By Shahid Ahmad Khan
MSME is a backbone of every industrial activity in a given industrial development of a country and the largest generator of employment. When this sector collapses all other big industrial activities automatically collapses.
What are the major reasons for failure of MSME in Kashmir and what the government is unaware of?—despite of incentives and eased labor reforms this sector still faces imminent threat of extinction. On the one hand government is trying to decentralize the MSME activities and want to take it to the grass root level for the employment generation.
Impediments which come in the way of MSME are :
1) Corruption and Red Tapism
2) The lack of infrastructure development.
3)Governments initiatives of e-marketing portals like GEM are not beneficial for the MSME sector.
4)Labor Problem, this is one of the biggest problems of MSME in Kashmir. Local unemployed youth are not willing to do hard-work in factories instead they prefer to do smart work—and these circumstances compels a factory owner to hire labor from other states on high rates. And this kind of situation leads the escalated costs of the manufactured products and local sellers find these products difficult to sell as compared to the goods imported from the other states on much cheaper rates.
5)Non availability of market for the local entrepreneurs and MSME.
6) The J&K department of employment is only focusing on the employment of the educated youth and also has provisions for unemployment allowances and voluntary job requirements, and loans in their schemes. They are not focusing on the uneducated human resources for their employment and well being.
7)GST implications : before the implementation of GST J&K MSME were exempted from sales taxes, and also procured Raw Materials on 2% cst. Now under GST regime there is no difference between a trading and manufacturing both procure goods and sells on uniform GST rates. The one big benefit the trading sector got under the GST regime is the abolition of Toll tax which also enables them to slash the rates further downwards.
Solutions and Explanations:
No 1 and 2 are self explanatory.
Problem # 3:
If we deep delve into the e-marketing portals we clearly get the picture that these are failures, why? The biggest producers of goods is MSME sector and this lies mostly in the hands of self working engagement of their proprietors and many are not in a position to hire ecommerce professionals because of the financial constraints, so it is impossible for them to search Government e-marketing portals for orders or uploading their products on these portals.
And hence the benefits of these portals are best utilized by big companies and importers.
Problem no 4 and 5 are interlinked: how a local MSME sells his manufactured goods locally, government should help the local MSME to sell their goods in the local market, but how can the government help? If we see the big importers and wholesalers import goods from different countries and other states in bulk quantities and dump these thus leaving no scope for locally manufactured goods to come into market.
What is to be done:-
Government should regulate the dumping norms of these importers and wholesalers.
The most important one, government must reserve at least 25% sales for the local MSME manufactured goods. This will solve the escalated manufactured cost of locally manufactured goods as when their turnover of sales increases they will earn profits and hence generate more and more employment.
Problem no 6: The department of employment in collaboration with department of labor must focus on uneducated youth what we call this, UN UTILIZED HUMAN RESOURCE, which otherwise get involved in drugs and other immoral activities. What these departments should do? These departments should come up with an employment package in collaboration with the local MSME and bear half of their remuneration on the government prescribed wages.
Problem no 7 GST implication: The Government must abolish GST from MSME sector, as, when there is no toll tax on imported goods there should be no GST on MSME manufactured goods.
(Sardar) Shahid Ahmad Khan is MSME entreprenuer, can be reached at sardarshahidkhan@rediffmail.com
