A month after reopening, industry bodies complain of a complete breakdown of supply-and-payment chain in the market, which has created severe shortage of working capital, no loans, and widespread job losses.
The industrial sector, they say, is reeling under a liquidity crisis and the banks, they allege, are not of any help despite the “collateral free automatic loans” to micro, small and medium enterprises (MSMEs) being a main feature of the ₹20 lakh crore relief package announced by the Union government.
“The Finance Minister said loans to MSMEs would be ‘automatic’ and earmarked ₹3 lakh crore for it. But banks are still wary of lending and concerned about non-performing assets. They are asking for orders on the book and to justify the need for the loan, among several other restrictions to grant loans. Not many industries in the State have received loans,” said C.R. Janardhana, president, Federation of Karnataka Chamber of Commerce and Industry (FKCCI).
Banks are also favouring larger MSMEs with a good credit rating, and the smaller firms that are more in trouble seem to figure nowhere in their scheme of things, said Srinivas Asranna, chairperson, Peenya Industries Association (PIA). Industry bodies like FKCCI, PIA, and Kassia are now holding a series of meetings with lead bankers to prompt them to disburse more loans.
Given the economic situation today, it may be months before the flow of new orders is restored to pre-lockdown days, industrialists say. But what is also troubling the industry is the existing orders being deferred, or worse, cancelled.
MSMEs work as ancillary units to large-scale manufacturing industries, which are themselves in trouble.
“For instance, the auto sector has had zero sales for two months now and has a large inventory of unsold vehicles. Forget new orders, auto industry is not ready to take delivery of orders they had placed before lockdown. This is true of other sectors as well. This has led to a cascading effect. Unless my customers pay my bill, I cannot clear the bills for raw materials. The only way to solve the disruption of payment and supply chains is to take a loan for working capital which has not been easy to come by,” explained Mr. Asranna.
At a recent tripartite meeting between the State government, industry and trade unions as part of the Task Force set up by the Labour Department, the Joint Committee of Trade Unions (JCTU) appealed to the government to ensure large industries clear bills of MSMEs for orders already on the books, which will ease up the liquidity crunch in the industry. However, the State government has not made any intervention in the space till date, sources in the MSME industry said.
Add to this, supply of raw materials from Tamil Nadu, Maharashtra, Gujarat, and Rajasthan — all States that have reported high number of COVID-19 cases — has not been restored.
“Even the imports have been impacted. Though some raw materials imported through the sea route have arrived, its delivery has been delayed for a long time now due to COVID-19 fears and associated procedures,” said Mr. Janardhana.