No relief to sick industries

Hyderabad: With the RBI not acceding to the request of industry bodies to give sick Medium, Small and Micro Enterprises (MSMEs) extensions to pay their dues, the industries are left in a lurch.

Roughly 7 lakh small and medium industries (particularly in the manufacturing sector) employing over 40 lakh people are facing complete breakdown.

The total outstanding loan amount of the entire MSME sector as on June 2013 was RS 61,318 crore as discussed in the recently held State-Level Bankers’ Committee meeting. Of these 7 lakh units, roughly 3 lakh are facing closure as per industry associations which have termed the crisis as an extraordinary situation coupled with natural calamities.

Among the key requests that the RBI turned down were: a moratorium period of one year be given to the sick industries without any penal interest; the original limits of loan sanction be restored and cash credit or demand loan be released immediately; and; loans for purchase of diesel generator sets along with simple interest be provided to all MSMEs. Rescheduling of loans without effecting the status of the industry during which period no unit should be made NPA, was also among the key requests.

Among the industry associations which made formal representations on these issues to the Industries Department were Federation of  Small and Medium Enterprises of AP, Association of Lady Entrepreneurs of AP, Federation of AP Industries and Federation of AP Small Industries Association.

The manufacturing sector has taken a severe beating and many industries, which had earlier become non-performing assets, have now been declared as “sick”; worse still is the fact that even the allied sectors have been impacted.

“The situation has cast a shadow on the flow of investments. Alarmed by the situation, many industry associations had been pleading with the state government to provide incentive packages and recommend rehabilitation of financial institutions to tide over the crisis. Even the existing units are achieving only 50 per cent production, resulting in huge losses,” said FAPI president B.V. Rama Rao.

“Even the State Level Bankers’ Committee meeting held in the presence of RBI regional directors discussed these issues and sent suggestions but they were put on the backburner.

Till this day, industries continue to function in pathetic conditions with political uncertainty plaguing the state for the last four years. Shockingly, every day about 75 units are shutting their shops, throwing thousands of people out of jobs,” said FSME-AP president, A.P.K. Reddy.

Next: MSMEs must be revived

MSMEs must be revived

Hyderabad: The sick units taken up for revival under the Industries Department’s special wing for the purpose of saving the ailing MSME sector, account for less than two per cent. This number is too small, but the committee has suggested more units to be taken up for revival.

Under the AP Small Scale Industries Revival Scheme 2006, the Industries Department helps sick units identified by banks to revive their businesses.

The banks are required to forward the proposal, together with the revival and rehabilitation package and administrative sanction given by the competent authority of the bank, to the State-Level Committee operating from under the commissioner of Industries.

“Banks want a quick recovery of their dues and most units are not getting enough time to get revived. Despite the Reserve Bank of India’s guidelines to revive sick units, less than two per cent of units are under the revival scheme,” said the president of ALEAP, Rama Devi.