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Parliamentary panel calls for fresh package to help MSMEs

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A parliamentary panel has said the stimulus package announced by the government was inadequate to help small businesses in the pandemic-hit economy and batted for more measures, particularly for micro, small and medium enterprises (MSMEs).

It has recommended that the government should immediately come out with a larger economic package “aimed at bolstering demand, investment, exports and employment generation” to help the economy, including MSMEs, to recover from the fallout of Covid-19.

“The measures adopted were more of loan offering and long-term measures instead of improving the cash flow to generate demand as immediate relief,” the parliamentary standing committee on industry said in its report on Tuesday.

“The stimulus package announced by government last year could not percolate down properly to the lower levels of MSME sector,” it said. “The committee feels that extra efforts need to be taken on this front.”

It suggested that a new National Employment Policy may be considered along with exploring the feasibility of establishing a National Electronic Employment Exchange and building a skill-based database to provide employment to skilled manpower in their area of expertise.

The maximum impact of the pandemic was felt on the gem and jewellery, leather, man-made yarn and fibres sectors, the report said. As these are highly labour-intensive sectors, employment prospects in these sectors were also badly affected by the lockdowns imposed on account of Covid-19. Besides, the maximum impact of the pandemic was felt on lodging, tourism, airlines, retail sector, steel, apparel, and automotive sectors, it said.

“It is estimated that almost 25% of MSME loans could slip into default as several MSMEs are finding it tough to draw working capital from banks,” the report said, quoting industry associations.

The committee recommended that the government should provide incentives to attract more MSMEs to register themselves on the Udyam Portal, which currently is a burden for MSMEs as it increases the number of compliances.

Citing the perennial issue of delayed payments to MSMEs, the committee has recommended that strict provisions against delayed payments need to be put in place to ensure timely release of payments by central public sector enterprises (CPSEs), which will immensely help MSMEs to meet their working capital or credit requirements.

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