Coimbatore: Due to the COVID-19 crisis and the enforced lockdown MSMEs have been greatly affected and paralyzed. To discuss the situation and to provide the government with an understanding of the relief required by the MSMEs, an advisory meeting of all trade organizations was held at the Coimbatore CODISSIA complex. 19 associations including CODISSIA, KOPMA, TACT, SIEMA, TAPMAA, MSIEA, CII, COMSIA, COINDIA and Foundry association took part in the meeting.
Coimbatore: Due to the COVID-19 crisis and the enforced lockdown MSMEs have been greatly affected and paralyzed. To discuss the situation and to provide the government with an understanding of the relief required by the MSMEs, an advisory meeting of all trade organizations was held at the Coimbatore CODISSIA complex. 19 associations including CODISSIA, KOPMA, TACT, SIEMA, TAPMAA, MSIEA, CII, COMSIA, COINDIA and Foundry association took part in the meeting.
At the end of the meeting, the CODISSIA trade unions submitted a request for relief measures required for MSMEs, due to the impact of COVID-19 and the prolonged lockdown period to the Prime Minister, Finance Minister, MSME Minister and their respective Secretaries, Government of India, New Delhi and Chief Minister, Dy. Chief Minister, Minister for Municipal Administration, Rural Development and Implementation of Special Programme, Minister for Industries and Minister for Rural Industries, Government of Tamil Nadu, Chennai.
Ramamurthy, President of CODISSIA, addressed the reporters on behalf of the All Federation of Trade Unions. He said, "All industrial organizations welcome the lockdown decision of the government. However, once the situation is under control the government should take action to inspect all the workers. No announcement has been made by the government to the micro and small entrepreneurs, so far. Further, banks are not cooperative and all the loan payments to be made have been auto-debited from the banks."
"Due to the prolonged lockdown since March 25, 2020, the MSMEs are facing many tangible and intangible losses affecting the industry very badly. Due to complete drying up of any cash inflow during this period, the majority of the MSMEs who were already reeling under the impact of the global slowdown, are left with no funds to even sustain their own households. Hence, it will be extremely difficult to bear the various recurring and unavoidable expenses of their respective units", he noted.
He added that, "The RBI should issue proper instructions to banks to lend to MSMEs which are already hit by the crisis. Also, banks should not charge interest from the MSMEs during the lockdown period. They are continuously placing extra burden on the entrepreneurs, instead they should share the burden. Rs.10 lakh crores should be allocated to MSMEs for them to recover from this crisis", he suggested.
He added that, "Entrepreneurs do not have the funds to provide salary to employees in the crisis despite the Prime Minister asking them to do so. Therefore the Central government should provide the salary for the month of April, and there is a legal provision in the Indian law to do so."
Ramamurthy also said, "Corporations cannot operate until COVID-19 spread is fully under control. Workplaces can be reopened only after the situation is safe. Business owners are already under immense mental stress. All inspections and audits should be avoided for the next one year and MSMEs should be provided with adequate relief."
"All orders are steadily being cancelled," he said and added, "Once the railway services resume, migrant workers will leave for their hometowns and businesses will have to look for skilled workers for functioning, which will be an added stress."
Remarking that the announcements of the Central government are not being implemented properly, he urged banks to hold talks with the RBI and the Finance Minister representing the MSMEs and conveying their requests.
He further stated, "Bank administrations have a similar set of rules and regulations for both corporates and MSMEs. Funds from the ESI and PF can be used by the Central government to pay the salaries of all workers", he said.
Following this the trade associations listed the relief measures required by the MSMEs due to the impact of prolonged lockdown period.
They said that as the situation arising out of COVID-19 crisis is unfolding, it was clear that it will have a long term bearing on the MSME sector, a few of which are envisaged below:
• Economic slowdown leading to the possible economic shutdown
• Unemployment
• Cancellation of orders
• Under-utilisation of capacity
• Reduction of manpower
• Reduced output and revenue
Therefore, on behalf of all MSMEs, they requested the Government to initiate the following steps immediately to support the MSME sector.
Central Government
Unified national policy to be formulated by the RBI, which should be made mandatory for all banks. They suggested the Reserve Bank of India to direct all the Banks to pass on the benefits to all MSMEs with immediate effect and it was suggested that the issued “guidelines” should be replaced by clear “directions” for the earlier announcements.
• To change the DSCR ratio for the MSMEs.
• The Drawing Power should not be assessed and reduced based on lower sales, receivables or lower stocks. Sales have been generally depressed in all segments of the industry, be it automotive or textiles or engineering due to the above said reasons. The worst affected they said has been the MSMEs.
• They also requested that the sanctioning of funds should not be based on internal ratings, as COVID 19 is a crisis not seen by the country and quoted the Prime Minister saying, "this crisis is akin to the Country being in the war and a Medical Emergency."
• Further they asked to fix the working capital as 40% of the turnover. They suggested that infusing huge liquidity is the only way forward to kindle the entrepreneurial spirit which is depressed now. Only putting money into the hands of the industry, which is strapped for cash flow, can revive the investment cycle. In this direction, they suggested that 30% of existing working capital in addition to the 10% already sanctioned may be provided to all industries, as Term Loan and not an enhancement of CC limits. It should be provided at 6% interest* with a holiday period of 12 months, and repayment from 13th month to 48th month. That is three-year repayment after a one year holiday period.
• To extend ADHOC additional credit (for COVID-19) to the extent of 25% on existing working capital limits by all public and private sector banks.
• To sanction the above facility, banks should take the base year as 2018-2019. The deferment of loan repayment by 3 months announced by the RBI they felt is not only insufficient due to this prolonged lockdown, but will prove counterproductive as it will only delay the burden of the borrowers and not lessen it. Therefore they requested the Government to give a one year moratorium period for all bank loans. The term loans should be allowed to be repaid over a period of ten years.
They requested the government to consider extending the NIL interest (lockdown period) on working capital, cash credit until the MSME industries start resuming their operations. They also requested the banks to support at this time of extraordinary crisis.
• Banks should postpone following NPA norms and other compliance norms for at least one year, so that the industry gets a breather, and is able to sustain and come out of this crisis.
• Moratorium announced for the term loans till 30th June 2020 should be charged NIL rate of interest and all accrued interests should be waived off.
• In respect of working capital facilities sanctioned in the form of cash credit/overdraft (“CC/OD”), lending institutions have been permitted to defer the recovery of interest applied in respect of all such facilities during the period from March 1, 2020, up to May 31, 2020 (“deferment”). The accumulated accrued interest shall be recovered immediately after the completion of this period.
• They requested the government to consider waiver of interest on all loans and cash credits for MSMEs for six months starting April 20. Further they requested that the banks should support the Industry, at the time of this extraordinary crisis.
• Though the moratorium has been extended to term loans and interest on working capital, it hasn’t addressed the issue of LC dues which will become due in 30 days. Renegotiation of contract for further 30 days should be allowed so that the LC can be honoured by MSME’s.
• For NPA and stressed units a suitable rehabilitation programme should be considered in consultation with the Promoters for a viable solution. It was suggested that the NPA now declared up to Dec 31, 2020 should be extended during the succeeding three financial years.
• CLCSS subsidy to be increased to 25 per cent.
• Interest subsidy up to 6% to be allowed to all MSME Units, for at least one year from 01.04.2020.
• Interest subsidy up to 4% for Micro Industries up to the loan amount of Rs.3 lakhs.
• No auto-debit of principal and interest by banks or NBFCs, Financial Institutes till the situation improves.
• During the lockdown period in April 2020, MSMEs will not have the capacity and viability to pay the entire month’s salary without running their business. The businesses are run based on their financial planning for one or two weeks only. Hence they will not be able to pay the salaries and wages for the workers for the entire month, as advised by the Prime Minister. Hence, for the lockdown period, salaries and wages to be paid by the Government.
• As a measure of social security and welfare of the employees, request for revocation of the provision of ESI Act 1948 with suitable amendments in the ESI Act for provision of compensation amount for the lockdown period.
• For unorganised sector, the payment may be paid through Jan Dhan Account.
• Once the lockdown is lifted, the normal working hours should be increased from the existing 8 hours to 9 hours for at least one year.
● Stimulus package to the MSME industries for the loss of business during the lockdown period.
• Exempt all MSMEs from payment of statutory dues viz. EPF, ESI, GST, Income Tax etc. till June 2020 and also consider waiving of interest being charged on the payment of statutory dues like PF, ESI, EPF, GST, Income Tax etc.
• To consider paying the PF Contribution for 6 months and extend the benefit for all units employing up to 200 persons, without any ceiling. All arrear payments of PF and ESI if any, by the MSMEs shall be permitted to be paid in instalments along with the current payment within the holiday period of 6 months. All legal actions against defaulting MSMEs to be dropped.
• To exempt Inspector Raj, visiting industries for inspection/audit purposes for one year, till the next financial year.
• To extend GST return filing dates for MSME's, remove late filing penalty till March 2021 and to permit payment of arrears of GST in instalments along with the current payment within the holiday period of 6 months without cancelling the GST Registration.
• To allow adjustment of Duty Credit Scrips (DCS) against payment of IGST in the bill of entry. This will help in easing cash flow for MSME and reducing support from banks and Government agencies.
State Government
• Stamp duty - For availing Bank Loans, the MOD charges for registration in the Sub-Registrar office is around Rs.30,000/- whereas previously it was only Rs.5,000/-. Due to this present critical situation, they requested to waive off the MOD Registration Charges. Once the situation returned to normalcy, they requested the Government to retain Rs.5,000/- only as of the MOD registration charges.
• To provide deferment for payment of EB Bills, Property Tax, Professional Tax, Licence Fees and all Statutory payments after one month from the resumption of operations by all MSMEs. MD charges and fixed charges to be removed. EB charges to be adjusted against the Security Deposit already available with EB. After a period of one year after the resumption, the Security Deposit to be collected.
• To provide a grant of Rs.5 lakhs for Micro Industries and Rs.15 lakhs for Small scale industries.
The MSMEs that come under the various associations predict a bleak future in the near long term and expect some proper impetus from the government. Last year the TN government tabled in the assembly that 50000 companies have shutdown between 2017-18. Now with the lockdown and the impending crisis following the novel coronavirus, MSMEs have already been reeling under the pressure of the last three years of poor economic management and this crisis will be a body blow to the struggling industries. With the two very average budget announcements, in 2019 and 2020, it is to be seen how the current government will respond to a problem of this scale.