One-fifth of micro firms default on post-moratorium loan schedule

"The biggest concerns of the business owners of micro and small enterprises are payment of bonus and cash advances to staff during the ensuing festival seasons," says KE Raghunathan, Convenor of Consortium of Indian Associations

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About 20 percent of the monthly loan repayments by micro and small enterprises after the moratorium on such bank loans ended on August 31 could be facing trouble, a survey carried out by Consortium of Indian Associations (CIA), an umbrella body representing various regional MSME organisations cautions.  

The incidence of ECS/Cheque returns among EMI collections in September, after the moratorium period, has been 23 percent in the case of self-employed, 18 percent among employees in general and 11 percent among medium enterprises, the survey points out.  

The analysis was done based on inputs from over 30 member associations and trade bodies of CIA between October 3 and October 6. Of the 17,500 respondents, 5,500 were individuals, 8,200 micro enterprises, 2,300 small industries and 109 medium enterprises. The respondents are individuals who are earning a monthly salary of above Rs 25,000, self-employed, owners driven micro and small enterprises and professionally managed medium scale industries, says K E Raghunathan, convenor, CIA.

"The EMI collections in September, after moratorium period has seen about 20 percent of ECS/Cheque returns. This is bound to increase in the coming months. The biggest concerns of the business owners of micro and small enterprises are payment of bonus and cash advances to staff during the ensuing festival seasons," Raghunathan says. According to the survey, enterprises with pending orders to execute are facing shortage of raw materials and price increase by over 15 - 20 percent especially in copper, brass, steel materials.

Similarly, more than 17 percent of the enterprises studied are likely to register only 25-50 percent of turnover as compared to last year and around 15 percent are expected to incur huge loss to catch up. Broadly, finance remains the biggest of concerns for MSEs in general. "It is estimated that about Rs 3,50,000 crores are due to be payable to MSEs from medium and large industries, public sector units, and Central and State governments. A very urgent action must be taken to enable these dues are paid immediately," Raghunandan said.

The respondents also suggested a host of measures that can be initiated by the government to help the MSEs. "Government must immediately declare abolishment of income tax for the current year for those earning less than Rs 15 lakhs to re-kindle demand. Enterprises with upto Rs 5 crore turn over shall be exempted from collection or levy of GST till March 2021 to help them offer competitive prices and also secure orders for services and AMC payments. All deduction of TDS must be kept on hold till March 2021 from micro enterprises, thereby allowing more cash flow in their hands. Government - both Centre and State - must spend at least 75 percent of their budgeted procurements for the financial year 20 - 21 before December 2020 to boost order book and create employment opportunities in the market...", Raghunathan gives out the industry wish list.  

CIA said they will submit their demands and the results of the survey to the finance minister and the Prime Minister's Office.

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