The Centre on Sunday announced plans to privatise PSUs in non-strategic sectors and suspend loan default-triggered bankruptcy filings for one year in the fifth and final tranche of its economic stimulus package that together with RBI’s liquidity measures totalled to about Rs 21 lakh crore but entailed less than 10 per cent cash outgo from government coffers.
Finance Minister Nirmala Sitharaman, whose previous four parts of the stimulus package involved credit line to small businesses and new fund creations to be shouldered by banks and financial institutions with very little extra budget spending, announced a Rs 40,000 crore hike in allocation for the rural employment guarantee scheme to provide jobs to migrant workers.
She also raised the threshold of insolvency proceedings to help the industry deal with COVID-19 pains.
The government also announced a new policy for companies under state control, saying PSUs in non-strategic sectors will be privatised while those in the identified strategic sector would be capped at four, with the rest to be merged or sold.
Sitharaman said the five-part stimulus together with the March 26 announcement of free foodgrain and cooking gas to poor and some cash to vulnerable sections for three months and RBI’s Rs 8.01 lakh crore worth of liquidity measures swell the size of the COVID-19 economic package to Rs 20.97 lakh crore.
While she refused to say what would be the extra spending by the government, analysts pegged it at no more than Rs 2.10 lakh crore after considering the March 26 announcement, free foodgrains to migrant workers, increased allocation for MGNREGS, tax relief to certain sections and Rs 15,000 crore allocated to the healthcare sector to deal with the pandemic.
Prime Minister Narendra Modi’s pledge of total spending of Rs 20 lakh crore (USD 265 billion) to weather the fallout of the coronavirus pandemic under ‘Atma-nirbhar Bharat Abhiyan’ is about 10 per cent of India’s GDP in 2019-20 and ranks behind stimulus provided by Japan, the US, Sweden, Australia and Germany.
With global lockdowns imposed to check the spread of COVID-19 causing economic turmoil that is touted to be worst since the 1930s, nations have announced what came to be known as ‘coronavirus stimulus packages’. The US has committed to the largest rescue package by any country in pure dollar terms at USD 2.7 trillion.
In the fifth and final tranche of the economic stimulus package, Sitharaman raised the allocation for the employment guarantee scheme by Rs 40,000 crore over and above the Rs 61,000 crore budgeted for MGNREGS to provide jobs to migrant workers moving back to their states.
This, she said, will help generate nearly 300 crore person-days in total.
For industries, she said the minimum threshold to initiate insolvency proceedings will be raised to Rs 1 crore from Rs 1 lakh, which largely insulates MSMEs from bankruptcy on defaulting on loans.
Also, a special insolvency resolution framework for MSMEs under Section 240A of the Insolvency and Bankruptcy Code (IBC) will be notified soon, she said, adding fresh initiation of insolvency proceedings will be suspended for up to one year depending upon the pandemic situation.
COVID-19 related debt will be excluded from the definition of “default” under the IBC for the purpose of triggering insolvency proceedings, she said, adding the changes will be effected by promulgating an ordinance.
Additionally, minor technical and procedural defaults under the Companies Act, such as shortcomings in CSR reporting, inadequacies in board reports, filing defaults and delay in holding AGMs, will be decriminalised.
Sitharaman said companies will be permitted to directly list securities in permissible foreign jurisdictions. Private companies that list non-convertible debentures (NCDs) on stock exchanges will not be regarded as listed companies.
There will be lower penalties for all defaults for small companies, one-person companies, producer companies, and start-ups, she said, adding the required changes in the Companies Act would also be done via an ordinance.
Announcing a new public sector enterprises (PSEs) policy, she said a list of strategic sectors requiring the presence of PSUs in the public interest will be notified.
In strategic sectors, at least one enterprise will remain in the public sector but the private sector will also be allowed.
In other sectors, PSUs will be privatised, she said, adding the timing would be based on feasibility.
“To minimise wasteful administrative costs, the number of enterprises in strategic sectors will ordinarily be only one to four. Others will be privatised/ merged/ brought under holding companies,” she said.
For states, she said the Centre has acceded to their request and increased borrowing limit from 3 per cent of Gross State Domestic Product (GSDP) to 5 per cent for 2020-21 only, giving them extra resources of Rs 4.28 lakh crore.
But the increased borrowing limit would be linked to specific reforms such as one-nation-one-ration-card, ease of doing business, power distribution and urban local body revenues.
Sitharaman’s previous 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.
On Saturday, the government announced a hike foreign investment limit in defence manufacturing and opened up the space sector while giving a new push to old reforms of commercial coal mining, mineral block auction and privatisation of power distribution as it sought new investments to help shore up the coronavirus-hit economy.
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