ECONOMIC RELIEF PACKAGE UPDATE
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ECONOMIC RELIEF PACKAGE UPDATE
To uplift the economic gloom, the Government has laid out a detailed road map towards building a self-reliant India
(Aatma Nirbhar Baharat Abhiyan), with five key pillars identified as Economy, Infrastructure, System, Vibrant
Demography and Demand (refer our newsletter of May 14, 2020 at https://lexcounsel.in/wpcontent/uploads/2020/05/Newsletter-May-14-2020.pdf). As part of the package, the Finance Minister of India unveiled
the first tranche of the economic relief package on May 13, 2020. Under the first tranche of the economic relief package,
the Ministry of Finance has focused on Micro, Small and Medium Enterprises (“MSME”), Non-Banking Financial
Companies (“NBFC”), Housing Finance Companies (“HFC”) and Micro Finance Institutions (“MFI’), DISCOM’s and Real
Subsequently, the Finance Minister of India has unveiled four more tranches of the economic relief packages, aimed at
strengthening the Indian economy and moving towards a self-reliant India. We discuss hereinbelow some of the key
reliefs provided by the Finance Minister of India in tranches two to five of the economic relief package, announced from
May 14, 2020 to May 17, 2020.
Second Tranche: The second tranche of the economic relief package, announced on May 14, 2020 primarily focused
on agriculture sector (providing liquidity support to farmers and rural economy) and migrant labours. Some key benefits
announced for the workers include:
a. universalization of right of minimum wages (which is presently applicable for only 30% workers) and timely payment
of wages to all workers including unorganized workers;
b. introduction of statutory concept of ‘National Floor Wage’ – to reduce regional disparity in minimum wages;
c. issuance of appointment letter for all workers to promote formalization of workers;
d. Occupational Safety & Health Code to be made applicable to all establishments engaged in work of hazardous
nature even with the threshold of less than 10 workers;
e. extension of employees’ state insurance coverage to all districts and all establishments employing 10 or more
employees as against the coverage being applicable for notified establishments;
f. social security scheme to be introduced for gig workers and platform workers; and
g. provision of gratuity for fixed term employees by extending gratuity benefit upon completion of one year compared
to the existing threshold of five years.
A detailed official presentation of the reliefs announced in the second tranche of the economic relief package may be
accessed at https://pib.gov.in/PressReleasePage.aspx?PRID=1623840.
Third Tranche: The third tranche of the economic relief package, announced on May 15, 2020, also focused at providing
financial impetus to the agriculture sector and the reliefs announced under the third tranche inter alia included provision
of emergency working capital for farmers, reliefs for animal husbandry and fisheries, financing facility for agriculture
infrastructure projects, formalisation and liquidity for micro food enterprises, promotion of herbal cultivation, agriculture
pricing and marketing reforms, etc.
A detailed official presentation of the reliefs announced in the third tranche of the economic relief package may be
accessed at https://pib.gov.in/PressReleasePage.aspx?PRID=1624104.
Fourth Tranche: The fourth tranche of the economic relief package, announced on May 16, 2020, focused on new
horizons of growth for the Indian economy, focused on eight key sectors viz. Coal, Mineral, Defence Production, Civil
Aviation, Space, Atomic Energy, Infrastructure and Power. The highlights of the economic relief announced in the
aforesaid key sectors are as follows:
• Policy Reforms to fast-track Investment: The Government has proposed for fast track investment clearance through
Empowered Group of Secretaries. A project development cell will be setup in each ministry to prepare investible
projects and coordinate with investors as well as State Governments. A ranking process of every State will be
developed based on their investment attractiveness to encourage new investments. Certain incentive schemes for
promotion of ‘New Champion Sectors’ such as Solar PV manufacturing, advanced cell battery storage, etc. will be
• Policy Reforms for introduction of Commercial Mining in Coal Sector: The Government has proposed to introduce
competition, transparency and private sector participation in the coal sector through revenue sharing mechanism
instead of fixed rupee per tonne regime, liberalisation of entry norms, exploration cum production regime for partially
explored blocks, incentivising through rebate in revenue-share for production earlier than scheduled, incentivising
coal gasification/liquefication through rebate in revenue sharing and infrastructure development of INR 50,000 Crore.
• Enhancing of Private Investments in Mineral Sector: The Government has announced composite regime for
exploration, mining and production of minerals. Under this composite regime, 500 mining blocks would be offered
through an open and transparent auction process. To enhance aluminium industry’s competitiveness, bauxite and
coal mines would be jointly auctioned. The distinction between captive and non-captive mines would be removed to
allow captive mining leases to be transferred to allow effective utilization of surplus mineral blocks. Rationalization
of stamp duty on mining leases would also be undertaken.
• Enhancing of Defence Production: To promote and encourage production of weapons and equipment in India, the
Government proposes to notify a list of weapons/platforms, the import of which will be banned/prohibited. The
Government has also announced corporatization of ordinance factory boards to increase efficiency.
• Foreign Direct Investment (“FDI”) Limit for Defence Sector: The FDI limit in Indian companies for defence sector
under the automatic route has also be increased from the current limit of 49% to 75%.
• Civil Aviation: The Government proposes to ease the utilisation of the Indian air space so that civilian flying becomes
efficient. Such reduction in restriction to use the air space will bring a total benefit of about INR 1,000 Crore per year
for the aviation sector. The Government has also announced that up to 12 airports would be auctioned on public
private partnership basis in two rounds.
• Power Distribution: The power distribution companies in the Union Territories are proposed to be privatised in
accordance with a new tariff policy to be released by the Government.
• Social Infrastructure Projects: The Government plans to boost investment by private sector in social infrastructure
by enhancing the quantum of viability gap funding (VGF) up to 30% of the total project cost from the existing VGF
support of 20%. The total outlay of the boost to be provided by the Government amounts to INR 8,100 Crore.
• Private Participation in Space: To boost the private participation in space activities, the Government will provide a
level playing field for private companies in satellites, launches and space-based services. The private sectors will
be allowed to use ISRO facilities and other relevant assets to improve their capacities. Further a liberal geo-spatial
data policy will be developed to providing remote sensing data to technology start-ups and entrepreneurs.
• Atomic Energy: It is proposed that research reactor will be established on public private partnership (PPP) mode for
production of medical isotopes, promotion of welfare of humanity through affordable treatment for cancer and other
diseases. Further, facilities for use of irradiation technology for food preservation shall also be established under the
A detailed official presentation of the reliefs announced in the fourth tranche of the economic relief package may be
accessed at https://pib.gov.in/PressReleasePage.aspx?PRID=1624465.
Fifth Tranche: The fifth and final tranche of the economic relief package, announced on May 17, 2020, focused on
health, education and corporate sector, made a provision for significant reforms in 7 areas, which include; (i) Mahatma
Gandhi National Rural Employment Guarantee Scheme (“MGNREGS”); (ii) Heath Reforms and Initiatives and Education
Reforms; (iii) Ease of doing business – Insolvency and Bankruptcy related reforms; (iv) De-criminalisation of the
Companies Act, 2013 (“CA 2013”); (v) Ease of doing business for Corporates; (vi) Public Sector Enterprises matters and
policies and; (vii) State Governments and resources related to State Governments.
The highlights of the economic relief announced in the aforesaid key sectors are as follows:
• Allocation of funds for MGNREGS: The Government has planned to allocate INR 40,000 crore under MGNREGS
for addressing the need of more work for migrant workers in monsoon season as well. Further, the government has
also aimed on creating a large number of durable and livelihood assets including water conservation assets that will
ultimately help in boosting the rural economy through higher production.
• Health and Education Reforms Initiatives: The expenditure on health will be increased by investing in grass root
health institutions and ramping up health and wellness centres in the rural and urban areas. Further, in order to
tackle the COVID-19 pandemic, the infectious diseases hospital blocks will be established separately in all districts
and lab networks and surveillance by Integrated Public Heath Labs will also be strengthened in all districts, block
level labs and public health units.
Under the education reforms, the government has introduced PM eVidya programme for providing multi-mode
access to digital and online education. In addition to this, the government has immediately launched an initiative
called Manodarpan for providing psycho-social support for students, teachers and families for mental health and
emotional well-being. Further, new national curriculum and pedagogical framework for school, early childhood and
teachers will also be launched by the government. Also, top 100 universities will be permitted to automatically start
online courses by May 30, 2020.
• Ease of Doing Business under Insolvency and Bankruptcy related reforms: Keeping in mind the current COVID-19
pandemic situation, the Government has proposed suspension of the fresh initiation of insolvency proceedings under
Insolvency and Bankruptcy Code, 2016 (“IBC”) for a period of 1 (one) year. Further, the minimum threshold to initiate
insolvency proceedings under IBC has been raised from INR 1 lakh to INR 1 crore for protecting the MSMEs from
the insolvency proceedings.
The Government also intends to notify the special insolvency resolution framework for MSMEs under section 240A
of the IBC. It was also announced that the Central Government will be empowered to exclude COVID-19 pandemic
related debt from the definition of “default” under the IBC for the purpose of triggering insolvency proceedings.
• De-criminalisation of the CA 2013: The Government has de-criminalised the violations under the CA 2013 which
involves minor technical and procedural defaults such as shortcomings in CSR reporting, inadequacies in board
report, filings defaults and delay in holding the annual general meetings. Further, a majority of compoundable
offences’ sections will also be moved to Internal Adjudication Mechanism (“IAM”) and the powers of the regional
director for compounding of offences will also be enhanced. Thus, keeping this reform in mind, a total of 58 sections
under CA 2013 will be dealt with under IAM as compared to the 18 sections earlier.
Further, 7 (seven) of the compoundable offences will be dropped altogether and 5 (five) will be dealt under the
• Ease of doing business for Corporates: The key announcements made under the ease of doing business reforms
for corporates include:
– permission for direct listing of securities by Indian public companies in permissible foreign jurisdictions;
– permission for private companies to list non-convertible debentures on stock exchanges without their being
regarded as listed companies;
– provisions of Part IXA (Producer Companies) of Companies Act, 1956 which related to formation of producer
companies to be introduced in CA 2013;
– grant of power to create additional/specialised benches of National Company Law Appellate Tribunal; and
– reduction in penalties for defaults by small companies, one-person companies, producer companies and startups will be notified.
• Public Sector Enterprises reforms: The Government will announce new public sector policy under which the list of
strategic sectors requiring presence of public sector enterprises in public interest will be notified. In strategic
sectors, at least one enterprise will remain in the public sector, but private sector will also be allowed and in other
sectors, public sector enterprises will be privatized (timing to be based on feasibility etc.)
Further, to minimise wasteful administrative costs, number of enterprises in strategic sectors will ordinarily be only
one to four and the others will be either privatised/merged/ brought under the holding companies.
• State Governments and resources related to State governments: The Government has decided to increase
borrowing limits of states from 3% to 5% for financial year 2020-21 only. This has been done to provide extra
resources of INR 4.28 lakh crore to the states. Part of the borrowing will be linked to specific reforms (including
recommendations of the Finance Commission). Reform linkage will be in four areas: (i) universalisation of ‘One
Nation One Ration card’; (ii) ease of doing business; (iii) power distribution and urban Local body revenues.
A detailed official presentation of the reliefs announced in the fifth tranche of the economic relief package may be
accessed at https://pib.gov.in/PressReleasePage.aspx?PRID=1624651.
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