A report by KPMG-CII on disaster preparedness in the MSME sector following the floods last year has found that industrial units continue to be vulnerable ahead of the coming monsoon.

The report analysing the impact of the December 2015 floods in Chennai said the MSMEs were the most affected with “losses estimated around ₹1,700 crore by the most conservative figures in just two weeks of peak flooding,” according to a report released by Small and Medium Enterprises Rating Agencies (SMERA).

56,000 workers hit

This does not take into account opportunity costs, job losses and the losses in the services sector. Over 8,500 industrial units were flooded and 56,000 workers directly affected, it said.

The report released today suggests that a comprehensive revision of the master plan of industrial areas has to be made, MSMEs have to be trained in banking, insurance, legal policies and processes for better coverage and protection.

Transparency in insurance

Insurance companies need to standardise and assess losses in a transparent manner, simplify claims processes, assist in documenting losses and issue guidelines to MSMEs on the systems and procedures.

The Centre, on its part, should create a customer redress mechanism if financial institutions and insurance agencies are not supportive during disasters, the report suggested.

The governments should circulate guidelines to banks and insurance agencies during disasters, direct financial institutions, tax departments and utilities on addressing needs of the sector during disaster recovery period.

The RBI guidelines on relief measures by banks in areas affected by natural calamities must specifically cover MSMEs, rehabilitation packages should be created for the sector in consultation with the banks and state-level institutional committees and empowered committees need to have local branches that are authorised to take decision and support MSMEs, the report said.

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