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MSMEs seek sops to tide over Covid crisis

MSMEs seek sops to tide over Covid crisis
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MSMEs seek sops to tide over Covid crisis

Highlights

The micro, small and medium enterprises (MSMEs) sector in South India, which has been trying very hard to re-establish its operations by reviving production in the aftermath of the lockdown, is urging the Union Finance Ministry to extendmore relief measures, including providing easy access to finance, interest subvention and creation of specialised banks on the lines of micro finance institutions to cater to the industry.

Hyderabad: The micro, small and medium enterprises (MSMEs) sector in South India, which has been trying very hard to re-establish its operations by reviving production in the aftermath of the lockdown, is urging the Union Finance Ministry to extendmore relief measures, including providing easy access to finance, interest subvention and creation of specialised banks on the lines of micro finance institutions to cater to the industry.

"Undoubtedly, the central government has come forward and stepped up financial and other assistance to MSMEs in various ways by pumping in liquidity and access to credit, which have been helpful. However, many problems still persist," said APK Reddy, national president, Federation of Small and Medium Enterprises of India (FSME India), and Vice Chairman, Joint Action Committee (JAC) of South India MSME Associations.

Recently, the JAC submitted a memorandum to the Union Finance Minister Nirmala Sitharaman seeking a better deal for the key MSME sector in upcoming Union Budget 2021

Covid-19 has caused irreparable damage to the small industry, which is still reeling under the impact of the pandemic due to disruption in supply chains, absence of demand, loss of jobs and unavailability of labour force, cancelled orders, over-extended payments and dried up financials.

According to the JAC's rough estimates, about 20 per cent of MSMEs may never be able to restart as a result of the disruptions caused by the pandemic.

"Primarily, absence of demand requires economic stimulus on a substantive scale in order to kick-start the economy. This requires immediate attention in order to sustain the industry, particularly MSMEs, in what is likely to be a prolonged drop in global and domestic demand for the foreseeable future even if the pandemic is brought under control or peters out in the next six months to a year," said KB Arasappa, Chairman, JAC, and president, Karnataka Small Scale Industries Association (Kassia).

In these circumstances, FSME India is requesting the Finance Ministry to consider making credit available without complex collateral requirements,provide for a longer moratorium period of two to three years while sanctioning bank loans, do away with the CIBIL scoring for at least three years for MSEs alone etc to ensure the industrial activity regains normalcy.

According to Arasappa, like agriculture, the MSME sector is labour-intensive and the operational problems and risk exposures are also identical. The contribution of the small scale sector is equally significant as that of agriculture. "We urge the government to advance money on par with the agriculture sector to MSMEs through the banks by subsidising the interest. The amount of loan made available at this rate may be capped at Rs 5 crore," he added.

Stating that the credit-linked capital subsidy scheme for technology upgradation in the MSMEs expired in March 2020, Reddy said the scheme be renewed with effect from April 1, 2021 for two years while increasing the credit under the scheme to Rs5 crore from the earlier Rs 1 crore for 15 per cent capital subsidy with proportionate hike in the upfront subsidy cover to Rs75 lakh.

"Income tax reduction of 15 per cent allowed to companies registered after 2019, be extended for the sole proprietary and partnership firms also. The government must extend the 25 per cent corporate tax slab benefit given to corporate SMEs to the other categories of SMEs also such as partnership, proprietorships etc, as most SMEs are not incorporated and thereby are left uncovered," APK Reddy told Bizz Buzz.

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