Finance minister announces last tranche of the economic package

Finance Minister Nirmala Sitharaman on Sunday said reforms will be the focus of the fifth and last tranche of the economic package to deal with the economic fallout of the COVID-19 pandemic.

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 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, decriminalization of Companies Act, and state governments. Under IBC related matters.

Here are the highlights of the last tranche of the economic package announced by FM:

1. Rs 40,000 crore increase in allocation for MGNREGS to provide employment boost

The Government will now allocate an additional Rs 40,000 crore under MGNREGS. It will help generate nearly 300 crore person-days in total addressing the need for more work including returning migrant workers in Monsoon season as well. The creation of a larger number of durable and livelihood assets including water conservation assets will boost the rural economy through higher production.

3. Technology Driven Education with Equity post-COVID

PM eVIDYA, a program for multi-mode access to digital/online education to be launched immediately. Manodarpan, an initiative for psycho-social support for students, teachers and families for mental health and emotional well-being to be launched immediately as well. New National Curriculum and Pedagogical framework for school, early childhood and teachers will also be launched. National Foundational Literacy and Numeracy Mission for ensuring that every child attains Learning levels and outcomes in grade 5 by 2025 will be launched by December 2020.

4. Further enhancement of Ease of Doing Business through IBC related measures

The minimum threshold to initiate insolvency proceedings has been raised to Rs. 1 crore (from Rs. 1 lakh, which largely insulates MSMEs). Special insolvency resolution framework for MSMEs under Section 240A of the Code will be notified soon. Suspension of fresh initiation of insolvency proceedings up to one year, depending upon the pandemic situation. Empowering Central Government to exclude COVID 19 related debt from the definition of “default” under the Code for the purpose of triggering insolvency proceedings.

5. Decriminalization of Companies Act defaults

Decriminalization 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 of AGM. The Amendments will de-clog the criminal courts and NCLT. 7 compoundable offenses altogether dropped and 5 to be dealt with under the alternative framework.

6. Ease of Doing Business for Corporates

Key reforms include:

– Direct listing of securities by Indian public companies in permissible foreign jurisdictions.

– Private companies that list NCDs on stock exchanges not to be regarded as listed companies.

– Including the provisions of Part IXA (Producer Companies) of Companies Act, 1956 in Companies Act, 2013.

– Power to create additional/ specialized benches for NCLAT.

– Lower penalties for all defaults for Small Companies, One-person Companies, Producer Companies & Start-Ups.

7. Public Sector Enterprise Policy for a New, Self-reliant India

The government will announce a new policy whereby –

– A list of strategic sectors requiring the presence of PSEs 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, PSEs will be privatized (timing to be based on feasibility, etc).

– To minimize wasteful administrative costs, the number of enterprises in strategic sectors will ordinarily be only one to four; others will be privatized/ merged/ brought under holding companies.

8. Support to State Governments

Centre has decided to increase the borrowing limits of States from 3% to 5% for 2020-21 only. This will give States extra resources of Rs. 4.28 lakh crore. Part of the borrowing will be linked to specific reforms (including recommendations of the Finance Commission). Reform linkage will be in four areas: universalization of ‘One Nation One Ration card’, Ease of Doing Business, Power distribution and Urban Local Body revenues.

A specific scheme will be notified by the Department of Expenditure on the following pattern:

– Unconditional increase of 0.50%.

– 1% in 4 tranches of 0.25%, with each tranche linked to clearly specified, measurable and feasible reform actions.

– Further 0.50% if milestones are achieved in at least three out of four reform areas.