FICCI Urged Interest Free, Collateral Free Loans to MSMEs for COVID-19 Fight

The Federation of Indian Chambers of Commerce and Industry (FICCI) has called for interest-free and collateral-free loans to support micro, small and medium enterprises (MSMEs) which form a vital component of India's economy and are suffering due to the COVID-19 lockdown.

An alternate mechanism should be worked out for MSME companies which are within the Goods and Services Tax (GST) network and having a turnover of less than Rs 500 crore for a period of up to 12 months to enable them to cover fixed costs, salaries and other operational expenses, said the industry body.

For non-GST paying companies, an alternate mechanism may be worked out based on income tax filing. "These loans can be given with pre-conditions that businesses will continue to run and there will be no layoffs of workers. After one year, the loans will be converted into a grant if all conditions are met. Threshold tax collection could be one metric," said FICCI.

The recent outbreak of the coronavirus pandemic has hit MSMEs which account for 45 per cent of total manufacturing output and 40 per cent of exports. "Given the complete breakdown of businesses, there is a need to assess the situation and if required, the timeline for loan moratorium should be extended."

FICCI said a large number of MSMEs are incurring business losses and facing severe cash flow disruption. Most of the MSMEs operate on cash and are in need of immediate liquidity to cope in the current circumstance as a majority of these enterprises are micro and small household-run businesses.

Furthermore, non-availability of workers, restrictions in the availability of raw materials and transport infrastructure is making matters worse.

"All tax payments including GST payments by MSMEs should be deferred by six months without inviting any penalty," said FICCI in an insight paper.

Besides, directions should be sent to state governments and central departments for releasing all payments and dues to MSMEs, including held-up incentives and subsidies which have been sanctioned and are due or will become due.

"During such critical juncture due to unprecedented pandemic, advisory should also go out to asset reconstruction companies to consider rescheduling repayments," it said.