View from India: Relief measures for MSMEs and aviation

The second wave of Covid across India has been more disruptive and destructive than the first. The Government of India and Reserve Bank of India have come forward with a slew of Covid relief measures for diverse verticals.

The Emergency Credit Line Guarantee Scheme, aka ECLGS, was first announced in May 2020 to mitigate the economic impact of the pandemic on MSMEs (micro, small and medium-sized enterprises). The scope of the scheme has now been expanded to include the aviation sector and to encourage healthcare facilities to set up on-site oxygen generation plants. The scheme which was to end in June has been extended until September 30 2021.

The second wave of the pandemic has pushed back the civil aviation sector’s nascent recovery by at least a couple of quarters. Inclusion of civil aviation sector will provide some liquidity support to the much battered sector, which has been severely impacted due to mobility curbs or travel restrictions.

“Healthcare infrastructure in tier two and three cities and small towns will benefit the most from the ECLGS 4.0 announcement. As per the announcement, it will provide sovereign guarantee for loans up to Rs 2 crore taken for setting upon-site low cost simple technology based oxygen generation plants,” commented Subodh Rai, Senior Director, CRISIL Ratings Ltd.   

This move will help augment oxygen availability, the shortage of which was severely felt during the second wave of the pandemic. “This scheme offers funding at an attractive interest rate of 7.5 per cent and also obviates the need to provide collateral by hospitals to augment oxygen capacity,” explained Rai. 

Already the PM CARES Fund has given in-principle approval for allocation of funds for installation of 551 dedicated Pressure Swing Adsorption (PSA) Medical Oxygen Generation Plants inside public health facilities in the country. PM has directed that these plants should be made functional as soon as possible to serve as a major boost to the availability of oxygen at the district level. The PM CARES Fund is a public charitable trust: the 'Citizen Assistance and Relief in Emergency Situations Fund'.

ECLGS has been formulated as a specific response to the unprecedented situation caused by Covid-19 and the consequent lockdown, which has severely impacted manufacturing and other activities in the MSME sector. The scheme provides MSMEs additional funding of up to Rs 3 lakh crore in the form of a fully guaranteed emergency credit line. The scheme also provides an incentive to member lending institutions (i.e. banks), financial institutions and non-banking financial companies to increase access to, and enable availability of additional funding facility to MSMEs. They are provided a 100 per cent guarantee for any losses suffered by them due to non-repayment of the guaranteed emergency credit line (GECL) funding by borrowers.

Recently, the Reserve Bank of India (RBI) announced that measures to the tune of Rs 16,000 crore are being provided to SIDBI. This is to fulfill the requirements of MSMEs. The financial needs may be of short-term measure or a long-term one. The 'Small Industries Development Bank of India' (SIDBI) is the principal financial institution for promoting, financing and developing MSMEs. Backed by RBI, banks have opened a liquidity window amounting to Rs 15,000 crore towards the benefit of sectors such as hotels, restaurants, bus operators and tourism activities, which are all contact-based services. RBI is India's central banking institution, which controls the monetary policy of the Indian rupee.

All these measures will be fully impactful if data is optimized. Apex body Nasscom, in its letter to Prime Minister Narendra Modi, emphasised the need for an effective data utilisation strategy. Data and AI (artificial intelligence) have a critical role to play for India to deal with the Covid crisis. In July 2020 the apex body had called for an urgent imperative for the country to build a data utilization strategy. Covid tracking and vaccination, insights and analytics from data could play a key role in decision making and early warning signals. Data is one of the most strategic ammunition available to manage the pandemic and respond better. Effective access to data for insights and planning, across all states and departments is a priority.

“The devastating impact of the second wave of Covid-19 is being felt across the country and its economic and social impact is unprecedented. The Indian technology industry is fully committed to supporting the nation to deal with the crisis,” said Nasscom in its statement.

While foreign vaccines are foraying into India, homegrown options are on the rise. Mukesh Ambani, Asia’s richest man who helms Reliance Industries, has used his refinery in Jamnagar to meet the oxygen supply in Maharashtra. The refinery-to-retail conglomerate has gone a step further. The group is exploring the possibilities of using Niclosamide, a tapeworm drug as a cure for Covid-19, as reported in the media.

Times like this call for greater partnership and collaboration across industries and the government. Times like this call for research and innovation so that medical supplies for Covid are affordable and accessible.

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