Finance Minister Nirmala Sitharaman today unveiled details of the first instalment of the mega Rs 20 lakh crore economic package announced by Prime Minister Narendra Modi.
The Prime Minister, in his speech yesterday focused on building a self-reliant India and announced the Aatmanirbhar Bharat package. The announcements made by FM Nirmala Sitharaman were focused on the relief to the MSME sector.
The finance minister said that the Aatmanirbhar Bharat rests on five pillars: Economy, Infrastructure, Technology-driven systems, Demography, and Demand. The focus will be on factors of production: Land, Labour, liquidity and Laws.
Let’s have a detailed look at the announcements made today.
Collateral-free loans, equity infusion for MSMEs
FM announced collateral-free loans to the MSMEs. Loans worth Rs 3 lakh crore will be provided to MSMEs having turnover of over Rs 100 crore and up to Rs 25 crore in outstanding. Such loans will have 4-year tenor with no principal repayment for the first 12 months. A total of 45 lakh MSME units will benefit from the scheme. MSMEs can avail the scheme till October 31 2020.
The participating banks and NBFCs would be given 100 per cent cover on principal and interest payments. The FM also announced Rs 20,000 crores subordinate debt for stressed MSMEs.
Rs 50,000 cr equity infusion announced for MSMEs through fund of funds which will be operated through a mother fund and few daughter funds. This will help to expand MSME size as well as capacity, Sitharaman said.
Change in MSME definition
For micro-units, the investment limit has been raised to Rs 1 crore from Rs 25 lakh. The turnover limit has been introduced at Rs 5 crore.
Businesses with an investment of up to Rs 20 crore and turnover of up to Rs 100 crore will be termed as medium enterprises. Companies with an investment of up to Rs 10 crore and a turnover of up to Rs 50 crore will be termed as small enterprises.
Rs 2500 crore EPF support for 3 more months
As announced earlier, under the Pradhan Mantri Garib Kalyan Package, payment of 12% of employer and 12% employee contributions was made by the government into EPF accounts of eligible companies. The support tenure has been extended by three more months till August from the previous tenure up to May 2020. This will provide liquidity relief of Rs 2500 crore to 3.67 lakh establishments and for 72.22 lakh employees.
Special liquidity scheme for NBFCs/HFCs/MFIs
The FM announced that the government will launch a Rs 30,000 crore special liquidity scheme for NBFCs. Under this scheme investment will be made in both primary and secondary market transactions in investment-grade debt paper of NBFCs/HFCs/MFIs. The security will be fully guaranteed by the government of India.
Rs 50,000 crores relief of TDS/TCS
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.
Payment for contracts, professional fees, interest, rent, dividend, commission, brokerage, etc. shall be eligible for this reduced rate of TDS. The reduction will be applicable for the remaining part of the FY 2020-21.
Rs 90000 crore liquidity injection for DISCOMs
The FM said that PFC and REC would infuse liquidity of Rs 90,000 cr to power distribution companies (DISCOMs) against receivables. The loans will be given against state guarantee for the exclusive purpose of discharging liabilities of Discoms to Gencos.
Real estate, and contractors
The FM announced the extension of registration and completion date by six months for all registered projects expiring on or after March 25, without individual applications.
Regulatory authorities may extend this for another period of up to three months if needed.
Also for road and highways companies, an extension of up to 6 months (without costs to the contractor) to be provided by all central agencies.