MSMEs are in the ICU; a bandaid will not help, say industry representatives

G Balachandar Chennai | Updated on March 25, 2020 Published on March 25, 2020

MSMEs (micro, small and medium enterprises) say it is going to be a nightmare for them for the next 3-6 months even if things get better by next month, which is still a big question.

Industry representatives feel that the battle against the Covid-19 outbreak could take longer than expected and there is no clarity on how to tackle the situation as this is a crisis like no other.

“With the Coronavirus outbreak and consequent shutdown for 21 days, MSMEs are in uncharted territory and they don’t see any early revival prospects,” X Arokianathan, Co-Convenor, MSME Panel, Confederation of Indian Industry,Tamil Nadu, told BusinessLine.

MSMEs are the backbone of this country’s economy and social well-being of a large section of the society. The government has been seeking solutions to mitigate the situation from representative associations, including CII and FICCI.

Several representations and suggestions have been offered to the Union Government and many of these have been addressed. But they are first-aid solutions to a grave disease.

“After the lockdown, it is going to take a very long time for businesses to resume normality. All major companies will relook into their priorities and change their business models, product lines, and may take a new avatar. To restart under this new era will take some time before orders start trickling down to Tier 2 and 3 smaller companies. Presuming it takes six or more months to receive new orders and cash flow resumes it will be almost a year to come back to normalcy, he pointed out.

Can MSMEs survive that long without cash flow? Apart from all statutory compliances, rentals, power and utility bills, financial debt services outstanding bills etc without inward cash flow how can the wages and salaries be paid, he wondered.

Arokianathan felt that the relief offered to defer payments up to June 30 is only first-aid, not a cure. MSMEs have to be brought out of ICU and treated to regain health.

Possible measures

An extended line of credit at very low cost for another year overruling all NPA norms with strict monitoring to restore them to health could be an answer.

Special incentives and tax holidays for MSMEs who retain their workforce and with a good past track record will also be required. All unpaid bills due to MSMEs by governments, PSU, and large companies must be paid immediately before April 30. This will go a long way to prevent healthy companies closing down, he added.

C Babu, Past President, TANSTIA (Tamil Nadu Small and Tiny Industries Association), said that unless more liberal measures relating to banks is extended it would be very difficult for MSMEs to survive.

“Even if the virus is contained by April 15, it will take a couple of quarters for us to revive. While the FM’s measures are a big relief, we would require support from bank side too. We need to pay salaries to the staff without any revenues. At least 25 per cent increase in working capital loans from banks without demanding documents would give a much-needed relief in addition to relaxation of repayment and NPA norms during this crisis period,” he said.

Published on March 25, 2020

A letter from the Editor

Dear Readers,

The coronavirus crisis has changed the world completely in the last few months. All of us have been locked into our homes, economic activity has come to a near standstill. Everyone has been impacted.

Including your favourite business and financial newspaper. Our printing and distribution chains have been severely disrupted across the country, leaving readers without access to newspapers. Newspaper delivery agents have also been unable to service their customers because of multiple restrictions.

In these difficult times, we, at BusinessLine have been working continuously every day so that you are informed about all the developments – whether on the pandemic, on policy responses, or the impact on the world of business and finance. Our team has been working round the clock to keep track of developments so that you – the reader – gets accurate information and actionable insights so that you can protect your jobs, businesses, finances and investments.

We are trying our best to ensure the newspaper reaches your hands every day. We have also ensured that even if your paper is not delivered, you can access BusinessLine in the e-paper format – just as it appears in print. Our website and apps too, are updated every minute, so that you can access the information you want anywhere, anytime.

But all this comes at a heavy cost. As you are aware, the lockdowns have wiped out almost all our entire revenue stream. Sustaining our quality journalism has become extremely challenging. That we have managed so far is thanks to your support. I thank all our subscribers – print and digital – for your support.

I appeal to all or readers to help us navigate these challenging times and help sustain one of the truly independent and credible voices in the world of Indian journalism. Doing so is easy. You can help us enormously simply by subscribing to our digital or e-paper editions. We offer several affordable subscription plans for our website, which includes Portfolio, our investment advisory section that offers rich investment advice from our highly qualified, in-house Research Bureau, the only such team in the Indian newspaper industry.

A little help from you can make a huge difference to the cause of quality journalism!

Support Quality Journalism
This article is closed for comments.
Please Email the Editor
You have read 1 out of 3 free articles for this week. For full access, please subscribe and get unlimited access to all sections.