May not be able to pay salaries to workers for April, say MSMEs

Lockdown-hit firms evaluating their options; many not paid full salary for March

April 15, 2020 11:55 pm | Updated 11:55 pm IST

Hard times:  How to manage next three months without any business is the big question facing MSMEs.

Hard times: How to manage next three months without any business is the big question facing MSMEs.

The micro, small and medium enterprises (MSME) sector in Tamil Nadu, which employs several lakh people, has indicated that it may not be able to pay salaries to its workers for April due to the lockdown.

Some MSMEs are evaluating their options for enforcing salary cuts in the coming months. According to employees, many firms have paid only 50-70% of their salaries for the month of March. “They have told us that they will give us the remaining amount as and when cash comes in from the vendors,” said an employee of a unit at the Ambattur Industrial Estate.

K.V. Kanakambaram, president, Industrial Estate Manufacturers’ Association, said several industries had borrowed money from private financiers and other sources to pay salaries for March, and as of now, April looked “very tough”. “It will take anywhere between six months and a year for the revival of our sector, as we are all dependent on the big companies for our survival. The three-month moratorium on payment of interest and principal will not be sufficient for this sector, as all units will face a severe liquidity crunch and the majority of them will be forced to shut down,” he said.

Recently, all MSME cluster and association heads in Tamil Nadu had a video call with State government officials, during which they informed the authorities about the challenges facing the industry. Letters seeking help were sent to the State government and the Centre. Most MSMEs are hopeful that Prime Minister Narendra Modi will allow companies to resume operations post-April 20. But if that does not happen, they fear the situation will worsen.

R. Selvam, secretary, Thirumudivakkam Industrial Estate Manufacturers’ Association, said the big question was how to manage the next three months (in terms of fixed costs, salaries, etc.) without having any confirmed business. “We have paid [salaries] for March in advance, but don't know how to manage salaries for April. In April, we won’t be able to pay 100% of the salaries; we will try to pay some percentage [of salaries] so that our employees meet their essential needs.”

Salaries may be cut

A.N. Rajasekaran, CEO of Precitek Exports, said salaries will be paid for two months, but post that period, a partial pay cut could happen if there is no improvement in the situation.

R. Ramamurthy, president of Coimbatore District Small Industries’ Association, said the government should ask banks to give loans to MSMEs to help them pay their workers. “The Industries Secretary spoke to the associations through a video call. We told him that MSMEs normally have a cash flow enough to meet their needs for only one or two weeks. How can we pay our workers when the units are shut and there have been no payments?” he asked.

MSMEs have also put forth a slew of demands to the State government and the Centre, including deferment of electricity bill payment on fixed charges, employees’ salary compensation under ESIC without any threshold limit, boosting the public sector’s purchases from MSMEs and settling the latter’s dues. Manufacturers in Guindy have requested the government to instruct the Reserve Bank of India and other banks to provide financial packages to MSMEs with a long repayment period of 60 months and attractive interest rates.

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