On the day the monsoon arrived in India, the government raised the minimum support price (MSP) of 17 kharif crops moderately in the range of 2-7.5 per cent year-on-year, besides extending the interest subvention scheme for crop loans for another three months till August 31 this year.
However, the increase in MSP, approved by the Cabinet, adhered to the Modi government policy of giving 50 per cent more over the cost of the crops to farmers. The new prices announced would be in the range of 50-83 per cent more over the cost of production, Agriculture Minister Narendra Tomar said after the Cabinet meeting.
The Cabinet Committee on Economic Affairs (CCEA) also further expanded the definition of medium enterprises than what was announced by finance minister Nirmala Sitharaman in the package announced last month.
The main kharif crops of paddy would witness 2.89-2.92 per cent increase, while pulses would see a rise of 2.07-5.26 per cent. Bajra would witness the highest increase of 7.5 per cent.
Simon George, President Cargill India, said, “the move would give adequate assurance to farmers in these difficult times where the consumption has gone down and buying of agri commodities by private players has decreased.”
However, CARE Ratings chief economist Madan Sabnavis said announcing MSP is one thing and ensuring that maximum farmers benefit from it is a completely different thing. “Unless there is large scale government procurement in most crops at MSP, these don’t make much of a difference,” he said.
Announcing the extension of the deadline for interest-subvention, Tomar said Rs 28,000 crore was spent on the scheme last year.
Farmers are given two per cent interest subvention after which loans to them draw seven per cent interest rate. Those who pay their dues on time are given three per cent further subvention after which the interest rate comes down to three per cent.
Tomar said Kisan Credit Card, through which crop loans are extended to farmers, covers abour 66.5 million farmers. However, 25-30 million farmers are still left out, who are being brought under the scheme, he said.
Rs 4 trillion is disbursed to farmers under the scheme, he said, adding that once all farmers are covered, Rs 2 trillion more will go to the farming community.
Two weeks after the government had announced changes to the definition of micro, small and medium enterprises (MSMEs), the norms for classifying medium scale enterprises were again changed on Monday.
After a push by industry bodies, the Centre has now reclassified medium scale companies as those with Rs 50 crore as investments and Rs 250 crore as turnover, up from Rs. 20 crore and Rs. 100 crores respectively. The move takes into account the rising cost of business and is expected to bring a much larger number of companies into the MSME fold.
Such a move will also bring automation of certain processes which are required for competitive manufacturing, said Sharad Kumar Saraf, President of the Federation of Indian Exports Organizations.
The government also announced that for all MSMEs, proceeds from exports will not be counted in the turnover limit. The new definition is expected to go live from July 1.
The Cabinet also approved the Rs 20,000 crore subordinate debt announced for two lakh MSMEs which are NPA or are stressed. While, the government will disburse Rs. 4,000 crore to the Credit Guarantee Trust for Micro and Small enterprises (CGTMSE) which allows MSMEs to secure bank credit without the hassles of collaterals or third party guarantees. However, the government will guarantee the entire Rs. 20,000 crore.
As already announced in the package, the Centre will also establish a mega fund of funds with a corpus of Rs 50,000 crore, to help MSMEs expand capacity and eventually get listed in the markets of their choosing. Gadkari clarified the government will now buy equity stakes up to 15 per cent in MSMEs that choose to get listed as public entities. Once the listed price of the firm’s stock gathers strength to a certain degree, the government will divest its investment, allowing the money to be given to another MSME, the minister said.
Current NPA norms don’t allow restructuring of MSMEs which are categorised as stressed, said MSME Minister Nitin Gadkari. Banks are expected to provide the subordinate-debt to promoters of such MSMEs up to 15 per cent of their existing stake in the unit. The loan amount will be limited to a maximum of Rs 75 lakh and interest will be kept to a minimum, Gadkari said.
The assistance will help MSMEs to make their accounts standard from NPAs and then restructure their loans.
This is expected to benefit 200,000 units and make them not only competitive but will also support them in becoming global brands, according to the government estimates.
The U K Sinha Committee for MSMEs had in June, 2019 suggested the fund along with a broad range of MSME reforms for small firms still reeling under the after effects of demonetisation and a liquidity crisis. But a lack of available ways to finance it had delayed the implementation.
Gadkari hoped that rise in prices of shares would help the government infuse equity worth Rs two trillion in three to four years.
Industry urged the government to also provide collateral free loans to medium units which now come under its expanded definition.
“We urge the government that provision of emergency credit line to businesses/MSMEs, as part of stimulus package announced by the finance minister, of Rs 3 trillion collateral-free automatic loans, should also be provided to MSME units with turnover of up to Rs 250 crore,” said D K Aggarwal, President, PHD Chamber of Commerce and Industry.
“The government has indeed walked the talk and nimbly brought into force two significant reforms which should give a tremendous fillip to the currently reeling MSME sector,” said Prasenjit Chakravarti Partner, Khaitan & Co. End