Outlook on MSMEs during COVID 19 — Part 4
This 4 part series helps in understanding the Micro, Small and Medium Enterprise Businesses during the Pandemic.
In the previous article, we concentrated on the various suggestive measures citizens have that if the government implements, could benefit a lot and those could be found here:
In this article, we will focus on the stimulus package provided by the government for MSMEs.
Stimulus Package by the Government for MSMEs
Prime Minister Modi has announced his idea of Atma Nirbhar Bharat (Self Reliant India) whose foundation stone was laid by the 20 Lakh Crore (20 Trillion) COVID-19 Stimulus Package. The package includes funds to be put forward for various uses in the difficult period of COVID 19. The will also include the ongoing Pradhan Mantri Garib Kalyan Yojana meant to help the poor and vulnerable section of society.
The Package allocates a fund of ₹20,000 crores for stressed and non-performing MSMEs as subordinate debt. Investment limits for MSMEs are also being expanded and grade is moving towards a turn-over based criteria. The Government has assured a sum of ₹3 Lakh Crore and ₹20 Thousand Crore towards collateral-free loans for MSMEs and subordinate debt for stressed MSMEs respectively.
The existing criteria for Micro Enterprises were Investments less than 25 Lakh (Manufacturing) and Investments less than 10 Lakh (Service) which has been revised to Investment less than 1 Cr and Turnover less than 5Cr (Both Manufacturing and service). For Small Enterprises the Criteria has been revised from Investments less than 5 Cr (Manufacturing) and Investments less than 2 Cr (Service) to Investment less than 10 Cr and turnover less than 50 Cr (both Manufacturing and Service).
Similarly, criteria for Medium Scale Enterprises has been revised from Investments less than 10 Cr (Manufacturing) and Investments less than 5 Cr (Service) to Investment less than 20 Cr and turnover less than 100 Cr (both Manufacturing and Service).
Furthermore, to provide liquidity MSME sector will be supported through a ₹30,000 crore investment scheme fully guaranteed by the Centre and further partial credit scheme worth ₹45,000 crores, of which 20% will be guaranteed by the government.
The government has also announced to pay the Employees Provident Fund contribution for businesses having less than 100 workers, where 90 per cent of these employees earn less than Rs 15,000 per month. These contributions amount to 24% of the total wages and will be credited to EPF accounts for the next 3 months.
The government in India has directed MSME owners not to cut off the payments of salaries of their employees however there is no wage subsidiary package announced as part of COVID-19 Stimulus. In Countries like Brazil, the government has decided to pay part of the salaries of micro and small units. Countries like New Zealand have also announced temporary wage subsidies for a fixed period of 3 months.
Some other relaxations provided by Ministry of Finance Include;
- The default threshold for beginning insolvency proceedings has been increased from 1 Lakh to I Crore.
- The due date for completing pending payments of central and excise duties has been increased to June 30, 2020, without any interest or late fee.
- The due date for filing GST extended till June 30, 2020, and no late fee or penalty will be charged for companies with turnover less than Rs 5 crore for late filing. For those with turnover more than Rs 5 crore, the only interest of 9 per cent will be charged.
- All last dated with respect to income tax returns and filings have been moved to June 30.
Even after all these relaxations, the MSMEs are bottlenecked and therefore need great support from the government. The government could consider giving relaxation in terms of utility bill payments and social security liabilities like Property Tax etc. The government can also consider introducing a new tax slab especially for MSMEs, this can be a saviour for these units. Government and RBI can also take steps to prevent MSMEs to be declared as NPAs during these difficult times (subject to scrutiny on the reason of non-payment of EMI/Installment. If provided a safety net at the correct time, the government can save the economy’s backbone and in turn, these units will play a huge role in getting the economy back on track.
