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By Manoj Kumar and Nupur Anand

MEERUT/MUMBAI, July 10 (Reuters) - India re-opened forbusiness in June after months of lockdown but for thousands ofsmall entrepreneurs in the town of Meerut, near Delhi, the blowhas been devastating.

Businesses from textiles to sports goods and furniture areshuttered or working at a bare minimum, and cows roam streetsthat would be normally packed with workers and vehicles.

Prime Minister Narendra Modi's programme to help smallbusinesses back on their feet through $40 billion ofgovernment-guaranteed loans is too little and may not be enoughto save the many companies that form the backbone of India'seconomy, nearly three dozen entrepreneuers Reuters spoke toacross the country said.

Some said their business was so hamstrung by the pandemicthat taking on new debt made little sense. They would rather the government had helped them by cutting the goods and servicetax or waive off the interest on loans.

Others said that despite Modi's promise to open up thecredit lines, it was not easy convincing bankers to lend because of the death throes their businesses were in.

Ashok, whose near 10 million rupees ($133,000) annualturnover company based in Meerut made steel furniture for hotelsand schools, said he had fired eight of his 10 workers and wasthinking of shutting down the operation.

"It would be better for me to close the unit than to runfrom pillar to post to get a loan," said Ashok, who did not want to give his full name.

He said his banker told him his creditworthiness is low ashis business is struggling.

The Finance Ministry, which has made the loan support schemethe centerpiece of the rescue effort, did not respond to aReuters request for comment on the problems faced by businesmen.

Small businesses that account for nearly one-quarter ofIndias $2.9 trillion economy and employ more than 500 millionworkers are the worst affected by the pandemic.

Nearly 35% of the 650 million small businesses across thecountry could shut down soon in the absence of governmentsupport, the Consortium of Indian Associations said in a letterto Modi's office seen by Reuters.

DOLE OUT LOANS

Bankers said there is government pressure to dole out loans,but businesses are not coming forward as demand remains tepid.

Till now, lenders have paid out 561 billion rupees, barely19% of the sum earmarked, and approved loans worth 1,145 billionrupees since the third week of May, according to governmentdata.

Businesses say that the lenders are either asking forincreased paperwork or the ones in desperate needs are beingdeemed ineligible.

"I was asked to provide a collateral and also buy aninsurance for getting this loan whereas it is supposed to becollateral free," said an entrepreneur in Modi's home state ofGujarat.

But two bankers said that securing money from the governmenteven in a fully-backed sovereign guarantee scheme is not easy.

"The experience is unpleasant," said the former corporatehead of a state-owned bank.

"You lend to most of these businesses only becausegovernment has directed but when it comes to getting back themoney, one has to spend considerable resources and time whichmakes little sense," he added.

Businesses have been pushed to the wall as their suppliershave not paid and orders have trickled to zero while fixed costsincluding electricity, wages, installments for earlier bankloans have drained their funds.

"We have not got a single rupee relief from the government,"said Sanjeev Rastogi, a garment manufacturer in Meerut who isrunning his factories at 25% of the production capacity.

Rastogi has incurred a loss of 3.5 million rupees in thelast two months and believes he may have to close down hisbusiness in the next three months.

About 25% small factories out of over 10,000 textile unitsin Meerut could shut down and default on bank loans in the nextfew months, said Anurag Agarwal, chairman of the Meerut chapterof Indian Industry Association.

Rastogi is making last ditch efforts to remain in business.

"Otherwise, I will sell the factory at any price to savesome money for my retirement."

($1 = 75.26 rupees)

(Reporting by Nupur Anand and Manoj Kumar; Editing by SanjeevMiglani) ((Nupur.Anand@thomsonreuters.com; +9122 68414388;))