Nirmala Sitharaman

COVID Stimulus Package of Rs 20 Lakh Crore: Main Highlights of FM Announcement for MSMEs

Prime Minister Narendra Modi announced a stimulus package of Rs 20 Lakh Crore, on which detail elaborations were provided by the Finance Minister

Nirmala Sitharaman, Minister of Finance and Corporate Affairs of India, provided elaborate details of how the Rs 20 Lakh Crore stimulus package would be used. “The package announced by PM Modi is to essentially spur the growth and make India self-reliant. That is why is called Aatmanirbhar package. Local brands will be supported,” said the minister.

“PM Modi laid out a comprehensive vision after wide consultation with several sections of the society and with various ministries,” added the minister. The finance ministry will also make announcements over the next few days about how the stimulus package will be distributed. The current announcement, according to FM, will enable 45 lakh MSME units to resume business activity and also safeguard jobs.

Six major steps for MSMEs

  1. Collateral free automatic loan up to 3 lakh crores to be provided to MSMEs with up to Rs 25 crore outstanding and Rs 100 crore turnover. The loan will have 4 years tenure and a moratorium of 12 months. This facility would be available until 31 October 2020.
  2. For stressed MSMEs with the problem of equity, the Government will facilitate the provision of Rs. 20,000 crore as subordinate debt. Functioning MSMEs, which are NPA or are stressed will be eligible, and the government says that likely 2 lakh MSMEs will benefit from this move.
  3. MSMEs doing viable business but need funds due to the ongoing situation will be provided with a fund of funds worth Rs 50 crore. Rs 50,000 cr. Equity infusion for MSMEs through fund of funds to be operated through a Mother Fund and few daughter funds; this will help to expand MSME size as well as capacity.
  4. The definition of MSMEs will get a revision. The investment limit to be revised upwards, and additional criteria of turnover is also being introduced. Organizations will be called micro-unit even if the investment is 1 crore.
  5. Global tenders will be disallowed in the government procurement up to Rs 200 crores to eliminate unfair competition from foreign companies.
  6. Post-COVID holding exhibitions and trade fairs will be extremely difficult. Within the next 45 days, all receivables will be cleared. e-Market linkage will be focussed upon as well.

Measures Regarding EPF

Liquidity relief is being given to all EPF establishment. Support to be extended for another three months – June, July and August. Liquidity relief of Rs 2500 crore will be released. Over 70 lakh employees expected to benefit from this.

In order to provide more take-home salary for employees and to give relief to employers in payment of PF, EPF contribution is being reduced for businesses and workers for 3 months from 12 percent to 10 percent, amounting to liquidity support of Rs 6750 crores. This move, however, will not be applicable to government employees.

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