Everything under one roof: Financial package announced by FM Nirmala Sitharaman, today

Nirmala Sitharaman, the Union Finance Minister convened a press conference along with MP Anurag Thakur today to announce a financial package to further boost up the economy suffering from the blow inflicted by the COVID-19 disruption. She informed on 15 measures to be undertaken by the government to further aid MSMEs, employees with regard to provident fund, NBFCs and micro-finance institutions, DISCOMs, independent contractors, real estate sector and also touching upon direct tax extended deadlines.

7 measures proposed for MSMEs chiefly dealt with :

  • Collateral free automatic loan in which a facility to take up 3 lakh crore at once is offered, 25 crore outstanding loan 100 crore turnover benefit, 4-year tenure is provided with a 100 percent guarantee, moratorium hence no principal payment is to be deposited for 12 months. This benefit has been extended till 2021 January so that MSMEs can resume business and safeguard jobs.
  • 20,000 subordinated debt proposition is proposed for stressed MSMEs to create liquidity. Approximately, 2 lakh MSMEs are predicted to benefit from this. Even NPAs can avail of this. 4,000 crore will be transferred to CGTMSE which will then provide partial credit support to banks.
  • Fund of fund constructed by infusing 50,000 crore as equity in MSMEs. It will function as a mother and daughter fund framework. Potential and viable MSMEs shall benefit. Greater support shall eventually provide help to these MSMEs to get listed in markets in which they choose
  • Definition of MSMEs was highly debated in the past few months, which has now been changed in favour of MSMEs. Many successful MSMEs were apprehensive and afraid to lose benefit but now investment limit criteria has been revised upwards to 1 crore which was 25 lakh earlier. Additional criteria to define MSME now is with turnover, limit raised now up to 5 crore. So investment size and turnover shall cumulatively define MSME. Service and manufacturing unit differentiation in MSMEs have now been removed so both can avail of the newly proposed benefits equally.
  • Global tenders (200 crore or less) disallowed by government. Often reduced rates offered by global tenders were unmatchable by MSMEs earlier and had fallen out of business with units for which they supplied earlier as ancillaries. Small units are thus participants now in government purchases
  • Post-COVID-19, trade fairs have a bleak future, due to social-distancing measures and fear of virus transmission. Thus e-market linkage shall be provided to ensure smoother market access to all enterprises.
  • Government and CPSEs shall clear all receivables within 45 days.

Employees’ Provident Fund:

  • After the announcement of Garib Kalyan, some perks were announced to citizens. Now liquidity relief to all EPF establishments. The benefit was that the government shall give 12 percent employer and 12 employee contribution. This support has now been extended for another 3 months. 3.6 lakh establishments had benefited earlier, now extended for June, July and August term. This is forecasted to infuse 2500 crore liquidity and 72.22 lakh employees shall benefit from it.
  • More take-home salary shall satisfy all employees. Statutory PF contribution has been reduced from 12 percent to 10 percent. These exemptions shall not be extended to state PSUs or government-owned organisations. This is predicted to create 6750 crore liquidity support.

Non-banking financial, microfinance, housing finance companies:

  • NBFCs had not gained enough in spite of RBI provisions and hence a 30,000 crore special liquidity scheme has been announced. Investment in the primary and secondary market. Debt papers shall be taken and bought and fully guaranteed by the Government of India, not necessarily high-quality papers and can be investment quality. This infusion is necessary and is hoped to bring an easy flow of credit in NBFCs.
  • 45,000 crore liquidity partial guarantee scheme is an existing scheme but the scope shall be expanded to also cover borrowings now. 20 percent loss alone shall be bored by the guarantor that is Government of India. AA-rated and below and also un-rated papers eligible and thought to create more liquidity to reach out to MSMEs in far-flung areas.

DISCOMS:

  • Cash flow problems are faced by DISCOMs and thus they are unable to pay power generating companies. There is an emergency in liquidity injection and hence 90,000 crore shall be provided to all DISCOMS against all receivables. This is a  one-time provision- PFCs and RECs to infuse-guarantee by states. DISCOM shall pay genco and keep the cycle moving and shall be awarded only to DISCOMs that pass the benefit to the consumer.

Contractors:

  • Upto 6-month extension without any cost to contractors has been announced working in construction and also goods and services sector. Also, completion and concessional period in PPE contracts shall be extended and facilitate greater liquidity facilitate. Government has released partial bank guarantees to partially completed projects.

Real estate:

  • Regulatory authorities have been advised under the control of Ministry of urban and housing affairs to provide suo motu flexibility about the execution of project, extend registration and completion dates for all registered projects which have been registered will 25 march 2020 till registered. 6-month extension-fresh certificates with revised timelines shall be given to these. TDS and TCS tax deductions are announced till 31 March 2021 and rates reduced by 25 percent of the existing rate that shall come in force from tomorrow. This shall release 50,000 crore in hands of people.

Dates extended: Direct Tax

  • Pending refunds shall be issued immediately to charitable and non-profitable, proprietors, co-operatives.
  • Income tax returns to be filed has been extended till 30 November.
  • Audit date extended till 31 October 2020.
  • Date of assessment extended till 31 December 2020.
  • Vivad Se Vishwas scheme launched which is a direct tax scheme, without any additional amount, extension till 31 December 2020.

The conference set off elaborating on past achievements of the current government and concluded assuring the people of the steps taken with a considerate view of all diasporas of population and their upliftment and ensuring a speedy recovery from this crisis. The Union Finance Minister, Nirmala Sitharaman repeatedly emphasised on the sensitive and receptive nature of government and their commitment to ensuring quick progress, while elaborating on her detailed dissection of the financial package.

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