STRENGTHEN THE MSE FACILITATION COUNCIL SOONER THAN LATER

Most micro and small enterprises suffer from delayed payments for their supplies and services. Several contractual engagements with both the government and public sector undertakings also are not honoured.

In line with the long-standing demand of small-scale sector to alleviate the problem of delayed payments the Delayed Payments Act came into being in 1993. The hope that the small scale industries would be relieved of the stress in working capital was short-lived due to ineffective implementation. The Act has been amended in September 1998 providing for payment of penal interest at 150% of the prime lending rate of SBI, defining default period as 120 days. It also provided for an alternative mechanism of arbitration and conciliation and also redefined the term supplier to include any institution, agency or undertaking notified as such by the Union Government. Industrial Facilitation Councils empowered to act as arbitrators/conciliators were to be notified by the State/UT governments. The amendments were effected to strengthen the Act, to make it more useful without disturbing the buyer - seller cordial relations and to provide a relief to the small suppliers from undergoing the cumbersome recourse of legal redressal through civil suits.

Subsequently, in 2006 when the MSME Development Act was brought in, the Delayed Payments Act was subsumed in Sections 15to18 of the MSMED Act whereby the MSE Facilitation Councils replaced the Industrial Facilitation Councils.