Recommending a slew of relief measures including regulatory easing, an ASSOCHAM paper has said government should consider wage support mechanism and interest subvention for the MSMEs which are reeling under severe impact of Covid-19 that has shown its heightened fury in the second wave.
Even as the states are in the process of easing lockdowns, the trade and industry would need an all-round support to pick up their business thread again, after halt or near-halt of their operations since middle of April, stated the recommendations report that ASSOCHAM submitted to the government.
Batting for protection of employment, it said, "The surplus funds of ESIC (Employees State Insurance Corporation) should be used for providing wage support measures/stimulus package for the employees."
Deepak Sood, Secretary General, ASSOCHAM said, “Wage and job protection measures have been further extended by several countries, including the US. After all, consumption, especially the non-discretionary, has to be ensured by protecting earnings of people even in the lockdowns. Government intervention is critical. "This is time to support and spend without giving too much focus on the fiscal parameters. I am sure, the RBI and the government are constantly working on innovative solutions to keep infusing cash into the system despite an understandable revenue pressure."
Sood referred to the latest industry interactions with the Commerce and Industry Minister Piyush Goyal who said the government is reaching out to all the major stakeholders to face the extraordinary situation arising out of once-in-hundred-years pandemic. Sood also lauded RBI announcement to include hospital infrastructure like oxygen plants to be included in the Emergency Credit Line Guarantee Scheme, which should see at least doubling of its present ceiling of Rs 3 lakh crore.
He added, "The Government's Ease of Doing Business and competitive manufacturing focus needs to go in overdrive with reforms to the Electricity Act, Unified Tariff and Unbundling of Natural Gas, removal of old and redundant laws so that we can have a fantastic economic rebound post pandemic."
The chamber study also sought an interest subvention for the trade and industry so that they can revive themselves with minimum disruptions. It said that the government and the RBI should consider an interest subvention scheme with a validity till March 31, 2022, especially, for the micro and small business segment. Similarly, NPA norms should be relaxed for MSMEs, if not for all industries. As cash flow cycles have been affected and businesses have not been able to realize receivables on time, it will be helpful if one-time relaxation in recognising NPAs is provided, extending the past due norm from 90 days to 180 days.
At the same time, Sood stated this is an opportune time for India to drive its focus on enhancing Ease of Doing Business and competitive manufacturing, with reforms to the Electricity Act, Unified Tariff and Unbundling of Natural Gas, among others. There are many obsolete laws, which need to be immediately repealed, to push forth the economic rebound post the pandemic.
The Law Commission of India’s – Third Interim Report, under its study titled the “Legal Enactments: Simplifications and Streamlining” listed many old and redundant laws such as Sick Textile Undertakings (Taking Over of Management) Act 1972, Gift-Tax Act 1958, Local Authorities Pensions and Gratuities Act 1919, among others.”
The paper also expected the RBI to continue with its accommodative stance for the policy rates in the ensuing meeting of the Monetary Policy Committee in the wake of an unexpected rage of the second wave of the pandemic.
The document also made out a case for changes in the Insolvency and Bankruptcy Code (IBC) to allow the existing corporate promoters to participate in the bids for revival of the debt-ridden companies referred to the insolvency procedures. "While industry requests for the extension of the NCLT moratorium until 31st March 2022, the Government should also consider to take away the sec29A where the sponsor cannot take its assets."
For the industries to reboot, fresh guidelines will have to be issued to protect the lives and livelihood. Standard operating procedures for industries will help companies operate across state lines and regions. Inputs should be sought from all stakeholder groups, taking into consideration operational structures of various industries. The Government should work on creating transport bubbles so that businesses can function, by safely managing the transportation of employees and other resources.
For providing relief to the worst hit hospitality sector, the document has suggested for allowing GST Input Credit for restaurants: The restaurant industry is the only sector that is not allowed claim tax credits under the current GST regime. This undermines the stated objective of bringing more businesses into the organized fold and heavily increases the capital expenditure.
Alternatively, the Government should give an option of dual tax
structures – 5 per cent with no GST input or 12 per cent with GST input credit
allowed. For giving a much-needed boost to the realty sector, it has recommended
reduction in stamp duty as also property tax by half at least for three
The pandemic induced economic situation might need restructuring of certain stressed enterprises, including takeover, for their quick revival. It is recommended that stamp duty and other levies on corporate restructuring transactions, be made uniform across States at 1 per cent of the relevant transaction value subject to a maximum levy of Rs 10 crore per state.
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