The representing body of auto parts suppliers, Automotive Component Manufacturers Association of India (Acma), called the first tranche of economic revival package for the micro, small and medium enterprises or MSMEs timely and pragmatic.
About 45% of Acma members come under the MSME category. The industry body, which has about 850 companies as its members, said that the measures announced by the Finance Minister Nirmala Sitharaman on Wednesday would give a big boost to the MSME sector, which has been under severe stress due to the lockdown.
“The change in definition of MSMEs has been a long-standing recommendation of Acma. With this new classification, a significant number of Acma members stand to benefit as the sector is dominated by smaller enterprises. That apart, infusion of liquidity through the collateral free automatic loans and the subordinate debt scheme, will ease the severe challenge of working capital being faced by the sector," said Deepak Jain, president, Acma.
Earlier today in her speech the FM announced revision in the definition of MSMEs that now sets higher limits on the investments and turnover of the enterprises in order to help them steer through the slowed down economic activities due to covid-19 pandemic.
These measures include replacing the earlier investment limit of upto ₹10 lakh for micro service enterprises and ₹25 lakhs for micro manufacturing companies with ₹1 crore for both the categories. The government has now also added additional parameter of turnover of upto ₹5 crore for a company to be classified as the micro enterprise.
FM also announced ₹3 lakh crore worth of collateral free automatic loans for businesses including MSMEs wherein borrowers with up to 25 crore outstanding and ₹100 turnover will be eligible. The loans given under this scheme will have a four-year tenor with moratorium of 12 months on principal repayment. While the scheme can be availed till 31 October 2020, the government has offered to give 100% credit guarantee cover to the banks and the NBFCs on principal and interest.
“It’s a good first step to address the issue of survival as a large number of small businesses which is the back bone of our country and measures taken to help them in way of collateral free loans and the fund of funds. Great step in government tenders up to 200 crore limited to Indian MSMEs. ₹90,000 crore to discoms and ₹70,000 crore support to the NBFCs are positive steps," said Sunjay Kapur, chairman, Sona Comstar and also chairman for CII Haryana Council.
Jain, however, continues to be hopeful that the government will soon announce measures to revive market demand for the auto industry.
"A uniform GST rate of 18% on all vehicles and auto components, backed by an incentive-based scrappage policy would bring the automotive industry back on track. That apart, we look forward to support from the government for payment of salaries of workmen and contractual labour during the lockdown period," added Jain.