Startups in India have reached out to the government demanding liquidity support in the face of disruption caused by COVID-19 and the resultant lockdown. The letter written to Finance Minister (FM) Nirmala Sitharaman states that almost half of the startups may be forced to shut shop if they don’t receive financial support.
Startups have also sought refund of taxes, both IT and GST refunds which are due to them, as well as working capital loans from the banks.
There are 75 signatories to the letter which includes T V Mohandas Pai, Kris Gopalakrishnan, Rajan Anandan among others.
Speaking to TNM, Mohandas Pai, former chief financial officer, Infosys, said, “The startups essentially need some support so that they can keep going for the next 2-3 months because many of the small companies are in trouble.”
Pai also added that they have asked the government to give money to the SIDBI (Small Industries Development Bank of India) ‘Fund of Funds’, which is due because the ‘Fund of Funds’ has not given money to venture capitalists (VCs) who are supposed to invest in companies; and also a special top-up fund so that VCs can fund startups which need the money.
LocalCircles, an online community of over 35,000 startups and SMEs (small and medium enterprises), has also written to the FM stating that the COVID-19 impact has been devastating for Indian startups and SMEs sector. With already slowing demand earlier due to COVID-19 impact around the world, the lockdown has taken the distress to new levels, it says.
The letter written by Sachin Taparia, Chairman of LocalCircles, adds, “Large corporates are exercising force majeure clause with startups and SMEs at an accelerating pace, not making payments due to lockdown and several other reasons, and almost all venture funding drying up, the situation is fast deteriorating. Add to it, the mandatory payment of salaries to workers for the period of lockdown as issued by many states or local administrations is only making things worse where many founders are at the point of calling it quits.”
In order to quantify the key demands, LocalCircles conducted a survey in its community to get a pulse on what the government should do to mitigate the impact of coronavirus on small businesses.
Some of the demands from the survey, which received more than 29,000 responses from startups, are as follows:
> Startups want that the government reimburse 50% salaries of startup employees for one month for all Department for Promotion of Industry and Internal Trade (DPIIT) registered startups (active with Registrar of Companies (ROC)) or provide a one-time grant of Rs 20 lakh for all DPIIT registered startups.
> 65% startups want that some or all of CSR funds be permitted into startups as grants
> 82% startups/SMEs want FY19-20 TDS refunds to be processed within 15 days of return filing
> Majority startups/SMEs want the government to ensure all PSUs and government departments pay all startup/SME pending dues by April 15, 2020, and all corporates are mandated to clear all 45 days old invoices for startups and SMEs at an enforcement level
The startup and SME community is hopeful that the government will consider these demands with the highest importance, the letter adds.