The second wave of the Corona pandemic has damaged the entire country’s economy as well as the health system. It will certainly take longer to normalize the situation. COVID has mainly put micro, small and medium enterprises on the verge of closure. According to the intention of the government, the industries were kept operational but for many other reasons, the operation was also negligible. Micro, small and medium enterprises were already facing financial problems, now this pandemic has rendered the entrepreneurs more helpless.
After the lockdown last year, various financial packages were announced by the Hon’ble Finance Minister, Government of India Smt. Nirmala Sitharaman, in which all the loans were like working capital term loans, in which interest was payable per month on the loans given to the industries and EMI on those loans was to be given after one year. At that time, entrepreneurs took loans by thinking that the situation would improve after 6 months and would be in a position to give additional EMIs after the next one year, but the second wave of Corona broke MSMEs even more because due to the non-functioning of the operations and the EMI liability of the loan taken last year also came on the head of entrepreneurs.
Lack of liquidity has affected the earnings of micro, small and medium enterprises. MSMEs are bound to close their units due to financial losses, working capital blockage, inventory blockage, interest on loans, bill payments, reduced market demand, constrained supply chain, increase in raw material costs, etc. They are not in a position to meet any financial compliance due to losses from COVID.
In times of crisis, MSMEs are in great need of financial support from the government in the form of a relief package which would be in the form of limits and not in an EMI because no prediction can be made about the situation in 2022. In this regard on behalf of Micro and Small Industries, IIA presented its suggestions/proposals on Financial Relief Package on 28 May 2021 to the Hon’ble Finance Minister Smt. Nirmala Sitharaman and Hon’ble Minister of Micro, Small and Medium Enterprises Shri Nitin Gadkari for consideration. In which mainly the following points have been included:-
- Keeping the point of increase in raw material cost and ease out the financial burden on Micro and Small Industries, the limit of CGTMSE coverage required to be increased from Rs. 2 crores to Rs. 5 crores.
- Considering the present situation, banks may be allowed to provide the working capital at 40% of the projected turnover.
- Micro and Small Industries, who have working capital against the Collateral loans, their limit must be increased by 25% without any additional collateral security demand.
- All loans (Term loans, WCTL and Debit/Credit Cards) should carry an Interest Rate of not more than 8%.
- The Moratorium of EMI and Moratorium under ELGS should be extended up to 31st March 2022.
- Including CGTMSE, no Processing charges and annual fees should be levied for renewal of Loans/Limits up to 31st March 2022. Loans sanction against the CGTMSE Scheme, currently, it is only for 1 year but it should be for 3 years to avoid unnecessary documentation every year. The Limit of mandatory collateral-free Loans limit of 10 lacs should be extended to 20 lacs under the CGTMSE scheme.
- Ad hoc increase of WCTL limit up to Rs. 2 crores should be increased on 0 % Margin up to 31st March 2022.
- For Working Capital Bills Payable should be considered for 6 months instead of 3 months.
- 8 Short Term Working Capital Bridge Loan up to Rs. 2 Cr. for a period of 3 years should be provided on demand to mitigate compelling demands of expenditure at an Interest Rate of 8 %.
- There should not be any NPA for Micro and Small Industries up to 31st March 2022
- No penalty should be levied for any delayed compliances with the Bank.
- SLIIC (State Level Inter Institution Committee) of RBI should meet monthly instead of quarterly to have better monitoring on the progress of Bank Lending.
- All pending proceedings under SARFAESI Act 2002, DRT Act 1993, or any other recovery including auctions should be suspended for 2 years.
- Due to the lack of funds in the scheme (CLCSS) for the last almost 2 years, the subsidy of all the entrepreneurs has been stopped. In view of the urgent need of funds by the Micro & Small Industries due to liquidity crunch, the government should release the subsidies immediately so they can survive amid the pandemic situation.
- All government departments/Companies and Corporates should be advised to release payments of MSME immediately.
Considering all the above points, if the financial relief package is announced by the Hon’ble Finance Minister and Hon’ble MSME Minister, then the problems related to finance of MSME will be reduced and in the situation of this epidemic, MSMEs will be able to survive.