‘BOOSTER FOR MSMEs’
In conversation with MSME and transport minister Nitin Gadkari
Micro, small and medium enterprises (MSMEs) form the lifeblood of the Indian economy. With the Covid pandemic and the resultant lockdown pushing millions of India’s small businesses to the brink, the first tranche of Prime Minister Narendra Modi’s Rs 20 lakh crore package includes a slew of measures to support the sector that contributes nearly 29 per cent to the country’s GDP. Even as the government takes on a massive risk of underwriting loans worth Rs 3 lakh crore, the announcement has evoked a mixed reaction—while some economists have endorsed its ‘bang for the buck’, MSME bodies have expressed their disappointment with the failure of the measures to address their immediate concerns. Group Editorial Director (Publishing) RAJ CHENGAPPA and Deputy Editor SHWWETA PUNJ spoke to Union minister of MSME and transport NITIN GADKARI to find out if the measures are aimed at survival or revival. Excerpts from the interview:
Q. What’s the broader vision behind these measures? Do you think the package addresses key crisis points? A. This will give a booster dose to MSMEs. Collateralfree loans could benefit 4.5 million industries. In terms of crisis points, there was stress in the working capital of banks; there was no money for salaries or for term loan instalments. The biggest problem was that industry and CPSEs (central public sector enterprises), to whom MSMEs were supplying, collectively owed them over Rs 5 lakh crore. MSMEs were about to die. This is the first time that money will be paid to MSMEs in the next 45 days. It will be a huge boost to liquidity.
Q. How will you ensure the cooperation of banks, which are risk-averse, in lending to MSMEs?
A. Banks that give loans to MSMEs don’t take the risk. If they give one lakh crore, we (the government) pay insurance premium of Rs 1,500 crore. Banks give only 25 per cent of the loan amount. We cover the rest 75 per cent. Banks don’t give loans to MSMEs on their own risk; they stand to gain from this (collateral-free credit scheme).
Earlier, only nationalised banks could give these loans, now NBFCs (non-banking financial companies), district cooperative banks, urban cooperative banks, all have been authorised to lend. Loan availability has gone up. This will benefit the industry.
Q. Does the ministry have any data on job losses and MSMEs that had to shut shop due to the lockdown? A. No, we don’t have information on job losses yet. There won’t be loss of livelihood, because we have started work on the NHAI (National Highways Authority of India), so people will find work there. The big problem is how to pay labour when they are not working. Decisions on the EPF (Employees’ Provident Fund) front, including reduction of EPF contribution from 12 per cent to 10 per cent for all establishments for the next three months, are in addition to the [extension of the] scheme providing for 24 per cent EPF support [by the government for an additional three months]. The government is doing away with the earlier requirement of Rs 15,000 per month salary and firms with less than 100 employees to avail of the benefit. This will help 650,000 organisations and 43 million employees. This will benefit labour, the relief will be passed onto them [in the form of ] salaries.
Q. One of the issues we are facing today is the return of migrants from the cities to their homes. How serious is the issue and do you think these measures address it? A. A lot of migrant labour comes from backward areas not out of want but out of necessity, because they don’t have opportunities in their states. Fear is what drove people away. People thought they would die. They will return when things get better, I feel, because they don’t have opportunities there. We have to learn the art of living with corona—washing hands, keeping one-metre distance. We will have to implement it in factories. We have to stick to the new hygiene guidelines. This is an artificial virus that has been prepared in a lab. If we find a vaccine, everyone will be free. But all our stakeholders—industry, labour, customers—will have to learn to live with corona.
Q. Large companies can easily enforce social distancing, but small industry will find it a constraint.
A. Conferences and meetings cannot happen anymore with people sitting in close proximity. Shop floors will have to practise social distancing and small industry will have to manage.
Q. The definition of MSMEs has changed and the government has also decided not to invite global tenders in government procurements up to Rs 200 crore. How do these two measures benefit MSMEs?
A. The change in definition is a historic one; it had been pending for 14 years. The government has removed the distinction between manufacturing and service-based MSMEs. Turnover is another measure that has been added to define an MSME. So far, MSMEs were defined on the scale of their investments. Now, a lot of industries will be able to avail of the benefits. It will have a multiplier effect.
Q. And not floating global tenders for government purchases up to Rs 200 crore? How will that help?
A. A global tender would attract international companies, but now that business will go only to MSMEs. This will give them the opportunity to get more business.
Q. Isn’t this move protectionist? Are Indian MSMEs up to the challenge of meeting cost and quality parameters? A. We are not less [than anybody in terms] of skills, engineering or ability. People (businesses) are coming out of China, this is an opportunity for Indian MSMEs to get foreign investment and improve their own technology.
Q. MSMEs were hoping for assistance in paying salaries and utility bills...
A. Their EPFO contribution [has been] waived, which will free funds to pay salaries or utility bills.
Q. Is this a revival and reform package or a survival one? A. We are fighting two fights, one against corona, and the other for the economy. MSMEs will get a double benefit. These measures are essential for survival. Even before corona, there were issues, and these measures will make India a superpower economy. You will see the difference in six months.
Q. What do you think of the Rs 20 lakh crore package announced by the prime minister?
A. It is a historic package. Everyone is facing problems—state governments don’t have the money to pay salaries, the central government’s revenue is dropping, labour is not getting paid. Atalji used to say hum kadam se kadam mila ke aage badhenge (we will move forward together). PM Modi, in the package, has given a lot more than what is possible for a developing country like India. We have given a lot more than what richer and more powerful countries have given. This package will see us through [the corona crisis].
“FEAR IS WHAT DROVE PEOPLE AWAY. THEY’LL RETURN WHEN THINGS GET BETTER AS THEY HAVE NO OPPORTUNITIES BACK HOME”