Peenya Industries Association Gets New Team; Expects Robust Mechanism For SMEs

Peenya Industries

Peenya industries Association is one of the key industrial regions in Bangalore and claimed to be one of the leading clusters in Asia level. The PIA had recently elected their new office bearers to govern them.  In an exclusive chat with CMR, H.M. Arif, Secretary of Peenya Industries Association speaks on the how Peenya is different from other industrial belts and the expectations he has from the government bodies in terms of support for SMEs and MSMEs.

What makes Peenya industrial cluster different from others?

The uniqueness and huge plus of Peenya is that it’s a huge horizontal cluster that can house several vertical clusters, within. Peenya is also one of the oldest untold clusters which came into being and functioned in spirit even before the word cluster development was coined and popularized.

This helps several common initiatives under cluster development to be addressed under a single umbrella. Infrastructure development for the Industries and public in general is a classic umbrella in this context.

Size of Forum and Key Industries in the Cluster

The Peenya industrial estate is about 48 sq kms in area and houses about 8000 SMEs. Peenya employs a labor force of about 8 lakhs strong. Around 35% of the work force are female.

Peenya is often referred to as the Pin to Plane conglomerate. That describes the diverse nature of industries some of which also complement each other and in unison to accomplish a bigger project. CNC units are a vast number in Peenya. Also housed in are lot of garment manufacturing, surface finishing, auto component manufacturing, tools manufacturing, pharmaceuticals, packaging, fabrication and machining units.

How well are you representing the Government when it comes to the issues of members?

Peenya industries association has a ‘go-together’ mindset in representing government both central and state. We give lot of inputs to the government not only in terms of data but also appraising the pain points of SMEs. The association is a go to source for members to keep abreast of government initiatives and policies. The association also acts as facilitator in tax collection and various license and compliance.

Key Plans and Social Activities for the Forum

To make Peenya a better place to work and for entrepreneurship. The association, apart from conducting several awareness camps on social and entrepreneurial matters is very closely associated with several NGO’s like Rotary, Lions, Manav and more as partners. Setting up of child care centre, working women’s hostel, development of parks, conducting health check up, blood donation, aids awareness etc are some of their key priorities.

What Indian MSMEs Want addressed Immediately

According to me, absence of a robust mechanism to assist distressed MSMEs to secure a new lease of life. An important aspect which needs to be debated over the crisis like situation in MSME community in India is – how present policy frameworks, aimed to assist proliferation of small businesses, are working. We have many schemes from central and  state Govts like subsidies, investment incentives, allotment of industrial units, promoting ease of doing business, tax breaks for startups and more.  Also, there are regulatory supports to extend credit support to MSMEs, collateral-free loans, start-up funds.

All these policies and support schemes are meant to promote entrepreneurship otherwise incentivize people to become an entrepreneur. Many entities suffer the distress at some point in time in their life cycle. Growth is a complementary transition for a start-up but riskier. The distress may be due to internal and external factors be it government policies, indifference/laid back or skeptical attitude by banker or otherwise.

Key Challenges Small Entities Face in Today’s Scenario

Many of the stressed MSMEs can be turned around with a little bit of hand-holding and non-ambivalent policy support for revival. MSMEs are extremely vulnerable to policy shocks. The vulnerability, also known as the sensitivity/weakness of the entity, represents its negative feature, may lead to distress and destruction of the value of an enterprise. The impact may be the loss of market position, cash flow, image, credibility, the health of entrepreneur and more. In crisis condition, smaller enterprises, in particular, are most vulnerable to financial difficulties,as they often lack the resources to adapt to rapid changes in the economic environment.

Many entrepreneurs are invariably resorting to borrowing from short-term informal money market thereby either postponing the capital formation or never attempting to build the capital asset. Few are forced to remain on the edge throughout. These points underline that the late detection of the problem or a particularly delicate situation inevitably leads the organisation to liquidation and the family will have to suffer at financial and social fronts.

Key Ways Government should support MSMEs

The government should take the following measures to address the concerns of the MSMEs

Expanding and simplifying the framework for Revival and Rehabilitation of Micro, Small and Medium Enterprises: This framework from MSME ministry and RBI looks very robust howeverits application is cumbersome and also its applicability for NPA accounts still unclear. Government to come out with concrete measures to make it easy to implement and take away the uncertainty associated with the access to it.

Enlarge the scope of Insolvency and Bankruptcy code(IBC): IBC is also an effective instrument to deal with distress. However, its reach requires to be expanded to make it more accessible. Govt may set up Bankruptcy courts all across the country to expedite the process.

Extend support to distressed entities under CGTMSE: Many units which are having the potential to turnaround require helping hand. In order to encourage banks to support them, the new exposure may be brought within the credit guarantee scheme. This will help MSMEs to overcome transitional challenges especially case like one discussed above.

Fate of Small Industries in India

If we show an inclination to assist those in distress as much as policymakers show for new MSMEs, it will boost the morale of people and will be a propellant for the proliferation of MSMEs in India. Despite the good intentions of policymakers in bringing out various schemes, the credit delivery system in our country is not assuring the entrepreneurs of minimum support to sustain the business through the formal channel of financing. CGTMSE- A great framework to achieve financial inclusion, requires reforms:.Further, there are many concerns on the claim settlement by CGTMSE so much that it contains huge uncertainty. Such concerns need to be addressed on an urgent basis so as to instill-confidence in the lenders.  

There are 633 lakh MSMEs in India and more than 99% are micro enterprises. In Karnataka alone, there are 38.34 lakh MSMEs. These MSMEs by and large provide employment opportunity to skilled, and semi-skilled people.Assisting these units to overcome the challenge of raising financial resource will help the agenda for human capital development.   Such a shift is policy perspective will facilitate the larger flow of Govt’s budgetary support to credit guarantee schemes.

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