Relief Package to boost up Micro Small & Medium Enterprise (MSME) & other domestic industry
“A special economic package has been announced to make India self-reliant.” Our Prime Minister, Mr. Narendra Modi said in his third address to the nation over COVID-19 pandemic. “This package, taken together with earlier announcements by the government during COVID crisis and decisions taken by RBI, is to the tune of Rs. 20 lakh cr. which is equivalent to almost 10 percent of India’s GDP.”
The package announced with the vision of Hon. PM: ‘Vocal for Local with Global outreach’, the main focus was on land, labor, liquidity, and laws. It will cater to various sections, including the cottage industry, MSMEs, laborers, middle class, and industries.
The summary of all the announcements totaling over Rs. 20 lakh cr.
|Sl No.||Items||(Rs. in Cr.)|
|1||Emergency W/C Facility for Business, incl MSMEs||3,00,000|
|2||Subordinate Debt for Stressed MSMEs||20,000|
|3||Fund of Funds for MSMEs||50,000|
|4||EPF Support for Business & Workers||2800|
|5||Reduction in EPF rates||6750|
|6||Special Liquidity Scheme for NBFC/HFC/MFIs||30,000|
|7||Partial Credit Guarantee Scheme 2.0 for Liabilities of
|8||Liquidity Injections for DISCOMs||90,000|
|9||Reduction in TDS & TCS Rates||50,000|
|10||Free Food Grain Supply to Migrant Workers for 2
|11||Interest Subvention for MUDRA Shishu-Loan||1500|
|12||Special credit facility to Street Vendors||5000|
|14||Additional Emergency Working Capital Fund through
|15||Additional Credit through KCC||2,00,000|
|16||Food Micro Enterprises||10,000|
|17||Pradhan Mantri Matsya Sampada Yojana||20,000|
|18||TOP to TOTAL: Operation Green||500|
|19||Agri Infrastructure Fund||1,00,000|
|20||Animal Husbandry Infrastructure Development Fund||15,000|
|21||Promotion of Herbal Cultivation||4,000|
|23||Viability Gap Funding||8,100|
|24||Additional MGNREGS allocation||40,000|
|25||Earlier Fund including PMGKP||1,92,800|
|26||RBI Measures (actual)||8,01,603|
1. Revised definition of MSME:
|Existing Definition of MSMEs|
|Criteria : Investment in Plant & Machinery or Equipment|
|Manufacturing Enterprises||Investment<Rs. 25 lac||Investment<Rs. 5 cr.||Investment <Rs. 10 cr.|
|Services Enterprises||Investment<Rs. 10 lac||Investment< Rs. 2 cr.||Investment<Rs. 5 cr.|
|Revised Definition of MSMEs|
|Composite Criteria : Investment And Annual Turnover|
|Manufacturing & Services||Investment<Rs.1cr. and Turnover<Rs.5cr.||Investment<Rs.10cr. and Turnover<Rs.50cr.||Investment<Rs.20cr. and Turnover<Rs.100 cr.|
Observation: Definition of MSME will be changed with additional classification based on turnover limits (at present it is based on investment limits). The difference in classification between the manufacturing and service sector would be removed. However, the revised definition of MSME will come into effect after necessary amendment in MSMED ACT 2006. Till amendment, the existing definition of MSME is applicable.
2. Emergency credit line to Business/MSMEs from Banks and NBFCs up to 20% of entire outstanding credit as on 29.02.2020:
- Borrowers with up to Rs. 25 cr. outstanding and Rs. 100 cr. turnover eligible.
- Loans to have 4 years’ tenor with a moratorium of 12 months on principal
- 100% credit guarantee cover to Banks and NBFCs on principal and
- No guarantee fee, no fresh
- The scheme can be availed till 31st October
Observation: This additional top-up loan will not call any additional collateral but will be covered with existing security with lenders to MSME.
3. Rs. 20,000 cr. subordinate debt for stressed MSMEs:
- Functioning MSMEs which are NPA or are stressed will be
- will provide a support of Rs. 4000 cr. toCGTMSE.
- CGTMSE will provide partial Credit Guarantee support to
- Promoters of the MSME will be given debt by banks, which will then be infused by promoter as equity in the
4. Equity infusion for MSMEs through Fund of Funds:
- Fund of funds with a corpus of Rs. 10,000 cr. will be set
- Equity funding will be provided for MSMEs with growth potential and
- Fund of funds will be operated through a Mother fund and few daughters
- Fund structure will help leverage Rs. 50,000 cr. of funds at daughter funds
- It will help to expand MSME size as well as
- It will encourage MEMEs to get listed on the main board of Stock exchanges.
5. Global tenders up to Rs. 200 cr. (reserve for domestic companies):
- Indian MSMEs and other companies have often faced unfair competition from foreign companies therefore Global tenders will be disallowed in Government procurement tenders up to Rs. 200
Observation: This will provide a boost to MSMEs wherein they will not have to face competition from global players & will get oxygen to survive in front of MNCs and larger corporates.
6. E-marketing linkage for MSMEs to be promoted to act as a replacement for trade fairs and exhibitions.
7. Fintech will be used to enhance transaction-based lending using the data generated by the e-marketing
8. MEME receivable from Govt. and CPSEs to be released in 45 days.
9. EPF support for Business & Workers for another 3months:
- For the month of June, July & August 2020 12% of employer and 12% of employee contributions towards EPF will be made by Govt. of India subject to a maximum of 100 employees and 90% of employees earn less than Rs. 15,000 per month
Observation: EPF contribution was paid by the government for COVID times, March, April, and May 2020. Now, this payment support has been extended by another 3 months, wherein 12% + 12% contribution will be paid by Govt. of India.
10. EPF contribution reduced for Business & Workers for 3 months:
- PF contribution of both employer and employee will be reduced to 10% from existing 12% each for all establishments covered by EPFO for the next 3 months except the establishments eligible for benefits mentioned in point no. 9.
11. Interest subvention for Dairy Cooperatives:
- A new scheme to provide a 2% interest subvention per annum to dairy cooperatives for the FY 2020-21 & additional 2% a. interest subvention on prompt payment/interest servicing.
Observation: Additional interest subvention @2% p.a. on prompt interest payment may be restricted to dairy cooperatives.
12. Direct Tax Measures:
- Due date of all income tax return for the FY 2019-20 will be extended from 31st July 2020 & 31st 2020 to 30th November 2020 & Tax audit from 30th Sept. 2020 to 31st Oct.2020.
- Date of assessment getting barred on 30th 2020 extended to 31stDec. 2020 and those getting barred on 31st Mach 2021 extended further to 30th Sept. 2021.
12.1 25% reduction on the rate of TDS & TCS for the remaining FY 2020- 21.
Observation: Government has also reduced Non-Salaried TDS and TCS rates by 25%, from existing slab rates. This will be effective from 14th May 2020 and will remain valid till 31st March 2021.
13. Agri Infrastructure Fund of Rs. 1 lakh cr. for farm-gate infrastructure:
- Financing facility of Rs. 1,00,000 Cr. will be provided for funding Agriculture Infrastructure Projects at farm-gate & aggregation points (Primary Agricultural Cooperative Societies, Farmers Producer Organisations, Agriculture entrepreneurs, Start-ups,)
- The impetus for development of farm-gate & aggregation point, affordable and financially viable Post Harvest Management
14. Rs. 10,000 cr. for the formalisation of Micro Food Enterprises (MEF):
- The scheme will be launched to help 2 lakh MFEs attain above goals.
- Existing micro food enterprises, Farmer Producer Organisations, Self Help Groups and Cooperatives to be
- Cluster based approach (e.g. Mango in UP, Kesar in J&K, Bamboo shoots in North-East, Chilli in Andhra Pradesh, Tapioca in Tamil Nadu etc.)
15. Pradhan Mantri Matsya Sampada Yojana (PMMSY):
- Government will launch the PMMSY for integrated, sustainable, inclusive development of marine and inland
- 11,000 cr. for activities in Marine, Inland fisheries and Aquaculture.
- 9,000 cr. for Infrastructure – Fishing Harbours, Cold chain, Markets etc.
- Cage Culture, Seaweed farming, Ornamental Fisheries as well as New Fishing Vessels, Traceability, Laboratory Network etc. will be key
- Provisions of Ban Period Support to fishermen (during the period fishing is not permitted), Personal & Boat Insurance.
16. Animal Husbandry Infrastructure Development Fund:
- An Animal Husbandry Infrastructure Development Fund of Rs. 15,000 cr. will be set
- Aim to support private investment in Dairy Processing, value addition and cattle feed
- Incentives to be given for establishing plants for the export of niche products.
17. From ‘TOP’ to TOTAL (Operation Greens)- Rs. 500 cr.:
- Operation Greens will be extended from Tomatoes, Onion and Potatoes (TOP) to ALL fruits and vegetables(TOTAL).
- Scheme features will be asfollows:
- 50% subsidy on transportation from surplus to deficient markets.
- 50% subsidy on storage, including cold storages.
18. Measures taken by RBI – To boost up the liquidity:
- Targeted Long Term Repo Operations (TLTROs) of 1,00,050cr.
- Reduction of Cash Reserve Ratio (CRR) for liquidity
- TLTRO of Rs. 50,000 cr. for investment in bonds, commercial paper, and non-convertible debentures of NBFCs, and
- Increased the banks’ limit for borrowing overnight – To avail an additional 1,37,000 cr. ofliquidity.
- Announced special refinance facilities to NABARD, SIDBI and the NHB for a total amount of 50,000 cr. at the policy reporate.
- Announcedthe opening of a special liquidity facility (SLF) of 50,000 cr. for mutual funds.
- Moratorium of three months on payment of instalments and payment of Interest on Working Capital Facilities in respect of all Term
- Easing of Working Capital Financing by reducing
- Additional time of one year extension for commencement for commercial operations (DCCO) by NBFCs to commercial real estate sector.
19. Relaxation in Statutory & Compliance matters:
- Extending last date for Income Tax Returns to June 30,
- Extending filing GST returns to end of June
- 24*7 custom clearances till 30thJune,
- Relaxation for 3 months for debit cardholders to withdraw cash free from any ATMs,
- Allowing payment before 15 May, 2020 for Motor Vehicle and Health Insurance
- Mandatory Board meetings extended by 60 days till 30
- Allowing Extraordinary General Meetings through Video Conference with e-voting/simplified voting facility.
20. Benefits for other Agricultural & Allied Sector:
- 4,000 cr. for promotion of HerbalCultivation.
- 500 cr. for Beekeepinginitiatives.
- National Animal Disease Control
- Additional Emergency Working Capital Fund of Rs. 30,000 cr. for farmers through
- Interest Subvention for MUDRA-Shishu Loans of Rs.