MSMEs | Covid second wave: Shock, fear, helplessness: Covid’s second wave is an emotional and economic crisis for MSMEs – The Economic Times

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Synopsis–It is not just the economic hardships; the second wave of Covid-19 has torn families. As MSMEs struggle to stay afloat, they confront a virus ravaging their kith and kin.

Manish Bansal, Director & CEO of Window Magic, a uPVC windows and doors manufacturer, still shudders when he thinks of the time his entire family, except him, were detected Covid positive. In March this year, his mother, father, wife and 1.5-year-old daughter contracted the deadly virus which left Bansal in an acute state of panic. “Covid entered my family in the last week of March. The first week was extremely tough in every sense — mentally, physically, financially. Being Covid negative, I was also under home quarantine and in isolation. That added to the pressure on me. Later, my parents had to be hospitalised but since I was in quarantine, I knew little about what was happening in their lives. All I could do was talk to them,” he woefully recalls.

Bansal would get a call from doctors once a day informing him about the well-being of his parents. However, it would mostly be a limited and quick interaction which never quite eased the stress he felt about their condition.

Not surprisingly, the task of running his MSME firm with over 500 employees went on the backburner at that time. “In times like these, business or business priorities don’t come to your mind. I don’t even know how my firm operated in the first seven days. As far as I recall, they called, and I gave them a decision but to be honest, I didn’t know what I was doing in those days,” he adds.

Bansal’s panic-stricken account of dealing with the virus is not a solitary tale. For the millions of MSMEs, the emotional upheaval of coping with the loss of lives and livelihood has taken an even greater toll amid Covid’s second wave ravaging the country.

An emotional and economic crisis

Ask Jayanth Mutha, Director of agri-electricals company Himlite Products, who lost his business partner, Ketan Sheth to the contagious virus in April. Mutha recounts the horror when Sheth’s blood pressure suddenly dropped and the doctors could not revive him. “I was completely shocked and numb. I had regularly been in touch with him, so getting to know that he passed away so suddenly was a reality that shook me. That feeling of shock soon gave way to a feeling of fear,” he reveals.

In the days that followed, Mutha experienced a range of emotions from shock, fear to helplessness and confusion. “I couldn’t help but think what would happen to my family if it had been a similar situation at my end,” he says, the sense of anxiety palpable in his voice.

iStockIndia’s nascent economic revival is threatened by the second wave.For the last three years, Mutha and his business partner had been working on prototypes of an innovative ceiling fan with power saving techniques. His partner’s domain of expertise had been in motors and embedded programming. However, taking the business forward now seems a daunting task. “Electronics and software are not my domain. Finding someone who is a domain specialist and can take over the existing project will not be easy. I am clueless at this point and should have thought of a business continuity plan from the start itself,” he confesses.

His struggles and dilemmas are reflected in the experience of others whose challenges seem two-fold in the current context. If last year was tough, this year is far more arduous for a sector which contributes 30% to India’s GDP and 48% to exports. With lockdowns enforced in different parts of the country, weekend curfews, labour exodus and rising cost of raw materials, the immense resource crunch is a harsh reality being faced by MSMEs.

Sudha Anand, Founder, Swaas, a homegrown MSME home decor company says that the second wave is causing significant disturbances in production. “Absenteeism, restrictions in movement of goods and people because of lockdowns and fear of infection is rampant. There are delays in all the processes and the pandemic also has a negative impact on people’s motivation as there is a lot of uncertainty around. Sales have dipped by 40% compared to last year this time. Our overseas customers are very concerned about the uncertain situation here and doubtful if we will ship the orders out on time. They are looking at other countries as a supply option,” Anand laments.

Then and Now
Anand’s views make one think of this time, last year when MSMEs had been one of the worst affected amid the virus outbreak. In fact, it had been the last nail in the coffin for the sector, which had been struggling even prior in the aftermath of GST and demonetisation. Shuttered units, high fixed expenses, cancelled orders and social distancing protocols in the wake of the virus had made it extremely difficult for the sector to stand on its feet. A survey by All India Manufacturers’ Organisation (AIMO) in June last year had revealed that at least 35% of MSMEs and 37% of self-employed professionals were shutting shop despite the financial dole outs announced by the government for their ilk.

iStockMigrant workers have again left economic centers and metro cities, a redux of 2020.As part of the Rs 20 lakh crore economic stimulus package announced in May last year, Finance Minister Nirmala Sitharaman had announced a Rs 3-lakh crore collateral free loan scheme for businesses, especially MSMEs, in the first tranche. A provision of Rs 20,000 crore subordinate debt for the sector and Rs 50,000 crore equity infusion through MSME Fund of Funds (FoF) had also been announced. But such measures had left the industry in mixed sentiments, with many MSMEs of the view that it did not offer them immediate financial support to clear off dues at a crucial hour.

After the first wave, many of the small businesses had to dip into their personal savings to remain afloat. And when they were just about looking at demand and growth pick up, they have been hit hard once again. Vikas Vasal, National Managing Partner, Grant Thornton Bharat says that the supply chain has been badly disrupted because of lockdowns in different parts of the country. “It has been impacted both for supply of finished goods as well as procurement of raw materials. Sometimes, goods have been in transit for a long time. Many in the labour force have moved or are contemplating moving back to their hometowns for fear of job losses, personal health and safety. Thus, even if things open up, it would take time for the labour force to return and for MSMEs to resume full level of production and distribution,” he highlights.

Industry experts whom ET Digital reached out to express disappointment on the ‘silence’ of the government so far on the relief measures for the sector. Rajiv Chawla, Chairman, Integrated Association of Micro Small and Medium Enterprises of India (IamSMEofIndia) doesn’t mince his words when he says that the Covid wave this time in India has hit us like Tsunami. He predicts the first quarter of 2021-22 to be deeply and negatively impacted. “Last year, the relief measures like a moratorium on EMIs and interest, deferment of statutory payments like GST, Income Tax, ESI, EPFO etc were announced within days of the lockdown on 24th March 2020. This time the government is silent. There is a growing panic in MSMEs as they find an enormous drop in businesses in April, a bit of uncertainty and a drop in revenues in May and June. They are staring at the payments of EMIs, GST, EPFO, ESI, TDS, TCS, license renewal fee, electricity and many more local taxes as well as utility bills in the coming months of May to July,” he explains.

What can be done?
Given the magnitude of the outbreak this time, many MSMEs have pitched in to lend a helping hand. Chawla, for instance, started an Emergency Covid Centre with 200 beds almost overnight and has facilities like oxygen, food, medicines for those in need. Their next target is to add more beds, set up a 20-50 bed ICU with ventilators and an oxygen plant.

Rajive Chawla of Faridabad Small Industries Association has started a 200 bed Covid hospital.Others have halted some of their production processes which require oxygen gas. Mohammad Jafar, Partner of Moradabad-based MA Incorporated which exports handicrafts to Europe, Middle East and US, says that they have told their suppliers to send it to hospitals instead. “In order to join the aluminium parts, the products need to be welded with oxygen gas. Seeing the acute scarcity of oxygen right now, we are not using it at present and hence the welding is currently not being done. Shipments will be delayed but such resources will be more effectively utilised elsewhere right now,” he says.

Jafar adds that making labour work in 40-degree temperatures with social distancing and safety protocols is also proving extremely difficult. And even though he has orders in hand for the Christmas season, the situation currently is not conducive to executing them. “Right now, we cannot understand anything. Everyone is shattered at this time and has forgotten everything else. Our clients in Europe have been very supportive and we are thankful for that,” he avers.

But what about support from the government to bail out MSMEs from this gloom and doom? Many MSMEs had availed of emergency loans to revive their operations last year and hence have increased their debts and paid additional interest. The burden of financial liabilities on them is hence more now than it was in April last year. Besides this, the cost of operations in the last few months has increased manifold because of a rise in prices of all industrial inputs, fuel and raw materials such as iron and steel, polymers, copper and aluminium.

Chawla suggests some key measures that should be considered for the industry in the light of reduced margins, cash flows and to boost the overall financial strength of MSMEs. “We seek urgent announcement of the moratorium on EMIs and interest from May till September 2021; deferment of statutory payments like GST for the month of April due in May; deferment of other statutory payments like ESI, EPFO etc in the first quarter; extension of license renewal and other compliances till September and extension in dates of filing statutory returns due to reduced staff in MSMEs, among other measures,” he states emphatically.

The strategy adopted by an MSME enterprise at this time would also depend on whether it is engaged in essential or non-essential services. While those in essentials would need more certainty on labour supply, the ones in non-essentials can review their portfolio of clients accordingly. “Non-essential MSMEs need to review and see where delivery can be postponed for the time being. Also, the slant should be on how one can go about creating reduced losses during this time. Lot of discussions between MSMEs and their key clients would need to come up. If we can manage alternate supply chains to move goods, it will offer confidence. It will be a big challenge for MSMEs if they lose orders,” Mohammad Athar, Partner – Economic Development and Infrastructure, PwC India says.

The fate of 65 million MSMEs currently hangs in balance, given the severity of the ruthless Covid-19 wave this year. Will they be able to emerge stronger this time from the varying effects of the crisis? Their resilience and ability to survive in tough situations can augur well in this once-in-a-century crisis that has cast its dark shadow everywhere.

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