Companies

FADA seeks working capital support, demand boosters to assist business amid coronavirus

Our Bureau | Updated on April 13, 2020 Published on April 13, 2020

Mumbai, April 13

The Federation of Automobile Dealers’ Associations (FADA) on April 12 wrote a letter to Prime Minister Narendra Modi seeking immediate relief to continue the business and boost demand amid the coronavirus pandemic. This is necessary to save lakhs of jobs and prevent automobile dealers from going bust, the letter stated.

Working capital support through a complete waiver of interest on all categories of loans, employees’ salaries to be paid through the Employees’ State Insurance Corporation (ESIC) and inclusion of automobile retail in the Micro, Small and Medium Enterprises Development Act (MSMED) were some of the suggestions put forth. The letter is addressed by Ashish Kale, President, FADA.

The apex dealers’ body, which represents over 25,000 dealerships across the country, cited these suggestions as necessary to help it remain afloat amid the coronavirus pandemic and save lakhs of jobs.

“This temporary support is extremely urgent and important to help us cushion the shock to our cash flows and the only way for us to continue in business till demand returns to normalcy,” the letter stated.

Tough times

For the last 15 months, the auto industry has been beleaguered by a prolonged slowdown that saw more than 275 dealerships shut shop and thousands of jobs being lost, the letter noted. FADA employs over 40 lakh employees at dealerships and service centres.

FADA has sought an extension of the 4 per cent interest subvention or subsidy for working capital/loan requirements to companies for a period of nine months post the lockdown. It has also requested 20 per cent additional overdraft on sanctioned credit limits for a period of six months post the lockdown to support salary disbursements and other fixed cash expenses.

It said that the salary of employees for the lockdown period should be paid through ESIC as this is a health pandemic and salary liabilities should be covered under the same by ESIC.

As for the inclusion of automobile retail in the MSMED Act, the letter said that a request to the MSME Ministry was put up in September 2019. “We request fast-tracking and an immediate favourable consideration (of the request). The subsidies and incentives received under the MSME division will provide much-needed relief to automobile dealerships, which provide direct and indirect employment to lakhs.”

Stating that consumer sentiment will be further dented due to the coronavirus pandemic, it has put forth suggestions to boost demand. A reduction in the Goods and Services Tax (GST) for a temporary period will lower the cost of acquisition and be a good incentive towards stimulating demand, it said. It said that an alternative could be a direct benefit to consumers in the form of 3-4 per cent interest rate reduction through banks and NBFCs, which will reduce the overall cost of owning a vehicle and help generate demand.

It also requested for an extension of the Corporate Depreciation Scheme, which was valid till March 31, to be extended till FY2021. An attractive incentive-based scrappage policy should also be introduced immediately for all vehicles which were running on the roads prior to 2010, it said.

The government should include the automobile industry in priority sector lending (PSL) so that both retail and wholesale financing can be made available easily, it said. The priority sector tag can be given to the auto sector for a period of 12 months till normalcy is restored, it added.

If implemented, these measures will help boost demand and overcome the dent in consumer confidence to some extent, until some kind of an economic normalcy is restored, it said.

“The current situation can lead to an existential situation for many of our members and their employees. Majority of them are small-scale, family-run businesses with no financial sustenance for such a crisis, after already having gone through a tough period in the past 15 months,” the letter said, adding that the “ the immediate situation is extremely bleak if not supported”.

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Published on April 13, 2020
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