Pawan Batra (name changed) has a small auto component manufacturing unit in Anand Parbat area of New Delhi. Earlier this week, he received several SOS calls from his workers for an advance, citing they don't have cash to buy food. Batra went to the factory despite the lockdown and paid all his 60 workers March dues. His factory is shut since Janata curfew (March 21) and payments from clients are not coming. "We work on very thin margins, so while I want to heed to government's ask to not terminate workers, I don't know how long I can continue," he says. "I am willing but for how long I can afford." His labour wage bill is Rs 6-8 lakh monthly.
He suggests government should reimburse at least 50 per cent of their wage expense upon submission of proof. "If government is asking us to continue paying them despite the closure, they should support us, only then everyone will come forward whole-heartedly." By supporting me they will assist at least 70 families, he says.
While the government has announced the lockdown as a preventive measure to curb the spread of COVID-19, it will have much wider socio-economic implications. It has also asked businesses not to layoff employees or cut salaries.
While large businesses with deeper pockets might be able to endure it for much longer, MSMEs work on tight cash flows and are much likely to face liquidity crunch. "MSMEs have been crying for credit subvention and other relief measures and in the absence of those they will not have the wherewithal to respond to government's appeal to not terminate workers," says K.R. Shyam Sundar, Professor, Xavier School of Management, Jamshedpur.
He adds, "The government is missing the point that if they want private sector to help, they have to first give them suitable relief measures. But, the economic relief package has ignored the MSME industry."
The urban poor who work in the unorganised sector neither have income security nor social security. Several daily wage labourers, street vendors, domestic workers, contract workers and casual workers will continue to go out to find work as they are not covered by EPF subsidy or by MGNREGA or any other direct cash transfer scheme.
"In spite of three-day consultation with the industry, the relief package is not well coordinated and is not a comprehensive package," says Sundar. He explains that a comprehensive package should have simultaneous reliefs across different realms, for instance, tax compliance, relief for poor, RBI monetary policy interventions, and relief for middle class in terms of EMI, internet rate subvention and most importantly an increase in investment in health infrastructure. But, that is unfortunately not the case.
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