Srinagar: Days after the administration of Jammu and Kashmir constituted a high level committee for relief and revival of business sector in the erstwhile state, the Federation of Chambers of Industries Kashmir (FCIK) in response to the committee has placed some inputs for the consideration.
These inputs, according to a statement issued by FCIK, are based on the facts that economy of Jammu Kashmir is shattered, crumbled, distressed and battered besides the environment being grim and tense.
According to FCIK, for industrial policy 2016-26, the Industrial policy issued by the government Vide Order No-58 Ind of 2016 Dated 15, 03, 2016, is being flouted every now and then.
The Policy protects the local industrial products by way of price preference up to 15% as per the clause 2.16.2 which reads “Up to 15% price preferences shall be available on the landed cost of the product to the local SSI units in all Government purchases.
The price preference shall also apply in case of any goods purchased by the public sector undertaking /boards, purchased for their own non-commercial use” but an order issued by the finance department vide No. A/50(2016)-I -865 dated 04-09-2019 directs all government departments to purchase material through GEM portal defeating the clause and object to support local Industry.
The statement said that order issued by the finance Department needs to be withdrawn forthwith to save the Industry from extinction. By introducing purchases through Gem portal you are placing all SMEs in competition against big manufacturers from outside the state and the day is not for away when the small scale sector will be rendered to wage labour from self-employed not because of state coercion but out of market competition.
A major support to manufacturing industries was exemption of Toll tax on raw material imported into JK.
With the abolition of toll Tax and LakhanPur toll barrier this benefit is denied and all the SSI units including major steel manufacturing units are struggling for survival as this formed their major share of profit besides the entry tax charged on Industrial products coming from other states into J&K is also abolished in the name of one India one tax.
The statement mentioned that government should strictly adhere to industrial policy in force and provide marketing support to the local manufacturing sector of JK considering the geographical position, locational disadvantage and being at the dead end of the country.
The government has to find an alternative solution of supplementing this amount of toll tax incentive promised in the Industrial Policy as investments are made considering the incentives promised in the policy which is valid till 2026.
About the payments pending against supplies made, works executed by MSMEs, FCIK said that release of payments withheld by different government agencies on account of supplies made/works executed should be immediately released. This delay in payments has put many of the units in distress and some have turned NPA’s or are on the verge of becoming so. Payments pending with PDD (SAUBHAGYA SCHEME ETC) R&B, Irrigation and Flood control, Jal Shakti, Rural Development Deptt and others should be immediately released.
About delay in reimbursement of GST, it said that government had assured immediate reimbursement of GST paid which prompted JK Bank to come up with a Scheme to grant a loan of an equitable amount but to our dismay we have to pay interest to financial institutions which is another a burden on our economics.
About the release of Interest subvention amount, FCIK mentioned that government also needs to release the interest subvention for 2016 basic rehabilitation scheme amounting to Rs 130 Cr approximately which has not been released since March 2019.
Timely release of these payments would have pumped equity into the accounts and saved many accounts from slipping into stress and helped improve the health of financial institution involved as well.
Immediate release of these payments is imperative for revival of these establishments which will help the financial institution involved as well, the statement added.
About the banking and finance, it said that losses incurred by the businesses over last couple of decades have resulted in unprecedented stress and erosion of capital. In spite of several interventions by the government.
These could not bear fruits as the recurring disruptions have overburdened the business establishment resulting in the situation they are presently in.
The recent stimulus package announced by GoI is a huge package but most of the businesses in JK could not take advantage of it as they have been witnessing lock down after lockdown.
More so, the package was only available to accounts which were not overdue on 5th August 2019 and the request of extending it to accounts which were standard has not yet been acceded to resulting in poor response of the scheme.
The closure of business post August 5 2019 has crumbled, shattered and put the businesses on the course of extinction. There is a dire need of special intervention to offset the impact of lockdown from 5th August 2019 to 31th March 2020 because the closure was forced on the business post abrogation of Article 370 and 35A.
FCIK said that government needs to reimburse as compensation the entire amount of interest paid /unpaid, the amount of bills raised by PDD, rent, salaries etc and the business losses suffered by these from August 5 2019 to March 25 2020. Besides re-structuring of their loans as they have not been able to pay back and have or will eventually turn NPAs.
Pertinent to mention that this may not be treated as any relief but compensation to bring these establishments back on their feet as the lock down was forced on them by virtue of the advisory issued.
For relief and revival of businesses, FCIK in a statement suggests that the loans to Micro Sector up to 5.00 Lakh who have suffered losses and have not shown any sign of recovery be waived off.
The statement mentioned that for accounts which are under stress but are standard, a capital infusion of up to 30% be induced with restructuring of loan accounts and a moratorium of 3 years and a repayment schedule of 7-10 years with an interest subvention of 5% on the entire loan amount.
For units that were ready to start commercial production in AUGUST 2019 or after that and could not commence production due to closure the moratorium period be extended up to 1 year after the lock down is lifted and an interest subvention of 5% for 5 years after commencing commercial production and restructuring of loans.
For units linked to Horticulture like C A Stores and Horticulture processing sector who could not achieve commercial production in the year 2019 due to lock down and again in 2020 due to COVID lockdown the loans be restructured.
The gestation period be extended commensurate with their commercial production and time of availability of raw material as this is entirely a seasonal and post-harvest activity where raw material is available once a year .An interest subvention of 5% on restructured loans is recommended to sustain this activity where huge investments have been made.
For units who had either liquidated their loans or were self-financed, it has been observed that they also faced the problem of erosion in capital as others. These are units who were beyond their infancy period and were doing well but due to this whammy, have been worst hit.
It is strongly recommended that fresh loans on softer terms of interest as 5% interest subvention be extended for a period of 10 years to these units.
For accounts that have turned NPAs and are potentially viable, the accounts are restructured, fresh working capital induced, a suitable moratorium granted and an interest subvention of 5% on the restructured loans.
For accounts that have turned NPAs but are not viable, a comprehensive exit policy be framed and accounts settled under OTS thus formulated.
According to FCIK, the policy for OTS be framed in consultation with Stake Holders considering all aspects of the cases and market appetite besides the reasons for their miserable plight which is mainly the law and order position and unprecedented situation in the region.
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