Congress leader Jairam Ramesh on Thursday said Micro, Small and Medium Enterprises (MSMEs) in the country are in deep distress due to the COVID-19 pandemic and urged the Central government to announce tax sops and a Rs one-lakh crore relief package to help them.
In a letter to Minister for MSMEs Nitin Gadkari, Ramesh called for ensuring liquidity for continuity of the businesses of these enterprises, preventing mass unemployment, improving consumer sentiment and investment appetite after the lockdown as well as deferment of payment of dues and pausing litigation.
As part of relief measures, he also sought tax exemptions for the medium and small industry, rescheduling their loans, besides setting up of a control room and helpline to provide cross-country logistical support to them.
The former union minister also suggested that ad-hoc working capital loans of up to a maximum of Rs 30 lakh be provided to the medium and small industry.
Ramesh said India has 6.33 crore MSMEs employing more than 11 crore people and they contributed nearly close to half of the country's total exports and almost one-third of India's GDP.
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"Since the COVID-19 outbreak, the closing of international borders followed by the near-complete domestic lockdown has led to MSMEs facing a sharp demand depression and a massive cash crunch," he said in his letter.
Almost all MSMEs have seen a fall in the number of orders and their inventory levels are rising, he said, adding that exporters are staring at cancelled orders and payments worth crores are delayed.
"With the large-scale migration of workers from urban centres to rural areas, small businesses are dealing with even more uncertainty. The biggest challenge for MSMEs is paying wages," he said.
The Congress leader noted that most micro businesses that comprise 99 percent of all MSMEs have between 5-10 workers and they do not come under the Employees' Provident Fund (EPF) Act, hence it makes most small, informal economic units ineligible to have PF accounts for their workers.
The financial package announced by the Finance Minister will not cover a large majority of enterprises in India, he noted.
"Nitin Gadkari ji, the critical MSME Sector employs more than 11 crore persons. MSMEs are facing an unprecedented crisis due to COVID19 Pandemic. Attached is a proposed relief package with concrete measures. I hope you will take these suggestions seriously and implement soon," Ramesh also tweeted.
Ramesh said in this time of unprecedented crisis, the measures suggested should be taken by the government to immediately alleviate the sufferings of the MSME sector.
"Setup COVID-19 MSME Corpus allotted at least rupees one lakh crore, along with MSME control room and helpline. COVID-19 MSME Corpus fund of rupees one lakh crore to roll out distress relief measures immediately.
"Set up 24x7 MSME Control room and helpline to provide cross-country logistics support addressing supply chain continuity," he said.
Ramesh also called upon the government to ensure liquidity for business continuity and sought that all government agencies and PSUs pay their bills immediately, like the National Highway Authority of India (NHAI) did.
He also sought financial institutions to reschedule/restructure loans, as well as offer 6-month payment moratoriums to MSMEs, extend soft loans with 50 pc government guarantee for affected sectors through SIDBI, along with an ad-hoc enhanced working capital limit of 25 pc on request.
Enterprises which have no finance facilities from public sector banks should be offered ad-hoc working capital loans, up to a maximum of Rs 30 lakh or an amount equal to average of 4 months of their last financial year's turnover, whichever is lower, to be covered under the Ministry of MSME's collateral coverage scheme, he said.
The former minister sought priority for women entrepreneurs and those from disadvantaged sections.
To prevent mass unemployment, the Congress leader said wage subsidy be given to employers including input tax credit for salary paid beyond 15 days to employees who cannot work from home, besides giving tax credit to companies for giving paid sick leave.
He also demanded re-opening of industries where work from home is impossible, especially in manufacturing, construction, logistics and transport, as soon as possible, with all social distancing measures for employees.
As part of tax sops, Ramesh sought deferment of payment of dues and pausing of litigation; introducing provision for extending the closing of Financial Year 2019-20 for all forms of MSME enterprises.
"Provide option to defer tax payments by six months. Extend permission for delayed GST payments, without levy of interest, late fees or penalties, to all statutory payments. Advisory to waive all taxes to local bodies, fixed charges on electrical installations, property taxes for at least next three months," he said.
"No punitive action to be taken by NCLT for delays of repayments till 31st December 2020," he said, besides seeking exemption of service tax from April 1, 2020 to August 31, 2020.
He said tax relief for domestic travel and tourism from May 1, 2020 to October 31, 2020 be given and additional tax breaks and depreciation benefits for new investments in Q2/Q3 of 2020.
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