New Delhi: In the new aid under the IBS, Finance Minister Nirmala Sitharaman announced on Sunday that no fresh insolvency case will be admitted for the next one year because of the coronavirus pandemic. Suspension of the same was announced earlier for a period of 6 months.
The long pending demand of the economists and industries of the country has also been heard. The government is setting up a special insolvency framework for MSMEs under Section 240A of the Insolvency of Bankruptcy Code.
The limit for insolvency will also be raised to Rs one crore from the present Rs one lakh which will be supportive for the MSME sector. A new policy for companies under state control saying public sector undertakings under the non-strategic sector will be privatized while those in the identified strategic sector would be capped by not more than four by merging some of them has also been announced.
Further, the debt occurring due to the coronavirus pandemic will not be categorized as “default”, thereby will be insulated from triggering insolvency proceedings and the changes will be effected by promulgating an ordinance.
The changes would be implemented through circulation of order subject to approval by the Parliament later so that things move quickly, Sitharaman said. Also, a special insolvency resolution framework for MSMEs under Section 240A of Insolvency and Bankruptcy Code (IBC) will be notified soon, she said adding that fresh initiation of insolvency proceedings will be stopped up to one year depending upon the pandemic situation. Additionally, minor technical and procedural defaults under the Companies Act such as shortcomings in CSR reporting, inadequacies in board report, filing defaults, and delay in holding AGM will be decriminalized.
The statements got issued under the fifth and the final tranche of Rs 20 lakh crore economic package announced by Prime Minister Narendra Modi on Tuesday. In strategic sectors, at least one enterprise will remain in the public sector with the allowance to the private sector as well.
In other sectors, PSUs will be privatized, she said adding that timing would be based on viability.
“To minimise wasteful administrative costs, the number of enterprises in strategic sectors will ordinarily be only one to four. Others will be privatized/ merged/ brought under holding companies,” she said.
The FM said that as far as the states are concerned, the Centre has consented to their request and increased borrowing limit from 3 per cent of gross state domestic product (GSDP) to 5 per cent for 2020-21 only.
States’ net borrowing ceiling for 2020-21 is Rs 6.41 lakh crore, based on 3 per cent of GSDP. States have so far borrowed only 14 per cent of the limit authorized, she said adding that the increase in borrowing limit would give states extra resources of Rs 4.28 lakh crore.
But, the increased borrowing limit would be associated to specific reforms such as One Nation-One Ration Card, ease of doing business, power distribution, and urban local body revenues.