NEW DELHI: Finance Minister Nirmala Sitharaman on Sunday announced the final tranche of the Rs 20 lakh crore package by hiking allocation under Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) by Rs.40,000 crore, announcing the exit of PSEs from non-strategic sectors, no fresh bankruptcy proceedings for one year and increasing borrowing limits of states to up to 5 per cent.
The finance minister, who had already announced direct cash transfer and free ration, said that the increased allocation under MNREGA will ensure immediate employment concerns. For the current financial year, budget estimate for MNREGA was Rs 61,500 crore.
“A large number of migrant workers are going back to their states. We are allotting an additional Rs 40,000 crore to this scheme for migrants who have gone back to their home states. This is to ensure that these workers find jobs in their home states,” Sitharaman told reporters.
The Centre claims this will help generate 300 crore person-days in total.
Acknowledging that many businesses were severely affected due to COVID-19, the finance minister announced that the debts related to COVID-19 shall not be considered under the category of defaults, under Insolvency and Bankruptcy Code and also exempted them from fresh insolvency proceedings for up to one year.
A special insolvency framework will be notified soon and the government will move an ordinance and pass it in parliament once it is in session.
Extending relaxations to companies, Sitharaman announced violations of Companies Act involving minor technical and procedural defaults would be decriminalized, which include shortcomings in reporting of corporate social responsibility, inadequacies in board report, filing defaults, delay in holding annual general meetings.
“Government will decriminalise most sections of Companies Act by dropping seven compoundable offenses and five others will be dealt with under an alternative framework. There will be a fresh ordinance to this effect and finer points will be notified soon by the ministry,” a senior official from the Ministry of Corporate Affairs said.
“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 said.
Another major announcement was the exit of public sector enterprises from a non-strategic sector.
“Government will announce a new policy – strategic sector and others. In those notified strategic sectors where public sector is present, at least one public will be present while private is also allowed to operate. Not more than 4 public sectors to be present in notified sectors. More than 4 will either be merged or brought together,” Sitharaman said, without elaborating about the sectors.
Considering the revenue fall of the state government the finance minister, in consultation with the RBI, increased advance limits for states by 60 per cent and hiked the borrowing limit of the state from 3 per cent to 5 per cent, with a rider that these hikes will be linked with specific reforms.
The finance minister also detailed the break-up of the overall relief package which includes liquidity measures of Rs 8 lakh crore announced by the RBI earlier. Stimulus measures from earlier announcements were worth Rs 192,800 crore, economic relief worth Rs 5.94 lakh crore in the first tranche, Rs 3.10 lakh crore in the second, Rs 1.5 lakh crore in the third tranche and Rs 48,100 in the fourth and fifth tranche, taking the total stimulus package worth Rs 20,97,053 crore.
However, there was no clarity on the fiscal burden of the announcement, and the Finance Minister missed the question by saying she will talk about this later.
This has left many industries and a large number of middle class fuming with disbelief.
“Indian Tourism industry goes into a state of shock and disbelief as there were no announcements to support tourism. Ten weeks of constant discussions come to naught and industry has gone directionless,” a representative from the Federation of Associations in Indian Tourism & Hospitality said.
Also, the salaried class was expecting some relief in loan moratorium given the increasing incidence of job loss, salary cuts, and delayed salary.