Govt announces Rs6,28,993-cr booster package for economy
30 June 2021
Union minister of finance and corporate affairs Nirmala Sitharaman on Monday announced a slew of measures, involving a total expenditure of Rs6,28,993 crore, to provide relief to diverse sectors affected by the second wave of pandemic caused by the Wuhan virus. The minister also announced measures to strengthen the healthcare system for emergency response and provide impetus for growth and employment.
A booster package contains a total of 17 measures, including two measures announced earlier, ie, the additional subsidy for DAP & P&K fertilizers, and extension of Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) from May to November 2021.
The measures are intended to provide economic relief from the pandemic, strengthen public health system and provide impetus to growth and employment.
Eight out of the 17 schemes aim at providing economic relief to people and businesses affected by the pandemic. Special focus is on health and reviving travel, tourism sectors.
Under a new loan guarantee scheme, the government targets provision of additional credit of Rs1.1 lakh crore to businesses. This includes Rs50,000 crore for health sector and Rs60,000 crore for other sectors, including tourism.
The health sector component aims at upscaling medical infrastructure, especially targeting underserved areas. Guarantee cover will be available both for expansion and new projects related to health/medical infrastructure in cities other than 8 metropolitan cities. The guarantee cover will be 50 per cent for expansion and 75 per cent for new projects. In case of aspirational districts, the guarantee cover of 75 per cent will be available for both new projects and expansion. Maximum loan admissible under the scheme is Rs100 crore and guarantee duration is up to 3 years. Banks can charge a maximum interest of 7.95 per cent on these loans. Loans for other sectors will be available with an interest cap of 8.25 per cent. Thus the loans available under the scheme will be much cheaper compared to the normal interest rates without guarantee of 10-11 per cent.
More credit to business
The government has decided to expand the Emergency Credit Line Guarantee Scheme (ECLGS), launched as part of Aatma Nirbhar Bharat Package in May 2020, by Rs1.5 lakh crore. ECLGS has received a very warm response with Rs2.73 lakh crore being sanctioned and Rs2.10 lakh crore already disbursed under the scheme. Under the expanded scheme, limit of admissible guarantee and loan amount is proposed to be increased above existing level of 20 per cent of outstanding on each loan. Sectorwise details will be finalised as per evolving needs. The overall cap of admissible guarantee is thus raised from Rs3 lakh crore to Rs4.5 lakh crore.
Sitaraman announced a completely new Credit Guarantee Scheme for Micro Finance Institutions, which aims to benefit the smallest of the borrowers who are served by the network of micro finance institutions. Guarantee will be provided to scheduled commercial banks for loans to new or existing NBFC-MFIs or MFIs for onlending up to Rs1.25 lakh to approximately 25 lakh small borrowers. Loans from banks will be capped at MCLR plus 2 per cent. Maximum tenure of the loan will be 3 years, and 80 per cent of assistance will be used by MFI for incremental lending. Interest rates will be at least 2 per cent below maximum rate prescribed by the Reserve Bank of India (RBI). The scheme focuses on new lending, and not on repayment of old loans. MFIs will lend to the borrowers in line with extant RBI guidelines such as number of lenders, borrower to be member of JLG, ceiling on household income and debt. Another feature of the scheme is that all borrowers (including defaulters up to 89 days) will be eligible. Guarantee cover will be available for funding provided by MLIs to MFIs/NBFC-MFIs till 31 March 2022 or till guarantees for an amount of Rs7,500 crore are issued, whichever is earlier. Guarantee will be provided for up to 75 per cent of default amount for up to 3 years through National Credit Guarantee Trustee Company (NCGTC).
Boost to tourism
Another new scheme announced today aims at providing relief to people working in tourism sector. Under new Loan Guarantee Scheme for pandemic-affected sectors, working capital/personal loans will be provided to people in tourism sector to discharge liabilities and restart businesses impacted by the pandemic. The scheme will cover 10,700 regional level tourist guides recognised by ministry of tourism and tourist guides recognised by the state governments; and about 1,000 travel and tourism stakeholders (TTS) recognised by the ministry of tourism. TTSs will be eligible to get a loan of upto Rs10 lakh each while tourist guides can avail loan up to Rs1 lakh each. There will be no processing charges, waiver of foreclosure/prepayment charges and no requirement of additional collateral. The scheme will be administered by the ministry of tourism through NCGTC.
Further, to revive the tourism that has fallen into a deep slumber the government has come out with an offer of free one month tourist visa to 5 lakh tourists. It envisages that once visa issuance is restarted, the first 5 lakh tourists visas will be issued free of charge to visitors. However, the benefit will be available only once per tourist. The facility will be applicable till 31 March 2022 or till 5 lakh visas are issued, whichever is earlier. Total financial implications of the scheme to the government will be Rs100 crore.
The government has decided to extend the date of registration under the Aatma Nirbhar Bharat Rozgar Yojana from 30 June 2021 to 31 March 2022. The scheme, launched on 1 October 2020, incentivises employers for creation of new employment, by restoration of loss of employment through EPFO.
Under the Aatma Nirbhar Bharat Rozgar Yojana (ANBRY), subsidy will be provided for two years from registration for new employees drawing monthly wages less than Rs15,000 for both employer’s and employee’s share of contribution (total 24 per cent of wages) for establishment strength up to 1,000 employees; and only employee’s share (12 per cent of wages) in case of establishment strength of more than 1,000. Benefit of Rs902 crore has been given to 2.14 million beneficiaries of 79,577 establishments under the scheme till 18 June 2021.
Under the scheme of additional subsidy to farmers for DAP and P&K fertilisers, announced recently, the NBS subsidy of Rs27,500 crore in FY 2020-21 has been increased to Rs42,275 crore in FY 2021-22. The farmers will benefit by an additional amount of Rs14,775 crore. This includes Rs9,125 crore additional subsidy for DAP and Rs5,650 crore additional subsidy for NPK based complex fertiliser.
In the last financial year, the government spent Rs133,972 crore for providing free food grains under Pradhan Mantri Garib Kalyan Yojana (PMGKY) to ameliorate the hardships faced by the poor due to economic disruption caused by pandemic. The scheme was launched initially for the period from April to June 2020. However, keeping in view the need for continuous support to the poor and the needy, the scheme was extended till November 2020. In the wake of the second wave of the pandemic, the scheme was relaunched in May 2021 to ensure food security of poor/vulnerable. Five kg of food grains will be provided free of cost to NFSA beneficiaries from May to November 2021. Estimated financial implications of the scheme will Rs93,869 crore, bringing the total cost of PMGKY to Rs2,27,841 crore.
Strengthening public health
Besides supporting the health sector through credit guarantee scheme, the finance minister announced a new scheme for strengthening public health infrastructure and human resources, with outlay of Rs23,220 crore for the current financial year. The new scheme will focus on short term emergency preparedness with special emphasis on children and paediatric care/paediatric beds. Under the scheme, funds will be made available for short-term HR augmentation through medical students (interns, residents, final year) and nursing students; increasing availability of ICU beds, oxygen supply at central, district and sub-district level; availability of equipment, medicines; access to tele-consultation; strengthening ambulance services; and enhancing testing capacity and supportive diagnostics, strengthen capacity for surveillance and genome sequencing.
Special attention has been given for providing impetus for growth and employment. As part of the programme, the government will be promoting bio-fortified crop varieties having high nutrients like protein, iron, zinc, vitamin-A. Developed by the ICAR, these varieties are tolerant to diseases, insects, pests, drought, salinity, and flooding, early maturing and amenable to mechanical harvesting. 21 such varieties of rice, peas, millet, maize, soyabean, quinoa, buckwheat, winged bean, pigeon pea and sorghum will be dedicated to the nation.
Earlier focus on developing higher yield crop varieties lacked attention towards nutrition, climate resilience and other traits. In these varieties, concentration of important nutrients was far below required level, and they were susceptible to biotic and abiotic stresses.
The government plans to revive the North Eastern Regional Agricultural Marketing Corporation (NERAMAC) to enhance agricultural procurement, processing and marketing infrastructure in the North East. NERAMAC was established in 1982 to support farmers of the North East in getting remunerative prices of agri-horticulture produce. 75 Farmer Producer Organisations/Farmer Producer Companies are registered with NERAMAC. It has facilitated registration of 13 Geographical Indicator (GI) crops of North East. The company has prepared business plan to give 10-15 per cent higher price to farmers by-passing middlemen/agents. It also proposes to set up North Eastern Centre for Organic Cultivation, facilitating equity finance to entrepreneurs. A revival package of Rs77.45 crore will be provided NERAMAC.
Fillip to export credit
To support the National Export Insurance Account (NEIA) Trust, which promotes medium and long term (MLT) project exports by extending risk covers, the government has proposed a Rs33,000-crore boost. NEIA provides cover to buyer’s credit, given by EXIM Bank, to less credit-worthy borrowers and support project exporters. NEIA Trust has supported 211 projects of Rs52,860 crore in 52 countries by 63 different Indian project exporters till 31 March 2021. It has been decided to provide additional corpus to NEIA over 5 years. This will enable it to underwrite additional Rs33,000 crore of project exports.
It has been decided to infuse Rs88,000-crore equity in Export Credit Guarantee Corporation (ECGC) over 5 years to boost export insurance cover. ECGC promotes exports by providing credit insurance services. Its products support around 30 per cent of India’s merchandise exports. It has been decided to infuse equity in ECGC over 5 years to boost export insurance cover by Rs88,000 crore.
Unser the Digital India mission, Rs19,041 crore will be provided for bringing broadband to each vVillage through BharatNet PPP Model. Out of 2,50,000 gram panchayats, 1,56,223 have been made service ready by 31 May 2021. It is proposed to implement BharatNet in PPP model in 16 states (bundled into 9 packages) on viability gap funding basis. For this, an additional Rs19,041 crore will be provided. Thus, total outlay under BharatNet will be enhanced to Rs61,109 crore. This will enable expansion and upgradation of BharatNet to cover all gram panchayats and inhabited villages.
Government will also extend the tenure of the PLI Scheme for Large Scale Electronics Manufacturing. The scheme provides incentive of 6 per cent to 4 per cent on incremental sales of goods under target segments that are manufactured in India, for a period of five years. Incentives are applicable from 1 August 2020 with base year as 2019-20. However, the companies have been unable to achieve incremental sales condition due to disruption in production activities due to pandemic related lockdowns; restrictions on movement of personnel; delay in installation of relocated plant and machinery; and disruption in supply chain of components. Therefore, it has been decided to extend the tenure of the scheme launched in 2020-21 by one year, ie, till 2025-26. Participating companies will get option of choosing any five years for meeting their production targets under the scheme. Investments made in 2020-21 will continue to be counted as eligible investments.
The finance minister also announced a Rs3.03 lakh crore Reform-Based Result-Linked Power Distribution Scheme to provide financial assistance to DISCOMS for infrastructure creation, up-gradation of system, capacity building and process improvement which was announced in the union budget for 2021-22. It aims at state specific intervention in place of “one size fits all”. Participation in the scheme is contingent to pre-qualification criteria like publication of audited financial reports, upfront liquidation of state government’s dues/subsidy to DISCOMS and non-creation of additional regulatory assets. Under the scheme, it is aimed to provide assistance for installation of 250 million smart meters, 10,000 feeders, 4 lakh km of LT overhead lines. Ongoing works of IPDS, DDUGJY and SAUBHAGYA will also be merged in the scheme. Out of the total outlay of Rs3,03,058 crore, the central government’s share will be Rs97,631 crore. The amount available under the scheme is in addition to the allowed additional borrowing of 0.5 per cent of gross state domestic product, which will be available to the states annually for the next four years, subject to carrying out specified power sector reforms. The amount of borrowings available this year for this purpose is Rs1,05,864 crore.
Sitaraman also announced a new, streamlined process for monetisation of public private partnership (PPP) projects and for asset monetisation. The current process for approval of PPP projects is long and involves multiple levels of approval. The new policy will aim at ensuring speedy clearance of projects to facilitate private sector’s efficiencies in financing construction and management of infrastructure and monetisation of core infrastructure assets, including through InvITs.