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Finance Minister Nirmala Sitharaman (Image: Amlan Paliwal)
The announcements, described by Sitharaman as the first in a series of tranches to be presented in the coming days, are part of the Rs 20 crore fiscal and monetary package of Rs 20 announced by Prime Minister Modi on Tuesday to support the economy.
- News18.com New Delhi
- Last update: May 13, 2020, 9:42 p.m. IST
Finance Minister Nirmala Sitharaman announced on Wednesday the first installment of a mega aid package aimed at reviving the economy with 15 measures and extended guaranteed credit for small and medium-sized enterprises, non-financial banking companies and energy distribution companies (discoms ).
The announcements, described by Sitharaman as the first in a series of tranches to be released in the coming days, are part of the Rs 20 crore fiscal and monetary package of Rs 20 announced by Prime Minister Narendra Modi on Tuesday to support the economy, which has been devastated by a week-long lockdown to curb the spread of the coronavirus.
Sitharaman said the government will provide loans worth Rs 3 lakh crore of free automatic guarantees for companies, including SMEs, a move that will help 45 lakh companies. He also said that the government will provide Rs 90,000 crore for power distribution companies through state power finance companies.
A special liquidity scheme of Rs 30 billion has also been introduced for NBFCs under which investments will be made in both primary and secondary market transactions in investment grade debt papers of these institutions. These values will be fully guaranteed by the government.
Sitharaman said that the next wave of self-sufficient reforms as a guiding principle will focus on land, work, liquidity and laws. “Basically, this is to stimulate growth and build a self-sufficient India. That is why this initiative is called “Atmanirbhar Bharat Abhiyan,” he said.
The Finance Minister’s announcements also aimed to improve the downturn morale of India’s workforce, facing the brunt of the slowdown in the economy and muted corporate earnings, by temporarily raising net wages by reducing the EPF contribution. 12 to 10 percent over the next three months. The due date for income tax returns for 2019-20 has also been delayed.
Here are the details of what the package has for different sectors:
Relief for MSMEs
The finance minister announced an automatic unsecured loan of Rs 3 lakh crore for companies, including MSMEs. The loan will last four years and will offer a 12-month moratorium on interest payments.
Sitharaman said that a subordinated debt of Rs 20 billion will be provided for stressed MSMEs, which would benefit two lakh businesses. A Rs 50 million fund is being created for MSMEs, which will infuse capital into MSMEs with growth potential.
The definition of MSMEs has been modified to allow units with investments of up to Rs 1 million to be called micro-units instead of Rs 25 lakh today. Similarly, units with a turnover of up to Rs 5 million will now be classified as micro-units, with a criterion based on the turnover that is entered to define small businesses. To help MSMEs compete in government tenders, global tenders for government purchases of up to Rs 200 million will be banned.
Rs 30,000 crore support for NBFC, HFC, MFI
The finance minister announced a special liquidity scheme of Rs 30 billion for non-bank financial institutions (NBFC). A partial credit guarantee scheme of Rs 45,000 crore 2.0 has also been unveiled for NBFCs, home finance companies (HFCs) and microfinance institutions (MFIs) with low credit ratings to help them extend loans to individuals and MSMEs .
25% reduction in TDS / TCS rate
The government cut the tax deducted at source (TDS) and the tax levied on origin fees (TCS) for non-salary payments to residents by 25%. However, Sitharaman clarified that the same “will also apply to all payments for contracts, interest, rentals, dividends, commissions or brokerage.” The reduction, he said, would put nearly Rs 50 billion in the hands of people who would otherwise have paid it as TDS.
Deadline to file extended ITRs
In a relief to taxpayers, the government extended the deadline for filing all income tax returns for fiscal year 20 through November 30. The direct resolution of tax disputes, the Vivad Se Vishwas scheme, also lasted for six months until December 31.
Sitharaman said that the Income Tax Department will speed up the processing of pending reimbursements to charity trusts, limited liability companies (LLP), non-corporate businesses, proprietary companies, among others.
Electrified discs
The government announced a liquidity infusion of Rs 90,000 crore in electricity distribution companies to help them overcome current financial stress. This amount will help eliminate outstanding fees from the hassles of state financial institutions. The state-owned Energy Finance Corporation (PFC) and Rural Electrification Corporation (REC) will instill liquidity by raising the market’s ₹ 90,000 crore against accounts receivable from discoms. State governments will provide a guarantee.
EPF benefits
The finance minister extended government support to companies with fewer than 100 employees in three months to meet the obligations of the retirement fund. For all companies, the legal obligation to pay 12 percent of the basic salary as part of the employer to the contribution of the employee provident fund (EPF) has been reduced to 10 percent to increase its liquidity.
Contractor Sops
In relief to contractors affected by the COVID-19 pandemic, they will now receive an extension of up to six months to complete obligations on highways, railroads, and other contracts. “The extension of up to six months at no cost to the contractor will be provided by all central agencies such as the Railways, the Ministry of Road and Highway Transportation and the Central Department of Public Works,” Sitharaman said.
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