The medium, small and micro enterprises (MSMEs), which account for over 40 per cent of India’s industrial production, are unhappy over the fiscal measures that were announced today. Industry representatives from these sectors are likely to meet Prime Minister Manmohan Singh on Monday to present their unmet demands. “The measures may be incremental but inconsequential,” said Anil Bharadwaj, secretary general, Federation of Indian Micro and Small and Medium Enterprises. The MSME sector employs 31 million people in about 10 million units spread across the country.
The sector has been hit hard by the liquidity crisis as banks are not keen on lending to them.
As part of the overall fiscal stimulus package, the government announced that it would provide an enhanced credit guarantee cover for loans under Credit Guarantee Scheme from the current level of Rs 50 lakh to Rs 1 crore. In addition, the lock-in period for loans covered under the existing credit guarantee scheme will be reduced from 24 months to 18 months.
Moreover, the government will issue an advisory to Central Public Sector Enterprises and request State Public Sector Enterprises to clear pending bills of the sector.
“Most of the employment comes from this sector. We are concerned that the weakening of the economy should not affect this segment adversely,” said Montek Singh Ahluwalia, deputy chairman of the Planning Commission, explaining the rationale behind the fiscal sops announced for MSMEs.
Despite these measures, difficulty in accessing bank credit is cited as major hurdle for MSMEs. “Agencies like SIDBI, for which the RBI has announced a refinance facility of Rs 7,000 crore yesterday, is small fry in the credit delivery to MSMEs,” Bharadwaj pointed out. According to data available with the FISME, the average loans under the Credit Guarantee Scheme stood at Rs 3 lakh. “How does it matter if the government has increased guarantee under the scheme. Moreover, small industries have to bear an extra one percentage point interest rate to avail the scheme,” Bhradwaj said.