Prime Minister Narendra Modi chairing a meeting of the Union Cabinet, in New Delhi, on June 1, 2020.
Prime Minister Narendra Modi chairing a meeting of the Union Cabinet, in New Delhi, on June 1, 2020.
Business & Economy

Cabinet approves schemes for farmers’ welfare, street vendors and MSME

NetIndian News Network

New Delhi, June 1, 2020

The Union Cabinet today took a number of decisions for the welfare of farmers, street vendors and the MSME sector in its first meeting in the second year of Prime Minister Narendra Modi's second

This was the first Cabinet meeting chaired by Prime Minister Narendra Modi in the second year of his second five-year term.

While the MSME definition was revised for the first time after 14 years, the definition of medium-scale units was changed to enhance investment to Rs 50 crore investment and turnover to Rs 250 crore.

A special Micro Credit Facility Scheme 'PM SVANidhi' for providing affordable loans to street vendors was launched. For Kharif season 2020-21, the government has fixed MSP at a level of at least 1.5 times of the cost of production.

The Cabinet also allowed the extension of repayment dates for short-term loans for agriculture and allied activities. Farmers would also get the benefit of interest subvention and prompt repayment incentive, an official press release said.

Micro, Small and Medium Enterprises (MSMEs) are the backbone of the Indian economy. Silently operating in different areas across the country, more than 6 crore MSMEs have a crucial role to play in building a stronger and self-reliant India, the release said.

Under the Atmanirbhar Bharat Abhiyaan, the MSME sector has not only been given substantial allocation but also been accorded priority in the implementation of the measures to revive the economy, it said.

These include upward revision of MSME definition that would help in attracting investments and creating more jobs in the MSME sector.

The Cabinet approved a proposal for provisioning of Rs 20,000 crore as subordinate debt to provide equity support to the stressed MSMEs to benefit 2 lakh stressed MSMEs.

Proposal for equity infusion of Rs. 50,000 crores for MSMEs through a fund of funds has also been approved by the Cabinet. This will establish a framework to help MSMEs in managing the debt-equity ratio and in their capacity augmentation. It will also provide an opportunity for them to get listed on stock exchanges.

In the package announcement, the definition of a micro manufacturing and services unit was increased to Rs 1 crore of investment and Rs 5 crore of turnover. The limit of a 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.

The revision comes after 14 years since the MSME Development Act came into existence in 2006. After the package announcement on May 13, there were several representations that the revision was still not in tune with market and pricing conditions and it should be further revised upwards.

Keeping in mind these representations, the Prime Minister 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.

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.

The Ministry of Housing and Urban Affairs has launched a Special Micro-Credit Facility Scheme - PM SVANidhi - PM Street Vendor's Atma Nirbhar Nidhi, for providing affordable loans to street vendors. This scheme will go a long way in enabling them to resume work and earn livelihoods.

Over 50 lakh people, including vendors, hawkers, thelewalas, rehriwala, theliphadwala etc. in different areas/ contexts are likely to benefit from this scheme.

The goods supplied by them range from vegetables, fruits, ready-to-eat street foods, tea, pakoda, bread, eggs, textiles, apparel, footwear, artisan products, books/ stationaries etc. The services include barber shops, cobblers, pan shops, laundry services etc.

Urban Local Bodies will play a pivotal role in the implementation of the scheme. This is for the first time in India’s history that street vendors from semi-urban/rural areas have become beneficiaries of an urban livelihood programme, the release said.

The vendors can avail a working capital loan of up to Rs 10,000, repayable in monthly instalments in the tenure of one year. On timely/ early repayment of the loan, an interest subsidy @ 7% per annum will be credited to the bank accounts of beneficiaries through Direct Benefit Transfer on a six-monthly basis. There will be no penalty on early repayment of the loan.

The scheme provides for escalation of the credit limit on timely/ early repayment of the loan to help the vendor achieve his ambition of going up on the economic ladder.

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 and proximity to the urban poor including the street vendors.

In line with the Government’s vision of leveraging technology to ensure effective delivery and transparency, a digital platform with a web portal/ mobile app is being developed to administer the scheme with an end-to-end solution.

The IT platform will also help in integrating the vendors into the formal financial system. This platform will integrate the web portal/ mobile app with Udyami Mitra portal of SIDBI for credit management and PAiSA portal of MoHUA to administer interest subsidy automatically.

The scheme incentivises digital transactions by the street vendors through monthly cashback.

MoHUA in collaboration with State Governments, State Missions of DAY-NULM, ULBs, SIDBI, CGTMSE, NPCI and Digital Payment Aggregators will also launch a capacity building and financial literacy programme of all the stakeholders and IEC activities throughout the country during the month of June and loan will commence in the month of July.

For the Kharif season 2020-21, the government has kept its promise of fixing the MSP at a level of at least 1.5 times of the cost of production. Today, the MSP of 14 crops for the Kharif season 2020-21 has been announced, based on the recommendation of CACP. The return over cost for these 14 crops ranges from 50% to 83%.

The Government has also decided to extend repayment date up to 31.08.2020 for all Short-Term loans up to Rs.3 lakh advanced for agriculture and allied activities by banks. Farmers will also get benefit of interest subvention and prompt repayment incentive.

The agricultural short-term loan due between March 1 and August 31 will continue to get the benefit of 2% Interest Subvention (IS) to Banks and 3% Prompt Repayment Incentive (PRI) to farmers.

Government decision of providing such loans to farmers through banks @ 7% per annum, with 2% per annum interest subvention to banks and 3% additional benefit on timely repayment by farmers thus provides loans up to Rs 3 lakh at 4% per annum interest, the release said.

The Interest Subvention Scheme (ISS) was started to provide concessional short-term crop loans including loans availed through Kisan Credit Cards to the farmers. In the last few weeks, many farmers were not able to travel to bank branches for payment of their short-term crop loan dues. Hence the Cabinet decision would help crores of farmers, it said.