May 26, 2020 3:20:31 am
The Congress on Monday poked more holes in the Centre’s ‘Atmanirbhar Bharat’ package, with former chief minister Prithviraj Chavan claiming that 99 per cent of micro, small, and medium enterprises (MSMEs) in the state would not be eligible for availing loans through the Emergency Credit Line Guarantee Scheme.
As part of the stimulus package to revive small businesses from the financial damage caused by the prolonged coronavirus-induced lockdown, Union Finance Minister Nirmala Sitharaman had announced Rs 3.70 lakh crore collateral-free automatic loans for businesses, including MSMEs. But on May 22, when the Union Cabinet approved the Guaranteed Emergency Credit Line (GECL) facility to enable the additional funding, an eligibility condition that the business’s turnover should be Rs 100 crore and that there should be no outstanding for more than 60 days, was specified.
Objecting to the condition, Chavan pointed out that of 99.4 per cent of the 6.34 crore registered MSMEs in India were micro businesses. These, he said, collectively employed 10.76 crore of the 11.1 crore, roughly 97 per cent, workforce in the sector. “It is very clear that the eligibility criteria rules all of them out,” said Chavan.
Another 3.31 lakh units were small enterprises. Only 50,000 or 0.08 per cent of all registered MSMEs were medium enterprises, he said.
Sharpening his offensive against the Centre, the Congress leader said “expecting businesses and industries to avail additional loans at a time when there has been a serious reduction or evaporation of their incomes was like rubbing salt to their wound.”
Chavan also questioned if the risk averse banking sector would approve of issuing loans without collateral to industries or businesses who find themselves in the red. “Would the Reserve Bank of India approve of such a move? Asking banks to provide non-collateral loans goes against the banking principles itself,” he said, forecasting the possibility of a large number of such loans turning bad.
Arguing that mass closures had resulted in supply-chain disruption and the total destruction of demand, Chavan said the Centre ought to have announced an economic stimulus full of cash grants to various affected sections.
He went on to allege that the Centre’s stimulus package amounted to Rs 2 lakh crore or just 1 per cent of the Gross Domestic Product. “When the Prime Minister first announced the Rs 21 lakh crore package, I had welcomed the announcement. But once the Finance Minister shared the details, it was clear the package was nothing but another jumla. India needs a stimulus package at this stage, not another jumla,” he said. Chavan also said the government had tapped into the provident fund account of 4.3 crore salaried employees to infuse fresh capital in the market, and objected to the Centre’s scheme of reduction the statutory EPF contribution by employers.
Reminding Prime Minister Narendra Modi of his ridicule of the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) as a symbol of UPA’s failure, Chavan pointed out the same scheme has now been given an additional budget of Rs 40,000 crore to aid the poor. “The Prime Minister must apologise to the nation for having misled them in the past,” he said.
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