News Details

Key Highlights
• MSMEs demand extension of moratorium on all loans till March 31, 2021
• Indian Industries Association (IIA) claims government entities owe Rs 500 crore to its members
• Industry body IIA wants government officers to be accountable for delays
• Payment cycle of receivables has also gone up adding to their woes.

Peeved over lacklustre response to their proposals, micro, small and medium enterprises (MSMEs) have made fresh demand for direct cash support for salary payments, beyond interest free loans and freeze on loan repayment till March 2021.

"We request you to recommend to Minister for Finance to extend Covid19 Regulatory Package till 31st March 2021 and instruct Secretary - DFS (Department of Financial Services), Governor, RBI and Indian Banks' Association (IBA) to give relief to MSME sector," SME Chamber of India President Chandrakant Salunkhe has written to Prime Minister Narendra Modi.

Soon after the announcement of nationwide lockdown, the RBI had on March 27 allowed banks and financial institutions to offer a three-month moratorium on all term loans. Since the moratorium relief is available till this month only, industry has demanded the freeze on repayments to continue.

The RBI had announced Covid-19 Regulatory Package providing relief for rescheduling of payments for both term loans and working capital facilities. It also provided easing of working capital financing.

Grappling with lockdown challenges, the smaller firms want the government to speed up payments of dues owed by public sector enterprises (PSEs).

Many MSMEs in manufacturing sector have opened their factories following relaxations in Lockdown 4.0 but are facing tepid demand, labour shortage and liquidity crunch. The payment cycle of receivables has also gone up adding to their woes.

Sanjay Kaul, Chairman (taxation and banking) of Lucknow-headquartered Indian Industries Association (IIA) said that personal accountability should be fixed for delays in payments due from the government. He claimed that both central and state entities together owe Rs 500 crore to the members of the industry body IIA.

Kaul said that government officials must be made accountable for such delays in payments. "Once officers are made accountable, the delays would be substantially cut down. In case the government entity claims shortage of funds for the delays, question must be asked why the order had been placed in absence of funds," he said.

The small and medium firms which contribute nearly 30% to the GDP and provide jobs to 12 crore workers are currently facing the worst crisis. With deepening impact of coronavirus on economy, many of them are staring at truncated capacity or even closure in worst cases. Most of the MSMEs are currently operating with 25-50% capacity. In case the demand does not pick up and sales remain low they are likely to continue with lower capacity which means more job losses.

"We are operating at much lower capacity. Besides demand issues, we are also facing problems in supplying finished products as local authorities are not issuing inter-state movement passes," said CS Goel, Managing Director of Goel Engineers which manufactures perforated sheets in its factory in Faridabad.