Only 25 percent of Micro, Small & Medium Enterprises (MSMEs) have managed to restart operations in Karnataka after the lockdown restrictions were lifted in the state on May 4. MSMEs are facing labour shortage and 50 percent of these would shut if they are not provided assistance by the government, the Karnataka Small Scale Industries Association has said.

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The association, which has 12,000 members and represents 6.5 lakh businesses in the state with a workforce of over 70 lakh people, said that MSMEs will not be able to pay salaries for the month of April unless they receive a relief package from the government.

"MSMEs have already suffered after demonetization and the economic slowdown. Around 50 percent MSMEs will shut down if there is no relief package from the government and if we are forced to pay salaries," president of KASSIA R Raju said.

They have also been hit by labour shortage as many migrant workers have returned to their home states amid the lockdown.

"Only 25% of enterprises have restarted operations in the state since the relaxations on Monday. SMEs are facing acute labour shortage with only 15-20 percent labour force coming to work," Raju said.

The Karnataka government has urged migrant workers to remain in the state and help revive the economy. However, the decision attracted criticism after special trains for migrants were cancelled on May 6 to stop them from travelling home.

Following which, the train service was resumed on Thursday.

Another big challenge for MSMEs is to pay workers for the month of April as their units were shut and no revenues were generated.

"It is not possible for MSMEs to pay salaries. They have paid salaries for March, but they have not paid for April. They are waiting for government relief before they can make payments," said S Nagaraju, Chairman of KASSIA’s Labour Committee.

Moreover, MSMEs are yet to receive payments from PSUs and bigger companies which has led to crunch in working capital.

Small scale industries have sought assistance from the government on various key aspects. They want banks to provide extra loans to MSMEs without interest to restart the sector.

MSMEs also feel that the three-month moratorium announced by RBI is not helpful as interest is accumulating, said Raju and added that the PF relief has also come with numerous riders and that the government should remove caps for companies to benefit.

The government had announced it would pay PF contribution of those in companies that employ up to 100 people, where 90 percent earn less than Rs 15,000 per month.

KASSIA also feels there should be no NPA for MSMEs for 180 days. The association has written to the central and state governments with these requests.

"We had asked for a fixed-charge waiver on electricity which the Karnataka government has provided," Raju said.

Karnataka allowed waiver of fixed electricity charges for MSMEs for two months as part of the compensation relief package.

First Published:May 7, 2020 7:29 PM IST