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Cabinet approvals on June 1, 2020

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Cabinet approvals May 20On June 1, 2020, Union Cabinet meet was held which was chaired by Prime Minister Shri Narendra Modi. This was the first meeting of the Union Cabinet after the Central Government entered into its second year in office. During the meeting, following decisions were taken that will have a transformative impact on the lives of farmers, MSME sector and those working as street vendors.

–Special Micro Credit Facility Scheme ‘PM SVANidhi’ for providing affordable loans to street vendors launched

On the lines of the announcement made by Finance Minister Nirmala Sitharaman on 14 May, 2020 to provide special micro-credit facility to street vendors, the Ministry of Housing and Urban Affairs (MoHUA) has launched a scheme PM SVANidhi (PM स्वनिधि ) – PM Street Vendor’s AtmaNirbharNidhi under which the street vendors, who had their businesses operational on or before 24 March, 2020 can avail a working capital loan of up to Rs. 10,000 which is repayable in monthly instalments in the tenure of one year. The loaning will commence from July 2020.

  • The duration of the scheme is till March 2022 and will be implemented through Urban Local Bodies (ULBs).
  • The scheme will cover vendors, hawkers, thelewalas, rehriwala, theliphadwala etc. in different areas/ contexts to help them in resuming their businesses being affected by COVID-19 crisis.
  • Importantly, this is for the first time that street vendors from peri- urban/ rural areas become beneficiaries of an urban livelihood programme.

Important Points regarding scheme:

Incentives: On timely/ early repayment of the loan by the vendor, an interest subsidy @ 7% per annum will be credited to the bank accounts of beneficiaries through Direct Benefit Transfer (DBT) on six monthly basis. Also, digital transactions by the street vendors provide monthly cash back to them.

  • If the vendor will repay the instalments in time or earlier, they will develop his credible credit score that makes him eligible for a higher amount of term loan to Rs 20,000 and so on.

Management of scheme through technology: To ensure effective delivery and transparency, a digital platform with web portal/ mobile app is being developed to administer the scheme. This platform will be integrated with UdyamiMitra portal of Small industrial Development Bank (SIDBI) for credit management and PAiSA portal of MoHUA to administer interest subsidy automatically.

Lending institutions: The lending institutions under the Scheme include Scheduled Commercial Banks, Regional Rural Banks, Small Finance Banks, Cooperative Banks, Non-Banking Financial Companies (NBFCs), Micro Finance institutions (MFIs) and Self Help Group (SHG) banks. It is for the first time that MFIs/ NBFCs/ SHG Banks have been allowed in a scheme for the urban poor due to their ground level presence.

Scheme coverage: The scheme covers the businesses of vegetables, fruits, ready-to-eat street foods, tea, pakodas, breads, eggs, textiles, apparel, footwear, artisan products, books/ stationery etc. The services include barber shops, cobblers, pan shops, laundry services etc.

Literacy programme: MoHUA in collaboration with State Governments, State Missions of DAY-NULM, ULBs, SIDBI, CGTMSE, NPCI and Digital Payment Aggregators will also launch a financial literacy programme of all the stakeholders and Information Education Communication (IEC) activities throughout the country during June 2020.

–Cabinet approves extension of repayment date for short term loans for agriculture and allied activities by banks till August 31, 2020

The Union Cabinet has given its approval to extend repayment date upto 31.08.2020 for Standard Short-Term loans upto Rs.3 lakh advanced for agriculture and allied activities by banks, which have become due or shall become due between 1st March, 2020 and 31st August, 2020 with continued benefit of scheme.

  • This will help the farmers to repay/renew such loans upto the extended repayment date of 31.08.2020 at 4% p.a., interest without attracting any penalty and thus help them in avoiding travelling to banks for such renewal during this COVID pandemic period.

Background

Govt. is providing concessional Standard Short-Term Agri-loans to farmers through banks with 2% p.a, interest subvention to banks and 3% Prompt Repayment Incentive (PRI) to farmers on timely repayment thus providing loans upto Rs,3 lakh at 4% p.a. interest on timely repayment.

  • Due to the ongoing Covid 19 pandemic, there have been restrictions imposed on movement of people therefore, farmers are finding it difficult to arrange the amount to be deposited for renewal and are unable to visit the banks to deposit and draw fresh loans. This extension will ease their challenges.

–Minimum Support Prices (MSP) for Kharif Crops for marketing season 2020-21 increased

The Cabinet Committee on Economic Affairs (CCEA) approved an increase in the minimum support prices (MSPs) for all mandated kharif crops, including paddy, pulses and cotton, for the 2020-21 marketing season. The increase in MSP for kharif crops is in line with the Union Budget 2018-19 announcement of fixing the MSPs at a level of at least 1.5 times of the all-India weighted average cost of production, aiming at reasonably fair remuneration for the farmers.

  • Paddy: The MSP for paddy (common) has been increased by Rs 53 per quintal, to Rs 1868 per quintal, while that of cotton was increased by Rs 260 per quintal to Rs 5,515 for medium staple variety, and by Rs 275 per quintal to Rs 5,825 for long staple variety.
  • Oilseeds: The highest increase in MSP is proposed for nigerseed (Rs 755 per quintal), followed by sesamum (Rs 370 per quintal) and urad (Rs 300 per quintal).
  • Cereals: the government increased the support price of bajra by Rs 150 to Rs 2,150 per quintal for this year, while that of ragi has been raised by Rs 145 to Rs 3,295 per quintal and maize by Rs 90 per quintal to Rs 1,850 per quintal for the current year. The MSP for jowar has been increased by Rs 70 per quintal for this year.
  • Pulses: The government has increased the MSP of urad by Rs 300 per quintal to Rs 6,000 per quintal, while that of tur has been raised by 200 per quintal to Rs 6,000 per quintal. The MSP of moong has also been increased by Rs 146 per quintal to Rs 7,196 per quintal.

The expected returns to farmers over their cost of production are estimated to be highest in case of bajra (83%) followed by urad (64%), tur (58%) and maize (53%).

For the rest of the crops, return to farmers over their cost of production is estimated to be at least 50%.

–Cabinet approves Upward revision of MSME definition and modalities/ road map for implementing Atmanirbhar Bharat Packages for MSMEs

Union Cabinet has approved the upward revision of MSME definition and modalities/ road map for laying down effective implementation mechanism under the Atmanirbhar Bharat Package. Following are the revisions:

  • Union Cabinet decided to increase the limit for medium manufacturing and service units. Now it will be Rs. 50 crore of investment and Rs. 250 crore of turnover. 
  • It has also been decided that the turnover with respect to exports will not be counted in the limits of turnover for any category of MSME units whether micro, small or medium.

Category New Capital  New Turnover Old Capital Old Turnover
Micro 1 Crore 5 Crore 25 Lakh 10 Lakh
Small 10 Crore 50 Crore 5 Crore 2 Crore
Medium 50 Crore 250 Crore 10 crore 5 Crore 

Background

In the package announcement, the definition of micro manufacturing and services unit was increased to Rs. 1 crore of investment and Rs. 5 crore of turnover. The limit of small unit was increased to Rs. 10 crore of investment and Rs 50 crore of turnover. Similarly, the limit of a medium unit was increased to Rs 20 crore of investment and Rs. 100 crore of turnover. It may be noted that this revision was done after 14 years since the MSME Development Act came into existence in 2006. After the package announcement on 13th May, 2020, there were several representations that the announced revision is still not in tune with market and pricing conditions and it should be further revised upwards. Keeping in mind these representations, it was decided to further increase the limit for medium manufacturing and service units. Now it will be Rs. 50 crore of investment and Rs. 250 crore of turnover. 

-Rs 20000 crore package for Distressed MSMEs

Union Cabinet also approved an infusion of Rs 20,000 crore into the MSME sector, which will benefit 2 lakh stressed MSMEs.

-Rs 50,000 crore equity infusion through Fund of Funds

Cabinet also gave its approval for equity infusion of Rs. 50,000 crore for MSMEs through Fund of Funds (FoF). This will establish a framework to help MSMEs in capacity augmentation. This will also provide an opportunity to get listed in stock exchanges.

This will help in attracting investments and creating more jobs in the MSME sector.