Hon’ble Prime Minister Shri Narendra Modi yesterday announced a Special economic and comprehensive package of Rs 20 lakh crores – equivalent to 10% of India’s GDP. He gave a clarion call for आत्मनिर्भर भारत अभियान or Self-Reliant India Movement. He also outlined five pillars of Aatmanirbhar Bharat – Economy, Infrastructure, System, Vibrant Demography, and Demand.
During the press conference here today, Union Minister of Finance & Corporate Affairs Smt. Nirmala Sitharaman said in her opening remarks that Prime Minister Shri Narendra Modi had laid out a comprehensive vision in his address to the Nation yesterday. She further said that after spending considerable time, the Prime Minister has himself ensured that inputs obtained from widespread consultation form a part of an economic package in the fight against COVID-19.
“Essentially, the goal is to build a self-reliant India that is why the Economic Package is called Aatma Nirbhar Bharat Abhiyaan. Citing the pillars on which we seek to build Aatma Nirbhar Bharat Abhiyaan, Smt. Sitharaman said our focus would be on land, labor, liquidity, and law.
The Finance Minister further said that the Government under the leadership of Prime Minister Shri Narendra Modi has been listening and is a responsive Government, hence it is fitting to recall some reforms which have been undertaken since 2014.
“Soon after Budget 2020 came COVID-19 and within hours of the announcement of Lockdown 1.0, Pradhan Mantri Garib Kalyan Yojna (PMGKY) was announced,” Smt. Sitharaman said. She further said that we are going to build on this package.
“Beginning today, for the next few days, I shall be coming here with the entire team of the Ministry of Finance to detail the Prime Minister’s vision for Aatma Nirbhar Bharat laid out by the Prime Minister yesterday,” Smt Sitharaman said.
Smt. Nirmala Sitharaman today announced measures focused on Getting back to work i.e., enabling employees and employers, businesses, especially Micro Small and Medium Enterprises, to get back to production and workers back to gainful employment. Efforts to strengthen Non-Banking Finance Institutions (NBFCs), Housing Finance Companies (HFCs), Micro Finance Sector and Power Sector were also unfolded. Other than this, the tax relief to business, relief from contractual commitments to contractors in public procurement and compliance relief to real estate sector were also covered.
Over the last five years, the Government has actively taken various measures for the industry and MSME. For the Real Estate sector, the Real Estate (Regulation and Development) Act [RERA] was enacted in 2016 to bring in more transparency into the industry. A special fund for affordable and middle-income housing was set up last year to help with the stress in this segment. To help MSMEs with the issue of delayed payment by any Government department or PSUs, Samadhaan Portal was launched in 2017. A Fund of Funds for startups was set up under SIDBI to boost entrepreneurship in the country and various other credit guarantee schemes to help the flow of credit to the MSMEs.
Following measures were announced today:-
- Call for Atmnirbhar Bharat Scheme or Self-Reliant India Movement
- Five pillars of Atmanirbhar Bharat – Economy, Infrastructure, System. Vibrant Demography and Demand
- A special economic and comprehensive package of Rs 20 lakh crores – equivalent to 10% of India’s GDP
- Package to cater to various sections including the cottage industry. MSMEs, laborers, middle class, industries, among others.
- Bold reforms across sectors will drive the country’s push towards self-reliance
- It is time to become vocal for our local products and make them global.
Pradhan Mantri Garib Kalyan Package (1)
Rs. 1.70 Lakh Crore relief package under Pradhan Mantri Garib Kalyan Yojana for the poor to help them fight the battle against Corona Virus:
- Insurance cover of Rs 50 Lakh per health worker
- 80 crore poor people given the benefit of 5 kg wheat or rice per person for the next 3 months
- 1 kg pulses for each household for free every month for the next 3 months
- 20 crore women Jan Dhan account holders get Rs 500 per month for next 3 months
- Gas cylinders, free of cost, provided to 8 crore poor families for the next 3 months.
- Increase in MNREGA wage to Rs 202 a day from Rs 182 to benefit 13.62 crore families
- Ex-gratia of Rs 1,000 to 3 crore poor senior citizen, poor widows, and poor Divyang
Pradhan Mantri Garib Kalyan Package (2)
- Front-loaded Rs 2,000 paid to farmers under existing PM-KISAN to benefit 8.7 crore farmers
- Building and Construction Workers Welfare Fund allowed being used to provide relief to workers
- 24% of monthly wages to be credited into their PF accounts for the next three months for wage-earners below Rs 15,000 p.m. in businesses having less than 100 workers
- Five crore workers registered under Employee Provident Fund EPF to get a non-refundable advance of 75% of the amount or three months of the wages, whichever is lower, from their accounts
- Limit of collateral-free lending to be increased from Rs 10 to Rs 20 lakhs for Women Self Help Groups supporting 6.85 crore households.
- District Mineral Fund (DMF) to be used for supplementing and augmenting facilities of medical testing, screening, etc.
Other Measures 1
- On the request of the Government of India, RBI raised the Ways and Means advance limits of States by 60% and enhanced the Overdraft duration limits.
- Issued all the pending income tax refunds up to 5 lakh, immediately benefiting around 14 lakh taxpayers
- Implemented “Special Refund and Drawback Disposal Drive” for all pending refund and drawback claims.
- Both the above measures amount to 18,000 crores of refund.
- Sanctioned Rs 15,000 crores for Emergency Health Response Package
Other Measures – 2 (ITR, GST, Board Meeting, EGM)
Provided Relaxation in Statutory and Compliance matters, such as
- Extending the last date for Income Tax Returns to June 30, 2020
- Extending filing GST returns to end of June 2020
- 24*7 custom clearance till 30th June 2020
- Relaxation for 3 months for debit cardholders to withdraw cash free from any ATMs, etc.
- Allowing payment before 15 May 2020 for Motor Vehicle and Health Insurance Policies
- Mandatory Board meetings extended by 60 days till 30 September
- Allowing Extraordinary General Meetings through Video Conference with e-voting/simplified voting facility
Measures taken by Reserve Bank of India
- Reduction of Cash Reserve Ratio (CRR) has resulted in liquidity enhancement of Rs.1,37,000 crores
- Targeted Long Term Repo Operations (TLTROs) of Rs. 1,00,050 crores for fresh deployment in investment-grade corporate bonds, commercial paper, and non-convertible debentures.
- TLTRO of Rs.50,000 crore for investing them in investment-grade bonds, commercial paper, and non-convertible debentures of NBFCs, and MFIS.
- Increased the banks’ limit for borrowing overnight under the marginal standing facility (MSF), allowing the banking system to avail an additional Rs. 1,37,000 crore of liquidity at the reduced MSF rate.
- Announced special refinance facilities to NABARD, SIDBI, and the NHB for a total amount of Rs. 50,000 crores at the policy repo rate
- Announced the opening of a special liquidity facility (SLF) of Rs. 50,000 crores for mutual funds to alleviate intensified liquidity pressures.
- A moratorium of three months on payment of installments and payment of Interest on Working Capital Facilities in respect of all Term Loans
- Easing of Working Capital Financing by reducing margins.
- For loans by NBFCs to commercial real estate sector additional time of one year has been given for extension of the date for commencement for commercial operations (DCCO)
Business Including MSMEs
- 3 lakh crores Collateral free Automatic Loins for Business, in MSME
- Rs. 20,000 crore Subordinate Debt for MSMEs
- Rs 50,000 equity infusion through MSME Fund of Funds
- a new definition of MSMEs
- Global tender to be disallowed up to Rs 200 Crores
- Other interventions for MSMEs
- Rs 2500 crores EPF support for Business and Workers for 3 more months
- EPF contribution redd for Business & Workers for 3 months – Rs 6750 crores
- Rs 30,000 crores Liquidity Facility for NBFC / HCs / MFIs
- Rs 45,000 a Partial Credit Guarantee Scheme 2.0 for NBFC
- Rs 90,000 er Liquidity Injection for DISCOMs
- Relief to contractors
- Extension of Registration and Completion Date of Real Estate Projects under RERA
- Rs 50,000 er liquidity through TDS / TCS reductions
- Other Direct to Measure
- Other Direct Tax Measure
Rs 3 lakh crores Collateral-free Automatic Loans for Businesses, including MSMEs
- Businesses / SMEs have been badly hit due to COVID19 need additional funding to meet operational liabilities built up, buy raw material and restart business
- Decision: Emergency Credit Line to Businesses/MSMEs from Banks and NBFCs up to 20% of entire outstanding credit as on 29.2.2020
- Borrowers with up to Rs. 25 crore outstanding and Rs. 100 crore turnover eligible
- Loans to have 4-year tenor with a moratorium of 12 months on Principal repayment
- Interest to be capped
- 100% credit guarantee cover to Banks and NBFCs on principal and interest
- The scheme can be availed till 31 Oct 2020
- No guarantee fee, no fresh collateral
- 45 Lakh units can resume business activity and safeguard jobs.
Rs 20,000 crores Subordinate Debt for Stressed MSMEs
- Stressed MSMES need equity support
- Gol will facilitate the provision of Rs. 20.000 cr as subordinate debt
- Two lakh MSMEs are likely to benefit
- Functioning MSME which is NPA or is stressed will be eligible
- Govt. will provide a support of Rs. 4,000 Cr. to CGTMSE
- CGTMSE will provide partial Credit Guarantee support to Banks
- Promoters of the MSME will be given debt by banks, which will then be infused by the promoter as equity in the Unit.
Rs 50,000 cr. Equity infusion for MSMEs through Fund of Funds
- MSMEs face a severe shortage of Equity.
- Fund of Funds with Corpus of Rs 10,000 crores will be set up,
- Will provide equity funding for MSMEs with growth potential and viability.
- FoF will be operated through a Mother Fund and few daughter funds
- Fund structure will help leverage Rs 50,000 er of funds at daughter funds level
- It Will help to expand MSME size as well as capacity.
- Will encourage MSMEs to get listed on the main board of Stock Exchanges.
New Definition of MSMEs
- Low threshold in MSME definition have created a fear among MSMEs of graduating out of the benefits and hence killing the urge to grow.
- There has been a long-pending demand for revisions.
- Definition of MSMEs will be revised
- The investment limit will be revised upwards
- Additional criteria for turnover also being introduced.
- The distinction between the manufacturing and service sector to be eliminated
- Necessary amendments to the law will be brought about.
Existing and Revised Definitions of MSMEs
|Existing MSME Classification|
|Criteria : Investment in Plant & Machinery or Equipment|
|Mfg. Enterprises||Investment < Rs. 25 Lacs||Investment < Rs. 5 Cr.||Investment < Rs. 10 Cr.|
|Service Enterprises||Investment < Rs. 10 Lacs||Investment < Rs. 2 Cr.||Investment < Rs. 5 Cr.|
|Revised MSME Classification|
|Composite Criteria : Investment and Annual Turnover|
|Manufacturing & Services||Investment < Rs. 1 Cr.|
Turnover < Rs. 5 Cr.
|Investment < Rs. 10 Cr.|
Turnover < Rs. 50 Cr.
|Investment < Rs. 20 Cr.|
Turnover < Rs. 100 Cr.
Global tenders to be disallowed up to Rs 200 crores
- Indian MSMEs and other companies have often faced unfair competition from foreign companies.
- Therefore, Global tenders will be disallowed in Government procurement tenders up to Rs 200 crores
- Necessary amendments of General Financial Rules will be effected.
- This will be a step towards Self-Reliant India (Atmanirbhar Bharat) and support Make in India
- This will also help MSMEs to increase their business.
Other interventions for MSMEs
- MSMEs currently face problems of marketing and liquidity due to COVID.
- e-market linkage for MSMEs to be promoted to act as a replacement for trade fairs and exhibitions.
- Fintech will be used to enhance transaction-based lending using the data generated by the e-marketplace.
- The government has been continuously monitoring settlement of dues to MSME vendors from Government and Central Public Sector Undertakings.
- MSME receivables from Gov and CPSEs to be released in 45 days
Rs. 2500 crore EPF Support for Business & Workers for 3 more months
- Businesses continue to face financial stress as they get back to work.
- Under Pradhan Mantri Garib Kalyan Package (PMGKY), payment of 12% of employer and 12% employee contributions was made into EPF accounts of eligible establishments
- This was provided earlier for salary months of March, April and May 2020
- This support will be extended by another 3 months to salary months of June, July and August 2020
- This will provide liquidity relief of Rs. 2500 cr to 3.67 lakh establishments and for 72.22 lakh employees.
EPF contribution reduced for Business & Workers for 3 months- Rs 6,750 crores Liquidity Support
- Business cod support to rap production over
- It is necessary to provide more take-home salary to employees and also to give relief to employers in payment of Provident Fund dues.
- Therefore Statutory PF contribution of both employer and employee will be reduced to 10% each from the existing 12% each for all establishments covered by EPFO for the Next 3 months.
- CPSE and State PSs will ever come to come 12 employer contributions.
- This scheme will be applicable for workers who are not eligible for 24% EPF support under PM Garib Kalyan Package and its extension.
- This will provide relief to about 65 lakh establishments covered under EPFO and also 4.3 crore such employees.
- This will provide Liquidity of Rs 6750 Crore to employers and employees over 3 months.
Rs 30,000 crore Special Liquidity Scheme for NBFCs / HFCs / MFIs
- NBFCs / HFCs / MFIs are finding it difficult to raise money in debt markets.
- The government will launch a Rs 30,000 crore Special Liquidity Scheme
- Under this scheme investment will be made in both primary and secondary market transactions in investment-grade debt paper of NBFCs / HFCs / MFIs.
- Will supplement RBI/Government measures to augment liquidity
- Securities will be fully guaranteed by Government of India
- This will provide liquidity support for NBFCs/HFC/MFIS and mutual funds and create confidence in the market.
Rs 45,000 crore Partial Credit Guarantee Scheme 2.0 for NBFCs
- NBFCs, HFCs, and MFIs with low credit rating require liquidity to do fresh lending to MSMEs and individuals
- Existing PCGS scheme to be extended to cover borrowings such as primary issuance of Bonds/ CPs (liability side of balance sheets) of such entities
- The first 20% of loss will be borne by the Guarantor ie., the Government of India.
- AA paper and below including unrated paper eligible for investment (esp. relevant for many MFIs)
- This scheme will result in the Liquidity of Rs. 45,000 crores.
Rs. 90,000 Cr. Liquidity Injection for DISCOMs
- Revenues of Power Distribution Companies (DISCOMS) have plummeted.
- Unprecedented cash flow problem accentuated by demand reduction
- DISCOM payables to Power Generation and Transmission Companies is currently – Rs 94,000 cr
- PFC / REC to infuse liquidity of Rs 90,000 cr to DISCOMs against receivables
- Loans to be given against State guarantees for the exclusive purpose of discharging liabilities of Discoms to Gencos
- Linkage to specific activities/reforms: Digital payments facility by Discoms for consumers, liquidation of outstanding dues of State Governments, Plan to reduce financial and operational losses.
- Central Public Sector Generation Companies shall give rebate to Discoms which shall be passed on to the final consumers (industries)
Relief to Contractors
- Extension of up to 6 months (without costs to the contractor) to be provided by all Central Agencies (like Railways, Ministry of Road Transport & Highways. Central Public Works Dept. etc)
- Covers construction/ works and goods and services contracts
- Covers obligations like completion of work, intermediate milestones, etc. and extension of the Concession period in PPP contracts.
- Government agencies to partially release bank guarantees, to the extent contracts are partially completed, to ease cash flows
Extension of Registration and Completion Date of Real Estate Projects under RERA
- Adverse impact due to COVID and projects stand the risk of defaulting on RERA timelines. Timelines need to be extended.
- Ministry of Housing and Urban Affairs will advise States/UTs and their Regulatory Authorities to the following effect:
- Treat COVID-19 as an event of ‘Force Majeure’ under RERA.
- Extend the registration and completion date suo-moto by 6 months for all registered projects expiring on or after 25 March 2020 without individual applications
- Regulatory Authorities may extend this for another period of up to 3 months if needed
- Issue fresh ‘Project Registration Certificates’ automatically with revised timelines
- Extend timelines for various statutory compliances under RERA concurrently.
- These measures will de-stress real estate developers and ensure completion of projects so that homebuyers are able to get deliver their booked houses with new timelines.
Rs 50,000 crores liquidity through TDS / TCS rate reduction
- In order to provide more funds at the disposal of the taxpayers, the rates of Tax Deduction at Source (TDS) for non-salaried specified payments made to residents and rates of Tax Collection at Source (TCS) for the specified receipts shall be reduced by 25% of the existing rates.
- Payment for a contract, professional fees, interest. rent, dividend, commission, brokerage, etc. shall be eligible for this reduced rate of TDS.
- This reduction shall be applicable for the remaining part of the FY 2020-21 i.e. from tomorrow to 31 March 2021.
- This measure will release the Liquidity of Rs. 50,000 crore.
Other Direct Tax Measures
- All pending refunds to charitable trusts and non-corporate businesses & professions including proprietorship, partnership. LLP and Co-operatives shall be issued immediately.
- Due date of all income-tax return for FY 2019-20 will be extended from 31st July 2020 & 31 October 2020 to 30th November 2020 and Tax audit from 30th September 2020 to 31st October 2020.
Other Direct Tax Measures
- Date of assessments getting barred on 30th September 2020 extended to 31st December 2020, and those getting barred on 31st March 2021 will be extended to 30th September 2021.
- Period of Vivad se Vishwas Scheme for making payment without additional amount will be extended to 31st December 2020.
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