MSME associations welcome move to study Covid impact, sick/closed units

Representative Image (Source: ShutterStock)

Associations representing micro, small and medium enterprises have welcomed the government’s move to analyse the number of sick and closed units in the past five years and assess the impact of Covid-19 on small businesses.

The Ministry of Micro, Small and Medium Enterprises invited bids on November 12 to conduct the study on sick/closed small business units, which it expects to be completed in two months.

“The Ministry of MSME maintains data of registered MSMEs through Udyam Portal, Udyog Aadhar Registration and EM-II,” the ministry said. “In order to cater the needs of sick units/closed units and to find out reasons for sickness/closure, the government faces certain limitations due to lack of accurate data. The current data source does not provide enough information on sick/closed units.”

“This is a welcome move as the MSMEs were the most impacted due to the pandemic,” said Mukesh Mohan Gupta, chairman of the Chamber of Indian Micro Small and Medium Enterprises. “It will not only help us know how many units got shut down but also help the ministry to formulate and announce revamped and new schemes.”

Gupta said the study duration was achievable and the ministry should go quick on this.

“This is definitely a positive step. During the Covid crisis, several associations and organisations had done independent studies to analyse the impact on MSMEs, which helped the ministry to draft policies,” said Ramamurthy, a member of the All India Council of Association of MSMEs, which represents 170 MSME associations across the country. “It is good that the ministry has recognised the need for this and should do it on a war footing.”

According to Micro, Small and Medium Enterprises Development Act, a micro and small is said to have become sick if any of its borrower accounts remains a non-performing asset for three months or more, or when accumulated losses erode an enterprise’s net worth to the extent of 50 percent during the previous accounting year.

Vinod Kumar, president of India SME Forum, noted that an exercise to analyse sick and closed enterprises is a positive step that will provide the government with data to plan schemes and policies.

In February, former MSME minister Nitin Gadkari had said there is no government data on the number of MSMEs that have shut permanently or temporarily due to the pandemic.

“The figures of the real GDP in India during the first quarter of 2020-21 indicate that economic activity contracted due to the strict lockdown measures imposed by the government. This contraction has also had an impact on the MSME sector. However, as MSMEs are there in both the formal and informal sector, data regarding temporary or permanent closure of the units are not maintained by the government,” Gadkari said in response to a question in parliament.

In July this year, MSME secretary BB Swain had called for an evaluation of the extent of damage due to the pandemic on MSMEs.