Crane owners have urged the government to provide liquidity support under the MSME package and extension of the moratorium to one year, as their vendors cancelled contracts or hold back payments of Rs 5,000 crore.
Since the first lockdown extension, Crane Owners Association of India, which has over 150 members, have written twice to MSME minister Nitin Gadkari and once to finance minister Nirmala Sitharaman, seeking their help.
These 150 members collectively own over 800 large capacity cranes with tonnage ranging from 5 to 500 tonnes which are all imported units each costing Rs 1 crore to Rs 30 crore. While Germany makes the best quality cranes they cost more than double of what a Chinese made unit comes but at lower quality.
The industry that employees over 10,000 people and also now faces labour crisis as almost 80 per cent of them come from UP and Bihar – who are now returning to their homes after government allowed their inter-state movement.
“One of our key demands is re-define the MSMEs so that we also become eligible for the MSME package announced as part of the Covid relief. This is despite we being an industry under the broader definition of MSMEs,” Navin Dedhia, president of the association, told PTI.
The MSME package allows 10 per cent additional working capital loan of the existing such facility, which is too low given the huge burden the industry is facing now, he said, and explained that without reworking the definition, the crane owners will not be eligible for the MSME package.
Another key demand is to extend the effectively two-month moratorium to at least 6 months with a cap on interest rates, as their payment is always delayed by at least three months, he added.
“Though the nature of our industry is MSME, pending a redefinition of MSME, we are unable to avail any of the benefits given to them,” they wrote to the ministers, pointing out this had made them ineligible for the recent benefits given by government.
Dedhia further said, largest EPC and engineering companies like L&T, Shapoorji Pallonji, Afcons, HCC, J Kumar and the like never make timely payments to their vendors who hire the cranes in turn delay the payments.
“So, in effect our payments get delayed in best case by 3 months and in the worst case by 5-6 months,” he said, adding, “our receivables are to the tune of Rs 5,000 crore now. Given this, we need the MSME minister to intervene to get us a special moratorium”.
He said for the past three years the crane industry has been under tremendous stress due to the troubles in the infra/EPC contractors. The COVID-19 pandemic and the resultant lockdown have brought us to a stage where now our very existence is in danger.
On top of it, their clients have invoked force majeure and refused to make even pre-lockdown payments, he said.
The association’s letters to the ministers have also called for lowering the GST rate from the present 18 per cent, given the crisis in the overall economy as cranes are a highly capital-intensive and their owners who are small entrepreneurs depend heavily on borrowings, and therefore the need for interest itself.
“While we’ve paid full March and April salaries to our employees without any income, our clients who are mighty corporates have refused to pay invoking the force majeure conditions even though it is a hiring/rental service contract,” the letters said.
On the other hand, we being small entrepreneurs are unable to defend themselves due to weak economic muscle power and legal options being impractical against big corporates. This may perish many of our defenceless members, the association said.
Therefore, there is an urgent need to increase the three-month moratorium to at least to six months with a cap on interest burden as many clients have unilaterally lowered the service charges or even cancelled the contract, the letters said.