CII submits 20-pt agenda to Indian govt to back firms hit by Iran war

The situation now represents a supply-side disruption, with pressures transmitted through energy costs, logistics and working capital cycles, it observed.

CII has unveiled a 20-point action plan for the government and the central bank (RBI) to respond to the situation evolving due to the Iran war.
CII observed that though the government and the RBI have initially responded with speed, clarity and coordination, the situation continues to evolve, with supply side pressures in energy, logistics and trade channels persisting beyond the initial phase.

While the policy response has mitigated immediate risks, the evolving situation requires continued coordination between the government and industry, it said.

“The government and the RBI have responded with speed, clarity and coordination. The early measures have helped stabilise sentiment and demonstrate that India’s policy framework is both responsive and resilient in the face of external shocks,” CII director general Chandrajit Banerjee said on CII’s official Instagram handle.

At the same time, CII observed that the situation continues to evolve, with underlying supply side pressures in energy, logistics and trade channels persisting beyond the initial phase.

Industry feedback indicates that while the first round of policy measures has mitigated the immediate impact, several sectors continue to face operational and financial stress, particularly micro, small and medium enterprises (MSMEs), exporters and energy intensive industries.

Here are some of the CII recommendations:

The Ministry of Finance may consider introducing a time-bound Conflict-Linked Emergency Credit Line Guarantee Scheme (CL) ECLGS), similar in spirit to the Emergency Credit Line Guarantee Scheme (ECLGS) implemented during the pandemic, so that additional collateral-free working capital can be extended to affected enterprises through government-backed guarantees, particularly targeting MSMEs, exporters and gas-dependent sectors.

RBI may consider a temporary and clearly defined three-month moratorium and restructuring window for MSMEs, especially exporters and ancillary units linked to export supply chains.  It could institute a special refinance window for MSMEs and other affected sectors, complemented by targeted liquidity support.

The ministry and the central bank could provide immediate contractual and operational relief to the industry, especially MSMEs, by extending delivery timelines for central and state public sector undertaking (PSU) contracts by three to four months without invoking liquidated damages clauses, reducing performance bank guarantee and security deposit requirements to minimal levels to ease liquidity constraints.

In addition, temporary relief in electricity tariffs may also be offered to help manage rising input costs during the disruption period.

A temporary reduction or waiver of administrative banking charges, including loan processing fees, foreign exchange handling charges and documentation costs, may be considered for MSMEs and affected sectors.

The ministry may consider a time-bound rationalisation of the tax and duty structure on energy inputs to mitigate cascading cost impacts of the disruption.

It may consider a temporary exemption from long-term capital gains tax for foreign investors in primary market investments, with the qualifying holding period extended from two to three years.

It may introduce accelerated depreciation benefits on capital goods, including domestically-procured equipment, to stimulate private capital expenditure during the disruption period. In addition, GST input credit could be refunded on capital goods within three to six months.

A special foreign exchange swap window may be considered for oil and gas PSUs, enabling them to meet their US dollar requirements in a manner that reduces volatility in the foreign exchange market and limits undue pressure on reserves.

The government may extend financial and institutional support to trade diversification efforts and development of alternative transport corridors, including initiatives that reduce dependence on a single geography for critical trade routes and energy logistics.

Fibre2Fashion News Desk (DS)