Centre disburses Rs 1 lakh crore to help MSMEs tackle cash crunch amid Gulf crisis: Top govt official
New Delhi, June 30
The Centre has disbursed approximately Rs 1 lakh crore under the Emergency Credit Line Guarantee Scheme 5.0 to enable MSMEs and other industries to tide over the liquidity crunch during the West Asia crisis, MSME Secretary Bharat Khera said on Tuesday.
Speaking at a Confederation of Indian Industry (CII) event here, Khera said, "Our effort has been to ensure that MSMEs don't suffer unduly in such times."
Khera said while disruptions caused by the West Asia crisis had affected some export consignments and cash flows, the government has already introduced the Emergency Credit Line Guarantee Scheme to help MSMEs tackle liquidity and working capital challenges. He added that the government had also engaged with the Department of Revenue and the shipping authorities to address logistical bottlenecks arising from the crisis
"I believe our industry is inherently very resilient. Whether it was during COVID or the recent West Asia crisis, it found corrective measures on its own and identified alternative sources. By learning from these supply chain disruptions, our MSME sector has become even more robust and resilient," he observed.
The Cabinet approved the ECLGS 5.0 on May 5 to support businesses facing short-term liquidity issues due to the Middle East conflict. The scheme aims to facilitate additional credit flow of up to Rs 2.55 lakh crore, including Rs 5,000 crore earmarked for the airline sector.
Under the scheme, the government provides credit guarantee cover of 100 per cent for MSMEs and 90 per cent for non-MSMEs to lending institutions through the National Credit Guarantee Trustee Company Ltd (NCGTC) for loans given to eligible borrowers. The step has been taken to ensure that no jobs are lost during the crisis phase.
He pointed out that after the West Asia crisis, the industry explored new markets for exports. India is also entering several free-trade agreements (FTAs) and this will bring enormous opportunities for MSMEs. Many markets which were earlier closed, are now open for the industry, he added.
Khera further stated that the government will examine the possibility of creating an appropriate export finance arrangement for micro, small and medium enterprises (MSMEs) in consultation with the Department of Financial Services (DFS), industry and Export Promotion Councils, after exporters flagged working capital constraints arising due to the longer cycle of realisation of export payments.
"We can perhaps work on it in consultation with the industry as well as with the Department of Financial Services. Many of the MSMEs today are also members of the Export Promotion Councils, we can certainly work out an arrangement for export finance," the Secretary added.
— IANS
Reader Comments
Finally some relief! My father runs a small manufacturing unit in Coimbatore, and since the Gulf crisis started, our export orders dropped by 40%. The liquidity crunch was so bad that we had to delay salaries last month. This scheme sounds promising, but I really hope the paperwork isn't too complicated for small players like us. The secretary saying they'll look into export finance arrangements is also encouraging—long payment cycles from overseas buyers have always been a nightmare for MSMEs.
Good to see the government acting proactively. The ECLGS 5.0 with 100% credit guarantee for MSMEs is a solid move—banks will be more willing to lend without asking for collateral. But I'm a bit skeptical about the Rs 2.55 lakh crore target. Last time during COVID, actual disbursement under similar schemes was much lower. Let's see how much actually reaches the ground. The secretary's point about FTAs opening new markets is also valid—Indian MSMEs need to diversify beyond the Gulf region.
As someone working in the export sector in Mumbai, I can confirm the cash crunch is real. The Red Sea shipping disruptions and payment delays from Gulf countries have put immense pressure on small businesses. This Rs 1 lakh crore disbursement is timely, but I worry about the interest rates—even with government backing, many MSMEs might end up paying high rates from private banks. Also, the secretary should consider reducing GST compliance burdens during such crises. Just my two cents.
I run a small IT services firm in Bangalore that has clients in the Middle East. While we aren't directly impacted by physical goods disruptions, the payment cycles have definitely lengthened. This scheme is a good safety net, but I'm not sure it addresses the root cause—our over-reliance on the Gulf region for exports. The secretary's mention
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