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Home / India News / Rs 1 lakh crore assistance for MSMEs must: P Chidambaram

Rs 1 lakh crore assistance for MSMEs must: P Chidambaram

For larger companies, he added, the government should announce a “Paycheque Protection Programme” on the lines of the one done by the United States.

india Updated: Apr 30, 2020 00:27 IST
HT Correspondent
HT Correspondent
Hindustan Times, New Delhi
The former finance minister also recommended a “Rs 1 lakh crore credit guarantee fund for MSMEs that will help them to go to the banks and borrow money.”
The former finance minister also recommended a “Rs 1 lakh crore credit guarantee fund for MSMEs that will help them to go to the banks and borrow money.” (Mohd Zakir/HT PHOTO)

Former finance minister P Chidambaram on Wednesday urged Prime Minister Narendra Modi to provide Rs 1 lakh crore wage protection assistance to 63 million Micro, Small and Medium Enterprises (MSMEs) to help them pay wages and salaries to 110 million people for the month of April.

For larger companies, he added, the government should announce a “Paycheque Protection Programme” on the lines of the one done by the United States.

“This is not a legislation but a financial assistance package,” Chidambaram said, addressing a news conference through video-conferencing.

“It is bewildering that there has been absolutely no financial package or assistance announced for businesses since the onset of Covid-19. The government may have the luxury of time but the MSMEs do not. They need to know right away whether they will be helped to stay afloat and thereby pay salaries and wages to those dependent on these businesses,” he said.

“Tomorrow is the last working day of the month. More than 120 million people of India are waiting with bated breath. They want to know if they will be paid their salaries and wages for the month of April. There is palpable tension and rising uncertainty among the working people of India and their families,” Chidambaram said.

Congress president Sonia Gandhi on April 25 wrote a letter to Prime Minister Narendra Modi, urging him to announce an immediate Rs 1 lakh crore “wage protection” package for the revival of MSMEs and warned that if problems of the sector are not addressed it could have a devastating effect on the country’s economy.

She said MSMEs are suffering a loss of around Rs 30,000 crore every day due to the nationwide lockdown and efforts should be made to revive these as they are the backbone of the economy.

The letter followed deliberations within the party’s 11-member consultative group, headed by former Prime Minister Manmohan Singh, on the revival of the MSME sector hit hard by the ongoing nationwide lockdown being implemented to contain the deadly coronavirus pandemic.

“How will these people feed themselves and their families without an income? These 110 million people’s livelihoods are in danger now because most of the employers are unable to pay wages and salaries. The businesses have had no sales this month and their payments to their vendors are also stuck, leaving the vendors also in distress,”Chidambaram said.

“Large swathes of the private sector are faced with what economists call an extreme liquidity shock. Furthermore, these businesses are also unsure about their future. They do not know whether they can continue their businesses or will be forced to shut down permanently. The time to make bold decisions to save the MSMEs is now. If businesses do not see hope, they will decide to close.” 

The former finance minister also recommended a “Rs 1 lakh crore credit guarantee fund for MSMEs that will help them to go to the banks and borrow money.”

Elaborating on the Paycheque Protection Programme, the former finance minister said according to the income-tax department, there are roughly 10 million people with a salary income of less than Rs 3,50,000 a year or Rs 30,000 a month.

“Assuming an average salary of Rs 15,000 a month for these 10 million people, the total cost comes to Rs 15,000 crore for the month of April. This is not a large sum to protect the livelihoods of 10 million people who have filed tax returns and paid taxes in the past, and can be easily found. The government must announce a Paycheque Protection Program right away to protect the salaries of these 10 million employees.”

The Congress also suggested waiver of employers’ contributions to the employees provident fund (EPF) and employees state insurance (ESI), on a temporary basis, for the next three months, he said, adding this will assist in reducing the payroll costs of employers and retaining the workforce.

“Time is of the essence. In the absence of a clear signal of assistance from the government during these extremely difficult times, the private sector will be forced to resort to large scale retrenchments and layoffs which will devastate livelihoods of hundreds of millions of people,” Chidambaram said.

“We urge the Prime Minister to step in urgently and announce an assistance package to protect the wages and salaries and pay cheques that are due in the next few days,” he added.

A BJP functionary said the government is already working out the plan for helping MSMEs. “MSME minister Nitin Gadkari has already assured that the government is thinking of formulating policy to help the sector in all possible ways. The government is also looking at setting soon setting a Rs 1-trillion revolving fund for MSMEs to bring in much-needed liquidity,” the BJP functionary said.

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