May 6, 2020

High tariffs, zero production — MSMEs want electricity charges waived as breather

High tariffs, zero production — MSMEs want electricity charges waived as breather

Workers at a spice factory in Pune (representational image) | Udit Kulshrestha | Bloomberg

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New Delhi: With the lockdown throwing micro, small and medium enterprises (MSMEs) into a deep crisis, the sector now wants state governments to waive off not only fixed electricity charges but also the power bills for the months of March and April.

The MSMEs have been beset by a range of problems from loss of production, loss in demand to shortage of labour. So far, Telangana, Punjab, Rajasthan, Gujarat, Haryana, Maharashtra, Tamil Nadu and Uttar Pradesh have provided some sort of relaxations such as deferred payment of the fixed charges but the sector feels it is not enough.

On an average, for 50-100 KW of power, the MSME units have to pay fixed charges of between Rs 25,000 and Rs 40,000 a month or between Rs 2 lakh and Rs 5 lakh a year. They also have to pay for any additional consumption.

The Laghu Udyog Bharati, an RSS affiliate representing small and medium industries, has now written to the Narendra Modi government urging it to direct the states to provide relaxations to the sector.

“We have requested the Centre to send advisories to state governments for relaxation in electricity bills. How can we pay the average bill or fixed bill when for the entire month of April, factories were shut and there was no production?” Virendra Nagpal, convenor of the Laghu Udyog Bharati, told ThePrint.

“Take for example, the Delhi government. It is asking us to pay the average bill for April even when there was a complete lockdown,” he added. “How come we pay without consumption? Industry can’t pay average bill on the lines of January or February when production was at normal.”

Of the 69 lakh MSME units across the country, Nagpal said, 64 lakh are facing the problem of paying average electricity rental to state discoms. “MSMEs are in a tough spot and by our estimates, 50,000 to 60,000 units will close down due to the lack of demand, lack of credit and the pile up of rent, utility bills and salaries. Getting the business back on track is not going to be an easy job,” Nagpal said.

Anil Bhardwaj, general secretary of the Federation of Indian Medium and Small Scale Industry (FISME), another trade body, said the MSME secretary should take up the issue with state governments.

“Among the worst hit by the lockdown has been the small scale industry,” Bhardwaj said. “The industry has been affected by high tariffs with zero production. We are demanding a complete waiver of the bills. We are job creators but this is the time we have suffered. We don’t have large capital to sustain.”

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MSME ready to pay actual bill but not fixed

Industry stakeholders say they are willing to pay the actual bill but not the average one.

Rajendra Kumar, who has a factory in Sector 63, Noida, which produces electrical cables, said the Uttar Pradesh electricity department has not charged him for the last seven days of the month of March after the lockdown was announced. But he has received the fixed bill for April with a penalty clause, which will come into effect if the bill is not paid on time.

“We have not consumed electricity in April as there was no production. How we can we pay without production?” Kumar asked. “We have to pay wages to labourers without work, rent and other costs to survive. The government has said you can open now but police still don’t allow the inter district movement of labourers. How can we then start production?”

“We are ready to pay for actual consumption but not the average bill. We are demanding a complete waiver of the April bill,” he added.

Virendra Kumar, who has a factory in the Narela Industrial Zone, is facing the same problem. “A few state governments have initiated waivers but the Delhi government has said average charges have to be paid,” he said. “My factory was shut in April. We are ready to pay for actual consumption but the average consumption bill isn’t justified at this time.”

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States offering relaxations but MSME demand more

A couple of states have, however, come up with measures for the sector.

Andhra Pradesh has waived fixed charges for three months — March, April and May.

Gujarat, Rajasthan, Punjab, Tamil Nadu, Haryana and Telangana have revised fixed charges to help small industries. Rajasthan has also deferred the payment of fixed electricity charges for March and April.

Maharashtra has suspended physical meter readings and will collect only the average bill. The Punjab government has decided to collect the actual bill, as opposed to the average bill, for the lockdown period. The state government has initiated another scheme in which the electricity board will pay 12 per cent interest if industries pay their bills in advance.

A MSME ministry told ThePrint that the government central electricity regulatory commission has issued circulars to the states asking them to waive off utility bills but states are yet to follow through.

“We are in touch with state governments to sort out the issue,” the officer said. “We are advising states to maximise incentives in this critical time but states are complaining that they are also facing revenue problems.”

Bipin Malhan, president of the Noida Entrepreneurs Association (NEA) that represents 3,000 MSMEs, called on the governments to do more.

“We have demanded electricity waiver, lease or rent waiver, waiver of interest on loans while salaries should be borne by the Employees State Insurance (ESI ) during the lockdown period,” he said. “Otherwise many entrepreneurs will close down their units and it will take a year to normalise the situation.”

India has 69 lakh MSME units in 6,000 clusters and their contribution to the GDP, according to the RBI report for 2015-16, is Rs 39 lakh crore.

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