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Covid -19 : Financial support from State Governments sought

NASSCOM has made representation to the State Government of Madhya Pradesh and Kerela, seeking financial support to the IT -ITeS companies in the State. The content of the representation is reproduced below.

In the wake of the ongoing Covid-19 crisis, the Indian IT-ITeS industry faces an unprecedented challenge in terms of business continuity and visibility. With countries resorting to lock-down measures and restricting the movement of people in an effort to contain the spread of the novel coronavirus, business across the globe are facing unforeseen levels of disruption. This has led to blurring of business visibility and has allowed pessimism to set in.

Clients of the Indian IT-ITeS industry, world over, have been severely impacted by the pandemic, and the cascading effect of this disruption on the Indian IT-ITeS industry is inescapable. IT-ITeS companies are already facing delays in payments due from their customers, and this trend is only expected to worsen in the near future, as companies conserve cash to tide through the crisis. In fact, existing contracts are being cancelled by mid-sized clients, who are typically served by the smaller IT firms, lending to the apprehension that new contracts will be difficult to come through in the near future. Given that the Indian IT-ITeS industry generally maintains about 30% workforce in excess of its requirement, in anticipation of new projects, the disruption caused by the present crisis has significantly impacted the industry’s ability to support employees and meet its other essential expenses for the next 6 months.

Therefore, State Government should consider the following relief, to help address the cash flow constraints faced by the companies in the near term and tide over the crisis.

  1. All departments and State owned PSUs shall be directed to release all pending and future payments/invoice receivables raised by IT-ITeS firms, within 15 working days.
  1. Rent waiver: IT firms in the State are housed in both government and privately-owned buildings. Therefore,
    1. Rent for companies that are housed in Government owned IT parks, shall be waived off, for the period April to June 2020.
    2. To support firms housed in private buildings, a rent subsidy to cover 50% of the rental expense, shall be provided for the period April to June 2020. The benefit that a company can receive shall be capped at Rs. 2 lakhs per month. Companies with annual turnover of less than 50 crores, which do not avail benefit under (a) shall be made eligible to avail this, on a reimbursement model.
  1. Maintenance charge of the Govt owned IT facilities shall be reduced by 50% for the period April to June 2020.
  1. Property tax for FY 21, shall be waived off, on the condition that the benefit be passed on to the tenant.
  1. All commercial electricity bills shall be subsidized by 50% for the next 6 months. No disconnection be made for the next 6 months on account of delay in payments.
  1. Wage subsidy to cover 50% of the salary cost of employees with an annual income of less than 5 lakhs per annum, shall be provided for a maximum of 100 employees per company. This benefit shall be made available on a reimbursement basis, on the condition that no layoffs of existing employees would be done in FY 21.

The Government of Kerela has already announced rent waiver to IT companies who have taken up less than 10000 sq.ft in govt owned buildings, for period April to June 2020. A 3 month moratarium has been offered to other companies. The order can be found here – https://www.nasscom.in/sites/default/files/corona-files/20200427_Kerala_GO%20Rt%20No51%202020-ITD-%20Resurgent%20measures%20for%20IT%20parks%20in%20Covid%20times.pdf

 

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