No takers for Modi’s Rs 20-lakh-cr package among Jharkhand MSMEs
High interest rates, poor demand and uncertainty caused by COVID-19 are some of the key reasons
Despite the much publicised Rs-20-lakh-crore economic stimulus package announced by the Modi government more than two months ago, claiming it would help economic growth of the country, the medium, small and micro enterprises (MSMEs) in Jharkhand are a harassed lot today. Faced with bureaucratic obstacles and caught in the cobweb of banking formalities, more than 15 lakh such units in this mineral-rich state, endowed with plenty of other natural resources, have not been able to come out of financial doldrums. More than fifty to sixty per cent of the entrepreneurs running such industries have shown little interest in taking advantage of the Centre’s much applauded stimulus package for one reason or the other.
President of the Jharkhand Chamber of Commerce and Industry, Kunal Ajmani, says that though MSMEs provide the largest share of employment after agriculture in Jharkhand, thereby contributing enormously to the socio-economic development of the state, their proprietors refrain from taking advantage of the stimulus package as the funds available in the package involve very high interest rates. Ajmani says these people are already reeling under the burden of paying interests charged on the loans they have already taken from financial institutions. He says that they had expected that the interest rates in the package meant for the MSMEs would be nominal, enabling them to avail of the offer.
Ajmani also says that most of the MSMEs in the state are being run by local industrialists who have hardly the tenacity to repay the high-interest loans on offer. Moreover, the uncertainty prevailing in the industrial and other sectors during the COVID-19 pandemic is another factor, he adds. When asked whether the entrepreneurs will be ready to avail the offer once the pandemic is over, he says that it may not be possible unless the government lowers the rate of interests. At the same time, banking institutions will have to ease the processing of documents which too is a great stumbling block in the success of the package for MSMEs in Jharkhand, he says.
The Jharkhand Chamber of Commerce and Industry chief also says that recently the chamber had organised a meeting with state-level bankers and the state government officials to sort out the ticklish issues involved in execution of the provisions of the stimulus package meant for the MSMEs.
Experts in the MSME sector too agree that unless officials and lending institutions become more responsive, the stimulus package may not catch the attention of these entrepreneurs. Recounting the situation prevailing in Jharkhand, former Assistant Director in the Ministry of MSME, Government of India, Sushil Kumar, says that MSMEs in Jharkhand face problems which are unique in themselves. He says that problems such as low liquidity or low cash flow, lack of skilled workforce, unpaid EMIs and loss-making balance sheets are amongst the major problems.
These apart, Kumar agrees with Ajmani that operations of MSMEs in the state have been further disrupted by the COVID-19 pandemic. He also lists problems like unsold inventory, lack of availability of raw materials from China and shrinkage of demand, salary cuts and poor logistics.
Entrepreneurs are thus unable to take advantage of the central scheme in a state which is endowed with a substantial part of the mineral wealth of the country, is the largest producer of Tasar silk and the second largest producer of horticultural crops, apart from contributing 20 per cent of India’s total steel production.