Ease of Doing Business – Part-IX

Srinagar, Apr 3: The much-publicised ‘Ease of Doing Business’ framework in Jammu and Kashmir has come under sharp criticism, as mounting evidence points to widespread delays in payments to Micro, Small and Medium Enterprises (MSMEs), pushing many towards financial distress and closure.

At the heart of the crisis lies the failure to implement the MSME Development Act, 2006, which clearly mandates that payments to MSMEs must be made within 15 days (in the absence of an agreement) or within 45 days (where an agreement exists), failing which penal compound interest is to be applied.

However, on the ground, these legal safeguards remain largely ineffective.

Across Jammu and Kashmir, MSMEs report pending dues stretching from months to several years, with many claims dating back to the pre-2019 period.

Stakeholders argue that this is no longer a case of administrative delay but a systemic default, where the state has failed to honour its financial obligations.

A striking disparity has also emerged in the system.

Large, external contractors, particularly those operating through centralised procurement platforms like GeM and turnkey contracts, are reportedly ensured timely, and in some cases, advance, payments.

In contrast, local MSMEs, despite executing works and completing supplies, are left chasing their dues indefinitely.

This duality has raised serious concerns about structural bias and exclusion within the system.

The situation is further aggravated by institutional lapses.

Agencies like JKPCC have accumulated significant unpaid liabilities, often withholding payments due to internal administrative issues like pending approvals or technical sanctions.

These delays, which originate within government functioning, unfairly shift the burden onto executing MSMEs.

Equally concerning are instances of selective payment practices.

In projects such as the Jal Jeevan Mission, material suppliers have largely been paid, while local MSMEs involved in fabrication and installation have had their payments withheld due to prolonged inquiries unrelated to their scope of work.

Industry observers say such practices have effectively turned compliant enterprises into scapegoats.

The financial consequences have been severe.

MSMEs, heavily dependent on bank-financed working capital, are facing acute liquidity crises.

Many accounts have slipped into Non-Performing Assets (NPAs), triggering recovery proceedings under stringent laws.

As a result, enterprises are collapsing, not due to inefficiency or lack of capacity, but due to delayed payments from government departments.

Experts point to a deeper governance failure underpinning the crisis.

Despite repeated violations of statutory payment timelines, there has been little effort to fix accountability or enforce corrective measures.

This institutional inertia has allowed the problem to persist unchecked, undermining both policy intent and business confidence.

The role of the Industries and Commerce Department has also come under scrutiny. As the nodal agency responsible for MSMEs, it was expected to enforce the MSMED Act, raise awareness, ensure timely dispute resolution, and alert the government to sectoral distress.

Instead, the system has devolved into a slow, complaint-driven mechanism where cases drag on for months or years, awards are rare, and even when issued, are often challenged by government departments themselves.

Critically, the department has failed to provide credible reporting or initiate policy interventions to address the growing sickness in the MSME sector.

Analysts say this lack of proactive engagement has compounded the crisis.

Calls are now growing for a shift towards a system-driven enforcement mechanism, including digital tracking of payment timelines, automatic triggering of statutory interest, and institutional accountability for delays.

Without such reforms, stakeholders warn, enforcement will remain discretionary and ineffective.

A comparison with other states further highlights the gap. States like Karnataka, Maharashtra, Tamil Nadu, and Telangana have taken steps to operationalise the MSMED Act through active Facilitation Councils, monitoring systems, and digital dashboards to track pending payments. While not flawless, these measures demonstrate administrative intent and responsiveness, something experts say is largely missing in Jammu and Kashmir.

The unfolding crisis exposes a stark contradiction: while digitisation and reform are showcased under the banner of ‘Ease of Doing Business,’ the most fundamental requirement – timely payment for completed work – remains uncertain.

Observers warn that unless immediate structural reforms are undertaken, the current system risks reducing MSMEs to reluctant financiers of government operations, expected to deliver on time while waiting indefinitely for their dues.

The say the situation is not merely an administrative lapse but a profound governance failure that threatens the very foundation of business confidence in the region.