, exceeding the 45-day credit period stipulated by law. Such defaults are subjected to justification under the Micro, Small and Medium Enterprises Development Act, whereby large companies that source products or services from small enterprises have to pay them within 45 days.In case of any violation of this law SMEs can complain to centres in their respective states and such complaints will be addressed within 90 days of being filed.

However, the associations claim that this is rarely the case. While in Tamil Nadu, the complaint body has addressed only 42-45 complaints out of the 500-600 complaints recieved in the past year, in Maharashtra, which has at least 1,400 industrial estates out of which SMEs operate, a complaints body is yet to be set up. Joginder Kumar, President, Federation of Tiny and Small Industries of India said, "Such bodies exist in Uttar Pradesh, Andhra Pradesh, Gujarat and the north-eastern states but they're barely functional."