Maharashtra: How MSMEs in India’s economic hub are left Covid-ravaged even as they stare at worst phase now

The state has around 47.78 lakh MSEs out of which 47.60 lakh are micro enterprises. (File image)

Ease of Doing Business for MSMEs: Micro and small enterprises (MSEs) in Maharashtra reeling under the impact of Covid-induced lockdown and post-lockdown phase are looking at a longer road to recovery despite a year after the pandemic struck. The country’s economic powerhouse Maharashtra, which has the fourth-highest concentration of small businesses in the country with an 8 per cent share of India’s 6.3 crore MSME base, is yet to see a complete turnaround of small businesses that have been falling short of their production targets due to shortage of manpower, capital, and broken supply chain, according to experts Financial Express Online spoke to.

“Business recovery for small businesses in Maharashtra is not more than 35 per cent while the national average would be around 42 per cent. There is a big impact on production while many migrant workers haven’t returned. Due to current Covid restrictions, trading businesses are not operating properly while manufacturing segments are operating but their head office or branch offices aren’t open,” Chandrakant Salunkhe, Founder, Maharashtra Industrial and Economic Development Association (MIEDA) told Financial Express Online.

The state has around 47.78 lakh MSEs out of which 47.60 lakh are micro enterprises and 17,000 are small enterprises, according to the MSME Ministry’s FY21 annual report citing NSS 73rd round survey during 2015-16. The total employment among its small businesses stood at 90.77 lakh out of 11 crore people employed with the sector across India. “At least 50-55 lakh employment has been impacted. The accounting and software systems, which these small enterprises use for orders or supplies, are not available for their employees at home. You cannot manage everything on phone,” added Salunkhe. MIEDA represents 95,000 small businesses in Maharashtra.

According to the Economic Survey of Maharashtra, out of Rs 2.48 lakh crore targeted credit disbursement to small businesses in FY21, Rs 90,000 crore was disbursed to 8.85 lakh businesses up to September last year. Under the Package Scheme of Incentives by the state government to encourage the setting up of new industries in the industrially less developed areas, Rs 473 crore was disbursed to MSMEs up to November up from Rs 258 crore in FY20. Moreover, under the Pradhan Mantri Mudra Yojana, which offers up to Rs 10 lakh loan to non-corporate and non-farm small and micro enterprises, Rs 27,398 crore loan was disbursed to 47.7 lakh accounts in FY20. The data for FY21 wasn’t shared.

“First six months of the year were disturbed as majority labour had gone back to their home town while the return was 40 per cent less. Moreover, the cost of production has also increased even as there has been no relaxation in power cost. The industry was shut for months but the government was still collected power charges. Power is a raw material for multiple sectors like foundry and steel. Rs 8.50 per unit is the charge and 25 per cent is fixed charge irrespective of whether you use it or not. Raw material prices have also increased to a minimum of 30 per cent across categories,” Lalit Gandhi, Sr Vice President, Maharashtra Chamber of Commerce, Industry & Agriculture (MACCIA) told Financial Express Online. The chamber has 800 association members representing 4.5 lakh MSMEs.

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Sectors including textile, foundry, automotive, tourism, etc., have taken a maximum hit in the state while plastics, pharmaceuticals, grocery, medical equipment, healthcare, etc., have witnessed increased customer traction. “Non-essential services have been impacted the most like automobile while many units in multiple sectors had to close,” Purushottam Agwan, Vice President at Thane-based Chamber of Small Industry Associations.

Maharashtra has been the biggest beneficiary of the Emergency Credit Line Guarantee Scheme (ECLGS) to offer loans to Covid-hit small businesses and other enterprises in the state. Maharashtra had availed maximum loans worth Rs 14,364.30 crore disbursed to MSME units as of September 16, 2020, under the scheme as of September 16, Minister of State for MSMEs Pratap Chandra Sarangi had said in a written reply to a question in the Rajya Sabha last year. Other leading states were Tamil Nadu (Rs 12,445.58 crore), Gujarat (Rs 12,005.92 crore), and Uttar Pradesh (Rs 8,907.38 crore).

“ECLGS was helpful because MSMEs could pay pending GST and other dues but the size of the problem is so big that it was of help only to an extent. Moratorium too was of help but we would need a similar concession again for survival amid the second wave. The supply chain has also been severely impacted. Unless there are people to lift and load supplies in a truck, how will MSMEs get the raw material? If entities are closed then how will I book my order of supplies?” added Agwan.

As India overtook Brazil on Monday to become the second worst-hit country with Covid cases continuing to surge, Maharashtra led the Covid tally with 5.64 lakh active cases. The state registered 51,751 new infections and 258 related fatalities on Monday whit its capital city Mumbai contributed one-fifth of the state’s daily cases. The second wave might have repercussions on small businesses that would extend the runway of their recovery further. According to a report by PTI, state minister Aslam Shaikh had said that the government will issue fresh restrictions to curb the spread on Tuesday itself. On April 4, the state government had announced daily night curfews from 8 pm to 7 am and a complete lockdown on weekends until April 30.

“Second covid wave will be detrimental for businesses. The government has already mandated the Covid test for workers. We are seeing labour again going back to home town due to the second wave. Around 25 per cent micro retailers were forced to shut shop so far,” added Gandhi. The state government had extended the deadline for workers to be reported Covid by five days to April 15, according to an order dated April 9.