MSMEs seek regulations to reduce China dependence, step up make in India
“It is important to ensure that traditional industries are innovated according to the demands of the 21st century, which is possible only by giving them institutional support in the form of training, financing, marketing, and technical support,” said Prime Minister Narendra Modi, in February 2020, while inaugurating the 63-foot-tall statue of former Bharatiya Jan Sangh leader Pandit Deendayal Upadhyay in Varanasi.
PM Modi has been encouraging the Indian Micro, Small, and Medium Enterprises (MSMEs) sector and has even taken numerous initiatives towards achieving the MSMEs goal of contributing to the Rs 5 trillion Indian economy.
However, the unforeseen scenario of coronavirus pandemic has brought everything to a standstill.
On March 24, PM Modi announced a nationwide lockdown in a move to contain the spread of the deadly virus. Though the step is the need-of-the hour, it has put many businesses into severe distress, with MSMEs being one the worst hit.
The MSME entrepreneurs are worried about their survival amid the lockdown. Most of them are dependent on recurring sales for meeting their fixed costs. However, with manufacturing units shut, exports blocked, and with restricted supply of goods to the market, this sector, that accounts for 31 percent of India’s GDP and 45 percent of exports, will be severely hit in the coming days.
What MSME entrepreneurs have to say
To tackle the impact of coronavirus on businesses, Finance Minister Nirmala Sitharaman on March 24, announced a slew of measures. She said,
“The last date for filing of Income Tax Return (ITR) and Goods and Services Tax (GST) has been extended to June 30, 2020. The interest rate for filing a delayed return has also been brought down to 9 percent from the existing 12 percent. Now, there is no interest, no penalty and no late fee for companies with a turnover of less than Rs 5 crore. For larger companies, interest rate at 9 percent will be applicable, but no late fee and no penalty.”
However, Expedite Foods founder, Abhinav Gupta is expecting the government to extend the moratorium period for payment of GST for five months from February to June 2020 with no interest or penalty, irrespective of the turnover of the MSMEs. He says,
“MSMEs will take the maximum time to recover as most of us are not VC funded. Even after this outbreak is contained, we will not have financial bandwith to make ends meet. I am for 21 days lockdown. It is mandatory to take this step. But, once the threat is over, I must know that I will be able to use the money in my bank to pay my employees’ salaries and not EMIs and penalties.”
The MSME entrepreneurs are requesting the government to rationalise the rates on various industries producing a range of products, from snacks to agro-based products. The MSMEs are now worried about post-June period and is urging the government to take long-term steps. Nipun Gupta, Executive Director, Springfit Mattress also requests the government for tax holidays as after covid-19 situation revival of business will be tough.
Radhika Mishra, Director, Messina Beej Pvt Ltd. tells SMBStory that the economic engine will need a lot of help to restart. The agri-input industries or the food processing industries will suffer for the rest of the year if the agricultural harvest that is beginning to come in now is not managed well.
“Large parts of India sow paddy from May until the rainy season, that supports exports as well as domestic demand. The paddy season is going to be affected with non-availability/delayed availability of seeds and other inputs. The government must lay down clear rules and plans for managing the agricultural work - harvest and sowing related - in order to ensure smooth transition from end of lockdown to normalcy. It must also clear up rules for cargo transit of agri-produce,” she adds.
The entrepreneurs are also calling for working capital waivers and term loans for at least six months or during lockdown period, whichever is more. Mariam Mohuideen from Baker’s Treat says,
“It will take at least six months for the economy to stabilise, losses to heal, and profits to realise the repayment. There should also be rent waivers for tenants for the lockdown period. Also, landlords should get collateral benefit on GST to certain extent, otherwise the landlord may not follow the order.”
At a time when India could have boasted of increased output following a decline in China exports and imports, overcoming the business and economic slowdown, and the lockdown have put entrepreneurs in a barrelling situation. Their plea to the government is to have more money in hand to avoid layoffs, pay cuts, and run their businesses without any serious hassle.
The fiscal measures taken by the government are highly encouraging but it would definitely help if the moratorium period for paying back the current loans can be increased, says Aishwarya Sawarna Nir, Director, Aishwarya Healthcare.
“It would also help if the govt can help cover daily wage cost for the labourers so that both the workers and the businesses are not hit by the economic downturn. The money thus earned against the goods supplied to the govt that are covered under the COVID-19 essentials list, can be tax-exempted to incentivise the businesses,” she added.
Aishwarya also told SMBStory that the government must actively identify industries that are heavily dependent on China, like the API and should encourage the MSME sector to become independent of such global disturbances. This is an opportunity for Indian businesses to become less dependent on China and for domestic market to become open to Indian products.
“The government should also provide relief from the running costs that include payment of electricity, water, and other bills. We hope that the Government execute effective plans to take care of jobs and businesses during these tumultuous times,” says Divya Jain, Founder Safeducate.
In conversation with SMBStory, Mukesh Mohan Gupta, President of the Chamber of Indian Micro, Small and Medium Enterprises says in reference to the Finance Minister and RBI Governor Shaktikanta Das’ announcement on statutory measures recently that interest on term loan has not been considered and credit cards are out of relaxation:
“Accumulated term loan installments and working capital interest will be payable after three months as addressed in the speech. However, this will not be possible for all MSME entrepreneurs,” he says.
In order to provide ease of doing business to MSMEs post-coronavirus threat, Gupta has made a request to the government on behalf of all the entrepreneurs that there should be no minimum electricity bill and no NPA accounts till the situation improves. No appeal of any payment order in favour of MSMEs by any PSUs and Government departments.
He also requested that MSMEs should be allowed to use IBC (Insolvency and Bankcruptcy code) even for default of Rs 1 lakh and above and there should be no downgrade of CIBIL score and rank. Keeping in view the cash-crunch grievances of the MSME entrepreneurs, Gupta also makes a plea for the salary and wages of the labourers paid during lockdown to be deducted from the income tax with carry-forward facility.
On Sunday, Prime Minister Modi, in his monthly Mann ki Baat radio address to the nation, praised the frontline workers in the fight against the virus as well as countless workers in the essential services who are ensuring the country doesn't come to a complete standstill in the 21-day lockdown announced on March 24.
Modi sought the nation’s forgiveness for imposing a monumental lockdown on the country, but said,
“We have to win ... and we will definitely win the battle” against the unprecedented menace of coronavirus that has claimed 25 lives in India so far.
(Edited by Javed Gaihlot)