FM Reveals First Set Of Details On Rs 20 Lakh Crore Stimulus

As part of the Rs 20 lakh crore stimulus package to revive the economy, Indian MSMEs would get collateral-free loans worth up to Rs 3 lakh crore, equity infusion of Rs 50,000 crore through a "fund of funds", and exclusive rights on all government tenders that are worth upto Rs 200 crore without any fear of competition from global players.

This, among several other measures, was announced by Finance Minister Nirmala Sitharaman on Wednesday as she disclosed details of the Rs 20 lakh crore package for which Prime Minister Narendra Modi laid out the vision a day earlier.

The Finance Minister said that for the next few days, she would address the media to give further details on the stimulus package.

While her first press conference on the package focused mainly on Micro, Small and Medium Enterprises (MSMEs), she also announced some measures for the real estate sector, NBFCs and on the direct tax front.

For real estate, Sitharaman said the registration and completion date of for all registered real estate projects expiring on or after March 25 would be extended by six months given they stand the risk of defaulting on RERA timeline. 

"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," she said.

For taxpayers, the Finance Minister annouced that 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 specified receipts shall be redued by 25 per cent of the current rate. This means those who got a deduction of 10 per cent would now get a deduction of only 7.5 per cent.

"This would provide more funds at the disposal of taxpayers and would release Rs 50,000 crore worth of liquidity. This reduction would be applicable for the remaining part of FY21 from tomorrowonwards," she said.

The government also extended the due date of all income tax returns for FY20 to November 30 and tax audit deadline to October 31.

Sitharaman also announced that the EPF support measures under Pradhan Mantri Garib Kalyan Package, announced earlier for three months, would be extended further by another three months till August. Under the scheme, payment of 12 per cent of employer contribution and 12 per cent employee contributions was made into EPF accounts by the government. The scheme was earlier only for salaries of March, April and May, but is now extended for June, July and August as well.

However, Wednesday's announcements mainly focused on the MSMEs with the Finance Minister announcing that Rs 3 lakh crore will be made available for collateral free loan for those MSME units, which have Rs 25 crore outstanding loan payments or Rs 100 crore turnover. These loans will be avaialable with a four-year tenure and a moratorium of 12 months. The move is expected to benefit 45 lakh units and the scheme will be available till October 31.

Sitharaman added that in order to provide stressed MSMEs with equity support, government will facilitate provision of Rs 20,000 cr as subordinate debt.

"Moreover, Rs 50,000 crore equity infusion would be provided for MSMEs through a 'fund of funds' which would be operated through a Mother Fund and few daughter funds," she said.

While the corpus of the fund would be Rs 10,000 crore, the Finance Minister said the fund structure will help leverage Rs 50,000 crore of funds at daughter level funds.

The government also decided to revise definition of MSMEs raising investment  upwards to Rs 1 crore.

"The definition of MSMEs is being changed for their advantage so that they can grow in size and get benefits. Investment limit which defined MSMEs have been revised upwards. Additional criteria being brought in is turnover size - earlier differentiation between manufacturing and service MSMEs will be categorised similarly," Sitharaman explained.

For government procurement, she said that tenders upto Rs 200 crore will no more be on global route as Indian MSMEs and other small companies have often faced unfair competition from foreign companies. 

"This will be a step towards Self-Reliant India and support Make in India while helping MSMEs increase their business," the Finance Minister said.

To ease liquidity pressures on MSMEs, she also announced that all MSME receivables from government and CPSEs would be released within 45 days.

For NBFCs, HFCs and micro finance institutions (MFIs) which are finding it difficult to raise money in debt markets, Sitharaman announced launch of a Rs 30,000 crore special liquidity scheme under which investment will be made in both primary and secondary market transactions in investment grade debt paper of NBFCs, HFCs and MFIs. Securities will be fully guaranteed by the government.

Under the Rs 45,000 crore partial guarantee scheme for NBFCs, the first 20 per cent of loss will be borne by guarantor, that is the Government of India, she explained.

However, the Finance Minister added that this was just the beginning and more announcements would be made soon.