All about Aatma Nirbhar Bharat Abhiyan

Generally Prime Minister Shri Narendra Modi's speech is preceded by an element of fear in the minds of Mitron aka the citizens of India. But be it Lockdown 1.0 or 3.0, each address to the nation has been marked by rejoicing and zeal. After boosting the morale of India by conducting fly pasts to each corner of the nation alongside showering flowers, the real news came on 12th My, 2020, the 50th day of lockdown when Mr. Modi announced an economic package of around Rs. 20 lakh crores (including measures announced by RBI previously during the lockdown amounting to nearly 4.0% of the GDP) under the 'AtmaNirbhar Bharat Abhiyan”. This amounts to nearly 10% of the Indian GDP making it the second largest stimulus in Asia after Japan. This package will give a new impetus to the development journey of the country in 2020 and a new direction to the Self-reliant India campaign. The magnificent building of self-reliant India will stand on five Pillars : Economy, Infrastructure, System, Demography and Demand In order to prove the resolve of a self-reliant India, Land, Labor, Liquidity and Laws all have been emphasized in this package. This economic package is for our cottage industry, home industry, our small-scale industry, our MSME, which is a source of livelihood for millions of people, and extends till labourer and farmer.

There are mainly 16 measures under Part I announced which can be categorised as follows:

1. 3 Lacs crore automatic collateral free loans for businesses including MSME

• Emergency Credit Line to Businesses/MSMEs from Banks and NBFCs up to 20% of entire outstanding credit as on 29.2.2020
• Loans to have 4 year tenor with moratorium of 12 months on Principal repayment
• Interest to be capped
• 100% credit guarantee cover to Banks and NBFCs on principal and interest
• Scheme can be availed till 31st Oct 2020
• No guarantee fee, no fresh collateral

2. Rs 20,000 crore Subordinate Debt for MSMEs

• GoI will facilitate provision of Rs. 20,000 cr as subordinate debt
• Two lakh MSMEs are likely to benefit
• Functioning MSMEs which are NPA or are stressed will be eligible
• Govt. will provide a support of Rs. 4,000 Cr. to CGTMSE
• CGTMSE will provide partial Credit Guarantee support to Banks
• Promoters of the MSME will be given debt by banks, which will then be infused by promoter as equity in the Unit.

3. Rs 50,000 cr equity infusion through MSME Fund of Funds

Fund of Funds with Corpus of Rs 10,000 crores will be set up.

• Will provide equity funding for MSMEs with growth potential and viability.
• FoF will be operated through a Mother Fund and few daughter funds
• Fund structure will help leverage Rs 50,000 cr of funds at daughter funds level
• Will help to expand MSME size as well as capacity.
• Will encourage MSMEs to get listed on main board of Stock Exchanges.

4. New definition of MSMEs

Low threshold in MSME definition have created a fear among MSMEs of graduating out of the benefits and hence killing the urge to grow.

5. Global tender to be disallowed upto Rs 200 crores

Indian MSMEs and other companies have often faced unfair competition from foreign companies. Therefore, Global tenders will be disallowed in Government procurement tenders upto Rs 200 crores

Necessary amendments of General Financial Rules will be effected.

6. Other interventions for MSMEs

MSMEs currently face problems of marketing and liquidity due to COVID.

• e-market linkage for MSMEs to be promoted to act as a replacement for trade fairs and exhibitions.
• Fintech will be used to enhance transaction based lending using the data generated by the e-marketplace.
• Government has been continuously monitoring settlement of dues to MSME vendors from Government and Central Public Sector Undertakings.
• MSME receivables from Gov and CPSEs to be released in 45 days

7. Rs 2500 crores EPF support for Businesses and Workers for 3 more months

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

• Under Pradhan Mantri Garib Kalyan Package (PMGKP), payment of 12% of employer and 12% employee contributions was made into EPF accounts of eligible establishments.
• This was provided earlier for salary months of March, April and May 2020
• This support will be extended by another 3 months to salary months of June, July and August 2020
• This will provide liquidity relief of Rs 2500 cr to 3.67 lakh establishments and for 72.22 lakh employees.

8. EPF contribution reduced for Business & Workers for 3 months- Rs 6750 crores

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

• It is necessary to provide more take home salary to employees and also to give relief to employers in payment of Provident Fund dues,
• Therefore, statutory PF contribution of both employer and employee will be reduced to 10% each from existing 12% each for all establishments covered by EPFO for next 3 months.
• CPSEs and State PSUs will however continue to contribute 12% as employer contribution.
• This scheme will be applicable for workers who are not eligible for 24% EPF support under PM Garib Kalyan Package and its extension.
• This will provide relief to about 6.5 lakh establishments covered under EPFO and about 4.3 crore such employees.
• This will provide liquidity of Rs 6750 Crore to employers and employees over 3 months.

9. Rs 30,000 crores Liquidity Facility for NBFC/HCs/MFIs

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

• Government will launch a Rs 30,000 crore Special Liquidity Scheme
• Under this scheme investment will be made in both primary and secondary market transactions in investment grade debt paper of NBFCs/HFCs/MFIs
• Will supplement RBI/Government measures to augment liquidity
• Securities will be fully guaranteed by GoI
• This will provide liquidity support for NBFCs/HFC/MFIs and mutual funds and create confidence in the market.

10. Rs 45,000 cr Partial Credit Guarantee Scheme 2.0 for NBFC

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 as 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.
• AA paper and below including unrated paper eligible for investment (esp. relevant for many MFIs)
• This scheme will result in liquidity of Rs 45,000 crores

11. Rs 90,000 cr Liquidity Injection for DISCOMs

• Revenues of Power Distribution Companies (DISCOMs) have plummeted.
• Unprecedented cash flow problem accentuated by demand reduction
• DISCOM payables to Power Generation and Transmission Companies is currently ~ Rs 94,000 cr
• PFC/REC to infuse liquidity of Rs 90,000 cr to DISCOMs against receivables
• Loans to be given against State guarantees for exclusive purpose of discharging liabilities of Discoms to Gencos.
• 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.
• Central Public Sector Generation Companies shall give rebate to Discoms which shall be passed on to the final consumers (industries)

12. Relief to contractors

• 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)
• Covers construction/ works and goods and services contracts
• Covers obligations like completion of work, intermediate milestones etc. and extension of Concession period in PPP contracts
• Government agencies to partially release bank guarantees, to the extent contracts are partially completed, to ease cash flows

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

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

• Ministry of Housing and Urban Affairs will advise States/UTs and their Regulatory Authorities to the following effect:
• Treat COVID-19 as an event of 'Force Majeure' under RERA.
• 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.
• Regulatory Authorities may extend this for another period of upto 3 months, if needed
• Issue fresh 'Project Registration Certificates' automatically with revised timelines.
• Extend timelines for various statuary compliances under RERA concurrently.
• 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.

14. Rs 50,000 cr liquidity through TDS/TCS reductions

• 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 contract, professional fees, interest, rent, dividend, commission, brokerage, etc. shall be eligible for this reduced rate of TDS.
• This reduction shall be applicable for the remaining part of the FY 2020-21 i.e. from tomorrow to 31st March, 2021.
• This measure will release Liquidity of Rs. 50,000 crore.

15. Other Direct tax Measures

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

16. Other Direct Tax Measures

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

These measures are shall not be just a financial package, but a reform stimulus, a mindset overhaul, and a thrust in governance. They would provide immediate and the much-needed relief to MSMEs, micro finance institutions, housing finance companies, stressed real estate and construction sectors. Additional collateral & guarantee free loans, equity funding options, better access to government procurement, e-market linkage and higher thresholds definitely are strong enablers to put the economy back on its feet.

The author can also be reached at onesc2019@gmail.com or onestopconsultants.com