Finance Minister Nirmala Sitharaman on Sunday said reforms will be the focus of the fifth and final tranche of economic stimulus package to deal with the economic fallout of the COVID-19 pandemic .
She said the package would focus on MGNREGA, healthcare and education, businesses, de-criminalisation of the Companies Act, ease of doing business, public sector undertakings, and resources related to state government.
Tranche 1: Business including MSMEs (May 13, 2020)
During the coronavirus-induced lockdown, ₹16,394 crore has been paid to 8.19 crore farmers under the ₹2,000 free cash dole scheme of PM Kisan, she said.
Old-age beneficiaries and others have been paid first instalment of ₹1,405 crore and a second one of ₹1,402 crore.
She allso said that as much as ₹10,025 crore has been transferred to 20 crore women Jan Dhan account holders. Also, 6.81 free LPG cylinders have been given to poor.
Tranche 2: Poor, including migrants and farmers (May 14, 2020)
Last week, the government pledged a ₹20 lakh crore (nearly 10 per cent of GDP) package to support the economy headed for its first full-year contraction in more than four decades.
This included March 27 announcement of ₹1.7 lakh crore package of free foodgrain and cash to poor for three months and the Reserve Bank of India’s ₹5.6 lakh crore worth of liquidity measures since March.
Further to this, the government last week announced a cumulative package of ₹10.73 lakh crore, mostly in liquidity measures with negligible extra-budget spending. The measures included a variety of steps for small businesses, street vendors, farmers and poor migrants as well as shadow banks and electricity distributors, but they have largely been either credit guarantee schemes or new fund creations to be shouldered by banks and financial institutions.
Tranche 3: Agriculture (May 15, 2020)
The government’s cash outgo is limited to a maximum of ₹18,500 crore on free foodgrain and affordable housing to migrant workers as well as limited tax relief and marginal dole to some companies on employee retiral benefits.
On Saturday, the government announced a hike in foreign investment limit in defence manufacturing and opened up space facilities while giving a new push to reforms of commercial coal mining, mineral block auction and privatisation of power distribution as it sought new investments to help shore up an economy hit by the coronavirus pandemic.
Beginning March 25, India imposed a three-week-long nationwide lockdown, the most far-reaching measure undertaken by any government to curb the spread of the pandemic.
Tranche 4: New horizons of growth (May 16, 2020)
The lockdown, which brought most of the economic activities to a standstill as factories and businesses were shut while rendering thousands temporarily unemployed, has since been extended twice through May 17, with some relaxations to allow resumption of economic activities.
According to estimates, the lockdown may have led to 12.2 crore people losing jobs in April and consumer demand evaporating.
Centre raises borrowing limit of States from 3 pc of GSDP to 5 pc
The Centre agreed to raise the borrowing limit of states from 3 per cent of gross state domestic product (GSDP) to 5 per cent in 2020-21, to make available an extra of ₹4.28 lakh crore.
Releasing the fifth and final tranche of the economic stimulus package, Finance Minister Nirmala Sitharaman said the Centre devolved ₹46,038 crore of taxes in April to states even though actual revenue shows unprecedented decline from Budget Estimates.
Revenue deficit grants of ₹12,390 crore were given to states on time in April and May despite the Centre’s stressed resources, she said.
Also, advance release of the State Disaster Relief Fund (SDRF) of ₹11,092 crore happened in first week of April, she said adding that a release of over ₹4,113 crore from the health ministry for direct anti-COVID activities was also released.
At the Centre’s request, the Reserve Bank of India (RBI) has increased Ways and Means Advance limits of states by 60 per cent. Also, the number of days state can be in continuous overdraft has been increased from 14 days to 21 days and the number of days state can be in overdraft in a quarter has been increased from 32 to 50 days.
State net borrowing ceiling for 2020-21 is ₹6.41 lakh crore (3 per cent of gross state domestic product).
Also read: Coronavirus package | Migrant workers to get free foodgrains
States have so far borrowed only 14 per cent of the limit authorised. Eighty-six per cent of the authorised borrowing remains unutilised.
Despite this, states have been asking for special increase in borrowing from 3 per cent to 5 per cent.
“In view of the unprecedented situation, the Centre has decided to accede to request and increase borrowing limits of states from 3 per cent of GSDP to 5 per cent for 2020-21 only. This will give states extra resources of ₹4.28 lakh crore,” she added.
Ms. Sitharaman said part of the borrowing will be linked to specific reforms.
Also read: Coronavirus lockdown | Narendra Modi announces ₹20-lakh-crore economic stimulus package
There will be unconditional increase of 0.50 per cent in borrowing limit. “1 per cent in 4 tranches of 0.25 per cent with each tranche linked to clearly specified, measurable and feasible reforms,” she said. “Further, 0.50 per cent if milestones are achieved in at least three out of four reform areas.”
Stimulus package includes ₹8 lakh cr liquidity measures by RBI
Ms. Sitharaman said the ₹20 lakh crore economic stimulus package to deal with the fallout of COVID-19 includes ₹8.01 lakh crore of liquidity measures announced by the Reserve Bank since March.
The stimulus totals to ₹20.97 lakh crore, she said, adding this also comprises the ₹1.92 lakh crore package of free foodgrain and cooking gas to poor and cash to some sections announced in March.
Also read: Coronavirus package | Government throws open defence production and mining sectors
The five part stimulus package announced beginning May 13 comprised ₹5.94 lakh crore in the first tranche that provided credit line to small businesses and support to shadow banks and electricity distribution companies.
The second tranche included free foodgrain to stranded migrant workers for two months and credit to farmers, totalling ₹3.10 lakh crore.
Spending on agri infrastructure and other measures for agriculture and allied sectors in the third tranche totalled to ₹1.5 lakh crore.
The fourth and fifth tranches that dealt mostly with structural reforms totalled to ₹48,100 crore, she said.
Allocates ₹40,000 cr more for MGNREGS
Ms. Sitharaman announced an additional ₹40,000 crore allocation for the rural employment guarantee scheme to help provide jobs to migrant workers returning home.
She said the allocation for MGNREGS is being increased by ₹40,000 crore over and above the ₹61,000 cr budgeted earlier.
Also, public expenditure on health will be increased, she said without giving details.
Investments in grassroot health institutions to be ramped up, she added.
She said a programme for multi-mode access to digital or online education to be launched immediately.
Also, one earmarked TV channel per class from 1 to 12 (one class, one channel) will be part of this, she said.
Top-100 universities will be permitted to automatically start online courses by May 30, 2020, she said.
Government to privatise non-strategic PSUs
The Union Finance Minister said a new “coherent” public sector enterprises policy will be formulated that will define strategic sectors which will have not more than four PSUs.
List of strategic sectors requiring presence of public sector undertakings (PSUs) in public interest will be notified, she said while announcing her fifth and final economic stimulus package.
In strategic sectors, at least one enterprise will remain in the public sector but private sector will also be allowed.
In other sectors, PSUs will be privatised.
“To minise wasteful administrative costs, number of enterprises in strategic sectors will ordinarily be only one to four; others will be privatised/merged/brought under holding companies,” she said.
12 lakh EPFO members withdraw retirement savings during lockdown
Ms. Sitharaman said around 12 lakh members of the Employees’ Provident Fund Organisation (EPFO) withdrew Rs 3,360 crore retirement savings during the coronavirus-induced lockdown.
Earlier, on March 28, the EPFO allowed formal sector workers to withdraw a non-refundable advance from their retirement savings to deal with the hardships due to the lockdown.
The government on March 25 imposed a nationwide lockdown to fight the coronavirus pandemic.
Unveiling the fifth and final tranche of the ₹20-lakh crore economic package, Ms. Sitharaman said 12 lakh members of the EPFO have withdrawn as non-refundable advance of ₹3,360 crore during the past two months.
The EPFO, under the Union labour and employment ministry, has settled a total of 12 lakh claims under the Pradhan Mantri Garib Kalyan Yojana (PMGKY) package.
The provision for a special withdrawal from the EPF Scheme to fight the COVID-19 pandemic is part of the PMGKY scheme announced by the government and an urgent notification on the matter was made to introduce a para 68 L (3) of the EPF Scheme on March 28, 2020.
Under this provision non-refundable withdrawal to the extent of the basic wages and dearness allowances for three months or up to 75 per cent of the amount standing to member’ credit in the EPF account, whichever is less, is provided.
Ms. Sitharaman also told that 2.2 crore building and construction workers got ₹3950 crore under the PMGKY to sustain in lockdown.
No fresh insolvency to be initiated for 1 year under IBC
In a bid to give relief to companies defaulting on loans due to the COVID-19 stress, Ms. Sitharaman on Sunday said no fresh insolvency will be initiated for one year under the Insolvency and Bankruptcy Code.
Also, coronavirus-related debt will be excluded from definition of default, she said.
Minimum threshold to initiative insolvency proceeding has been raised to ₹ 1 crore from ₹1 lakh to benefit MSMEs, she said adding that an Ordinance will be promulgated to bring this change in IBC.
She also announced decriminalisation of the Companies Act in violations involving minor technical and procedural defaults including shortcoming in CSR reporting, inadequacies in board report, filing defaults and delay in holding AGM.
Majority of the compoundable offences sections will be shifted to internal adjudication mechanism (IAM), she said adding that amendments will be brought through an Ordinance and will de-clog the criminal courts and NCLT.
Seven compoundable offences under the Companies Act altogether dropped and five to be dealt with under alternative framework, the finance minister said.
Also, the government allowed companies to directly list securities in permissible foreign jurisdictions.
Private companies, which list non-convertible debentures on stock exchanges, would not to be regarded as listed companies, she added.
