Waiting for Maharashtra government's economic package for MSMEs, says Chandrakant Salunkhe, founder of SME Chamber of India:
MSMEs employ 16 crore people. This is excluding the additional 10 crore people that are employed unofficially, stated Chandrakant Salunkhe, founder and president of SME Chamber of India in an interview to FPJ’s Jescilia Karayamparambil. So, to revive a sector, which creates millions of jobs, the state and the central governments will have to devise a strategy that will help the sector to recover, he added. Below given is edited excerpts:
How is COVID-19 challenges different or similar from pre-COVID-19 challenges?
Pre-COVID-19, there were plenty of issues already, particularly in raising funds, limited access to skilled manpower and other infrastructure issues. In addition, the economic downturn hit the medium, small and micro enterprises (MSMEs). This was followed by many clients cancelling export orders since September last year. Other than this, the taxation issue was also there.
Already SMEs were burdened with pre-COVID-19 issues when COVID-19 struck. The biggest issue was migrant labours leaving the city. This reverse migration took place because there was no support for their survival.
Due to COVID-19, the supply chain management was completely disturbed, manufacturing came to a standstill, transportation was an issue (at least in the first month of lockdown) and there was no access to skilled manpower. Even minimal machinery work was not possible, due to the lockdown.
It was only after the lockdown was lifted partially, companies were able to operate. In Maharashtra alone, there are around 19.5 lakh companies, of which nine lakh are service-oriented companies and around 10 lakh are manufacturing industries. So, the government is claiming that 75,000 companies have started and I do not think that is a big achievement for the government. The government’s effort can only be appreciated if they were able to reopen a few lakh companies.
The Maharashtra government has not even announced a package for MSMEs in the state. In the case of the central government, it has announced Rs 3 lakh crore economic package particularly for those MSMEs that are enjoying facilities from banks already. Many MSMEs have approached the bank for working capital needs but no avail and other MSMEs are stuck in paperwork formalities.
The factories are allowed to function but there is no transport for workers to travel. Such issues crop up and there are no solutions to them yet. What are the challenges faced by MSMEs in raising capitals?
In the last financial year 2019-2020 (since September), the growth in manufacturing activity and exports has been upside down. So, if a company with Rs 100 crore turnover, and annual growth of 20-30 per cent, was not able to achieve its target due to the economic slowdown in the last two quarters of FY 2019-2020, then the banks are not giving the companies the funds that they essentially require.
In addition, these companies have lost business in the first quarter of FY 2020-2021. So, it will be further difficult to raise working capital requirements from banks and other financial institutions.
Other issues that were raised are related to state government.
The Maharashtra government had announced on May 1 that there will be an economic package for the industry that are facing challenges and for rural areas. But nothing has happened there.
How do you see banning import and export of Chinese products and services hit Indian MSMEs?
MSMEs import large electrical equipment, chemicals, machinery etc from China. We are not capable of fighting with Chinese manufacturers. We depend heavily on China for most of the products that we import from China, as against our exports. Our imports are double the exports. Our industry is not an innovative industry (about 75 per cent of MSMEs). The sector only produces products and sells them in the market. MSMEs do not set aside money for research and development. This issue is not limited to MSMEs alone. Despite having funds, large companies do not support research and development units. In China, MSMEs’ productivity is huge which is driven by innovation; also supported by a highly-productive labour force.
What policy level changes are you expecting from the government authorities?
The government should empower Indian SMEs by providing a level playing field. Funding should be made available easily and at low cost.
There is a need to put more efforts into the export promotion by finding new markets or new supply opportunities. At this time of the pandemic, we should see this as an opportunity.
Another policy level change should be to encourage industrialisation that should take place in rural India, rather than limiting these activities to metros. There is a need to encourage entrepreneurship in the manufacturing sector. The government should encourage job creation and get labour forces back.
The government should also look at extending ease of doing business not just to foreign players but to India counterparts as well. The government should not provide red carpet treatment to foreign companies and offer red-tapism to Indian companies.
Would increasing the working hours of labour and annulling labour laws help MSMEs?
People working on the shop floors can hardly work for 10-12 hours. By increasing the working hours, the productivity of the workforce will come down. So instead of quantity, quality work should be the focus. If you make people work for long hours, the health of the people will deteriorate. So, encouraging long working hours is not a feasible option.
Would that mean MSMEs will forgo their employees and focus more on automation?
This is not possible for SMEs as they lack funds to invest in capital-intensive goods, advance machinery and technology among others. To achieve digitisation and automation, the banks will have to come forward to support MSMEs by offering loans at the rate of six per cent.
The Maharashtra government announced the new website to promote local talents. How will it help MSMEs?
The website was to help employers and employees find their match, but it will take some time before it becomes smooth. This website will not just help industries in Mumbai but in other parts of Maharashtra.
While this project is mainly for bhumiputra (sons of the soil), it has to be noted that these are not the types of jobs that the sons of the soil are looking for. So, we will end up depending on migrant labourers. In the past, there were few programmes that were run to encourage participation from sons of the soil but there is no clarity how much has that helped the state government.