Finance Minister announces fifth phase of the economic package for COVID-19 relief

FM

The Finance Minister Nirmala Sitharaman announced the fifth tranche of the economic package introduced for COVID relief through a press conference on May 17, 2020. The announcement comes as a part of the Rs. 20 lakh crore package Atma Nirbhar Bharat Mission. 

There were 7 announcements made today focusing on:

  1. Mahatma Gandhi National Rural Employment Generation Scheme (MGNREGS)
  2. Health both in rural and urban areas
  3. Education
  4. Decriminalization of the companies act
  5. Ease of doing business and related matters
  6. Enterprises related matters
  7. State governments and related matters

Recap of the government’s initiatives in the last two months: 

Health: 

  • INR 15,000 crores have already been announced. This includes money given to state governments, essential items, testing labs and kits and insurance cover for healthcare individuals.
  • Leveraged IT to roll out tele consultation services, virtual learning modules and Aarogya Setu app.
  • Protection to health workers by an amendment in the Epidemic Diseases Act and adequate provisions for PPEs.

Ease of Doing Business:

  • Timely action was taken during COVID-19 to reduce compliance burden under various provisions of the Companies Act, 2013. 
  • Enabled companies to conduct online board meeting, EGMs, and AGMs.
  • 44% recovery has been achieved since the inception of IBC, 2016. 

Education: Technology driven systems to provide online education during COVID.


Key Highlights:

 

INR 40,000 crores increase in allocation for MGNREGS to provide employment boost 

  • This will help generate nearly 300 crore person days in total boosting the economy through higher production.

Health reforms and initiatives:

  • Increased investments in public health: Increase in the public expenditure on health and investments will be made in grass-root health institutions.
  • Preparing India for any future pandemics: Infectious diseases hospital blocks, strengthening of lab networks and surveillance, encouraging research- National Institutional Platform for One Health by ICMR and implementation of National Digital Health Mission.  

Technology driven education with equity post-COVID:

  • PM eVIDYA: DIKSHA platform for school education in states/UTs, one earmarked TV channel per class from 1 to 12, exclusive use of radio, community radio and podcasts, special e-content  for virtually and hearing impaired, top 100 universities to be permitted to automatically start online courses by May 30, 2020. 
  • Manodarpan: Psychological support for teachers, students, and families. 
  • New national curriculum and pedagogical framework for school and early childhood and teachers will be launched.
  • National foundational literacy and numeracy mission for ensuring that every child attains learning levels and outcome in grade 5 by 2025 will be launched by December 2020.

Decriminalization of the Companies Act:

  • Minimum threshold to initiate insolvency raised to INR 1 crore.
  • Special insolvency resolution framework for MSMEs under section 240A of the code to be notified soon.
  • Suspension of fresh initiation of insolvency proceedings up to one year depending upon the pandemic situation.
  • Empowering central government to exclude COVID-19 related debt from the definition of “default” under the code for the purpose of triggering insolvency proceedings.
  • Decriminalization of Companies Act violations involving minor technical and procedural defaults.
  • Majority of the compoundable offences sections to be shifted to internal adjudication mechanism (IAM) and powers of RD for compounding enhanced (58 sections to be dealt with under IAM).
  • The amendments will de-clog the criminal courts and NCLT.
  • 7 compoundable offences altogether dropped and 5 to be dealt with under alternative framework.

Ease of Doing Business and related measures:

  • Improvement in rankings in ‘starting a business’ and ‘insolvency resolution’ have contributed to the overall improvement in India’s ranking on EoDB.
  • Direct listing of securities by Indian public companies in permissible foreign jurisdictions.
  • Private companies which list NCDs on stock exchanges not regarded as listed companies.
  • Including the provisions of part IXA (producer Companies) of Companies Act, 1956 in Companies Act, 2013.
  • Power to create additional specialized benches for NCLAT.
  • Lower penalties for all defaults for small companies, one person companies, producer companies and startups.

Public Sector Enterprise Policy for a new, self-reliant India:

  • All sectors are open to the private sector while Public Sector Enterprises (PSEs) will play an important role in defined areas. 
  • Accordingly, the government will announce a new policy whereby:
    • List of strategic sectors requiring presence of PSEs in public interest will be notified.
    • In strategic sectors, at least one enterprise will remain in the public sector, but private sector will also be allowed.
    • In other sectors, PSEs will be privatized.
    • Number of enterprises in strategic sectors will ordinarily be only one to four; others will be privatized/ merged/ brought under holding companies. 

State government and related matters

  • Centre has already extended much support to the states even though center has itself faced a sharp decline of resources.
  • This includes devolution of taxes (INR 46,038 crores), revenue deficit grants (INR 12,390 crores), advance release of SDRF (INR 11,092 crores) funds, the release of over INR 4,113 crores from Health Ministry and RBI reforms for the sates. 
  • State net borrowing ceilings for 2020-21 is INR 6.41 lakh crores based on 3% of Gross State Domestic Product (GSDP).
  • 75% thereof was authorized to them in March 2020 and timing is left to the states.
  • States have so far borrowed only 14% of the authorized limit.
  • Centre has decided to increase borrowing limits of states from 3% to 5% for 2020-21 only on the request of the states, giving the states extra resources of Rs. 4.28 lakh crores. 
  • Part of the borrowing will be linked to specific reforms. Reform linkage will be in four areas: universalization of ‘One Nation One Ration Card’, Ease of Doing Business, power distribution and urban local body revenues. 
  • A specific scheme will be notified by Department of Expenditure on the following pattern:
    • Unconditional increase of 0.50%.
    • 1% in 4 tranches of 0.25%, with each tranche linked to clearly specified, measurable and feasible reform actions.
    • Further 0.50% if milestones are achieved in at least three of the four reform areas.

 

Stimulus from earlier measures:

Part 1:

S.No.

Item

(INR crores)

  1.  

Emergency W/C facility for businesses including MSMEs

3,00,000

  1.  

Subordinate debt for stressed MSMEs

20,000

  1.  

Fund of Funds for MSME

50,000

  1.  

EPF support for business & workers

2800

  1.  

Reduction in EPF rates

6750

  1.  

Special liquidity scheme for NBFC/HFC/MFIs

30,000

  1.  

Partial Credit Guarantee Scheme 2.0 for liabilities of NBFCs/MFIs

45,000

  1.  

Liquidity injection for DISCOMs

90,000

  1.  

Reduction in TDS/TCS rates

50,000

Sub total

5,94,550

 

Part 2:

S.no.

Item

(INR crores)

  1.  

Free food grain supply to migrant workers for 2 months

3500

  1.  

Interest subvention for MUDRA Shishu Loans

1500

  1.  

Special credit facility to street vendors

5000

  1.  

Housing CLSS-MIG

70,000

  1.  

Additional emergency working capital through NABARD

30,00

  1.  

Additional credit through KCC

2,00,000

Sub total

3,10,000

 

Part 3:

S.no.

Item

(INR crores)

  1.  

Food Micro Enterprises

10,000

  1.  

Pradhan Mantri Matsya Sampada Yojana

20,000

  1.  

TOP to TOTAL: Operation Greens

500

  1.  

Agri Infrastructure Fund

1,00,000

  1.  

Animal Husbandry Infrastructure Development Fund

15,000

  1.  

Promotion of Herbal Cultivation

4,000

  1.  

Beekeeping Initiative

500

Sub-Total

1,50,000

 

Parts 4 & 5:

S.no.

Item

(INR crores)

  1.  

Viability Gap Funding

8,100

  1.  

Additional MGNREGS allocation

40,000

Sub total

48,100

 

Overall:

S.no.

Item

(INR crores)

  1.  

Part 1

5,94,550

  1.  

Part 2

3,10,000

  1.  

Part 3

1,50,000

  1.  

Parts 4 & 5

48,100

Sub total

11,02,650

  1.  

Earlier measures incl. PMGKP

1,92,800

  1.  

RBI measures (actual)

9,94,403

Sub total

9,94,403

Grand Total

20,97,053

 

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