Cheaper power can help MSMEs stay competitive: VR Sharma3 min read . Updated: 24 Jun 2020, 06:56 AM IST
MSMEs’ operations were completely disrupted during the nationwide lockdown. Now, they are faced with a shortage of manpower and liquidity
With micro, small and medium enterprises (MSMEs) struggling to get back on their feet after a prolonged coronavirus-induced nationwide lockdown, both the government and financial sector should work in tandem to help them pull through, said V.R. Sharma, managing director, Jindal Steel and Power Ltd. In the latest interview for Mint’s Pivot or Perish series, he said small businesses should be offered cheap power and cash to wait out the period of low demand. Edited excerpts:
What can the MSME sector do to get over the coronavirus crisis?
The MSME sector forms the last link of the value chain for industrial products and employs a large section of the workforce. Without a robust and thriving MSME sector, the inclusive growth story of India will not be possible.
MSMEs’ operations were completely disrupted during the nationwide lockdown. Now, they are faced with a shortage of manpower and liquidity.
Access to easy and cost-effective finance to the MSME sector is a priority for reviving growth in areas like consumer durables and automobiles, which in turn, will drive demand for steel.
The government had addressed this in the relief package, but the focus needs to be now on implementation.
MSMEs should be given electricity at reasonable prices and a “One Country One Tariff" policy should be implemented to normalize competitiveness and growth of MSMEs across the country.
On the manufacturing side, which sectors among MSMEs are best placed to emerge stronger from the crisis? Will they be able to innovate in terms of products and markets to survive?
I strongly believe that MSMEs involved in the making of steel, pharmaceutical, health equipment and cement, and firms involved in e-commerce activities will emerge stronger in their respective sectors.
The world has changed significantly post-covid-19. Now, these firms need to adjust to the changing market dynamics and respond with new strategies and innovative products.
How soon can we see the results of the ₹3 trillion package announced by the government for the MSME sector? Do you see any major challenges?
For the MSME sector, they need a lot of handholding. The announcement of the relief package has come in very handy to support these businesses.
It is heartening to note that as on 18 June, public sector banks have sanctioned loans of more than ₹40,000 crore under the 100% Emergency Credit Line Guarantee scheme, out of which more than ₹21,000 crore has already been disbursed.
The green shoots of revival are becoming visible in the Indian economy.
However, there are a few reports of layoffs in MSMEs and small businesses. This needs to be addressed efficiently as the industry is broadly dependent on skilled manpower and, hence, I would urge these companies to retain their people, as they are critical for the recovery process.
What measures will banks have to put in place to prevent the expected deterioration in asset quality for the MSME sector in view of the covid-19 crisis?
The GST (goods and services tax) collection has been going up considerably.
GST collection went up from about ₹32,000 crore in April to more than ₹62,000 crore in May. By July, it is likely to cross ₹100,000 crore. This is a good sign of economic recovery.
Overall, about 30% of the loans by private sector banks are on moratorium, which borrowers can avail until 31 August. Small- and medium-sized enterprises, and retail, have dominated the moratorium book, with relatively lower take-up from large corporate borrowers.
However, the moratorium should not be seen as a benchmark for credit losses in the corporate segment, as many borrowers have deferred payments purely for cash conservation.
Since the domestic economy is swiftly returning to normalcy, we don’t see widespread deterioration in asset quality.
The need of the hour is to assist businesses by infusing liquidity to regain the normal level of the economy.
What should be done to ease the concerns of MSMEs, while ensuring that the financial system remains healthy in the post-covid world?
MSMEs should be provided easy access to credit and the market. Last year, our Prime Minister had asked all public sector units to compulsorily procure 25%, instead of 20% of their total purchases, from MSMEs.
We should take all measures possible to improve the competitiveness of MSMEs through technological upgradation of their manufacturing systems, availability of cheaper raw material, making all the taxes GST-compliant and providing easier access to the market, especially to those units located in remote areas.