MSMEs seek more sops, want interest waivers, subvention and tax cuts for survival

G Balachandar Chennai | Updated on May 17, 2020

MSMEs in various clusters are struggling as mobilising staff and the availability of transport will be key bottlenecks

Micro, small and medium enterprises (MSMEs) have said that Finance Minister Nirmala Sitharaman’s stimulus measures would serve as a lifeline, but more measures in terms of interest waiver and tax cuts will only help the sector sustain and survive.

The Centre’s initial stimulus measures such as ₹3-lakh crore collateral-free automatic loans, ₹20,000-crore subordinated debt, and revised definitions etc have been welcomed. But MSMEs are disappointed that the relief measures expected by way of interest waiver for the lockdown period, cut in GST slab and subsidy support were not included.

MSMEs are looking for immediate relief by way of subsidy amount to restart business and manage the immediate-term cash flow challenges.

X Arokianathan, Co-Convenor, MSME Panel, Confederation of Indian Industry-Tamil Nadu, said: “There is not much cheer among the small business community for various reasons. First and foremost there is no liquidity to meet the expenses. 20 per cent extended credit without any security is a deferred loan. The government could have given virtual credit based on GST data to business accounts like the Jan Dhan accounts where money was transferred directly to the beneficiary.”

Tamil Nadu Small & Tiny Industries Association (TANSTIA) pointed out that the only major relief in the MSME package was the government’s intent to clear all pending payments from its departments in the next 45 days.

“There was no interest waiver on lockdown period and we expected some reduction in GST rate and deferment of SARFASI Act for three years for the micro sector. The penal interest for late payment of GST is not cancelled for MSMEs. We request the Prime Minister to intervene and help the MSME sector with more suitable relief measures,” said S Anburajan, President, TANSTIA.

Fiscal measures

MSMEs felt that enough measures were announced on the loan side, but to manage the expenditure and other costs, there should be some fiscal measures as the units don’t have any general reserve due to poor profit margins in their businesses.

“We welcome the initial measures announced by the Finance Minister. The move for stressed assets is a great move and nobody has done it for NPA accounts. But there are no fiscal measures so far by way of tax cuts or waiver of interest. We requested for nil interest for the lockdown period and interest subvention scheme besides extension of the moratorium for one year to sustain and survive. We will make the request again,” said R Ramamurthy, President, Coimbatore District Small Industries Association (CODISSIA).

Ramamurthy and Prabhu Dhamodharan, Convenor, Coimbatore-based Indian Texpreneurs Federation, said theguarantee scheme, as part of the measures, would encourage banks to start lending without any hesitation to MSMEs and consequently the liquidity situation may improve in the system.

To infuse further confidence, the Chairman of State Bank of India has indicated that the bank would ensure simplified procedures with easy documentation for the incremental credit needs of MSMEs to facilitate the restart and spur economic activity.

“The government and the RBI should review periodically the credit flow to the MSME segment in order to ensure that benefits are reaching all companies that are starved of working capital support,” felt Dhamodharan.

Published on May 17, 2020

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