1. Will migrant workers benefit from the Centre’s measures?

Relevant for GS Prelims & Mains Paper III; Economics

In her second tranche of COVID-19 relief package announcements, Finance Minister Nirmala Sitharaman announced the steps taken by the government for migrants and farmers during the national lockdown, including free ration for stranded workers.

Why and how have migrant workers suffered during the lockdown?

One of the most severely affected sections of the population due to the extended lockdown has been migrant workers, especially those in urban areas across the country.

With increasing distress, many migrant workers took recourse to their own means of transport to go home — many had no other option but to walk long distances — before the central government finally notified the start of services of “Shramik trains” to transport them. Migrant workers have continued to travel to escape distress conditions at their places of work and in the absence of any social security net.

What has been announced for migrant workers?

The Finance Minister acknowledged the significance of the MGNREGS in providing jobs to returning workers in rural areas. The government noted that work off-take increased in May. This followed instructions from the Centre to restart the scheme after work hours fell drastically in April. The Centre has now advised States/Union Territories to provide work through the scheme and to extend this to the monsoon season as well in providing jobs in plantations, horticulture, livestock-related work. The latest unemployment survey report also found that while various segments (small traders, salaried employees, entrepreneurs, etc) have suffered significant job losses, the number of farmers in the survey had increased, indicating that farm work has been a source of livelihood during the lockdown.

The government has promised a free supply of 5 kg of foodgrain per person and 1 kg channa per family per month for two months, for those migrants who are neither beneficiaries of the National Food Security Act (2013), or NFSA, nor possess State cards. The government expects eight crore migrants to benefit from this scheme and the Centre will spend Rs. 3,500 crore on this. States will be in charge of implementation and distribution.

The inclusion of these estimated eight crore beneficiaries will bring the total number of people under the Public Distribution System coverage close to the level legally mandated by the NFSA of 67% of the population. Food Minister Ram Vilas Paswan has said that if the number exceeds eight crore, the Centre is ready to provide additional foodgrain for free supply but it would leave it to States to identify genuine beneficiaries. “States can directly supply free ration at shelter camps, or issue distress coupons or adopt any suitable method for free distribution of the food grains and channa,” Food Secretary Sudhanshu Pandey clarified at a briefing on Saturday.

What about the One Nation One Ration Card scheme?

The Centre has also said that the One Nation One Ration Card scheme will be enhanced by assuring national portability of 83% by August 2020 and 100% by March 2021. The scheme should allow migrant workers to access food in States other than that of their permanent residence. But concerns remain about availability of ration in shops to allow for distribution to migrant workers as well. In places where the scheme has been implemented so far, the utilisation of the scheme has been very low (800 workers on an average in a month before the lockdown and an average of only 200 workers during the lockdown).

Besides these steps for immediate relief to the workers, the government has also announced that it will launch a scheme under the Pradhan Mantri Awas Yojana (PMAY) to convert government funded housing in the cities into affordable rental housing complexes under PPP mode through a concessionaire.

A special credit facility with liquidity of up to Rs. 5,000 crore has been announced for street vendors through a special scheme that will facilitate easy credit and will be launched in a month.

Will small farmers benefit?

Among steps announced to ease credit for small farmers, the government said that the National Bank for Agriculture and Rural Development (NABARD) will extend an additional refinance support of Rs. 30,000 crore for crop loan requirement of rural cooperative banks and regional rural banks.

Source: The Hindu

2. How will the COVID-19 relief for MSMEs help?

Relevant for GS Prelims & Mains Paper III; Economics

In his address to the nation, his third, on May 12, Prime Minister Narendra Modi announced a Rs. 20-lakh crore economic relief package titled Atmanirbhar Bharat Abhiyan. The relief package is being unveiled in tranches from May 13 by Finance Minister Nirmala Sitharaman. The first tranche, aimed at micro, small and medium enterprises (MSMEs), non-banking financial companies (NBFCs) and at some individuals was announced by her on Wednesday.

What are the proposals aimed at offering relief to micro, small and medium enterprises (MSMEs)?

The government has proposed to offer collateral-free loans to MSMEs which will be fully guaranteed by the Centre. There will be a principal repayment moratorium for 12 months and the interest rate will be capped and there will be no guarantee fee.

All MSMEs with a turnover of up to Rs. 100 crore and with outstanding credit of up to Rs. 25 crore will be eligible to borrow up to 20% of their total outstanding credit as on February 29, 2020. These loans will have a four-year tenure and the scheme will be open until October 31. A total of Rs. 3-lakh crore has been allocated for this.

How will this benefit MSMEs?

This will act as initial seed money for these small enterprises hit by zero cash flow due to the national lockdown. This loan will help them buy raw materials, pay initial bills and daily wages to employees. In short, this will be like working capital for cranking up their businesses again.

Banks, though flush with funds, have been unwilling to lend to this category of borrowers as they fear that the money will not be repaid. These small businesses have also pledged all their assets already for other loans and do not have any more assets to pledge.

It is to break this logjam that the government has said that it will backstop banks up to Rs. 3-lakh crore and said that these loans do not need collaterals. Banks are now expected to be more comfortable in assisting this category of borrowers because the risk is zero (since the loans are guaranteed by the central government).

This is the single biggest proposal in the last three tranches of announcements under the Atmanirbhar Bharat Abhiyan and small businesses are expected to benefit from this in a big way. About 45 lakh MSMEs are expected to gain from this proposal.

Are these the only proposals for MSMEs?

No. A partial credit guarantee scheme has been extended to enable promoters of these units to increase their equity. A total of Rs. 20,000 crore will be funnelled through the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) whereby banks will lend money to promoters which can be infused as equity in their businesses. About two lakh stressed MSMEs with non-performing assets (NPAs) are projected to benefit from this. The CGTMSE will offer a partial credit guarantee to banks.

There is also a proposal to infuse equity into MSMEs through a Fund of funds system where the government will provide Rs. 10,000 crore as initial corpus of the Fund. This will be leveraged to raise Rs. 50,000 crore which will be used to support MSMEs in desperate need of equity through ‘daughter funds’ of the main Fund of funds. The aim is to expand size and capacity of the MSMEs with equity and help them get listed on the stock exchanges.

Was not a change in the definition of MSMEs also announced?

Yes, henceforth MSMEs will be defined not based on their investment alone but also on their turnover. The definition has been tweaked and the existing distinction between manufacturing and services units has been eliminated.

Henceforth, a unit with up to Rs. 1 crore investment and Rs. 5 crore turnover will qualify as a micro unit, investment up to Rs. 10 crore and turnover up to Rs. 50 crore will qualify as a small unit, and investment up to Rs. 20 crore and turnover up to Rs. 100 crore will qualify as a medium enterprise.

It has been a long-standing demand from industry to hike the investment limits, as with inflation, units often cross the threshold that will bring them benefits. To prevent this, they either run their operations at a reduced level or incorporate multiple units so that turnover is distributed in a way that they remain within the threshold that will give them the benefits. The decision to add turnover criteria to investment is seen as a good decision as there are units that leverage a small capital to post large revenues.

What are the proposals for non-banking financial companies (NBFCs)?

NBFCs, housing finance companies and micro finance institutions are finding it difficult to raise debt capital due to a confidence crisis in the debt markets. The government has, therefore, announced a special liquidity scheme of Rs. 30,000 crore to pick up investment grade debt paper from both primary and secondary markets. Such paper will be fully guaranteed by the government. This is expected to break the low confidence cycle in the market for lending to the above category of borrowers.

In addition, to help low rated finance companies to raise debt, the existing partial credit guarantee scheme has been extended to cover primary market debt paper wherein the first 20% loss will be borne by the government.

A total of Rs. 45,000 crore has been set aside for this Partial Credit Guarantee Scheme 2.0 that will offer liquidity to paper rated AA and below and even unrated paper.

Do electricity distribution companies (discoms) also feature in the first tranche announced?

Yes, discoms are in a huge liquidity crisis and unable to pay their dues to electricity generation companies. Their cash flow and revenues have been hit due to low demand from industrial consumers for power during the lockdown. The various State discoms together owe about Rs. 94,000 crore to their suppliers, the generation and transmission companies.

The government, through Power Finance Corporation-Rural Electrification Corporation, will infuse liquidity of Rs. 90,000 crore to discoms which will be securitised against their receivables from consumers. The loans given for the purpose of discharging their dues to generation companies will be against a guarantee from the respective State related to the discom. This emergency liquidity infusion will avert a crisis where generation and transmission companies stop supplies to discoms that are in default.

What are the measures for the common man?

In March, when the first relief package called the Pradhan Mantri Garib Kalyan Yojana was announced, the government offered to pay the 24% provident fund contribution (employer+employee) for those earning up to Rs. 15,000 a month as salary and working in units that employ less than 100 workers for three months. This has now been extended for another three months up to August. The statutory PF contribution for those employed in the private sector (and not in the category of establishments above) has been reduced to 10% (from 12% now) for the next three months in order to increase liquidity in their hands. This is expected to benefit 4.3 crore people and 6.5 lakh establishments and release a total of Rs. 6,750 crore liquidity.

In addition to the above, the rate of tax deducted at source (TDS) and tax collected at source (TCS) has been reduced by 25% for a whole range of receipts. Thus, in payments to contractors, professional fees, rent, interest, commission, brokerage, etc. the TDS will be 25% lower. The TCS paid while buying a car of over Rs. 10 lakh in value and TCS collected in property transactions will also be lower.

The lower TDS is not applicable on monthly salaries that employees receive.

In the cases where TDS/TCS has been reduced, the tax liability is not reduced. It will be payable while filing return or while paying advance tax. The idea is only to offer immediate cash relief to people. The lower TDS/TCS kicks in right away and will stay until March 31, 2021.

Source: The Hindu

3. What are the measures announced by the government to deal with the farm crisis across the country?

Relevant for GS Prelims & Mains Paper III; Economics

With mandi closures and supply chain disruptions causing havoc in agricultural marketing, the COVID-19 pandemic has put a spotlight on some of the critical infrastructure gaps and long-pending governance issues that plague the farm sector. The third tranche of the Atmanirbhar Bharat Abhiyan listed measures to deal with those gaps, though there has been no announcement on an immediate economic stimulus for the sector.

What are the reforms announced in the farm sector?

The third tranche announced on Friday focused on long-term issues in the agricultural sector, by promising financing to strengthen infrastructure, build better logistics and ramp up storage capacities, as well as proposing three major governance and administrative reforms that have been in the pipeline for many years.

Finance Minister Nirmala Sitharaman’s rationale for the third tranche was that improving farmers’ income needed such long-term investments and changes, rather than a focus on short-term crop loans.

However, a number of farmers and activists said that in the light of the COVID-19 crisis, immediate support and relief in the form of cash transfers, loan waivers, and compensation for unsold produce should have come before long-term reforms.

How will they change the agriculture sector?

Taking the opportunity of a crisis situation, the Finance Minister has pushed through reforms that the Centre has been trying to implement for years.

For instance, the Essential Commodities Act, 1955 came into being at a time of food scarcity and famine; last year’s Economic Survey called it an “anachronistic legislation”. It allows the government to control price rise and inflation by imposing stock limits and movement restrictions on commodities, giving States the power to regulate dealer licensing, confiscate stock and even jail traders who fail to comply with restrictions. Earlier this year, it was used to control soaring onion prices.

Traders have long complained of harassment under the Act on the suspicion of hoarding, black marketing and speculation, while food processors and exporters have also pointed out that they may need to stock commodities for longer periods of time. The Act has disincentivised construction of storage capacity and hindered farm exports.

Discussions about amending or repealing the Act have been going on for almost two decades. On Friday, the Finance Minister announced that the Act would be amended to deregulate six categories of agricultural foodstuffs: cereals, pulses, edible oils, oilseeds, potato and onion. Stock limits on these commodities will not be imposed except in times of a national calamity or a famine, and will not be imposed at all on food processors or value chain participants, which/who will be allowed to store as much as allowed by their installed capacity. Exporters will also be exempted.

It is hoped that the amendment will bring more private investment into warehouses and post-harvest agricultural infrastructure, including processors, mills and cold chain storage. It could help farmers sell their produce at more competitive rates if there is no fear of government intervention to artificially suppress market prices, and is likely to give a boost to farm exports.

What about the other planned reforms?

The Centre plans to bring in a new federal law to break the nearly half-century long monopoly of the Agricultural Produce Market Committee (APMC) mandis . It has already tried the route of trying to coax State governments into adopting its Model APMC Amendment Act which aims at developing unified State-level markets by offering a State-wide licence and single point levy of market fees while also allowing private markets, direct marketing, ad hoc wholesale buying and e-trading.

However, only a few large States ruled by the Bharatiya Janata Party, including Gujarat and Madhya Pradesh, have amended their Acts. Now, the Centre proposes to bypass States altogether by bringing in a federal law to abolish inter-State trade barriers.

The hope is that these reforms will bring in more options for the farmer, offering more competitive prices if there is a wider choice of buyers. The plan to bring in a legal framework for contract farming also aims to provide more certainty and choice for farmers, although some experts caution that recent drafts of contract farming law promote the interests of the large corporate player at the expense of safeguarding the small farmer.

How are infrastructure investments expected to help?

Reforming governance structures is of no use unless there is infrastructure on the ground to enable farmers to take advantage of the wider choices with which they are being provided. A Rs. 1-lakh crore agriculture infrastructure fund run by the National Bank for Agriculture and Rural Development will help create affordable and financially viable post-harvest management infrastructure at the farm gate and aggregation points.

The Finance Minister emphasises that her announcements would also bring better infrastructure and logistics support to fish workers, dairy and other livestock farmers, beekeepers and vegetable and medicinal plant growers.

She also offered support to lakhs of small informal food processors, mostly women, who need technical upgradation and marketing support in order to compete in a changing marketplace.

The Finance Minister has pushed through reforms that the Centre has been trying to implement for years, such as amending the Essential Commodities Act and proposing a federal law to break the monopoly of Agricultural Produce Market Committees

Source: The Hindu

4. Call for WHO probe into virus origin

Relevant for GS Prelims & Mains Paper II; IOBR

An India-backed draft resolution at the 73rd session of the World Health Assembly received a big boost on Monday when the African group of nations extended support for the motion which seeks global investigation into the spread of the novel coronavirus.

The development came soon after the Assembly convened in Geneva where the head of the World Health Organization (WHO) declared that the global body will look into the lessons of the COVID-19 pandemic.

Resolution backed by 62 countries

The assurance, however, is at variance from the draft resolution, which was earlier backed by WHO’s 62 countries and sought to identify scientific “events” that could have contributed to the spread of the novel coronavirus and the consequent COVID-19 pandemic. The recommendation is part of the text jointly conceived by Australia and the European Union. It aims to evaluate possible food and animal-related sources that could have led to the spread of the deadly pandemic. Informed sources said that given the growing number of co-sponsors, the likelihood of a vote on the motion was lessened. The language of the motion seeks to delve deep into the origin of the virus.

Possibly against China

The language of the resolution reflects the diplomatic tug of war that has taken place since the pandemic began in early 2019 . This tension was visible on Monday when Taiwan protested at not receiving a formal invite from the WHO Secretariat for the 73rd Assembly. Taiwan has, however, urged the WHO to discuss the multi-nation backed proposal. The group of countries led by Central America’s Belize also proposed a supplementary agenda item to invite Taiwan in the WHO as an observer. China has opposed the inclusion of Taiwan as a member at the WHO. At Monday’s meeting, Health Minister Dr. Harsh Vardhan presented the Indian perspective and said the preparation against the pandemic is being supervised by Prime Minister Narendra Modi personally.

Among the co-sponsors of the proposal to seek global investigation into scientific “events” are Bangladesh, Japan, South Korea, U.K. and Turkey. The support extended to the move shows that all BRICS member countries but China have extended support to the language. The resolution does not mention China or Wuhan but it is understood to be influenced by the Australian line which called for seeking an explanation of the COVID-19 pandemic from China.

Australia’s Prime Minister Scott Morrison, who earlier sought an international investigation, had drawn strong criticism from China, and because of the initial exchanges, the resolution is being interpreted as a move to fix accountability for the pandemic.

Source: The Hindu