MSEs running below capacity due to fund shortage: Assocham | business | Hindustan Times
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MSEs running below capacity due to fund shortage: Assocham

business Updated: Apr 11, 2010 11:38 IST

Industry chamber Assocham has called for setting up a separate fund for the micro and small enterprises sector to ensure better flow of finances to them, as most of these units are able to utilise only 70 per cent of their capacity for want of funds.

"MSEs are running at close to 70 per cent capacity utilisation only due to paucity of funds, arising out of unduly delayed payment of their dues," an Assocham study has said.

Calling for instituting a separate fund for this crucial sector that contributes 8 per cent of GDP, Assocham, study said, "such a fund should be utilised exclusively for lending to micro enterprises."

Nearly 75 per cent of sick small and medium enterprises attribute their sickness and lower capacity utilisation to poor availability of funds, the report said, adding that the banking sector is skeptical about extending credit to them.

"As many as 92 per cent of all units remained dependent on personal and family savings and even borrow money from friends and relatives at higher rates of interest to ensure their survival," it said.

Besides, limited access or knowledge of technology and marketing skills are also affecting their functioning.

Recently, a task force for the micro, small and medium enterprises (MSMEs) headed by Principal Secretary T K Nair submitted its report suggesting a roadmap for the development and promotion of the sector.

The report makes detailed recommendations in the areas like credit, marketing, labour, rehabilitation and exit policy, infrastructure, technology and skill development.

The MSME sector accounts for eight per cent of the country's gross domestic product, 45 per cent of the manufactured output and 40 per cent of exports. There are 26 million enterprises employing about 60 million people.