More Viable Projects Needed For Financing In MSME Food-Processing Sector: Rahul Rai, Partner & Director, Rabo Equity Advisors Ltd
"There is a dire need to change and realign the definition of MSMEs. The conviction of MSMEs to do great comes from their ability to staff people, capitalize the business and innovation," Sumit Gupta, Group President and National Head of Business and Rural Banking, YES Bank
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The MSMEs in the food processing sector face various challenges like access to markets, access to finance, access to technology and access to raw materials (agricultural produce). On the second day of World Food India 2017, at a session called “MSME Food Processing Sector: Global Opportunities”, some of these challenges were discussed along with global opportunities.
Vinod Thacker, Managing Director, ELMAC Foods introduced his journey in the MSME sector saying that “Just after school finished, my father bought the company and gave it to me saying I have to give back whatever he gave me. With a very limited capital, I started my journey, as a micro, or perhaps a nano. I had to get knowledge and ideas without computers and technology today. Regarding MSMEs, there should be a benefit for new schemes for the start-ups. Cheaper credit and tax benefit will certainly help the case of MSMEs.” He also added, “It will be good to train urban and semi-urban youth to enhance the capabilities of MSMEs. MSME sector employs the maximum females, and that is necessary and we have to continue to promote that. Let’s join hands and begin again, and promote the MSME sector, of which I was once a part of.”
“2006 we came up with the norms of what actually constitutes an MSME. You need to get in people, and support system and definitions where proper plant and machinery can be set up. Finance is very important, and we have two esteemed bankers here on the dais luckily who can explore that. On the global side there exist challenges like marketing your product. Most of the MSMEs operate in the B2B segment. Will an MSME be able to compete with its South Asian counterparts, who don’t have raw materials, but can compete due to lower cost of finance and capital?” said Vikas Jain, Joint Managing Director, PMV Maltings Pvt Ltd. He also added, “Another challenge is that the quality of the farm produce has to be improved, yield has to be increased and value-addition has to come in. We also need to keep in mind the other side of the balance, the food which is required to feed the Indian livestock. We have the largest cattle population and largest milk supply, but we are the biggest consumers too and have the lowest yield per capita of cattle.”
With respect to finance, Rahul Rai, Partner & Director, Rabo Equity Advisors Private Ltd, said, “Lot of established companies across the world are awaiting finance. So, why are MSMEs in the food processing sector not able to avail that? This is because the rate of return is not viable enough to be given capital or finance. Interest rates are high in the country, but it cannot be fixed, and if fixed it can be only done through interventions from the government temporarily.” Rai also went on to add, “There have to better projects with better returns in the MSME sector. The Chairman of PETA said that Indian Products don’t tell their stories, and people love stories, there has to be more interest created towards the origin of the product. One of the key attributes of the MSME sector is the ability to be heterogeneous, and the scaling up sometimes leads to homogeneity.”
The session concluded with Sumit Gupta, Group President and National Head of Business and Rural Banking, YES Bank saying, “The food and agri-business and the MSMEs are core to our business at Yes Bank. We are debt providers, so we provide debt not equity, with the hope we will get it back with some interest. There is a dire need to change and realign the definition of MSMEs. In banks, the MSMEs come under the priority sector. The conviction of MSMEs to do great comes from their ability to staff people, capitalize the business and innovation.”