MSMEs seek more sops to tide over crisis

Unsold inventory can cause problems of cash flow and unemployment, says past chief of AIMO, K.E. Ranganathan.  

Despite Finance Minister Nirmala Sitharaman announcing several initiatives on Friday for providing relief to the MSME sector, a section of the industry said that those measures alone would not help it come out of its problems.

“Today, the main problem of MSMEs is the financial issue. To solve this, both the central and State governments must immediately clear all dues towards supplies and services rendered by MSMEs within 30 days,” said K.E. Ranganathan, past national president, All-India Manufacturers Organisation.

Other refunds such as GST and TDS must be done immediately, and not within 30 days, he said. The Centre has to keep on hold any demand for payment by MSMEs on statuary claims of the past, for the next three months as MSMEs have no money left. “The government also has to waive interest and penal interest on bank dues payable for the next three months.”

‘Change NPA norms’

“The government has to increase NPA norms for MSMEs from 3 months to six months on default period,” he added. Mr. Ranganathan said the biggest challenge for MSMEs is unsold inventory, which had led to cash flow and unemployment issues.

To address this, the government has to offer up to 25% of the stockholding by an MSME. as certified by the auditors. as adhoc facility to tide over immediate cash requirements to help clear salary dues.

This will help enable individual buying capacity, he said. The government should consider launching an e-marketing portal and increasing its procurement to absorb inventory available with MSMEs, he added.

“The government should completely waive f GST on marketing spend. This will save them 18% tax being incurred and help them advertise and secure business to improve topline,”he said.

Third, to address the problem of employment, the government should waive payment of EPF/ESI for existing staff for the next three months, he said. “The government has to provide 50% salary subsidy for employees working in a unit with less than 25 employees.”

However, Garima Kapoor, economist, Elara Capital, said the measures aimed at accelerating payment of government’s dues to private sector entities and ensuring timely refund of GST refunds to MSMEs would help resolve the liquidity crisis.