The government is also believed to be considering a one-year moratorium on loan repayment for MSMEs or Micro, Small and Medium Enterprises
New Delhi, May 13:
The government is considering a proposal to guarantee as much as 3 lakh crore of loans to small businesses as part of a plan to restart the economy battered by the coronavirus and a 50-day lockdown, sources said on Wednesday.
The possible move emerged a day after PM Modi announced Rs 20 lakh crore – equivalent to 10 per cent of India’s GDP — in fiscal and monetary measures.
The government is also believed to be considering a one-year moratorium on loan repayment for MSMEs or Micro, Small and Medium Enterprises.
Small firms may be eligible to borrow an additional 20% of their credit limit, sources said.
Confirmed details will be available only when Finance Minister Nirmala Sitharaman addresses the media at 4 pm today.
There is also a proposal to pay the April to June salaries of MSME employees from ESIC or Employee State Insurance Corporation, a self-financing health insurance scheme under the government that is mandatory for employees earning up to Rs 21,000 rupees a month.
The government may also pay the employees’ share of provident fund for those in the MSME sector who draw up to Rs 30,000 a month. The limit is currently Rs 15,000.
This will cost the government an additional Rs 5,000 crore.
Small businesses have been the worst hit by the lockdown with their activity coming to a halt. Some 10 crore workers in mining, construction, manufacturing and services sectors have been rendered jobless due to the lockdown, according to various reports.
Hundreds of thousands of cash-starved small businesses have either deferred or cut their workers’ wages this month, say industrialists and union leaders. The All India Manufacturers Organisation (AIMO)- an industry body representing some 100,000 small manufacturers – said last month that more than two-thirds of its members faced problems in paying salaries.
Several states had written to the government to allow the use of funds collected under the employee state insurance funds to cover wages or at least a part of it for the lockdown period.
The ESIC funds, which have Rs 31,000 crore at present, offer compensation in the form of cash up to three months of unemployment.
