Press Conference by FM Nirmala Sitharaman HighlightsNirmala Sitharaman Highlights | Final Tranche of Economic Package: Finance Minister Nirmala Sitharaman’s fifth and last tranche of the Rs 20 lakh crore special economic package focused on the consolidation of PSUs, make the environment conducive for the private companies as to boost ease of doing business, and an additional allocation of Rs 40,000 crore under MNREGA scheme. Besides, the other announcements were related to health, businesses and COVID-19, decriminalisation of Companies Act, and state governments. Under IBC related matters, FM Sitharaman said many businesses have been severely affected by lockdown. The debts related to COVID-19 shall be excluded from defaults under IBC. Also, the minimum threshold to initiate insolvency proceedings has been raised to Rs 1 crore from Rs 1 lakh. Moreover, no fresh insolvency proceeding will be initiated up to 1 year. Government has also decided to increase the borrowing limit of states from 3 per cent to 5 per cent for FY21, which will give an extra resources of Rs 4.28 lakh crore to states. Fm Sitharaman also provided the breakup of nearly Rs 21 lakh crore special economic package. Where the value of the first tranche of the stimulus was Rs 5.95 lakh crore, the second tranche amounts to Rs 3.1 lakh crore and the amount of the third stimulus was Rs 1.5 lakh crore. While the fourth and fifth tranche were equal to Rs 48,000 crore including Rs 40,000 crore additional spending on MNREGA. However, the stimulus from earlier measures were equal to Rs 1,92, 800 crore
Highlights
Private companies who undertake listed issuances will no longer be considered as listed companies. As a result, private companies do not have to comply with corporate governance standards applicable to listed companies like setting up audit committees or having independent directors. There will also be relaxations in relation to related party transactions. Further, ongoing disclosures required to be made by them will be less onerous - Leena Chacko, Partner, Cyril Amarchand Mangaldas
The policy regarding public sector enterprises (PSEs) should be finalized in consultation with the states since there are a large number of state-level PSEs. The choice of sectors earmarked as public enterprise sectors would depend on their strategic importance. The policy of limiting the number of PSEs in one sector to a maximum of four may prove to be an uphill task since, at present, there are many sectors where the number of CPSEs is quite large - D.K. Srivastava, Chief Policy Advisor, EY India.
We are very sad and extremely disappointed that the Hon'ble Finance Minister chose to completely ignore this (restaurant) sector in these five days of announcements of the stimulus package. Now, we are staring at a large scale close down of businesses and massive loss of employment in the sector. With the imminent closure of many F&B Establishments, this will certainly cause a long-term impact on the farming sector - Anurag Katriar, President of NRAI
The announcements have provided for an extension of CLSS scheme and an extension of deadline by six months under RERA for registered projects as a relief to the real estate sector. We also hope that the partial Credit Guarantee to NBFCs and HFCs will enhance liquidity support and to assuage risk concerns of lenders, thereby help the sector to remain positive during this crisis. Overall, we feel disappointed that no direct demand stimulus was announced that could have benefited the beleaguered sector - Shishir Baijal, Chairman & Managing Director, Knight Frank India.
Accounting for the support measures unveiled yesterday (Rs 81bn), and today (Rs 400bn), we estimate that the government's fiscal support programme totals Rs 21trn, which includes Rs 8trn of measures announced by the RBI. However, we estimate that the actual fiscal impact on the budget will be only Rs 1.5trn (0.75% of GDP), based on our calculations and assumptions made during the series of announcements - Rahul Bajoria, Chief India Economist, Barclays.
A welcome announcement was about notification of a list of strategic sectors requiring the presence of PSEs in the public interest. In strategic sectors, at least one enterprise will remain in the public sector but the private sector will be allowed. In other sectors, PSEs will be privatized. If this bold announcement is quickly transmitted into action, then it could unlock a lot of value -Dhiraj Relli, MD & CEO, HDFC Securities
We need to see the effect of these announcements in addressing some immediate liquidity concerns especially for farmers, and daily wagers besides fixing the medium and long term improvement of confidence. The immediate confidence-boosting measures are sure to encourage the investment cycle allowing industries to take additional loans from banks which recently have been flushed with funds and parking the additional capital only with RBI - Lohit Bhatia, President, Indian Staffing Federation
Finance Minister Nirmala Sitharaman announcing the fifth tranche of the Rs 20 lakh crore economic package on Sunday extended the initiation period of fresh insolvency proceedings against MSMEs by six months to up to one year depending upon the Covid situation. The minister added that Covid-19 related debt would be excluded from the ‘default’ category under the Code to further enhance ease of doing business.Read full story
In a major push to generate more job opportunities in rural India, especially during the upcoming monsoon season, Finance Minister Nirmala Sitharaman today announced an additional allocation of Rs 40,000 crore for the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA). The government had allocated Rs 61,000 crore for MNREGA in the budget for the current fiscal announced on February 1, 2020. Read full story here
The announcement on the public sector policy spells out the role of the government-owned companies within a broad framework of strategic sectors and it would help both the private sector and the state-owned firms as there is no conflict between the public and private sector, said Assocham Secretary general Deepak Sood. It is a move aimed at getting the best out of our national assets, whether they are in the public or private sector, he added.
Finance Minister Nirmala Sitharaman has paved the way for opening up of all sectors to private companies, while allowing for consolidation of the PSU companies (public sector utilities) into only strategic sectors, to be notified. Further, each of such notified strategic areas will have a maximum of four PSUs, and the remaining state-run companies would be either merged or privatised. The move could trigger a series of mergers, and disinvestment, sale and privatisation of state-run companies in the coming months and years. Nirmala Sitharaman said that limiting the number of PSUs in each sector would minimise wasteful administrative costs.
Read full story
In a major push to generate more job opportunities in rural India, especially during the upcoming monsoon season, Finance Minister Nirmala Sitharaman today announced an additional allocation of Rs 40,000 crore for the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA). The government had allocated Rs 61,000 crore for MNREGA in the budget for the current fiscal announced on February 1, 2020. With a lot of workers migrating back to their villages, the government has made provisions so that they can also join in the scheme from their hometowns, if they want to enrol in MGNREGA
Read full story
Finance Minister Nirmala Sitharaman has paved the way for opening up of all sectors to private companies, while allowing for consolidation of the PSU companies (public sector utilities) into only strategic sectors, to be notified. Further, each of such notified strategic areas will have a maximum of four PSUs, and the remaining state-run companies would be either merged or privatised. Read full story here
Proposal to Increase the threshold limit to initiate proceedings under IBC from the existing limit of Rs. 1 lakh to Rs. 1 crore, exclusion of default due to COVID-19 and barring initiation of new insolvency cases for next 1 year will surely benefit corporate entities who genuinely want to pull themselves out of an economic slump or slowdown but will ultimately hamper the recovery prospects of Financial Institutions in cases of existing defaults by a Corporate entity and in those cases as well where the accounts have already been declared as NPAs - Sumit Batra, a corporate lawyer.
While the MSME amendments have given some breathing space to the sector, the blanket suspension of defaults on account of COVID could lead to unintended consequences. Questions like why should an entity not refer itself to insolvency, what is the parallel regime of the resolution, recovery steps are not curtailed and therefore will continue to rise, what is the framework for creditors to come up with a viable resolution plan outside of IBC, continue to remain unanswered - Veena Sivaramakrishnan, Partner, Shardul Amarchand Mangaldas & Co.
FM SItharaman asks media to look into core issues, instead of the effect on the annual budget.
FM Sitharaman pleads Congress party to work together for migrant workers, instead of just criticising.
Minimum threshold to initiate insolvency proceedings raised to Rs 1 cr from Rs 1 lakh and no fresh insolvency proceedings will be initiated for one year, depending on the pandemic situation.
FM Nirmala Sitharaman gives break up of Rs 21 lakh crore in economic package 2.0
Value of Part 1 stimulus- Rs 5.95 lakh crore, including Rs 3 lakh crore emergency working capital facility for MSMEs, business; Rs 90,000 crore liquidity infusion for DISCOMS
Part 2 stimulus worth Rs 3.1 lakh crore total, including, Kisan Credit Card additional credit Rs 2 lakh crore
Part 3 stimulus worth Rs Rs 1.5 lakh crore, including Rs 1 lakh crore agriculture infrastructure fund
Part 4 and 5 stimulus worth Rs 48,000 crore, including Rs 40,000 crore additional spending on MNREGA
The total is Rs 20,97,053 crore.
Second tranche announcement was worth Rs 3.1 lakh crore and the third tranche was worth Rs 1.5 lakh crore.
Stimulus from earlier measures before the PM’s address - total Rs 1.93 lakh crore, including Rs 1.7 lakh crore under PM Garib Kalyan Yojana
Government gives break up of Rs 20 lakh crore package, which was awaited.
Four sector-specific tasks will be related to One Nation One Ration card, Ease of Doing Business, Power reforms, and Urban Local Bodies to build new opportunities.
Part of the borrowing will be linked to specific reforms. From 3-3.5 per cent, it will be unconditional. The other 1 per cent increase will be released in four tranches to take specified steps in four sectors. Last 0.5% will be given if at least three of these three aims are fulfilled.
FM Sitharaman has announced to increase the borrowing limit of states from 3% of SGDP to 5% of SGDP. This will allow states to borrow an additional amount of Rs 4.28 lakh crore as extra resources.
RBI has increased Ways and Means Advances by 60%, also states can remain in continuous overdraft position for 21 days, instead of 14 days
In the notified strategic sectors, only up to four PSUs will be present - not more than 4 PSUs in those notified sector. If there are more PSUs in any sector, they will be merged together, or they will be brought in such a way that there are only four or lesser.
The central government extends more support to the state governments. Revenue deficit grants to the states of Rs 12390 crore given to states despite financial crisis - FM Sitharaman
Govt will notify strategic sectors where at least one PSE will be present while private players will also be allowed to participate.
Decriminalisation of Companies Act violations involving minor technical and procedural defaults, such as shortcomings in CSR reporting, inadequacies in board report, filing defaults, delay in holding EGMs. 7 compoundable offences altogether dropped, and 5 to be dealt with under the alternative framework.
Listing of non-convertible debentures on stock exchanges will not be regarded as those companies as listed companies - so if companies were to list their NCDs on stock exchanges, it doesn’t mean that they would become listed companies.
All sectors will be open to private sectors as we need coherent policies for Atma Nirbhara Bharat even as PSUs will play an important role - FM Sitharaman
Government allows companies to directly list their securities in foreign jurisdictions. Listing on non-convertible debentures will mean that the company is listed - FM Sitharaman
The government has decriminalised most of the offences under the Companies Act. Also, for compoundable offences, internal adjudicating mechanism route will be set up to reduce burden on criminal courts and NCLT.
Special insolvency resolution framework for MSMEs under section 240A of the Code to be notified soon. No fresh insolvency proceedings will be initiated for one year, depending on the pandemic situation.
Deaths related to Covid-19 will not be included in the category of Insolvency and Bankruptcy Code. No fresh insolvency proceedings for the next one year. Minimum threshold for MSMEs to go under IBC code increased to Rs 1 crore - FM Sitharaman
PM e-vidya programme, for multi-mode access to digital/online education to be launched immediately
Government will launch PM e-Vidya programme and DIKSHA for digital education and one earmarked TV channel per class will also be a part of this. Radio community and podcast also be included.
Public expenditure on heath sector has been increased. All districts will have infectious diseases blocks and public health labs will be set up at block levels.