Budget 2021-22: MSMEs seek moratorium on routine compliances for five years

According to D Muralidhar, former President of FKCCI, the moratorium on compliances will help MSMEs in saving a lot of time, effort and money.

Bengaluru: As the Micro, Small and Medium Enterprises (MSMEs) are the worst hit segment of the economy due to the Covid-19-induced disruptions, industrialists have urged Finance Minister Nirmala Sitharaman for a five-year moratorium on all the routine compliances to help MSMEs in recovering losses.

Speaking to ETV Bharat, D Muralidhar, Former President of Federation of Karnataka Chambers of Commerce and Industry (FKCCI), has said that both the Centre and State governments should consider this proposal for the benefit of the industry, which significantly contributes to the Indian Economy in terms of Gross Domestic Product (GDP), exports and employment generation.

“For all the compliances which are coming under both the state government and central government, there must be a moratorium for three to five years,” said Muralidhar.

As per experts, the compliance burden is disproportionately high on MSMEs and a mid-sized industry has to deal with hundreds of compliances related to the environment, taxes, labour, etc.

According to Muralidhar, doing away with these compliances will help entrepreneurs in saving a lot of time and money in these troubled times.

“Moratorium on compliances is completely in the hands of the governments and it is not going to cost them any money but it is going to save a lot of time, effort and money for the MSME owners,” he added.

As per an estimate of the Central Statistics Office of the Ministry of Statistics and Programme Implementation, MSMEs contribute around 30 per cent of the country’s total economic output, 48 per cent of total exports and employ over 11 crores, non-agriculture workers.

However, the industry suffered a body blow when the government imposed a nationwide lockdown for nearly three months to save the lives of citizens from the infectious Covid-19 disease.

The lockdown has not only dried up demand but also created supply-side issues as millions of labourers went back to native villages and towns as the industries were completely shut down.

Interest costs are still high in India

One more issue Muralidhar raised was high-interest costs the MSME sector is bearing. He pointed out that compared to other segments of the economy, MSMEs are at a disadvantage while availing loans.

“Though interest costs softened in the last one or two years, compared to the interest costs in other parts of the world, MSMEs still borrow at a much higher price,” he observed.

He further said that the sectors like housing, education, etc getting loans at low-interest rates compared to interest rates offered to MSMEs.

According to Muralidhar, the government should sit with banks to help MSMEs on this front.

“Lending to MSMEs must come at a much lower interest rate so that they can invest a lot of money in capital goods and increase the capacities,” he added.

To rescue troubled MSMEs from the credit crunch, the government last August announced a three lakh crore Emergency Credit Line Guarantee Scheme (ECLGS) offering collateral-free loans.

So far, the scheme got two extensions and the latest one ends in March 2021. The scope of the scheme was also extended to cover Mudra loan borrowers and 27 stressed sectors identified by the RBI appointed Kamath panel.