Sagging MSMEs need 6 to 9 months to regain foothold, says study

Nearly 50% of the units are struggling to pay salaries, according to Madras Chamber of Commerce and Industry survey

The study says 36% of the MSME units have more than 30% migrant labourers who have returned to their natives during the lockdown. Here, a small scale unit in Ambattur begins work with minimum staff after the government relaxed some lockdown conditions. File photo.

A survey conducted by the Madras Chamber of Commerce and Industry (MCCI)shows that nearly 50% of the MSME units are struggling to pay salaries and rent and one-fourth of the units expect their inventories to become obsolete/degraded.

The respondents identified customer orders and working capital as major challenges in restarting operations. The survey covered 1,218 respondents with 945 of them having their units in Tamil Nadu and the rest outside the State. The units are predominantly micro and small units. About 6b5% of the units employ less than 50 people and 89% of them are micro and small units (turnover of less than ₹50 crore).

Srivats Ram, vice-president of MCCI, told

The Hindu that the objective of the study was to gauge the extent of awareness among units of the various measures announced by the government, identify the key challenges faced by the units in restarting operations and understand the key constraints faced by the MSME units in the COVID-19 context.

“Around 40% of the units haven’t been able to collect their receivables on time. On the manpower front 36% of the units have more than 30% migrant labour. Consequently, 40% of the respondents feel that it is imperative to train and reskill new employees,” he said.

Given the low demand, 78% of the units are working at 50% capacity and 40% of the units feel that it will take at least 6 to 9 months for demand to reach pre-COVID levels.

Interest waiver

A significant majority of the respondents felt that interest waiver during the lockdown and loans at concessional rates would help them tide over the crisis. About 60% of the respondents also felt that relaxation of NPA norms would be beneficial. Another interesting data from this survey was that even though 75% of the respondents were aware of the government loan schemes, they hadn’t availed of the same.

According to Mr. Srivats Ram, the reasons for not availing loans are: banks are not clear about the scheme, some don’t require loan currently, high interest cost and repayment concerns due to uncertain future and lack of customer orders.

Ramkumar Ramamoorthy, president of MCCI, said the chamber had come up with an eight-point recommendation across financing, labour, operations, taxation, compliance and mobility. “As many of these challenges are addressable by the State government, if implemented at speed, they will enthuse greater confidence in MSMEs to restart their operations and scale them in a staged fashion,” he added.

The recommendations include: A debt restructuring scheme specifically for MSMEs needs to be notified, government must enable and ensure that dues to MSMEs from PSUs and governmental bodies are cleared immediately and moratorium on GST payments should be extended till October 2020 without any interest payments.

Given the need for recruitment and training amongst half the units surveyed, the chamber has suggested that government should provide a training stipend for a period of 6 months for new recruits. While sharing the survey findings with officials from the Tamil Nadu government, the chamber has recommended that the government may identify a nodal officer in all major industrial estates for coordination with MSMEs .