MSMEs in doldrums as Covid 2.0 takes big toll

New Delhi THE Micro, Small and Medium Enterprises (MSME) segment in India continues to suffer a sharp downward spiral amid second wave of the Covid-19 pandemic. Experts believe that lack of demand followed by failure of Atmanirbhar Bharat scheme to boost the expected manufacturing capacities has made MSME sector more vulnerable towards heft losses.

BizzBuzz spoke with industry specialists to understand the present scenario vis-à-vis the pandemic.

"There is more panic now as Covid cases are hitting record levels day in and day out. Most of the industrial units are facing labour shortage. The problem is more acute in MSMEs which are facing 50 per cent labour shortage," Sanjay Aggarwal, president, PHD Chamber of Commerce and Industry (PHDCCI), told Bizz Buzz.

Apart from shortage of labour, industry experts believe that lockdown in different States also disrupted logistics and supply chains. Besides, the prices of raw material such as steel, copper, aluminum hit an all-time high in India, making it more difficult for MSMEs to sustain themselves.

Stating that the industry body would support any decision taken by the government towards a nationwide lockdown, the PHDCCI president said that the MSME sector is in dire need of a stimulus package with emergency credit line amount to be doubled as well as withdrawal limit to be increased from 20 per cent to 40 per cent.

Ravi Nandan Sinha, Director of Development, MSME Business Forum India, says that the sector was already suffering greatly since the beginning of the pandemic in 2020. The labour-intensive sector has not been able to retain its complete workforce due to mass migration of economically weaker section from Tier 1 and Tier 2 cities to Tier 3 cities and rural areas.

"There is no respite to an MSME entrepreneur in terms of compliance, paying bills on time, not having sufficient labour force. Despite the pandemic, we have to pay GST, Provident Fund (PF), Employees' State Insurance (ESI) on time, and the money comes from our own pockets. The pandemic has hit MSMEs very hard," Sinha said.

More than 90 per cent of MSME units are on ventilator as demand has drastically fallen, he added.

"In May 2020, after Atmanirbhar Bharat initiative was announced, the government aggressively pushed for Vocal for Local. This meant creating demand. Today, the situation for Indian MSMEs is that there is no demand for its products. Government opened its door saying that Railways, Defence sector, various ministries procure from MSMEs. But it failed to benefit MSMEs due to the issues of Earnest Money Deposit (EMD) and other challenges," Sinha said.

He said that the Centre should come to the rescue of the MSMEs now. "Like last year, it should direct all the public sector undertakings (PSUs) to clear the dues of MSMEs. It should also announce other relief measures for MSME sector," he added.