Integrated approach by government to reshape MSME sector

By OEM Update Editorial June 10, 2020 1:18 pm IST

This is the time that all stakeholders should encourage the people and the industry and create confidence in their minds for the future.

Talking about the financial announcements for the MSME sector, Nitin Gadkari, Minister of Road Transport & Highways, Micro, Small & Medium Enterprises, in a conversation with Shereen Bhan, Managing Editor of CNBC-TV18, says that the government is initiating all possible measures to support MSMEs and is looking for ways to restructure the MSME sector with additional working capital for their reaping benefits.

The finance ministry has recently announced a financial package for the MSME sector. Can you please enlighten us with detailed disbursement planning of the same?
Presently, we are facing a very critical problem. It is not just India; the world’s economy is the biggest concern. Talking about the MSME sector, their status is also a concern, and we are with the business and the industry. The government has already taken a decision for up to March end, and said that the banks have already restructured 6 lakh MSMEs and they are giving permission of up to 31st December 2020. We are expecting that they can complete the restructuring of around 25 lakh MSMEs. At the same time, we have also provided 3 months for deferred payment there and additional working capital of 20 percent is also sanctioned and that can strengthen the MSME sector. The corona war is enduring, but now we are in a position that we need to understand how to fight against corona and at the same time we have to resume our daily life. This is the way in which we are trying to find our way out.

Regarding the national highway road construction that we have already started, 65-70 percent traffic is on the road and at the same time, export and import has started, banking operations are going on and now we are trying to start small-scale industries to work also. In many green areas, it has already started and in some of the areas, preventive measures are being taken and additional guidelines are also given; also, we are giving the permission to initiate it. I know this is a problem, but I also feel that it is a blessing in disguise.

So, this is an opportunity. China is in a position to be a very sound economy in the world and now because there is hatred towards China, it is an opportunity for the Indian economy, Indian industry and Indian entrepreneurs to take advantage of it. We will definitely take advantage of it and we should be positive about it.

Already I have had an interaction with many people by video conferencing and we have received lot of good suggestions and have already forwarded all the suggestions to the finance ministry and the Prime Minister’s office. I am confident that the government is seriously working on all these proposals and whatever is possible for the government, it will do.

It is said that there could be a corpus of ₹40,000 crore which can be extended to provide line of credit to the tune of ₹3 lakh crore. How will this benefit the MSME sector?
Presently, the working capital of the MSMEs is already increased. I also found some problems in it, and when Nagpur Chamber of Commerce people approached me, they mentioned that the state government office for stamp and registry are closed, and without documentations it will be difficult for the bank to issue 20 percent of additional working capital. I spoke with the State Bank of India’s chairman and he mentioned about the requirement of completing the legal formalities; he also asked me whether the government is ready to give the promise that they will not compound it and then they can think about it. But after that the chief secretary of Maharashtra and I discussed with him, and he issued an order and now in Nagpur the State Bank of India has released additional working capital. In the whole country, the process is going on. So it is the time for the country and all stakeholders to understand that the state government is also in a problem; they have no money to give salary for next month, the revenue of central government is also reduced, and the banks are also in a challenging position, so we need an integrated approach. Everyone is in a problem and we cannot compare our economy with Japan’s economy and US’ economy. Still our government is very clear that whatever is best possible for us to give support to the MSME industry, we will do it. I am confident that we have to save everybody, we have to protect everybody and we are taking all the stakeholders together and we need to march ahead. The government is also seriously thinking on it.

A large chunk of the manufacturing opportunity has gone to the South East Asian countries and hasn’t come to India. What can be the possible reason for the shift?
We do have video conferencing and video interactions, where I interacted with 6,000 scholars from 15 universities from around the world. They mentioned about the change of mind especially amongst the investors, particularly the good industries that are having good ratings, and they are now keenly interested to establish their establishments in India. It basically depends on our approach. The government is very friendly, and we are developing good infrastructure; water, power, transport and communication are the four important things which are very important for the industry and now they are available in India. Our ports are good, efficiency has increased, and from export import point of view, it is also an ideal place. I am confident that we will enjoy the advantage of all these situations, so we should think positive with full confidence. This is the time that all stakeholders should encourage the people and the industry and create confidence in their minds for the future.

Is the government thinking about helping MSMEs from a salary perspective to create a salary support fund?
These are all genuine and legitimate problems. However, as the Minister of Micro, Small & Medium Enterprises, it is not possible for me to declare anything about it. It is a confidential issue right now and decisions are yet to be announced. We already had an interaction with all the stakeholders, associations, chambers, FICCI, CII, and others and now on the basis of that, our department is already making the research and study of all these proposals and sending it to the finance ministry.

Do you believe that a salary support fund is a legitimate request of the MSMEs and is the government considering that?
We are considering many different things, but in this position, to give any indication as to what my department has recommended to finance ministry will not be appropriate. I will assure you and all the MSMEs that we are very serious and sensitive, we understand the situation and we will try our level best. Whatever best is possible for the government we will do it for the MSMEs.

Should the auto sector give up on the scrappage policy given the government’s fiscal constraint or do you believe that the policy is likely to see the light of day?
We have already completed the scrappage policy. We have taken the opinion of different departments and will soon implement the policy as early as possible. I understand the importance of it; there is a delay, but we are very much committed to it and after the lockdown we will start the working on this policy. We are also discussing issues of incentivising with the finance ministry. We are trying our level best to see which benefits and incentives we can offer for this and that is the reason that the policy is delayed.

What has been the impact of COVID-19 on the MSME sector and how many MSMEs are likely to be faced with a solvency problem?
We understand the problems being faced by MSMEs, what type of help they need, what type of deferred payment and in which sector they need, and at the same time what the problem is with the working capital. The major concern is that the MSMEs are not getting timely payment for the supplies that are being provided to the state government undertaking, central government undertaking and major industries. So, we need to find out some way out on that. We are also trying to make some scheme for that, wherein we can create some funds and provide guarantee to the banks and know whether that fund can be used as a rolling fund. This is also one of the schemes we are thinking about, and we are also pushing for that. We are now talking to the finance ministry, public undertaking ministry, and state chief ministers that we need some mechanism for how the MSMEs will get their payment within a month because in some cases for more than 3 months the payment has been delayed, and that is one of the problems that MSMEs are facing.