Covid makes future gloomy for MSMEs

Visakhapatnam: Faced with multiple problems with regard to funding and marketing, the micro, small and medium enterprises (MSME) sector, considered the backbone for the country's economy, is totally shaken by the big blow caused to their earnings due to Covid-19 pandemic.

According to some of the entrepreneurs, the slew of incentives announced by the Ministry of Finance to infuse funds into the sector and help the entrepreneurs to tide over the worst-ever crisis, have not helped them much, forcing the entrepreneurs to pin high hopes for a bailout package in the ensuing general Budget.

"On paper it sounds very good but the benefits envisaged under Atma Nirbhar Bharat Abhiyan (self-reliant India) with an outlay of Rs 3 lakh crore for giving collateral-free automatic loan for businesses and MSMEs has not reached many," said AK Balaji, President, Visakha Autonagar Small-Scale Industrialists' Welfare Association (VASSIWA).

MSMEs contributed 30 per cent to India's GDP and 48 per cent of exports till November 2020. The sector is the second-largest employment creator after agriculture. The country has 6.33 crore MSMEs, of which 99.4 per cent are micro-enterprises.

He said due to several riders, of the Rs 3 lakh only Rs 1.4 lakh crore had been disbursed till date. Due to conditions attached to get the credit, almost 70 per cent of the MSME entrepreneurs could not get the funds under the scheme.

Increase in the MSME capital investment limit from Rs 5 crore to Rs 10 crore also helped the big units to corner the benefit to a large extent, he bemoaned. Besides problems in marketing, they were facing steep increases in the prices of metals like iron, steel and copper as well as chemicals required for use as raw material for most of the MSME units. Short supply, triggered by heavy demand of metal and chemicals by China, has led to severe shortage in the domestic market.

According to Sudhir Mulagada, Zonal Chairman of AP Chamber of Commerce and Industries Federation, cash flow is hit hard due to delay in payment by the public sector units, forcing the MSME entrepreneurs to pay GST at the time of raising the invoice. "We will be happy if the payment is done within 30 days of preparing the invoice," he said, advocating a provision to grant loans to them at two per cent less interest than the market rate. "At present, we are being constrained to take institutional loans like others on an interest of 11 to 12 per cent, whereas being labour-intensive units we should be granted loans at a concessional rate," he contended. When contacted, APK Reddy, National President of Federation of Small and Medium Enterprises of India, said a majority of the factories have been closed due to the lockdown. Limited transport and non-payment of dues have decreased the production. "It takes another year to restore normalcy and the MSME sector needs special attention from the government through various measures," he stated.

Reddy wanted that the banks should be liberal in sanctioning loans keeping in view the hardships faced by the MSME sector. The government and the RBI should come out to address the issues of non-performing assets (NPAs) and offer flexibility in declaring these assets as special mention accounts.

It takes another year to restore normalcy and the MSME sector needs special attention from the government through various measures

- APK Reddy, national president, FSME India