ATMANIRBHAR BHARAT Rs 20 LAKH CRORE ECONOMY PACKAGE: STRATEGY TO MITIGATE THE ILL-EFFECTS OF COVID-19 LOCKDOWN!

1.    Introduction- 

The Government of India has acknowledged the fact that COVID-19 has severely affected and still is affecting the life as well as the livelihood of people in India due to continuous lockdowns one after another in a row three times before. Also, the global pandemic has resulted in major losses for the economy in the form of revenue losses, migration of laborers from cities to villages, the shortfall in the supply of essential commodities, regulation of businesses, and what not!

It is also being realized that as situations do occur without alarming anyone, in particular, the Govt. of India now fastened its efforts to grow the economy into a self-sufficient economy by giving more focus & encouragement to Medium & small enterprises along with bigger global enterprises to grow further who can actually play a better role in fulfilling this aim owing to the fact that in present MSMEs are contributing about 40% of the total exports of our country.

For understanding further, let’s understand the following and how it is going to help us to mitigate the ill effects of COVID-19.

2.    Changes In Overall MSME’S Definition Criteria-

Due to the repeated demands of various stakeholders to revise the definition, the Govt of India has changed the overall definition & criteria of recognizing MSMEs primarily by lowering the threshold limit so that more & more entities could take benefit of the privileges given to them.

Earlier, the definition was in accordance with the amount of Investment done by the entity on Plant & Machinery or equipment which was again separate for Manufacturing Enterprises as well as enterprises dealing with services.

Investment in Plant & Machinery or Equipment:

Now, the revised definition has made a similar criterion for both Manufacturing & Service Enterprises where the deciding factor shall be any investment (not confined to Plant, Machinery, or equipment) & Annual turnover of the company for recognition as a Micro, small or medium one.

Composite criteria- Investment & Annual Turnover

3. Key Points of Atmanirbhar Bharat Economy Package- 

A.    Pradhan Mantri Garib Kalyan Yojana (1) &(2)-

It is a special comprehensive relief comprising of about 1.70 Lakh crore by the Prime Minister for the poor to help them fight against COVID-19which shall provide benefits in following forms-

a.    Providing an insurance cover of rupees 50 lakh  to every health worker;

b.    Distribution of 5kg wheat or rice per person to about 80 crore people  for coming 3 months;

c.    1kg pulses  to be provided to each household free for the coming three months;

d.    Gas cylinders to be given free of cost to 8 crore people for coming three months;

e.    Rupees 500 per month to be transferred in the Jan Dhan accounts of about 20 crore women up to coming three months;

f.    For benefitting about 13.62 crore families in India, the daily wages of an MNREGA wage worker to be increased to Rs.202 per day from rs.182 per day provided earlier;

g.    Ex-gratia payment of Rs.1000 to about 3 crores of the poor senior citizens, widows& people with physical disabilities( Ex-gratia payment means a payment made out of no obligation to payment);

h.    Payment of Rs. 2000 directly in the accounts of the farmers under the scheme of PM-KISAN benefit to 8.7 crore farmers;

i.    Building & Construction Workers Welfare Fund to be used to provide relief to the construction workers;

j.    Limit of collateral-free lending to be increased from Rs.10 to 20 lakhs for encouraging women Self-help groups;

k.    The District Mineral Fund (DMF) shall be allowed to be used for supplementing & augmenting necessary medical facilities including medical testing & screening etc.

B.    Other Benefits Include-

i.    Relaxation in various aspects related to MSME’s- 

Apart from widening the scope of the definition of MSMEs, an overall help shall be provided taking care of various aspects-

a.    Emergency Credit facilities to MSME’S-

Considering the fact that the operations of the MSME sector have been in failure in last two months resulting in heavy business revenue losses, it has been provided that now such enterprises shall be able to avail collateral-free automatic loans up to a number of rupees 3 Crores to resume their businesses & run their work efficiently. This scheme is intended to benefit up to 45 lakh business units.

Emergency Credit Line to Businesses/MSMEs from Banks & NBFCs 

•    Businesses/ MSME’s having a turnover up to 100 crores & a borrowing up to 25 crores outstanding to the date of 29.02.2020 shall be eligible to avail this loan;

•    The tenure for repayment of loans shall be allowed for a  maximum period of 4years with a moratorium of 12 months for the repayment of the principal amount with a  capping on the  amount of interest;

•    A 100%  guarantee-cover for the repayment of principal & interest shall be provided by the government;

•    This scheme shall be open to being availed till 31.10.2020.

b.    To Enhance Equity in Stressed MSME’s-

•    To overcome the shortage of  equity the Government has decided to facilitate a provision of  Rupees twenty thousand crores as subordinate debt  intended to benefit two lakh MSME businesses;

•    To enhance equity support within the businesses, the Central Government shall provide aid to CGTMSE (Credit Guarantee Funds for Micro and small enterprises), who shall, in turn, provide a credit guarantee support to banks partially.

•     Such banks will provide debts to promoters which shall be infused by the promoter as equity in the Units;

c.    Promoting Growth, Potential & Viability of Business for MSMEs through a corpus called” Funds of Funds”-

•    Under this part of the scheme a fund corpus of about 10,000 crores will be set up by the Government to face the problem of shortage of equity by setting up a corpus of funds called Funds of funds or FoF which will ultimately help the businesses to improve the growth, potential& viability of the business.

•    A FOF shall be operated by setting up a mother Fund and multiple funds structure, in which will help to leverage Rs.50000 Crore funds at daughter funds level;

•    The MSME will be provided encouragement to get listed on the main board of stock exchanges.

d.    Better Marketing Facilities & other provisions for MSME’s 

•    Promoting marketing facilities for the MSME products an e-market linkage shall be made instead of exhibiting products & services in the trade fairs & exhibitions;

•    Fintech will be used to enhance the transaction-based lending by the use of data generated by the e-marketplace;

•    Settlement of dues to MSME vendors from Government  & Central Public sector undertakings shall be made under the observation of the Government;

•    Receivables towards the MSME businesses from the Government & CPSEs shall be released within a period of 45 days.

ii.    Partial Credit Guarantee scheme 2.0  for the NBFCs- 

•    For enhancing liquidity in the leading Non -Banking Financial Institutions(NBFCs), Housing Finance Companies(HFCs) & Micro Finance Institutions(MFIs) having low credit rating need liquidity in their business to further lend to MSMEs & Individuals;

•    Existing Partial Credit Guarantee Scheme(PGCS)to be extended to cover all borrowings such as primary issuance of bonds/ CPs of such entities;

•    Such commercial bonds/ securities with a  AA or lower rating along with unrated papers shall be eligible for investment especially for Mutual Funds;

•    The Government of India shall bear the initial 20% loss incurred by these NBFCs/ HFCs or MFIs respectively.

iii.    Injection of Liquidity for DISCOMs-

Due to the Lockdown problem, power distribution companies (known as DISCOMs) have suffered heavy losses along with the cash flow problems as well as demand reduction. Accordingly, the following provisions have been made-

•    To enhance liquidity in the power distribution companies, the PEC/REC shall infuse liquidity of 90000 crores to DISCOMs against receivables.

•    For the exclusive purpose of discharging liabilities of DISCOMs to Gencos, loans shall be provided against state guarantees.

•    Digital payments facility by DISCOMS for consumers;

•    Creation of plans for reducing financial & operational losses;

•    Rebate by the Central Public sector Generation companies to DISCOMs which shall be ultimately passed on to the final consumers. 

iv.    Discouraging Global Tenders-

Currently, the government is planning to curb unfair competition by disallowing global tenders up to Rs. 200 Crores and supporting “Make in India” for the ultimate goal of a “Self- reliant economy”.

v.    EPF Provisions for  Business & workers –

As we are going towards Lockdown 4.0, businesses are suffering from losses & financial stress having lower revenue. Thus, the Government of India has declared that it will provide EPF support of rupees 2500 crores for business & workers for the coming 3 months (June, July & August) and (already given for March, April & May).

•    Pradhan Mantri Garib Kalyan Package- This package allows a mutual contribution of payment of 12% of employer & 12% employee to be made into EPF accounts of eligible establishments.
 

Reduction EPF contribution for Business workers-

•    Taking note of the fact that it will take some time for businesses to bring stability in their business operations and increase their production in the next quarter. However, it shall also be necessary for such establishments to pay better salaries to the employees in these circumstances. Thus, the government has relaxed the statutory compliances of PF contribution after which the contribution of both employer & employee shall be reduced to 10% each from 12% for the coming three months.

•    However, this provision shall not be applicable to PSUs & CPSEs;

•    This provision shall also be applicable for workers who are not eligible for 24% EPF support under the PM Garib Kalyan Package.

•    This provision shall benefit about 6.5 lakh establishments covered under the EPFO & about 4.3 Crore employees.

vi.    Special Liquidity scheme for NBFCs/ HFCs/ MFIs-

Currently, the NBFCs/HFCs/ MFIs are facing liquidity issues & problems in raising debts from markets that are preventing them to run their business efficiently. To remedy this situation, the Govt. of India has launched a Special Liquidity scheme for these which will help them to provide liquidity support & to build trust in the market.

Under this scheme, investments shall be made in primary as well as secondary markets transactions in the investment-grade debt paper of such NBFCs/HFI/ MFIs which shall be fully guaranteed by the Government of India.

vii.    Relaxation to Contractors- 

Site-construction work is again one of the worst affected sectors during the lockdown. Thus, it has been declared that all Central Agencies (like Railways, Ministry of Road Transport & Highways, Central Public work Deptt) shall provide an extension to the Contractors undergoing such work.

The relaxations shall cover the following-

a. Construction goods/ services contracts;

b. Obligations like Completion of work, intermediate milestones, etc.& extension of concession period of PPP contracts;

o    Partial release to Bank Guarantees-

 To ease the cash flows the government Agencies shall also to release partially the bank guarantees to the extent of contract completed

viii.    Extension of the time-limit for Registration & completion of projects under RERA –

To de-stress the real-estate developers and ensure completion of projects so that homebuyers could take the position of their houses with new timelines, the Government of India has provided new timelines and relaxation in certain compliances under the Act.

Following are the specifically provided treatments which shall be advised by the Ministry of Housing & Urban Affairs to the States/ UTs along with their regulatory authorities to rule out the ill effects of COVID-19 on the RERA projects-

•    The event of COVID-19 to be treated as the “Force- Majeure” under RERA;

•    Extension to important dates like the registration and date of completion suo-moto (by itself) by 6 months for all registered projects expiring on or after 25th March 2020 without individual applications;

•    Such important dates may be further extended to another 3 months where required;

•    Governments shall be advised to issue “Project Registration certificates” automatically with revised timelines;

•    Extend various timelines provided under the RERA Act for various statutory compliances concurrently.

ix.     Reduction in TDS/TCS rates- 

1.    To release the flow of Liquidity by 50000 crores in the economy, the government has declared a reduction in the rates of Tax Deduction at Source(TDS) for non-salaried specified payments made to residents and alternatively for specified receipts to be reduced by 25% of the present existing rate;

2. Payments eligible for reduced rates of TDS shall include-

•    Contract Payments

•    Interest

•    Rent

•    Dividend

•    Commission/ Brokerage

•    Other Payments

2.    Such reduced rates of TDS/TCS shall be applicable for the remaining parts of FY 2020-21 i.e. 13.05.2020 to 31.03.2021.

x.    Direct-Tax Measures-

•    All pending refunds to charitable trusts & non-corporate businesses & professions including proprietorship, Partnerships, LLP & co-operatives shall be issued immediately;

•    Due-date of filling Income-tax returns for the FY2019-20 shall be extended from 31st July 2020 & 31st Oct 2020 to 30th Nov2020 ;

•    Last date to submit a tax audit report from 30.09.2020 extended to 31.10.2020.

•    Date of Assessments under the Act barred till-

•     Getting barred on 30th September  to be extended  to 31st December;

•    Getting barred on 31st March 2021 to be extended to 30th Sept 2021.

Conclusion- How will it be helpful for strengthening the Economy?

Therefore, it can be safely said that the Government of India has made its efforts towards the growth of the economy by exploring industries with more potential to be supported & encouraged on one hand as well as taking care of other section of the society like health-workers, farmers, businessmen, taxpayers, etc. which is an ideal goal for the country because of our economy a holistic development for its development & prosperity.

Author:

eStartIndia Team