Special Economic Package of Rs. 20 Lakh Crore announced by FM Part-1

special-economic-package-of-rs.-20-lakh-crore-announced-by-fm-part-1

Special Economic Package of Rs. 20 Lakh Crore announced by the Finance Minister: Finance Minister Nirmala Sitaraman has announced the economic package of Rs. 20 Lakh crore on 13.05.2020 related to MSMEs and others after the PM announced an economic package to spur the growth and make India self-reliant.

The minister begins her speech by providing the gist of the actions taken by the government as per earlier announcement under PMGKY of Rs. 1.70 Lakh crore.

The key highlights of today's announcement by the Finance Minister -

I. Special Economic Package to NBFCs/HFCs/MFIs

Rs 30,000 crore Special Liquidity Scheme for NBFCs/HFCs/MFIs

Government launches a Rs 30,000 crore Special Liquidity Scheme for NBFCs/HFCs/MFIs

1. NBFCs/HFCs/MFIs are finding it difficult to raise money in debt markets. 

2. Government will launch a Rs. 30,000 crore Special Liquidity Scheme

3. Under this scheme investment will be made in both primary and secondary market transactions in investment grade debt paper of NBFCs/HFCs/MFIs

4. Will supplement RBI/Government measures to augment liquidity

5. Securities will be fully guaranteed by GoI

6. This will provide liquidity support for NBFCs/HFC/MFIs and mutual funds and create confidence in the market. 

II. Special Economic Package to EPF members and establishments

Rs. 2500 crore EPF Support for Business & Workers for 3 more months 

To ease financial stress as businesses get back to work, Government decides to continue EPF Support for Business & Workers for 3 more months providing a liquidity relief of Rs 2,500 crore

1. Businesses continue to face financial stress as they get back to work. 

2. Under Pradhan Mantri Garib Kalyan Package (PMGKP), payment of 12% of employer and 12% employee contributions was made into EPF accounts of eligible establishments. 

3. This was provided earlier for salary months of March, April and May  2020 

4. This support will be extended by another 3 months to salary months of June, July and August 2020 

5. This will provide liquidity relief of Rs 2500 cr to 3.67 lakh establishments and for 72.22 lakh employees. 

EPF contribution reduced for Business & Workers for 3 months- Rs 6750 crores Liquidity Support

In order to provide more take-home salary for employees and to give relief to employers in payment of PF, EPF contribution is being reduced for Businesses & Workers for 3 months, amounting to liquidity support of Rs 6,750 crores.

1. Businesses need support to ramp up production over the next quarter. 

2. It is necessary to provide more take-home salary to employees and also to give relief to employ., in payment of Provident Fund dues.

3. Therefore. statutory PF contribution of both employer and employee will be reduced to 10% each from the existing 12% each for all establishments covered by EPFO for the next 3 months. 

4. CPSEs and State PSUs will, however, continue to contribute 12% as an employer contribution. 

5. This scheme will be applicable for workers who are not eligible for 24% EPF support under PM Garib Kalyan Package and its extension. 

6. This will provide relief to about 6.5 lakh establishments covered under EPFO and about 4.3 crore such employees. 

7. This will provide liquidity of Rs 6,750 Cross to employers and employees over 3 months. 

III. Special Economic Package to NBFCs

Rs 45,000 crore Partial Credit Guarantee Scheme 2.0 for NBFCs

Government announces Rs 45,000 crore liquidity infusion through a Partial Credit Guarantee Scheme 2.0 for NBFCs.

1. NBFCs, HFCs and MFIs with low credit rating require liquidity to do fresh lending to MSMEs and individuals • Existing PCGS scheme to be extended to cover borrowings such es primary issuance of Bonds/ CPs (liability side of balance sheets) of such entities • First 20% of loss will be borne by the Guarantor i.e., Government of India.

2. AA paper and below including unrated paper eligible for investment (esp. relevant for many MFIs)

3. This scheme will result in the liquidity of Rs 45,000 crones 

IV. Special Economic Package to DISCOMs

Rs. 90,000 Cr. Liquidity Injection for DISCOMs

To give a fillip to DISCOMs with plummeting revenue and facing an unprecedented cash flow problem, Government announces Rs. 90,000 Crore Liquidity Injection for DISCOMs.

1. Revenues of Power Distribution Companies (DISCO.) have plummeted.

2. Unprecedented cash flow problem accentuated by demand reduction

3. DISCOM payables to Power Generation and Transmission Companies is currently — Rs 94,000 cr

4. PFC/REC to infuse liquidity of Rs 90,000 cr to DISCOMs against receivables

5. Loans to be given against State guarantees for the exclusive purpose of discharging liabilities of Discoms to Gencos.

6. Linkage to specific activities/reforms: Digital payments facility by Discoms for consumers, liquidation of outstanding dues of State Governments, Plan to reduce financial and operational losses.

7. Central Public Sector Generation Companies shall give rebate to Discoms which shall be passed on to the final consumers (industries) 

V. Relief to Contractors

In a major relief to contractors, all Central agencies to provide an extension of up to 6 months, without cost to contractor, to obligations like completion of work covering construction and goods and services contracts.

1. Extension of up to 6 months (without costs to contractor) to be provided by all Central Agencies (like Railways, Ministry of Road Transport & Highways, Central Public Works Dept, etc)

2. Covers construction/ works and goods and services contracts

3. Covers obligations like completion of work, intermediate milestones etc. and extension of Concession period in PPP contracts

4. Government agencies to partially release bank guarantees, to the extent contracts are partially completed, to ease cash flows.

VI. Extension of Registration and Completion Date of Real Estate Projects under RERA

MoHUA will advise States/UTs and their Regulatory Authorities to 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

1. Adverse impact due to COVID and projects stand the risk of defaulting on RERA timelines. Time lines need to be extended.

2. Ministry of Housing and Urban Affairs will advise States/UTs and their Regulatory Authorities to the following effect:

(a) Treat COVED-19 as an event of 'Force Majeure' under RERA.

(b) 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.

(c) Regulatory Authorities may extend this for another period of up to 3 months, if needed

(d) Issue fresh 'Project Registration Certificates' automatically with revised timelines.

(e) Extend timelines for various statuary compliances under RERA concurrently.

3. These measures will de-stress real estate developers and ensure completion of projects so that homebuyers are able to get delivery of their booked houses with new timelines. 

VII. Direct Tax measures

Rs 50,000 crores liquidity through TDS/TCS rate reduction 

Government to infuse Rs 50,000 crores liquidity by reducing rates of TDS, for non-salaried specified payments made to residents, and rates of Tax Collection at Source for specified receipts, by 25% of the existing rates.

1. In order to provide more funds 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. 

2. Payment for contract, professional fees, interest, rent, dividend, commission, brokerage, etc. shall be eligible for this reduced rate of TDS.

3. This reduction shall be applicable for the remaining part of the FY 2020-21 i.e. from tomorrow to 31st March, 2021.

4. This measure will release Liquidity of Rs. 50,000 crore. 

Other Direct Tax Measures 

Among other measures, Due date of all income-tax return for FY 2019-20 will be extended from 31st July 2020 & 31st October 2020 to 30th November 2020 and Tax audit from 30th September 2020 to 31st October 2020.

1. All pending refunds to charitable trusts and non-corporate businesses & professions including proprietorship, partnership, LLP and Co-operatives shall be issued immediately. 

2. Due date of all income-tax return for FY 2019-20 will be extended from 31st July 2020 & 31st October 2020 to 30th November 2020 and Tax audit from 30th September 2020 to 31st October 2020. 

3. Date of assessments getting barred on 30th September 2020 extended to 31st December 2020 and those getting barred on 31st March 2021 will be extended to 30th September 2021.

4. Period of Vivad se Vishwas Scheme for making payment without additional amount will be extended to 31st December 2020. 

VIII. Global tenders to be disallowed up to Rs 200 crores

Unfair competition from foreign companies to become a thing of the past; Global tenders to be disallowed in Government procurement up to Rs 200 crores

1. Indian MSMEs and other companies have often faced unfair competition from foreign companies.

2. Therefore, Global tenders will be disallowed in Government procurement tenders up to Rs 200 crores

3. Necessary amendments of General Financial Rules will be effected.

4. This will be steep towards Self-Reliant India and support Make in India

5. This will also help MSMEs to increase their business.

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