CII makes suggestions for supporting MSMEs through the COVID 19 crisis
Mumbai, 14 April 2020: Further to its suggestions on the economic package for the Industry, Confederation of Indian Industry (CII) submitted its recommendations targeted at providing relief specifically to MSMEs, to the Government.
Detailing the suggestions Mr Chandrajit Banerjee, Director General, CII said, “With limited resources, MSMEs do not have the capacity to withstand massive shocks like COVID 19. In addition, many MSMEs are an important part of larger supply chains. The health of these MSMEs have a bearing on the entire supply chain, including the large corporates”. “Therefore, special, immediate and substantive support measures are required to see the MSMEs through this crisis”, added Mr Banerjee.
The CII recommendations focus primarily on increasing the financing available to MSMEs with relaxed collateral norms, extension of the RBI moratorium and wage support. It also suggests expediting the Fund of Funds for MSMEs, which has been under the consideration of the Government, and augmenting the assets of MUDRA Bank.
Key Highlights of the CII Suggestions on ‘Supporting MSMEs through the COVID -19 crisis’.
- Support through Banks
ü Increase working capital limits, with relaxed collateral norms
ü Additional working capital equivalent to April – June wage bill of the borrowers, backed by a Government guarantee, at 4-5 per cent, with a refinance guarantee from RBI.
ü Additional reconstruction term loans with a government guarantee on default, up to 20 per cent.
ü Extend the three-month moratorium period allowed by RBI to 6 months, for MSMEs.
ü Increase the assets of Mudra Bank and other MSME-focused banks.
- Expedite the U K Sinha Committee recommended Fund of Funds for MSMEs to support VC/PE firms investing in the MSME sector.
- Extend wage support by utilizing the ESIC funds under Rajiv Gandhi Shramik Kalyan Yojana, Atal Beemit Vyakti Kalyan Yojana to pay workers for the lockdown period.
- Clear all outstanding government dues to MSMEs, including payments for supply for goods and services to PSUs by MSMEs, GST refunds, various state and central government incentives for MSMEs.
- Other relief measures
ü Delays in discharging social security liabilities may be condoned without any penal action for next 6 months.
ü Provide a moratorium for all PF, ESI and Gratuity payments by employer for six months if the employer does not retrench or remove more than 10% of its workforce.
ü Government departments making purchases should not impose delay penalties as delays are bound to happen due the disruptions caused by the lockdown.
ü Completion dates of the government projects need to be reconsidered and extended without liquidated damages, till such time the fear of COVID-19 is over.