Finance Minister Nirmala Sitharaman on Sunday announced the fifth and final tranche of the Rs 20 lakh crore economic package given under Prime Minister Narendra Modi's Aatmanirbhar Bharat Abhiyaan initiative. The government announced a series of measures to boost liquidity into the system and brought structural reforms addressing the land, labour, liquidity and laws.
The package also included the reforms measures adopted by the RBI along with Rs 1.7 lakh crore fiscal package announced earlier.
In the first tranche, the FM announced collateral-free loans worth Rs 3 lk cr with 100% credit guarantee for MSMEs. Stressed MSMEs are allotted Rs 20,000 crore with a partial guarantee up to Rs 4,000 crore.
The government has also broadened the definition of MSMEs by reclassifying the investment and turnover limits. Investment limit for Micro, Small and Medium businesses has been raised and the distinction between manufacturing and service sectors has also been eliminated. Under new definition, the units with investment upto Rs 1 crore and turnover upto 5 crore are reclassified as micro businesses; units with investment up to Rs 10 crore and turnover up to Rs 50 crore will now be classified as small units and units with investment up to Rs 20 crore and turnover up to Rs 100 crore will be considered as medium units.
To further incentivize the MSME participation and to promote Make in India, foreign companies will be barred from participating in any government tender valued upto Rs 200 crore. These rules will apply to those tenders which could be completed with domestic expertise and doesn’t warrant foreign participation.
For NBFCs, the government provided a special window of Rs 30,000 crore to buy investment-grade debt papers, again under full guarantee. A partial guarantee window of Rs 45,000 crore is also opened for 'AA' rated and unrated papers of the second rug of NBFCs where the first 20% loss will be borne by the GoI.
The government also announced Rs 90,000 crore liquidity injection for electricity distribution companies through PFC and REC. This package is aimed at reducing the burden on electricity generation companies. The entire power sector is currently reeling under the high receivables from the distributing companies.
The second tranche of the package focused on the troubled migrant workers and street vendors. The government provided 5 kg of grains per person and 1 kg Chana per family per month free for two months and also introduced ‘One Nation One Ration card’ for migrants to give them access to ration at reasonable rates from any part of the country. A special credit facility of Rs 5,000 crore was also announced to support around 50 lakh street vendors who will be having access to an initial Rs 10,000 working capital requirement.
In the third tranche, the FM proposed changes in essential commodities act and APMC act to allow the farmers to choose merchants to sell their produce.
New rules, once implemented, would facilitate farmers to engage with processors, aggregators, large retailers, exporters etc in a fair and transparent manner and help them sell agricultural produce at attractive prices. The government is also mulling to enable barrier free inter-state trade and a framework for e-trading of agricultural produce. Current restriction on corporate to direct access to farm produce will be lifted which will help the farmers to achieve better realizations.
The government also proposed to dilute the APMC act. Under the current rules, the farmers are bound to sell agriculture produce only to licensees in Agricultural Produce & Livestock Market Committee (APMCs). This resulted in the hindrance of free flow of agricultural produce and fragmentation of markets and supply chain.
Apart from the proposed reforms, the FM further announced a financing facility of Rs 1 lk cr for funding Agriculture infrastructure projects. It will help primary agriculture cooperative societies, farmers producer organisations and agri startups. A separate fund of Rs 10,000 crore is also created for micro food enterprises to help them for branding, modernizing and capacity expansion. The fund is expected to benefit 2 lakh MFEs.
Under the PM Matsya Sampanda Yojna, a fund of Rs 20,000 crore is allocated for the marine, inland fisheries sector to help building new fishing vessels, harbors and insurance of boats and individuals. This sector provides employment to 55 lakh workers and it is expected to contribute Rs 1 lk cr to India’s exports.
Under the National Animal Disease Program, 100% vaccination for cattle, buffalo, sheep and pigs against foot and mouth disease will be ensured with an outlay of Rs 13,343 crore and a fund of Rs 15,000 crore is allocated for Animal Husbandry Infrastructure Development.
The package further announced Rs 4,000 crore for promotion of herbal cultivation and Rs 500 crore is allocated for beekeeping initiatives.
In the fourth tranche, more reforms were announced pertaining to the coal, mining, defense and civil aviation sectors. Particularly for the coal sector, the government allowed 100% private participation. Thereby, completely ending the government monopoly. The move is particularly aimed at reducing the coal import bills by improving the quality as well as quantity of coal produced in India. The country has the 3rd largest coal reservoir, yet it still imports coal at higher cost due to the poor quality produced in the domestic market. The government has also provided Rs 50,000 crore to develop coal infrastructure in the country.
The mining sector is also opened up further and 500 mining blocks will now be available for bidding through an open auction process. The removal of distinction between captive and non-captive mines is aimed at simplifying the process of transferring mining leases and sale of surplus unused minerals. The FM also informed that the Ministry of Mines is in the process of developing a Mineral index.
To boost the defense sector, the government is looking to promote local manufacturing. A list of defense items is created that can’t be imported further. These items shall be procured only from the domestic manufacturer and this list shall be growing every year. This reform aims at promoting Make in India as well as reducing the import bills for defense.
The FDI limit in defense manufacturing under the automatic route is now revised from 49% to 74%. It will attract foreign defense manufacturers to set up their operations in India with local partnership.
The fourth tranche of the package has also made an attempt for cost cutting and improving efficiency in the civil aviation sector. India’s civil aviation sector is currently able to utilize only 60% of the air space due to the several restrictions. The government is looking to ease this to reduce time in the air; resulting in fuel and time efficiency. The effective implementation of this policy could save about Rs 1,000 crore per year for the airline, resulting in higher realizations per passenger.
Further reforms also envision India to become a global hub for aircraft Maintenance, Repair and Overhaul (MRO). Tax regime for the MRO ecosystem has been rationalized which will reduce the maintenance cost of the airlines. Government aims to increase this market from Rs 800 crore to Rs 2,000 crore in the next three years. The policy targets major engine manufacturers like Rolls-Royce, P&W and GE to set up their engine repair facilities in India in the coming years.
The government has further expanded its policy of operating and maintaining the airports on public-private partnership basis. A total of 6 airports will soon be up for auction by the Airports Authority of India (AAI) to invite private Partnership. AAI has already tested the concept by awarding three aerodromes for operation and maintenance under public private partnership.
Yet another major policy overhaul is related with the entry of private sector companies in satellites, launches, space-based services. The private players will be allowed to use ISRO facilities and other relevant assets to improve their capacities which in turn will increase investment in the sector as it reduces the funding pressure on the government.
The agriculture reforms are also complemented further by facilitating irradiation technology for food preservation through PPP and India's robust startup ecosystem will be linked to the nuclear system, technology development and incubation centers. It will foster synergy between research facilities and tech entrepreneurs.
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