MSME disappointed over no help in payment of wages, electricity bills

Many in the Micro, Small and Medium Enterprises (MSMEs) sector are disappointed with the government for ignoring their demand for part-payment of wages, fixed electricity costs and waiver of interest on loans to tide over the lockdown months and are concerned that more loans will drive them deeper into debt.

While the Centre’s decision to take care of Employees’ Provident Fund (EPF) contribution of both the employer and the employee of small units for another three months (till August 2020) has been appreciated, some units want the eligibility criteria to be broadened to not penalise those paying higher wages.

“The industry is in a critical state. Credit guarantee is not the right treatment at this time. It can be good in the future when the MSME sector is back on its feet, but to survive the lockdown units need immediate help in meeting their expenses,” said Animesh Saxena, a Gurgaon-based manufacturer of garments and President of the Federation of Indian Micro, Small and Medium Enterprises (FISME).

Finance Minister Nirmala Sitharaman, on Wednesday, announced a Rs 3 lakh crore collateral free credit line for the MSME sector, ₹20,000 crore subordinate debt for stressed MSMEs and ₹50,000 crore equity infusion for MSMEs through Fund of Funds.

"Providing collateral free loans to stressed MSMEs and ₹ 50,000crore equity infusion and relaxation in TDS deduction will give a fillip to the sector which is already facing acute financial crunch,” said J K Arora, Chairman, Tradologie an enquiry to delivery trade enablement platform.

With the MSME sector not producing or selling anything or earning any revenue since March 25 2020 when the national lockdown was implemented, Saxena pointed out that many units may not survive without government support.

“There was a strong demand from FISME that the government should take care of 70 per cent of salaries of workers in MSME units during the lockdown period. We had also sought government support in taking care of fixed costs such as electricity and waiver of interest on loans,” he said adding that the package turned out to be disappointing.

No change in the criteria of small units eligible for getting EPF contributions from the government has also disappointed many unit owners. “Only those units with up to 100 employees, where 90 per cent of employees draw less than ₹ 15,000 salary, are eligible for EPF contributions from the government. In Kerala, there are hardly any units which pay such low wages. We shouldn’t be penalised for paying well,” said Kannur-based K Vinod Narayanan, who is into the production of machine parts. The sector expected much more than what was given, he added.

The new definition of MSMEs, which increases the threshold limit for investments in these units, was a long-pending demand of the industry, but there is no clarity on how it will be implemented, Saxena said.

Additional collateral & guarantee free loans, equity funding options, better access to government procurement, e-market linkage and higher thresholds are strong enablers, said Kunal Bahl, co-founder and CEO, Snapdeal. “Liquidity & credit guarantees for banks & NBFCs will help remove hesitation in lending. Friction-free implementation of these measures can slowly convert adversity to advantage,” he added.