Over 4 lakh MSMEs struggling in Telangana since outbreak of Covid: FTCCI chief

Over four lakh micro, small and medium enterprises (MSMEs) in Telangana are struggling for existence right from the days Covid-19 pandemic broke out in the country. The subsequent economic slowdown has further deteriorated the financial status of the MSMEs, but the governments have failed to address their concerns.

The Federation of Telangana Chambers of Commerce and Industry (FTCCI) urged the State government to save the MSME sector by taking timely initiatives and releasing the pending incentives. Anil Agarwal, President of FTCCI, told Bizz Buzz that Telangana government is yet to release incentives worth Rs 2,500 crore to the industries in the State

How many members does the FTCCI have? Among them, how many are MSMEs?

The FTCCI is a city-based 106 old organisation, and it is one of the most vibrant regional chambers in India. It liaises between the industry and the government, participating and suggesting to the government on their policies on labour laws, energy, environment, direct & indirect taxes and various issues. It also draws attention and represents industry about the challenges of commerce and trade.

At present, the FTCCI has a membership of more than 4,000 direct members, including 2,500 MSMEs. Along with its 160 associations/ Chambers of Commerce, the industry body has an indirect membership of over 30,000. It has become an important forum for interaction between government and business ecosystem from a local to global perspective.

What are the major challenges of the MSME sector in the State?

As many as 53,422 MSMEs in the State are eagerly waiting for the incentives for a long time. These enterprises have been facing numerous problems right from the outbreak of pandemic Covid-19. Though we couldn’t control the impact of macro-economic factors, the government can support the MSMEs to create a competitive environment for the industry by providing incentives timely.

Every year, the Telangana government has been allocating sufficient amounts for industrial promotion policy in the Budget, but not releasing the same to the enterprises. The State government had allocated Rs 2,503 crore towards industrial incentives in the last year's Budget, and Rs 2,937 crore during this year's Budget. However, it has released only Rs 600 crore in the month of March, 2023.

There is a lot of unrest among the MSMEs and we are receiving their representations regularly. The incentives to the extent of Rs 2,500 crore are yet to be paid in arrears. This delay is a major setback for the industry, mainly to the MSME sector. The State government must fulfill the promises it made while the MSMEs have set up their units.

What are the reasons for the delay in providing incentives to the industry by the State government?

Telangana is the most progressive State in India. It is an investor friendly State. Industries Minister KT Rama Rao is the ‘Brand Ambassador’ for the State. Its infrastructure is one of the best in the country. The TS-iPASS industrial policy is the best in the country. The State has recorded an average GSDP growth rate of 8.6 per cent, which is the third highest in the country.

The GSDP increased nearly three times from Rs 5.5 lakh crore at the time of bifurcation to Rs 13.27 lakh crore now. So, there is no dearth of funds in the treasury. The State government is concentrating more on welfare measures. However, industries are equally important, and today most of the MSMEs are dependent on government support. We expect timely release of the subsidies and incentives.

What are the other issues of the industry in the State?

There are several issues being faced by the industry. Trade license fee collected by municipal corporations is nothing but double taxation. Both property tax and trade license for establishments are calculated on the basis of area. FTCCI raised the issue with the competent authorities several times in the past but this is not yet addressed.

The highest trade license fee collected in the past used to be Rs 7,000. From 2020, the trade license fee will be collected on the basis of the area (per sq ft basis). The industrial establishments are to pay a minimum rate of license fee between Rs 4 per sq ft to Rs 7 per sq ft for built up area including sheds and administrative blocks, as per the size of the unit whether micro, small, medium or large.

The business establishments are charged Rs 3 to 5 per sq ft depending on road width 30 ft, 40 ft or more than 40 ft road. The GO was issued in September 2020 but due to the Covid, somehow, it was not implemented. But, now we have been receiving notices for payment and to the astonishment of all, the sums are substantially high. A trading unit, which used to pay Rs 7,000 a year, is now forced to pay lakhs.

Moreover, the power tariff levied on the industries in Telangana is one of the highest in the country. Industrial units used to buy power from Power Exchanges through open access, which industrial units used to buy cheap power from the open market. The concept is to allow the customers to choose from a number of competitive power companies, rather than being forced to buy power from the local utility.

This not only helps the industrial and commercial consumers by ensuring regular electricity supply at competitive rates but also enhances the business of power markets. But, since the year 2015, NOCs (No Objection Certificates) have not been issued to the new units. Those, who were issued NOCs, additional surcharges are imposed on purchase of power on open access to the tune of Rs 1.38 paise per unit.

Additional Surcharge was introduced as a temporary measure to allow recovery of stranded power costs of DISCOMs. Further the additional surcharge is discouraging industrial units procuring power from open access. The proposed additional surcharge for H1 of FY 2022-23 was Rs 4.06/kWh and approved additional surcharge was Rs 1.15/kWh.

Further, recently wheeling charges are being levied. Another big difficulty faced is Open Access consumers in Telangana need to bear wheeling and it is collected upfront. All other states are charging on a unit basis. Because of this, the industrial units are unable to avail open access power to get the power at an affordable price and reduce the operational cost putting financial burden on the units.

What are the demands of the FTCCI to the State government?

The trade license fee collected in Telangana is the highest among all the States in the country. Many States in India don’t levy trade licenses on industrial establishments to encourage them. Even if some States charge, they charge very nominally. While the Karnataka government has exempted the trade license fee for industries, other State governments like Maharashtra are collecting a nominal fee.

The FTCCI requests the Telangana government to scrap the GO No 147 issued in September 2020. The State government should remove the new trade license fee method, and revert back to the old system. The industrial property tax increase is also very high in Gram Panchayats and the cost of running industrial units is becoming prohibitively high, particularly for MSMEs.

Currently, the net metering for solar power in the same premises is allowed up to 1 MW only. To promote renewable energy and reduce the cost of doing business, we urge the State government to allow net metering upto 5MW. Further to develop solar power, we request the government to allow wheeling of solar power for captive use or for third party sale.

The land rates in the State are skyrocketing, and they are not affordable even in the industrial clusters and special economic zones created by the government. The cost of the land has gone up so high that it has become a very challenging task for the MSMEs to set up their own units. The State government should come up with a policy to allocate industrial lands at subsidised prices to the MSMEs.