Updated: November 12, 2020 10:33:00 pm
Union Finance Minister Nirmala Sitharaman addresses a press conference in New Delhi on November 12, 2020 (Twitter / @ FinMinIndia).
The government on Thursday announced various measures boost job creation, provide liquidity support to struggling sectors, and increase investment in the housing and infrastructure sectors.
The Ministry of Finance extended the deadline for the Emergency Credit Line Guarantee Scheme (ECLGS), under which additional government-guaranteed credit without guarantees is granted to MSMEs, until March 31, 2021.
In light of the increase in the area sown, an additional Rs 65 billion is being provided as a fertilizer subsidy in addition to the provision in the budget.
In announcing these stimulus measures, Finance Minister Nirmala Sitharaman said the government’s “relentless reform tone” has helped a “strong recovery” take hold in the economy.
What is being done for stressed sectors?
The government has launched a new version of the ECLGS scheme to provide financial support to stressed sectors of the economy.
This is within the Rs 3 lakh crore loan penalty limit set in the scheme, but could be increased depending on demand. Companies that have loan installments of up to 30 days (Special Mention or SMA 0 accounts) as of February 29, 2020 will receive an additional 20 percent credit outstanding under the scheme.
Entities in 26 stressed sectors identified by the Kamath Committee, as well as the healthcare sector, with outstanding credit of more than Rs 50 million and up to Rs 500 million as of February 29, are eligible to take advantage of the funding. under the plan.📣 Express Explained is now on Telegram
Stressed sectors, including construction, commerce, hotels and transportation, contributed nearly 83.4 percent to the service sector contraction in the April-June quarter. The ECLGS scheme, which has been extended until November 30, has made disbursements of Rs 1.48 lakh crore against penalties of Rs 2.03 lakh crore to borrowers of 60.67 lakh, according to government data.
A five-member expert committee headed by KV Kamath, former president of ICICI Bank, which was created to recommend the financial parameters necessary for a one-time loan restructuring window for corporate borrowers, said in its report that companies in sectors such as retail, wholesale, roads and textiles were facing stress. Sectors that have been under pressure prior to Covid include NBFC, energy, steel, real estate, and construction.
Kamath’s committee noted that corporate sector debt worth 15.52 lakh crore rupees had been under stress after the pandemic hit India, while another 22.20 lakh crore rupees were already under stress by then. This effectively means that Rs 37.72 lakh crore (72% of the banking sector’s debt to industry) remains under pressure. This is almost 37 percent of total non-food bank credit.
The term of the additional credit under the plan will be five years, including a one-year moratorium on repayment of the principal. The scheme will be available until March 31, 2021. Industry sources said these measures will provide significant relief to companies that are expected to recover in line with the rebound in economic activity, but are facing an immediate shortage of money.
Union Finance Minister Nirmala Sitharaman and State Minister Anurag Thakur during a press conference in New Delhi on Thursday, November 12, 2020 (PTI Photo: Kamal Kishore).
What measures have been announced to boost job creation?
The government announced a work incentives scheme, Atmanirbhar Bharat Rozgar Yojana, under which it will provide a subsidy for the provident fund contribution to add new employees to establishments registered with the Employee Provident Fund Organization (EPFO). The central government will grant the subsidy for two years to workers who lost their jobs between March 1 and September 30 and to new workers hired from October 1.
Under the plan, the government will pay the PF contribution for workers with wages of up to 15,000 rupees. The 24 percent contribution for both employers and employees of establishments employing up to 1,000 employees will be borne by the government; and for establishments employing more than 1,000 employees, the government will contribute 12 percent of the employee share.
The additional eligibility condition for the plan specifies that the subsidy will be awarded for the employment of two new employees if the establishment has 50 or fewer employees, and will be paid for five new employees if the establishments have more than 50 employees.
The amount of the subsidy under the scheme, which will be operational until June 30, 2021, will be credited in advance only to the EPFO (UAN) accounts seeded in Aadhaar of the new employees.
“99.1 percent of the establishments will be covered by this scheme and it is estimated that 65 percent of all employees in the formal sector will be covered in the first category, in which contributions to the EPF will be granted by the government in form of subsidy ”. Sitharaman said.
The new scheme is similar to the previous Pradhan Mantri Rozgar Protsahan Yojana (PMRPY) scheme that was implemented until March 2019 to incentivize new jobs. PMRPY was announced in August 2016, and the government provided the total employer contribution of 12% (EPF and Employee Pension Plan), for a period of three years for new employees registered with the EPFO starting from April 1, 2016, and earning up to 15,000 rupees per month. A total of Rs 8.3 billion has been delivered to 1,52,899 establishments covering 1,21,69,960 PMRPY beneficiaries.
The government also announced an additional outlay for employment under the previously announced scheme of Pradhan Mantri Garib Kalyan Rozgar Yojana. The government had previously identified 116 districts in six states where at least 25,000 workers have returned in each district to provide employment to migrant workers for 125 days by putting together nearly 25 schemes and anticipating the work and money allocated for the entire year.
On Thursday, he said that Rs 37,543 million has been spent to date under the plan, representing an additional outlay of Rs 10 billion for Prime Minister Garib Kalyan Rozgar Yojana. The rural employment guarantee program, MGNREGA, received Rs 61,500 crore in the 2020-21 budget, while Rs 40,000 crore was also provided in Atma Nirbhar Bharat 1.0.
“To date, 73,504 million rupees have been released under MGNREGA and 251 million rupees-person of employment have been generated,” he said.
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What has the FM announced for construction and infrastructure?
In a major push that may lead to the revival of stalled affordable housing projects, the FM announced an additional disbursement of Rs 18 billion for PM Awas Yojana (PMAY) – Urban. The FM said this would help ground 12 lakh of houses and complete 18 lakh.
Industry participants say this will not only help meet the need for housing in urban areas, but the revival of stalled projects will also lead to increased economic activity and job creation in the construction sector.
In another important measure, the FM announced a reduction in the security deposit and the performance deposit in government tenders (also applicable to PSEs). While he reduced performance security on contracts to 3 percent from around 5 to 10 percent, he said EMD will not be required.
While the relaxations were provided through December 31, 2021, industry experts say this represents a major relief for the construction sector as it will free up capital for contractors and improve their financial ability to carry out. the project.
The government also announced Rs 6,000 crore of capital in the National Infrastructure and Investment Fund (IFRS) to support debt financing totaling Rs 1.1 lakh crore by 2025.
The IFRS Strategic Opportunities Fund has established a debt platform comprising an NBFC Infra Debt Fund and an NBFC Infra Finance Company, comprising a total loan book of Rs 8,000 crore and a portfolio of deals of Rs 10,000.
What has been done for the real estate sector?
In a move that may allow developers to sell their housing units at 20 percent lower than the circle rate due to lower market prices, the government has announced an increase in the spread from 10 to 20 percent. % (under section 43CA) for the period between the date of the announcement and June 30, 2021.
However, the benefit will be available only on the primary sale of residential units with a price value of up to Rs 2 crore. This will effectively allow developers to reduce their price below the circle rate. It will also reduce the cost of registration for buyers if they buy the unit at a price lower than the circular rate, as the registration would not be at the circular rate.
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