JSW - MSME Measures

What are the relief measures offered to MSME’s by the Government of India’s ‘Atmnirbhar Bharat’ package?

“Atmnirbhar Bharat”, a vision for a self-reliant India set by the honorable Prime Minister was announced as the foundation for relief measures to spur the growth of the Indian Economy post a COVID-19 slowdown.

In recognition of up to 30% contribution towards the GDP by MSME’s, the Government of India announced several measures directly to benefit the sector.

By The Numbers

Bringing alive a billion dreams.

Rs 3 lakh Crores

Collateral-free Automatic Loan

Benefited 45 lakh units

Rs20,000 Crores

Sub-Ordinate Debt

Benefited 02 lakh units

Rs 50,000 Crores

Equity Infusion

New Definition of MSMEs

The matter of changing the definition of MSMEs upwardly has been accepted as a part of the Package.

Definition of MSMEs has been revised
Investment limit has been revised upwards
An additional criterion of turnover has also been introduced.
The Distinction between manufacturing and service sector to be eliminated.
The turnover with respect to exports will not be counted in the limits of turnover for any category of MSME units

Existing MSME Classification
Criteria:Investment in Plant & Machinery or Equipment
Classification	Micro	Small	Medium
Mfg. Enterprises	Investment<Rs. 25 lac	Investment<Rs. 5 cr.	Investment <Rs. 10 cr.
Services Enterprise	Investment<Rs. 10 lac	Investment< Rs. 2 cr.	Investment<Rs. 5 cr.

Revised MSME Classification
Composite Criteria: Investment And Annual Turnover
Classification	Micro	Small	Medium
Manufacturing & Services	Investment< Rs. 1 cr. and Turnover < Rs.5 cr.	Investment< Rs. 10 cr. and Turnover < Rs.50 cr.	Investment< Rs. 50 cr. and Turnover < Rs.250 cr.

Rs. 3 Lakh Crores Collateral-free Automatic Loans for Businesses, including MSMEs

The Government announced guarantee and collateral free loans amounting to a total Rs. 3 Lakh Crores. These loans will be on a moratorium of 12 months on payment of Principal. It is expected to benefit about 45 lakh units that will resume business activity and is aimed towards safeguarding employment in the sector.

Salient features of this measure

Emergency Credit Line to Businesses/MSMEs from Banks and NBFCs up to 20% of entire outstanding credit as on 29.2.2020
Borrowers with up to Rs.25 Crore outstanding and Rs.100 Crores turnover are eligible
Loans to have 4 year tenor with moratorium of 12 months on Principal repayment
Interest to be capped
100% credit guarantee cover to Banks and NBFCs on principal and interest
Scheme can be availed till 31^st October 2020

Rs. 20,000 Crores Subordinate Debt for Stressed MSMEs

A Sub-Ordinate Debt Fund, on the recommendations of the Reserve Bank of India and U.K. Sinha Committee, with partial guarantee support.

A provision of Rs.20,000 Crores is made to provide support of Rs. 4,000 Crores for this purpose and will look to benefit Two lakh MSMEs

Salient features of this measure

Facilitate provision of Rs. 20,000 Crore as subordinate debt
Functioning MSMEs which are NPA or are stressed will also be eligible
Govt. will provide a support of Rs. 4,000 Cr. to CGTMSE
CGTMSE will provide partial Credit Guarantee support to Banks
Promoters of the MSME will be given debt by banks, which will then be infused by promoter as equity in the Unit.

Rs 50,000 Crore Equity infusion for MSMEs through Fund of Funds

A Fund of Funds with Rs.10,000 Crores would be set up, which would infuse Rs.50,000 Crores through the market in the model of “Mother and Daughter Funds”.

Salient features of this measure

Fund of Funds with Corpus of Rs. 10,000 crores will be set up.
Will provide equity funding for MSMEs with growth potential and viability.
FoF will be operated through a Mother Fund and few daughter funds
Fund structure will help leverage Rs 50,000 Crore of funds at daughter funds level
Will help to expand MSME size as well as capacity.
Will encourage MSMEs to get listed on Stock Exchanges.

CHAMPIONS: Technology Platform to empower MSMEs

The technology platform CHAMPIONS (Creation and Harmonious Application of Modern Processes for Increasing the Output and National Strength) was launched to provide guidance through testing times.

The portal will help MSMEs through:

Grievance Redressal: Specifically built to answer COVID-19 result issues.

Assisting in capturing new opportunities: Identifying new manufacturing possibilities such as manufacturing of medical equipment and PPEs, for supply to national and international markets.

Identification and encouragement of the sparks: Potential MSMEs who withstand the current situation and become national and international market leaders.

Global tenders to be disallowed up to Rs 200 crores

One of the most important interventions by the Government, towards building a ‘Self-reliant India’ is the discouragement of global tendering up to Rs. 200 Crores. This will assist MSMEs by negating the pressure of competition from international companies.

Rs. 2,500 Crore EPF Support for Business & Workers for 6 months

TDS and TCS will be reduced by 25% and that all refunds to entities including Proprietorship, Partnership firms, and LLP, etc. would be issued immediately to create more liquidity within the MSME sector.

Under Pradhan Mantri Garib Kalyan Package (PMGKP), payment of 12% of employer and 12% employee contributions was made into EPF accounts of eligible establishments.
This was provided earlier for salary months of March, April, and May 2020 and will continue for the months of June, July, and August 2020.
This will provide liquidity relief of Rs. 2,500 Crore to 3.67 lakh establishments and for 72.22 lakh employees.

EPF contribution reduced for Business & Workers for 3 months- Rs 6750 crores Liquidity Support

To create more liquidity in the hands of MSME’s and to increase the take-home salaries of employees, the following measures have been introduced through the EPF benefits.

Statutory PF contribution of both employer and employee will be reduced to 10% each from the existing 12% each for all establishments covered by EPFO for the period of May 2020 to July 2020
CPSEs and State PSUs will however continue to contribute 12% as employer contribution.
This scheme will be applicable for workers who are not eligible for 24% EPF support under PM Garib Kalyan Package and its extension.
This will provide relief to about 6.5 lakh establishments covered under EPFO and about 4.3 crore such employees.
This will provide liquidity of Rs. 6,750 Crore to employers and employees over the period May 2020 to July 2020.

Relief to Contractors

Extension of up to 6 months (without costs to contractor) to be provided by all Central Agencies (Railways, Ministry of Road Transport & Highways, Central Public Works Dept, etc)
Includes construction/ works and goods and services contracts
Extended to obligations such as completion of work, intermediate milestones etc.and extension of Concession period in PPP contracts
Government agencies to partially release bank guarantees, to the extent contracts are partially completed, to ease cash flows

Extension of Registration and Completion Date of Real Estate Projects under RERA

Adverse impact due to COVID-19 and projects stand the risk of defaulting on RERA timelines. Timelines need to be extended. Ministry of Housing and Urban Affairs will advise States/UTs and their Regulatory Authorities to the following effect:

Treat COVID-19 as an event of ‘Force Majeure’ under RERA.
Extend the registration and completion date suo-moto by 6 months for all registered projects expiring on or after 25th March, 2020 without individual applications.
Regulatory Authorities may extend this for another period of up to 3 months, if needed
Issue fresh ‘Project Registration Certificates’ automatically with revised timelines.
Extend timelines for various statuary compliances under RERA concurrently.

Other interventions for MSMEs

Announcing the promotion of e-marketing linkage to assist the MSME Sector in the era of Social Distancing in the absence of physical trade fairs and exhibitions would be difficult.
All Departments of Government of India and the CPSEs are mandated to pay all receivables to MSMEs within the next 45 days to create liquidity.
The extension in the compliance date of various income-tax related deadlines will allow small units now to focus on work and productivity for the next few months. Date of assessments getting barred on 30th September 2020 extended to 31st December 2020 and those getting barred on 31^st March 2021 will be extended to 30^th September2021.
Rs 45,000 Crore Partial Credit Guarantee Scheme 2.0 for NBFCs, HFCs, and MFIs with low credit rating require liquidity to do fresh lending to MSMEs. The first 20% of loss will be borne by the Guarantor ie., Government of India.
TDS and TCS will be reduced by 25% and that all refunds to entities including Proprietorship, Partnership firms and LLP, etc. would be issued immediately to increase liquidity in MSMEs. This reduction shall be applicable till 31st March, 2021.