FCIK seeks Alternative Dispute Resolution Cell for delayed payments to MSMEs

Srinagar, July 17: The Federation of Chambers of Industries Kashmir (FCIK) has advocated for the establishment of Alternative Dispute Resolution Cell (ADRC) to resolve the long-pending  issue of delayed payments to Micro, Small and Medium Enterprises (MSMEs) by government departments and PSUs.

The President FCIK Shahid Kamili, in a letter to Chief Secretary, has stated that establishment of ADRC equipped with inherent adequate powers to mediate, negotiate and arbitrate in all issues and disputes related to delayed payments in consonance with the established law and provisions of Micro, Small and Medium enterprises Development Act of 2006 (MSMED Act-2006) could be the only viable remedy to give a stop to the menace of delayed payments to MSMEs.

Kamili regretted that the current mechanism to tackle the issue of delayed payments through Micro and Small Enterprise Facilitation Council (MSEFC) had failed to yield any tangible results because the process involved no action beyond informal follow-ups and reminders. Whereas the law required the buyer department to pay to the MSME compound interest at monthly rests at 3-times the rate notified by RBI if the payment to the supplying enterprise was delayed beyond 45 days, there had hardly been any case settled by MSEFC on these lines. The recourse available with entrepreneurs after getting disappointed with the current system could have been to file petitions in courts of law but the same was plagued with number of issues including involvement of heavy resources beyond the capacity of entrepreneurs, he added.

The President FCIK said that the organisation received regular complaints about delay in release of due payments to the MSMES which had taken a toll on their financial health by choking their cash flows and pushing them towards the brink of insolvency. Since most of the MSMEs operated on bank support, the delay in release of payment had resulted in slipping of their accounts into NPA and stressful categories, informed FCIK President; adding, that in many NPA cases, the banks had already initiated action invoking SAFEASI Act. The President said that MSMEs under such a situation found themselves lonely with no support from their sponsors- the Government as they wanted them to identify and fix responsibility on the real culprits who had actually prevented the entrepreneurs from regular servicing of their bank loans by withholding their due payments.

The President FCIK also regretted that SICOP, as a mediatory, has also withheld crores of rupees received from government departments which actually belonged to the supplying MSMEs. SICOP has also failed to make payments on account of supply of industrial goods and works executed in respect of their own projects under various schemes including “Tameer”.

FCIK has solicited a high level meeting under the chairmanship of Chief Secretary with administrative heads of Finance, I&C, Law and other heads of departments and stakeholders.