Sitharaman unveils Modi’s Rs. 20 lakh crores financial package
The Finance Minister of India – Nirmala Sitharaman today, i.e., Wednesday, May 13, 2020 shared the details of a combined financial stimulus of Rs. 20 lakh crores, which was announced by the Prime Minister of India – Narendra Modi on May 12, 2020.
A facility of Rs. 3 lakh crores collateral-free automatic loans for business, including Micro, Small and Medium Enterprise (MSMEs) has been announced. This will benefit 45 lakh units so that they can resume work and save jobs. For stressed MSMEs, a subordinate debt provision of Rs. 20,000 crores have been announced. It will benefit 2 lakh MSMEs.
Rs. 50,000 crores equity infusion will be done through Mother Fund – Daughter Fund for MSMES that are viable but need handholding. A fund of funds with corpus of Rs. 10,000 crores will be set up to help these units expand capacity and get listed on share market, if they wish to.
The Government has also revised the definition of MSME to allows MSMEs to flourish. As per the new definition, the micro units with investment till Rs. 1 crore and turnover upto Rs. 5 crores will classify as MSME. Small units with investment till Rs 10 crores and turnover upto Rs. 50 crores will also classify as MSME. Medium units with investment till Rs. 20 crores and turnover upto Rs. 100 crores will also qualify as MSME.
Applauding the Sitharaman’s announcement, Narendra Modi tweeted
Today’s announcements by FM @nsitharaman will go a long way in addressing issues faced by businesses, especially MSMEs. The steps announced will boost liquidity, empower the entrepreneurs and strengthen their competitive spirit. #AatmaNirbharBharatAbhiyan
— Narendra Modi (@narendramodi) May 13, 2020
Sitharaman also said that global tenders will be disallowed up to Rs. 200 crores for Government contracts. The Government will also ensure that e-market linkages are provided across the board in the absence of non-participation in trade fairs due to the Coronavirus (COVID-19) outbreak. Besides, all the receivables will be cleared by the Government and Public Sector Undertakings (PSUs) in the next 45 days.
For employees, a liquidity relief of Rs. 2,500 crores Employee Provident Fund (EPF) support will be given to all EPF establishments. The Government will make the EPF contribution till August 2020. The move will benefit 72 lakh employees. Most importantly, the statutory EPF contribution for all organisations and their employees covered by EPFO, has been reduced from 12% to 10%, to increase the take home salary of employees. This will infuse Rs. 6,750 crores liquidity into these organisations. However, this rule will not apply to Government organisations.
A special liquidity scheme of Rs. 30,000 crores have been allowed for investing in investment grade debt paper of Non-Banking financial Companies (NBFCs), Housing Finance Companies (HFCs) and Micro Finance Institution (MFIs). It is to be noted that these are those NBFCs who are also funding MSMEs. These will be fully guaranteed by Government of India. A partial credit guarantee scheme 2.0 of Rs. 45,000 crores have also been allowed for the NBFCs. The first 20% loss will be borne by the Government of India.
For Distribution Companies (Discoms), a one-time emergency liquidity infusion of Rs. 90,000 crores have been approved, against all their receivables.
For real estate projects, the Ministry of Housing and Urban Affairs will issue advisory to States / Union Territories so that the regulators can invoke force majeure. The regulators can suo moto extend completion/registration dates for 6 months for projects expiring on or after March 25, 2020.
The Government has also offered a reduction of 25% of existing rates of Tax Deducted at Source (TDS) & Tax Collection at Sources (TCS) till March 31, 2021. This will free-up Rs. 50,000 crores that can be used for other purposes. The date of filing the Income Tax (I.T.) Returns has been extended from July 31, 2020 to November 30, 2020.
Meanwhile, India recorded 3,604 fresh cases of COVID-19 and 87 casualties in the past 24 hours. As per the Ministry of Home & Family Welfare, there are 74,281 cases and there have been 2,415 casualties.
