Union Finance Minister Nirmala Sitharaman on Wednesday announced a series of relief measures spanning across the micro small and medium enterprise (MSME), power, real estate sectors, besides providing a slew of temporary changes to the direct tax collection rules. The announcements by the Union Finance Minister, who was accompanied by Minister of State Finance (MoS) Anurag Thakur, were the first tranche of what is essentially a follow-up of Prime Minister Narendra Modi's vision of moving India towards self-reliance, or Atmanirbharta, by boosting domestic industry and consumption.
A relief package totalling approximately Rs 3.7 lakh crore has been announced for the MSME sector, which has felt the heat of the COVID-19 pandemic in form of disruption of supply chains and delay in payments. Out of nine measures announced by Sitharaman and Thakur, six of them pertained to MSMEs.
The most prominent among them was the change in definition of what constitutes an MSME. From now on, services and manufacturing units will be governed by a single set of criteria, unlike previously when both had governing parameters. Besides, while investment was the only criteria governing the sector earlier, another one that of turnover has now been added.
The enterprises with an investment of less than Rs one crore and turnover less than Rs 5 crore will be treated as micro, while businesses with less than Rs 10 crore investment and Rs 50 crore turnover will fall under the small category. The medium enterprises will be those which have an investment less than Rs 20 crore and turnover less than Rs 100 crore.
"These changes will help businesses in the sector to expand and still reap benefits accorded to MSMEs by the government," said Sitharaman.
In capital infusions, the government announced a Rs 3 lakh crore collateral-free automatic loan facility for businesses, for which the government would provide 100 per cent guarantee to the banks. The facility will be available till Oct 31, 2020, and would involve no repayment on the principal amount for the first 12 months. The four-year loan facility will benefit around 45 lakh units, said Sitharaman.
Further, a Rs 20,000 crore subordinate debt scheme for stressed MSMEs has been announced, which Sitharaman said would address the problem of equity. The move would infused liquidity to the tune of Rs 20,000 crore into the sector and benefit nearly two lakh MSMEs.
Sitharaman also announced the creating of Fund of Funds (FoF), which will be valued at Rs 50,000 crore and be aimed at infusing equity into the sector. The fund will be set-up with initial corpus of Rs 10,000 crore.
While the debt scheme will be for stressed MSMEs, the FoF is aimed at hand-holding MSMEs which are at expanding stage and require government support in things like getting listed on different markets, said Sitharaman.
In another major path-breaking announcement, Sitharaman said that global tenders under Rs 200 crore for government procurements will from now on be disallowed, which in effect will shield Indian suppliers from "unfair competition."
The government has also ordered the clearance of all receivables in the next 45 days, in other intervention for the MSME sector.
Direct tax, EPF
The government said that it would bear the cost of Employee Provident Fund (EPF), paid for by companies and employees, for the next three months, including June, July and August. The exemption on payment on EPF was already in effect for the months of March, April and May. The move would boost the disposable income of 72.22 lakh employees working at 3.67 lakh establishments, and would cost the government around Rs 2,500 crore.
While the government has exempted businesses and workers from EPF for the next three months, it has also at the same time reduced the contribution of EPF payable for the same period, except for employees working at central and state public sector undertakings.
Sitharaman said that the move would inject liquidity support of Rs 6,750 crore into the sector.
In another major relief to non-salaried people, the government reduced the rate by 25 per cent till March 31 next year. Further, the last date of filing direct tax returns has been extended from 31 July 2020 and 31 October 2020 to 30 November 2020. The government has also made easier certain compliance norms, as part of the announcements earlier in the day.
Rs 50,000 crore liquidity will be injected into the market due to reduction of TDS rates for non-salaried professionals, said Sitharaman.
Non-banking financial corporations (NBFCs)
To maintain the health of India's non-banking financial institutions, the government announced a special Rs 30,000 crore special liquidity scheme, as part of which investment will be made in both primary and secondary market transactions in investment-grade debt paper of NBFCs.
In another major relief for the non-banking institutions, the government announced a Rs 45,000 crore worth partial credit guarantee scheme for NBFCs, as part of which, the first 20 per cent loss will be borne by the government.
Highlighting that the power distribution companies, or DISCOMs, were facing an unprecedented cash crisis due to the ongoing lockdown, Sitharaman announced a special Rs 90,000 crore liquidity package so that power distributors could pay off dues of power generation companies, or GENCOs. As part of the package, loans will be given off to DISCOMs against state guarantees, she said.
Real estate sector
In the real estate sector, the government has allowed automatic extension of registration and completion dates of housing projects, with COVID-19 being treated as a 'force majeure', or an act of god.
Those who registered their projects before March 25 will be allowed an automatic extension for six months by the Union Ministry of Housing and Urban Affairs, said Sitharaman.