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Forgotten Factories: What Do Karnataka's MSMEs Want from Government?

Karnataka's MSMEs are the backbone its economy, but are they getting ignored? Read how red tape, lack of infra, and unpaid bills are squeezing them. Can policy changes be the key to their survival? Watch KASSIA President talk about all this.

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Swati Dayal
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On World MSME Day, the spotlight is on the state of small scale industries in Karnataka. These enterprises, vital to the region's economy, face a multitude of challenges. In an exclusive interview, Mr. Shashidhar Shetty, the President of the Karnataka Small Scale Industries Association (KASSIA) and Managing Director of ProTech Engineering, shared his insights on the current landscape and the hurdles these industries encounter.

Current State of Small Scale Industries in Karnataka

Mr. Shetty, highlighting the infrastructure issues plaguing small scale industries, said "Around 95 percent of the small industries in Karnataka are located in private industrial estates," he explained.

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This dependence on private estates stems from the inability of government agencies like the Karnataka Industrial Areas Development Board (KIADB) and the Karnataka Small Scale Industries Development Corporation (KSSIDC) to meet the land requirements of industrialists. 

"These agencies are not in a position to meet the requirements of the industrialists. The procedures are complex, making it difficult for small industries to apply for government plans," he added.

The lack of proper infrastructure, such as roads and utilities, further exacerbates the situation. Industries situated in non-industrial areas often rely on local politicians for infrastructure development, leading to inconsistent support. 

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"Industrial areas are often neglected because they are not vote bank areas," Mr. Shetty remarked, pointing out the disparity in attention and resources.

Sectoral Performance

When discussing sectoral performance, Mr. Shetty noted that engineering components, particularly CNC equipment and fabrication work, dominate Karnataka's small scale industries.

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"Bangalore is a significant exporter to European countries and the US," he said.

However, small industries that act as subcontractors to large industries face challenges related to pricing and payment terms. Despite the amendment to the MSME Act to enforce payments within 45 days, many large companies prefer to work with traders who do not enforce this rule strictly, causing financial strain on small industries.

Policy Reforms and Government Support

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Mr. Shetty emphasized the need for policy reforms to address delayed payments and regulatory burdens. He advocated for the compulsory onboarding of large companies and government bodies onto the TReDS platform for bill discounting.

"If larger companies and government units are mandated to use the TReDS platform, small industries can discount their bills and alleviate financial problems," he suggested.

Uniform labor policies across states are another critical area requiring attention. "Different states have different minimum wages and labor laws, creating unnecessary bureaucratic interference and corruption," Mr. Shetty noted. He called for a single labor policy that exempts small industries with less than 20 employees from cumbersome regulations, focusing only on safety and essential compliance.

Innovative Collaborations and Future Prospects

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Discussing public procurement policies, Mr. Shetty highlighted the need for better collaboration between MSMEs and startups.

 "MSMEs are not competitive cost-wise and often struggle against large industries and imports. We need to support MSMEs to scale their production for the global market," he asserted.

This collaboration could foster innovation and provide the necessary market access for small industries.

Mr. Shetty also underscored the importance of an exit policy for entrepreneurs.

"We are requesting an exit policy that allows distressed entrepreneurs to exit with dignity, perhaps with a residential unit to live in," he said, emphasizing the need for financial safeguards for entrepreneurs who collect revenue for the government without any commission.

In his closing message to aspiring entrepreneurs, Mr. Shetty advised thorough analysis and proper guidance before venturing into any industry.

"Manufacturing is crucial; we cannot rely solely on software. I urge the younger generation to venture into the manufacturing segment," he concluded.

World MSME Day serves as a reminder of the crucial role small scale industries play in our economy and the need for continued support and reform to ensure their growth and sustainability.

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