Parliamentary panel to govt: Extend ECLGS loan repayment period for MSMEs up to 7-8 years
Credit and Finance for MSMEs: The committee also recommended increasing the limit for collateral-free loans including term loans or working capital loans under the CGTMSE scheme from the existing Rs 2 crore to Rs 5 crore.
Credit and Finance for MSMEs: The Parliamentary Standing Committee on Industry has recommended the government to extend the loan repayment period under the Emergency Credit Line Guarantee Scheme for MSMEs up to seven- eight years. Currently, the repayment period of three-four years including the
moratorium period under the scheme is a very short period for MSMEs that are struggling to survive from the second wave of Covid, the committee said on Monday. The parliamentary panel also asked for at least a two-year moratorium period on the principal amount. Finance Minister Nirmala Sitharaman in her budget speech this year had announced an extension of the ECLGS scheme up to March 2023 along with an increase in guarantee cover by Rs 50,000 to Rs 5 lakh crore. According to the minister, more than 130 lakh MSMEs have raised additional credit under the scheme since its launch in May 2020.
The recommendations to the government were part of the 315th report on Demands for Grants (2022-23) pertaining to the MSME Ministry presented by the panel headed by Rajya Sabha member Dr K Keshava Rao. The report submitted to the Parliament incorporated suggestions from industry experts around budgetary allocations and overall challenges faced by MSMEs.
They have woken up very late as moratorium period under ECLGS 1.0 was of one year which already lapsed last year. In terms of the repayment period, the instalments can be extended up to at least six years as there is a lot of pressure among MSMEs to return the money. If the government increases it to seven
years, there is no harm as it has nothing to lose in it. So, recommendations are in the right direction with respect to repayments,? Rajiv Chawla, Chairman at the MSME association — IamSMEofIndia told Financial Express Online.
According to the ECLGS guidelines, the current repayment period including the moratorium under ECLGS 1.0 is four years and the moratorium period on principal repayment is one year. Likewise, for ECLGS 1.0 extension, the repayment period is five years and the moratorium period is two years. Further, for ECLGS 2.0 repayment period is five years but the moratorium is available for only one year. For ECLGS 2.0 extension, ECLGS 3.0, and ECLGS 3.0 extension, the repayment period is highest at six years along with the moratorium of two years.
The committee also recommended increasing the limit for collateral-free loans including term loans or working capital loans under the CGTMSE scheme from the existing Rs 2 crore to Rs 5 crores irrespective of the company type such as
private ltd., limited liability partnership, partnership or proprietorship. This was among the key asks by MSME associations for the budget as well. Nonetheless, Sitharaman had announced revamp of the scheme with the infusion of additional credit of Rs 2 lakh crore for micro and small enterprises.
Among other key recommendations by the parliamentary panel included:
Forming separate policies for medium enterprises vis-a-vis micro and small enterprises based on their divergent needs.
Establishing SME Finance companies in the country on the lines of infrastructure finance companies (IFCs) or micro-finance companies that are not engaged in real economic activity but help in the financing of SMEs.
Digitising GST regime without the requirement of separate hard copies to be provided to the concerned department to claim refunds.
Setting up a Central Market Intelligence Centre to replace goods imported by MSME with domestic manufacturing. The said Centre may be entrusted with the task of putting out a list of imported products and spreading awareness of the
same to attract entrepreneurs to set up new manufacturing enterprises in the MSME Sector, the panel said.
Using existing Technology Centres for subsidised testing and certification of regional MSMEs. The panel said MSME Ministry should also devise a mechanism to tie up with global Testing Centres whose certificates are acceptable in respective countries/regions to ease the testing process, reduce cost, and encourage innovation among new entrepreneurs.