Ahmedabad: Shortfalls in revenue, decline in demand, production shortfalls, surge in raw material prices and stretched payment cycles were among the worst after-effects that plagued industries post the lockdown of 2020. To meet overhead costs and other operating expenditures, several industries, particularly, MSMEs availed emergency credit to battle the disruptions caused due to the pandemic. Clearly, the number of loans sanctioned under emergency credit line guarantee scheme (ECLGS) surged by a whopping 140% in a year, according to the latest report by State Level Bankers’ Committee (SLBC).
The 170th SLBC meeting was held earlier this week, during which the report was released. It states that the number of industries seeking loans under ECLGS surged from 1.5 lakh in the first quarter of 2021-22 to 3.6 lakh in the corresponding quarter this year. During the same period, the amount of loans sanctioned too surged from Rs 7,480.29 crore to Rs 23,424 crore.
The cumulative disbursals at the end of the first quarter of 2021-22 stood at Rs 20,434 crore in Gujarat under ECLGS.
“To meet piling overhead costs amid revenue shortfalls and stretched payment cycles, a number of industrial units took loans. Since the interest rate of loans extended under ECLGS was 7.5% which is lower than what is extended to industries otherwise, certain units also availed these loans to repay other loans so that they can save on interest money,” said MM Bansal, convener, SLBC – Gujarat. “The definition of MSME was changed by the Union Ministry of Finance last year by including service sector units under MSMEs and increasing the turnover limit upto Rs 100 crore for a unit to be classified under MSME. As a result, more companies availed the benefit of emergency credit, made available as part of the relief package under Atmanirbhar Bharat,” Bansal added.
Sectors such as apparel, garments and textiles, hospitality and tourism, among others witnessed a relatively slow revival, suggest industry estimates, and therefore, brought in more takers for emergency credit.
Industry players said that while demand revived slowly, piling raw material costs since October 2020, also one of the reasons for surge in industrial units availing emergency credit.
“Raw material prices have doubled across all sectors including real estate, chemicals, textiles, among others. After the lockdown, demand began reviving and export orders began to pour in. To meet the production requirements amid surging costs, many industries have opted for emergency credit,” said Hemant Shah, president, Gujarat Chamber of Commerce and Industry (GCCI).
Source:thetimesofindia.com