Economic Relief Package for Aatmanirbhar Bharat Abhiyan

Nirmala Sitharaman (Finance Minister of India) has declared the items of the Economic Relief Package for “Aatmanirbhar Bharat Abhiyan” to provide economic relief in Covid-19 pandemic. This economic package of Rs 20 lakh crore has been declared with the top goal of making India self-reliant.

During her speech, the minister introduced different reformations implemented till now by the Government of India. These reformations include Direct Benefit Transfer; Jan Dhan, Aadhaar, Mobile (JAM); Pradhan Mantri Awas Yojana, Pradhan Mantri Ujjwala Yojana, Microfinance schemes, Swachh Bharat Mission, Ayushman Bharat Yojana etc.

In the same press conference, Ms Nirmala mentioned that the present tranche comprises of 15 different measures according to the given composition: six for MSMEs, two for Employee provident funds, two for NBFCs, two for MFIs, one for discoms, one for real estate, three are tax-related while the remaining one for contractors.

Below we have mentioned all the details of Economic Relief Package for “Aatmanirbhar Bharat Abhiyan”:

1. For Standard MSMEs:

Till 31st Oct 2020 Rs 3 lakh, crore collateral-free automatic loan for Businesses including MSMEs can be availed.
Loans facility would be available for those firms with Rs 25 crore outstanding loans and an annual turnover of Rs 100 crores.
This loan facility would be having a tenor of 4 years along with moratorium of 12 months.
100% credit guarantee would be provided to banks and NBFCs on principal as well as interest.
There will be no guarantee fees as well as no fresh collateral required.

These changes are supposed to benefit 45 lakh business units in order to resume their business activities and jobs.

2. For stressed MSMEs:

Government of India has announced a Subordinated Debt of Rs 20000 crores which is supposed to help about 2 lakh MSMEs.
The functioning of MSMEs which are NPA or are stressed would be eligible to avail this facility.
Government of India has declared to provide Rs 4000 crore as its contribution to Credit Guarantee Fund Trust For Micro And Small Enterprises (CGTSME).
The CGTSME will provide partial credit guarantee support to Banks in order to benefit the stressed MSMEs.
The promoters of the MSME will be given debt by banks, which would be infused by the promoter as equity in the unit.

3. For MSME having potential and which are viable:

A fund of fund has been created to infuse equity of worth Rs 50,000 crore in the MSME.
Fund of Fund with corpus of Rs 10,000 crores would be set up to provide equity funding to MSMEs with growth potential and viability.
This FoF would be operated via a mother fund including some daughter funds.
FoF is expected to benefit MSMEs by expanding size along with their capacity.
It will also encourage MSMEs to get listed on main board of Stock Exchanges.

4. New definition of MSMEs:

The meaning of MSME has been changed by extending the investment limit of MSME, introducing an extra criterion of turnover as well as removing the distinction between manufacturing and service sector MSME. The new definition is as follow:

For Micro enterprise: Investment of upto Rs 1 crore and turnover of upto Rs 5 crore.
For Small enterprise: Investment of upto Rs 10 crore and turnover of upto Rs 50 crore.
For Medium enterprise: Investment of upto Rs 20 crore and turnover of upto Rs 100 crore.

5. For government appropriation, tenders up to Rs 200 crores will no longer be on global tender route.

6. E-market linkage would be provided to the MSMEs in order to enable them to access the markets as they would not be able to participate in Trade Fairs and Exhibitions which are difficult to organised because of COVID-19. The CPSEs and GoI will clear all the receivables of MSMEs within next 45 days.

7. Employees Provident Fund:

Liquidity relief is being given for all EPF companies. Beneath Pradhan Mantri Garib Kalyan Package (PMGKP), payments of 12% of employer and 12% employee contribution were made into EPF accounts of eligible companies.

It will provide liquidity of Rs 6750 Crore to employers and employees over 3 months.

8. For Non-Banking Financial Company (NBFCs)/ Housing Finance Companies (HFCs)/ Micro finance Institutions (MFIs)

The government will originate a Rs 30,000 crore Special Liquidity Scheme under which investment will be made in both primary and secondary market transactions in investment-grade debt paper of NBFCs/HFCs/MFIs.
It will supplement RBI/Government measures to increase liquidity.
All the securities under this scheme would be fully guaranteed by GoI.

9. Partial Credit Guarantee Scheme 2.0 for NBFCs

Existing PCGS scheme would be extended to cover borrowings such as that of primary issuance of Bonds/ Commercial Papers (liability side of balance sheets) of such entities.

In this, first 20% of loss will be borne by the Guarantor i.e. the Government of India.
Under this scheme, AA paper and below, including unrated paper would also be eligible for investments (esp. relevant for many MFIs).
This scheme is expected to result in liquidity of Rs 45,000 crores.

10. In order to support Power Distribution Companies (DISCOMS), PFC/REC will introduce liquidity of Rs. 90,000 Crore to DISCOMs against receivables.

Loans would be given on state guarantees for the particular purpose of discharging liabilities of Discoms to Gencos.
Central Public Sector Generation Companies shall give a rebate to Discoms which shall be passed on to the final consumers (industries).

11. For Contractors:

All Central Agencies such as Railways, Ministry of Road Transport & Highways, Central Public Works Dept, etc will provide extension of up to 6 months without costs to
contractor. This extension will cover:

construction/works and goods and services contracts.
obligations like completion of work, intermediate milestones etc. as well as extension of Concession period in PPP contracts.

12. For Real Estate Sector

Some measures have been declared to de-stress real estate developers and ensure completion of projects so that home buyers are able to get delivery of their booked houses with new timelines. Accordingly, the Ministry of Housing and Urban Affairs will advise States/UTs and their Regulatory Authorities to the below-mentioned conclusion:

Manage 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 25th 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 statuary compliances under RERA concurrently.

13. Liquidity of Rs 50000 crore through Tax Deduction at Source (TDS)/Tax Collection at Source (TCS) rate reduction.

To provide more stocks 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 the 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 14th May 2020 to 31st March 2021.