The unprecedented disruption cause by the corona virus pandemic at the time when MSMEs in India were already suffering from the after-effect of demonetization order of November 2016 and hurriedly implemented GST on July 1, 2017, has delivered mortal blow to millions of units. It is very difficult to say how much units are still surviving out of 633.88 lakhs units as per NSS 73rd round (2015-16), since the Annual Report of the Union Ministry of MSME 2019-20 does not provide the latest record, while the MSMEs dashboard for the current status shows that there are only about 94 lakh MSMEs registered with Udyog Aadhar.

Under the Aatmanirbhar Bharat programme the definition of the MSMEs were changed with effect from July 1, 2020. The new definition has merged the two categories – manufacturing and services – into one. Micro enterprises are now those which have investment in plant and machinery or equipment not more than Rs 1 crore with annual turnover not more than Rs 5 crore. The amounts for small enterprises are Rs 10 crore and Rs 50 crore respectively, and for medium enterprises these are Rs 50 crore and Rs 250 crore. The definition was changed under covid support package to give benefit to the enterprises which were not included under earlier definition of medium enterprises for both the categories. In earlier definition medium manufacturing enterprises were those having investment in plant and machinery between Rs 5-10 crore, and for service sector between Rs 2-5 crore. The new definition seriously impacted the financial access to all the enterprises having investment of less than Rs 10 crore in manufacturing and Rs 5 crore in services. The major benefit of the relief package of Rs 3 lakh crore to MSMEs went to newly included bigger companies rather than previously operating companies. It proved to be number game that showed the Union government was doing great things for MSMEs.

The fact is entirely different, because Emergency Credit Guarantee Scheme is not working smoothly. Though the scheme was launched as a key stimulus for firms battered by lockdown restrictions, loans to struggling MSMEs are painfully slowed down. Only around Rs 19,000 crore of fresh loans were sanctioned under the scheme to businesses and MSMEs in October and November 2020. As of December 4, a total of only 2.05 lakh crore were sanctioned, but only 1.58 lakh crore were disbursed to 40.49 lakh borrowers out of which 13.40 lakh were given loan in the last two months after a great hue and cry. It may not be out of place to mention that loans were sanctioned to 80.93 lakh borrowers while 1.39 crore are eligible for such a loan. Government of India expects that 45 lakh units will resume business activities and safeguard jobs. It reflects the sorry state of affair. Since most of the MSMEs continue to be denied access to the relief package in particular and access to credit in general, budget 2021-22 must address the problem with speed. Provisions should be made for MSME borrowers to directly apply to Credit Guarantee Fund Trust for MSMEs.

Apart from access to finance, this sector is facing a variety of problems. One of them is lack of skilled worker at present, who have left for their home and are yet to return. Where there are units, there are no skilled workers, and where there are skilled workers, there are no units. It is a complex problem, and government must target two things in the budget. New MSMEs will have to be opened in large numbers in the areas where there are skilled persons available to work. Secondly, the government must try to do something so that the workforce that left their usual working place could return to their work. It is here the government should shed its narrow mindedness. The recent labour laws are against our workforce, which are limbs of the industries to produced and to server. How can a person be made strong by weakening the limbs on which the very movement depends? The workforce must have charm left in their works and should not be made exploitative. The tendency to automate MSMEs to deal with shortages of labour force should be discouraged in the present scenario of large scale joblessness, at least for now. The priority should be to mitigate the impact of the pandemic, and everything else should follow after that.

Apart from migration of labour force, the other problems the sector is facing are the demand and supply chain disruption, cancellation of export orders, raw material shortage, etc. However, there is no respite from tax on MSMEs. There are already demands for reducing GST for the sector, and the government must do something for this. Delayed payment to MSMEs is another major problem that cripples the growth of this sector. The government should assure that they get payments in time. There must be a redressal mechanism is place that can timely deliver. The Ministry of MSME has assured that they will come with a law to ensure that all MSMEs receivable should be paid within 45 days, but it is yet to see the light of the day.

The situation thus demands a fresh look at the ground level, doing away with narrow minded approach towards the various limbs of the MSMEs including the GST, labour laws, financial access, and incentives. It must be done on priority basis because MSMEs are the largest employers in the country after agriculture. This labour intensive sector was employing 114 million person, contributing about 30 per cent in India’s GDP, and approximately 50 per cent of our exports come from goods and services within this sector. Time has come to speed up and strengthen all ongoing schemes by providing sufficient fund and strengthened mechanism in place. (IPA Service)