COVID-19 crisis: 50% of MSMEs struggling to pay salaries and rents, says study

The report also states that the majority of respondents felt that interest waiver during the lockdown period and loans at concessional rates would help MSMEs tide over the crisis

Representational image (EPS)

CHENNAI: Nearly 50 per cent of micro, small and medium companies (MSMEs) are struggling to pay salaries and rents. One-fourth of the units expect their inventories to become obsolete or degraded, according to a survey done by the Madras Chamber of Commerce and Industry (MCCI).

The MCCI conducted the survey among 1,218 MSMEs, of which 945 are in Tamil Nadu, to understand the extent of the impact on their operations. It found that 40 percent of the units haven’t been able to collect their receivables on time.

Stating that the units surveyed are predominantly micro and small units, the study found that 78 per cent of MSME units are working at 50 percent capacity and 40 percent of the units feel that it will take at least 6 to 9 months for demand to reach pre-COVID levels, the report said.

It is also learnt that 65 per cent of the units employ less than 50 people and 89 per cent of them are micro and small units (turnover of less than Rs 50 crore). The study also found that 36 per cent of the units have more than 30 percent of migrant labour and now it is imperative to train and reskill new employees.

The report also states that the majority of respondents felt that interest waiver during the lockdown period and loans at concessional rates would help MSMEs tide over the crisis.

Recommending debt restructuring scheme specifically for MSMEs needs to be notified, the survey states. Loans can be restructured to ensure that there are no outflows till the end of this year and the amounts due can be converted into a loan repayable after two years at a concessional rate of interest, it said.

The study also recommends that the government ensure that dues to MSMEs from PSUs and governmental bodies are cleared immediately.

Other key recommendations:

• Moratorium on GST payments to be extended for MSMEs till October 2020 without any interest payments.
• Refund applications from MSMEs should be cleared immediately.
• Given the need for recruitment and training amongst half the units surveyed, the government should provide a training stipend for a period of 6 months for new recruits.
• Willing employees should be allowed to work up to 12 hours.
• Requirement to obtain registration and licence under the CLRA Act 1970 to remain suspended for 180 days.
• Increase in Dearness Allowance may be frozen till July 2021.
• Government may identify a nodal officer in all major industrial estates for coordination with MSMEs.