Tamil Nadu’s TReDS push falters as PSUs lag on MSME payment platform

 

C Shivakumar @ CHENNAI:
A state initiative to ensure timely payments to micro, small and medium enterprises (MSMEs) has faltered, with only 22 of Tamil Nadu’s over 60 public sector undertakings (PSUs) actively using the Trade Receivables Discounting System (TReDS) platform — despite a government order making participation mandatory.

The TReDS mechanism, designed to allow MSMEs to discount their invoices through banks and financiers to ease cash-flow pressures, has seen poor adoption among state-owned entities. Concerned by the slow uptake, the Finance Department has issued a circular directing all PSUs, statutory boards, apex cooperatives and municipal corporations to operationalise the platform without further delay.

The letter, signed by Expenditure Secretary Prashant M Wadnere, instructs departments to appoint a senior officer — at least of general manager rank — as a nodal officer to oversee the uploading, settlement and monitoring of MSME invoices. Departments must also submit monthly progress reports to the Industries Commissioner, the Director of Industries and Commerce, and the Finance Department.

The move underscores a wider gap between policy intent and implementation in the state’s public procurement ecosystem. “Delayed payments remain one of the biggest pain points for MSMEs,” said a senior official. “Non-compliance undermines the very purpose of the platform and disrupts the entire supply chain.”

Industry bodies say the problem runs deeper. “Many PSUs are loss-making and face fund shortages, which affects their compliance,” said CK Mohan, president of the Tamil Nadu Small and Tiny Industries Association (TANSTIA). “Once routed through TReDS, payments become time-bound commitments. It improves transparency, reduces corruption and enhances ease of doing business — but PSUs are hesitant.”
Mohan urged the state to strengthen the TReDS framework and widen its reach. He also called the Union government for lowering the threshold for mandatory participation from the current ₹250 crore in annual turnover to ₹50 crore, to include smaller enterprises.