SMEs across AP, Telangana take30% hit due to note ban

​Hyderabad: Small and medium enterprises (SMEs) across Telangana and Andhra Pradesh are in a tight spot now, with the ill-executed demonetisation move announced by Prime Minister Narendra Modi last week taking a heavy toll on their operations.

Industry bodies and insiders estimate that the SMEs in both the Telugu states have been losing roughly 30 per cent of their business as the central government’s decision of banning high-value Rs 500, Rs 1000 denominations has dried up the liquidity in the system. Restrictions on cash withdrawals from the banks too compounded their woes.

The ban is a good move, but it has dealt a huge blow to the small and medium companies as the central government did not take adequate measures to replenish the system with sufficient liquidity before executing the revolutionary decision,” J Nageswara Rao, president, Federation of Telangana Small Industries Association, told The Hans India.

According to him, the SMEs are losing 30 per cent business on account of the currency ban. “Some SME entrepreneurs are finding it difficult to pay salaries which, in majority of cases, are due around 10th of every month. And there is no liquid cash in hand to meet other regular expenses such transportation costs,” Rao explained.

He also found fault with the restrictions on cash withdrawals from the banks. The central government restricted cash withdrawals from all accounts to Rs 20,000 per week in the immediate aftermath of demonetisation on November 8. However, the limit was extended to Rs 50,000 a week on November 13 for current accounts, mostly operated by companies and business establishments.

“The amount is not sufficient to meet our expenses. Besides, we have to stand in long queues along with non-account holders who come to banks to exchange banned notes. This is totally unfair on the part of the banks. They should arrange separate queues for the current account holders,” he said.

Concurring with his views, A P K Reddy, president, Federation of Small and Medium Enterprises of India (FSME), felt that the adverse impact of the currency ban on the SME sector in AP and Telangana would last for over a couple of years. “Bad execution of the currency ban has hurt the SMEs across the two Telugu states. A good decision has gone awry now and the SMEs are reeling under the cash crunch,” he said.

According to unofficial estimates, there are more than one lakh micro, small and medium enterprises (MSMEs) in Telangana, employing over five lakh people. The number is equally significant in Andhra Pradesh.

Pointing out that majority of the SMEs depend on liquid cash for their day-to-day operations, V Anil Reddy, former president, Federation of Telangana and Andhra Pradesh Chambers of Commerce and Industry (FTAPCCI), maintained that the cascading impact would be up to 70 per cent in the long run.

At the most, some SMEs can buy raw materials through online transactions. But they also need cash for all other payments. Cash crunch will obviously hit the small and medium businesses,” he explained.