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Last updated: 08 Apr, 2020  

msme-THMB-2010.jpg Avail additional reconstruction term loans for MSME sector: CII

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SME Times News Bureau

Amid COVID-19 crisis, industry body CII on Wednesday called for a fiscal stimulus package, adding that the Micro, Small and Medium Enterprise (MSME) sector should be provided with additional reconstruction term loans.

"Banks should provide additional reconstruction term loans to MSMEs, which are otherwise sound, but impacted by the shutdown, with Government of India offering a guarantee up to 20 per cent of the default," CII said in a recommendation.

It has recommended to the Centre for providing a fiscal support package, for FY21, limited to 2 per cent of the GDP and to support enterprises through banks.

Accordingly, the industry body in its recommendations -- 'Towards an Organ ised, Safe & Sustainable Re-start of the Economy' -- said: "Since we are not going to see the end of the crisis soon, the government should not spend all its firepower at once. Safeguarding macro fundamentals are important to ensure that the country does not suffer significant rating downgrades, and potential flight of capital.

"In view of this, we recommend a fiscal support package, for FY21, limited to 2 per cent of the GDP, in addition to the INR 1.7 lakh crore provided under the Pradhan Mantri Garib Kalyan Yojana."

Besides, the industry body has urged the Central government to support enterprises through banks.

"Our estimates are that the economy would need a credit expansion of 14-15 per cent," the recommendation paper said.

CII requested the RBI to extend the wage and interest support. "Banks should provide additional working capital limits, equivalent to the April-June wage bill of the borrowers, backed by a government guarantee, at 4-5 per cent, with a refinance guarantee from RBI," the paper read.

"A similar carve-out could be provided for the April-June interest obligations of the stressed sectors."

The industry body also called for working capital support for the industry.

"Allow banks to provide enhanced credit limits for working capital across the board to all industries," the paper said.

As per the recommendations, the government should create a dashboard to monitor curves of various key cities and states.

"The re-start calendar across cities and states should be based on the dashboard. The progressive ramp-up in terms of the proportion of manpower allowed to get back to work, should be based on the movement of the respective curves on the dashboard," the paper pointed out.

In terms of sectors, CII said that those industries where work from home is difficult and which provide mass employment could be re-started first.

In the phase 1, CII recommended manufacturing, e-commerce and construction, alongside logistics and transport should be re-started first.

After 2-3 weeks of the phase 1, based on the progression of the city or state graphs, all other sectors could start.

"The ramp-up could be 50 per cent employees to start with, for about 3 weeks. This could be increased gradually, based on how the curves are progressing in various cities and states," the paper said.

"On the health front, the government should ensure adequate availability of masks, testing and protective gear."

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