Based on feedback from readers on a recent editorial, SME Times has found that small businesses from across the country are suffering tremendously due to bureaucratic hurdles, excessive paperwork, unnecessary fees and widespread corruption prevailing at every level, including but not limited to sales tax offices, excise registration authorities, public sector banks and other lending institutions, electricity boards, etc.

Top Stories

»	49% Indian startups now from tier 2, 3 cities: Jitendra Singh
»	'India ranks 3rd in global startup ecosystem & number of unicorns'
»	Tripura exported over 9K tonnes of pineapples in 2 years
»	CPI inflation eases to 6.71% in July, IIP falls to 12.3%
»	Rupee depreciates 12 paise to close at 79.64 against US dollar

Writuparna Kakati | 14 Dec, 2012
Excessive red tape, bureaucratic inefficiency and corruption have been driving Indian small and medium enterprises (SMEs) up the wall, taking away their valuable time, money, and peace of mind, and making their struggle against a slowing economy even more difficult.

Based on feedback from readers on a recent editorial, SME Times has found that small businesses from across the country are suffering tremendously due to bureaucratic hurdles, excessive paperwork, unnecessary fees and widespread corruption prevailing at every level, including but not limited to sales tax offices, excise registration authorities, public sector banks and other lending institutions, electricity boards, etc.

"The reality is that in obtaining various statutory permissions and compliance, it takes about 180 days. Many of the permissions and compliance are sequential. You obtain one, and then only you can apply for the other. . . . A SSI starter, is always short of resources, which forces him to be perpetually on the mercy and whims of the officer," said Shrinivas Moghe in his reaction.

On excessive paper work SMEs have to deal with, S. K. Butta said, "I have a small manufacturing unit in Noida running since 1993. It is so irritating to see the government increasing the paperwork in ESI, EPF, SALES TAX, Excise, etc. while changing manual to internet working. Getting " C " forms & "38" forms for getting purchase from other states, is controlled by 'babus' asking bribes openly."

Another respondent from Uttar Pradesh, Aditya said that getting electricity connection is another big problem. "Last year, the waiting time for getting electricity for our new production unit of fabric manufacturing was over one year. Moreover, it was a nightmare to follow the department with the paperwork. The cost involved was beyond our expectation. How this scenario is going to be helpful for SMEs particularly in Uttar Pradesh?"

Bribery, according to Butta, takes away lots of hard-earned money from small entrepreneurs. "One has to pay bribe of Rs. 25,000 to sales tax officer for getting the yearly assessment of case. This bribe is when everything is in order. If there is small mistake then the bribe rates rise to any extent," he said in anguish.

In the recent years, the government has introduced a number of facilities for SMEs to register online, but still the results do not seem much impressive in many states.

"Obtaining VAT number in Tamil Nadu seems to be deliberately kept manual. The online link never works. One has no other choice but to file it manually through a middle man - and you can never obtain the number without paying bribe," said Sundar.

Sasisekar, a Keralite expresses similar concern. "Government of Karnataka has introduced many registrations directly through online facility to avoid interaction with officials who possibly expect bribe. It is also of great convenience for us . . . . However, even in this case, we still need to depend on officers to clear our application and they visit us and look for some money to be paid. Then why online at all?" he said.

Unfriendly behavior of some public sector banks has added to these worries.

"It is very strange but true that the SME suffer from nationalised banks as finance is not readily available to genuine people willing to set up industry in Punjab. You have either to go through agents and set network of CAs, or face harassment for no reason . . . . No loan gets passed without 2% commission to BM/PO and 1.5% to CA . This is the general setup in Punjab," entrepreneur Jitendra Tah reacted.

Giving a similar picture, Atam Parkash Gulati from Haryana commented, ". . . here it is minimum 4% bribe rate for bank managers and that also if you have all the documents in place."

The same thing is happening with the MSME schemes, said, Rajesh, claiming, "If one claims for any govt scheme or subsidy, 50% from the amount claimed or received (?) goes in corruption to get that claim and remaining goes in paper work, man power loss, mental harassment, loss of production and many more from bureaucracy."

"Lending institutions should have a positive attitude towards SMEs while processing loan request. Online accessibility of Govt procedures is very low and many of the things are done manually. Government should monitor efficiently in execution of their policy's so that the actual needy will be benefitted thus helping in growing our economy," opined Y. Raghu.

Indian exporters are suffering no less from bureaucratic inefficiencies.

"Some of the JDGFTs are not connected with DGFT online IE code application system. If we apply IE code through DGFT online, we can't get. We have to call concerned JDGFT and inquire them; after that they will say, "Send copy of application by post". Then for what propose the online system made with Rs 20 crore," said Kannan.

" The problem I am facing is with Excise department . . . i.e submission of the export documents provided by the merchant exporter's. I think I don't have to elaborate as everybody knows the problem and no one has the solution," said Sanjay Jain.

There is nothing new with bureaucratic hurdles faced by Indian SMEs, viewed another respondent.

"15 years ago I went to Taipei for exploration. I got a call from Taipei Economic Commission asking me if they could be any assistance. When I said yes, they took care of all logistics and made me meet a large number of Taipei Businessmen. They helped me overcome all kind of bottlenecks. In India our bureaucracy starts with a belief that everyone is a thief. So all procedures and papers are basically to ensure that the theft does not take place. To stop 1% of theft 99% have to suffer," said Sanjive Mehta, a veteran entrepreneur.

Sudhir Mohan Mittal pointed to a recent measure initiated by the government that, according to him, has increased bureaucratic hurdles further for SMEs. "Ministry of Corporate Affairs has mandated that from FY 2012-13 any Company having more than Rs. 5 crore reserve, irrespective of its size will have to prepare a Cost Audit report certified by a cost accountant and submit it along with Annual Return of the Company. This has added at least 200 man hours of extra work and Rs 25000/- additional cost to an MSME like us," he said voicing his concerns.

"It's not red tape, it's the hanging rope for SMEs," viewed Nassar, one of those many small business owners who think that inefficiency and corruption in public bureaucracy are making life difficult for the country's SME sector.