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MSMEs say cash flow, labour and raw material are major concerns in post-lockdown period

G Balachandar Chennai | Updated on May 04, 2020 Published on May 04, 2020

About 92 per cent of MSMEs indicated raw material unavailability as another major concern when the lockdown ends   -  Kamal Narang

Even as some categories of units are taking steps to recommence operations, availability of finance, labour and raw material, and payment of wages remain major concerns for MSMEs (micro, small and medium enterprises) in the country.

These were the findings from a survey conducted by All India Manufacturers Organisation (AIMO) across India.

“AIMO has taken the role of the coordinated voice of the MSME sector in highlighting the issues faced by more than 58 million units employing over 120 million people. While numerous requests have been made to the Central and State governments for financial packages and support, the survey reveals that MSMEs would face multiple challenges in the post-lockdown period,” according to Sudharsan Sareen, National President of AIMO.

About 66 per cent of the entrepreneurs cited cash flow as a major issue due to their inability to make wage payments for April, which normally happens between 1st and 5th of the month, as the receipts from the customers have dropped to zero and there has been no advance received during March and April for fresh orders.

“Our interaction with entrepreneurs point, as of today over 91 per cent of entrepreneurs have not fully paid the wages and salaries for April,” said KE Raghunathan, Past President, AIMO.

About 92 per cent indicated raw material unavailability as another major concern when the lockdown ends. Units may reopen with a possible higher price, lower credit from vendors, settlement of previous dues and higher minimum quantity being the key concerns that are likely to crop up.

About 72 per cent of the entrepreneurs felt that labour issue was a concern area as getting migrant workers back will be difficult. Such workers may not be traceable if they get their March and April salaries paid in full and allowed to return back to their native places during this period.

Most MSMEs are finding it very difficult to assess and determine how much to pay as some of them may have worked from home like their sales staff whereas the production staff has been idle at home.

Procedural delays

About 82 per cent of the respondents felt their banks did not pass on any reduction in the interest rates on existing loans taken even though the RBI Governor had announced it during the course of the lockdown. “Procedural delays and fine print were worrisome challenges faced by MSMEs today,” said Raghunathan.

For over 94 per cent of the entrepreneurs, survival was the biggest challenge and profitability was the least of their worry. Respondents felt they are unable to plan or budget due to the uncertainty of the impact of this pandemic.

With this, AIMO has conducted six surveys with entrepreneurs, self-employed individuals, SME owners, corporate CEOs and trade and industry experts in multiple sectors across India. These surveys have also helped collect various suggestions and needs of the various sectors and people. Based on that, it will come out with a set of recommendations to the government shortly.

Published on May 04, 2020
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