MCCI calls for debt restructuring plan for MSMEs

Even as MSMEs struggle to open up their businesses post the Covid-19 lockdown, the Madras Chamber of Commerce & industry has come out with eight recommendations specifically to provide a lifeline to these businesses, especially the small and micro enterprises. These suggestions are based on a survey conducted with more than 1,200 manufacturing MSMEs, a significant portion of which are in Tamil Nadu.

“The survey reveals that about 50 per cent of the MSMEs are struggling with the basic problem of paying salaries and rent,” Srivats Ram, Vice President, MCCI told BusinessLine during a webinar interaction.

While one-fourth of the units expect their inventories to become obsolete or degraded, about 40 per cent of the units haven’t been able to collect their receivables on time.

MSMEs are of the view that recovery is going be a longer process with working capital and liquidity issues. About 78 per cent of the units are working at 50 per cent capacity and 40 per cent of the units feel that it will take at least 6-9 months for demand to reach pre-Covid levels.

Even though three-fourths of the respondents were aware of the government loan schemes that have been announced, they haven’t availed of the same due to high-interest cost, lack of clarity from banks on the schemes and repayment concerns due to uncertain future and lack of customer orders. Only about 26 per cent have availed the loans, mostly for working capital requirements, said Ram.

A significant percentage of the respondents felt that interest waiver during the lockdown period and loans at concessional rates would help them tide over the crisis. Sixty per cent of the respondents also felt that a relaxation of NPA norms will be beneficial.

Recommended measures

With its survey outcomes, MCCI has suggested a debt restructuring scheme specifically for MSMEs that need to be notified. The loans can be restructured to ensure that there are no outflows till the end of this year, and the amounts due are converted into a loan repayable after two years at a concessional rate of interest.

Governments should ensure that their undertakings clear the dues to MSMEs immediately.

The industry body has also recommended that moratorium on GST payments could be extended till October 2020 without any interest payments.

As there will be a challenge on the manpower front, the government should provide a training stipend for a period of six months for new recruits.

Ramkumar Ramamoorthy, President of the Chamber said MCCI has recommended several measures to the state government in the areas of operations, logistics, labour and compliance, among others. “Quicker implementation of these measures will infuse greater confidence in MSMEs to restart and scale-up in a staged fashion,” he stated.

As public transport is not available due to lockdown, alternate arrangements should be made for employees of MSMEs. There is also a big constraint for material transport, both inter- and intra-State. Here, State governments should facilitate free movement of industrial goods and intermediaries, he said.

The recommendations also include permission for 12 hours of work based on the employees’ willingness, suspension of requirements to obtain registration and licence under the CLRA Act 1970 for 180 days and freezing of increase in Dearness Allowance till July 2021.

MCCI has also recommended a shift to online of compliance procedures and exemption or extension up to 180 days for various subsidiary requirements under Factories Act (such as building stability/eye test).

It also sought a government-appointed nodal officer in all major industrial estates for coordination with MSMEs.