MSME Associations Launch ‘Save MSME’ Campaign, Seek Modifications in Financial Package

A consortium of 25 trade associations have launched a campaign titled ‘Save MSME’, and released a joint statement. The statement requests the government for several modifications in the COVID-19 financial package announced last month, and suggested measures such as exemptions from levy of Goods and Service Tax (GST), a reduction in income tax for firms and the like – so that micro, small and medium enterprises (MSMEs) can get back on their feet soon.

Experts argued that a revival of demand for MSME products will take more time and pointed out that micro units among MSMEs have been left out of government schemes. They said that small and medium units are primarily availing the benefits.

Calling the Rs 3 lakh crore emergency credit scheme for MSMEs a non-starter, the joint statement pointed out that only 10% of the funds under the scheme have been disbursed so far, despite the scheme being launched over a month ago.

Under the scheme, existing MSME borrowers with a turnover of upto Rs 100 crore can get additional funds of upto 20% of their outstanding loan as on February 29 from public sector banks. To make the scheme more effective, the associations suggested modifications, such as changing the date from February 29 to March 22 (the day of the Janta Curfew) and the inclusion all MSMEs which are not declared as non-performing assets (NPAs) by banks as on March 22.

Other suggestions put forward by the associations include the exemption from GST levy for companies with a turnover of Rs 5 crore until March 2021, a reduction in income tax rates – from 30% to 15% – for Proprietorship and Partnerships and LLP firms. The associations also advocated for interest subsidised loans of Rs 25 lakh, or upto 6 months of their monthly fixed overheads for start-ups and units without any current loans with banks.

Commenting on the suggestions put forward by the associations, Professor Arun Kumar, Malcolm Adiseshiah Chair Professor at the Institute of Social Sciences said: “The government needs to help the MSMEs to mitigate their interest burden and support them to survive the crisis due to lockdown and the pandemic.” While MSMEs are concerned about the markets and revival of demand, Professor Kumar said that the demand in markets fell even before the pandemic struck. He added that a revival of demand may take at least between one and two years as consumer sentiment is down.

“The micro sector among the MSMEs needs working capital support for their revival, and effective implementation of Mudra scheme can be one way to support the micro units,” suggested Kumar.

“The Government must categorise the MSME sector into those who are fully dead, near dead, critically injured, with minor impact and no impact establishments, and administer treatment of solutions to enable them to recover,” suggested K.E. Raghunathan, the Convenor of the Consortium of MSME associations.

He added that those “who are dead need an honourable exit; those who are near dead require ventilator support to revive and those needing urgent care and all others require specialised care and solutions depending on the impact they had taken. General treatment or solutions can only be a first aid and can not yield a permanent solution,” he added.