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On table: Cash transfers for unorganised workers, 7 kg subsidised grain per person

While the government may use money available with certain labour welfare funds, a limited fiscal space would be its biggest constraint.

By: ENS Economic Bureau | New Delhi |
Updated: March 26, 2020 10:21:14 am
india lockdown, india coronavirus lockdown, labourers lockdown, relief package informal sector, relief package for unorganised workers, indian economy, coronavirus and indian economy, indian express news Migrant workers leaving Delhi on Wednesday. Express photo by Prem Nath Pandey 25 march 2030

The Government is finalising an economic package, the broad contours of which are likely to include targeted monetary transfers to unorganised sector workers, especially daily wage workers, sops for small and medium enterprises and relaxations in banking sector prudential norms to help companies tide over the countrywide lockdown that is causing significant disruption across the economy.

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While the government may use money available with certain labour welfare funds, a limited fiscal space would be its biggest constraint. The Centre may borrow more to fund the relief package, which is expected to be announced later this week, said senior officials.

Read | No transport and no money, migrants take long road home

“Measures for MSMEs, cash transfers for daily wage workers and liquidity infusion are the key focus areas for the planned economic package,” a Finance Ministry official said.

According to sources, the plan, being finalised in consultation with the Reserve Bank of India, also involves relaxing the non-performing asset classification norms — by another 30-60 days from the current 90 days. This will give companies the space to tide over the cash flow problems caused by the disruption in business, without getting tagged as NPA accounts.

Also Read | Money transfer, food aid: States announce schemes for daily wagers, vendors

Cash transfers through direct benefit transfer are being considered for registered unorganised workers and a minimum sustenance level transfer to those who are out of the social security net. As in the case of construction workers, the Centre can issue advisories to states to disburse funds from their respective labour welfare boards for those in the unorganised sector, like beedi, mine, cine workers. The government already has DBT schemes under labour welfare funds for beedi, cine and mine workers, offering financial assistance for education and healthcare facilities.

On Tuesday, in the first step for unorganised sector workers, the Centre had asked states to devise schemes for the use of Rs 52,000 crore of unutilised cess collected under the Building and Other Construction Workers’ Welfare Cess (BOCW) Act and transfer these funds to the bank accounts of construction workers through the Direct Benefit Transfer (DBT) route.

“Those who are outside the ambit of registration can possibly be asked to register or a basic sustenance level could be provided by states till then,” said an official.

When contacted, a secretary in the finance ministry said he could not share details of the package as it is being worked out. Another government official said the RBI may have to subscribe to the bonds issued by the Centre to support the funding plan.

The government will have to strike a delicate balance as any relief package will require substantial funding and it has already used the 0.5% additional fiscal deficit space available under the Fiscal Responsibility and Budget Management (FRBM) Act.

“A stimulus of even 1% of GDP can cost around Rs 2 lakh crore, and since tax and non-tax revenues collections will be even below the Revised Estimates, one can expect significant jump in the fiscal deficit levels,” said a government economic advisor who did not want to be named.

At a Cabinet briefing on Wednesday, Union Minister for Information and Broadcasting Prakash Javadekar said that “all employees of the central government will get their wages, including even the contractual labour”.

“In private industry as well, all the employees, and those who provide services, have been asked to provide salaries and the minimum wage. We have got a very good response for that,” he said.

Some states like Bihar, Tamil Nadu, Uttar Pradesh and Delhi have already announced free ration for the poor. For the rest of the unorganised sector, experts said the government may also need to look at widening the coverage of the public distribution system to include vegetables apart from foodgrains and subsidies for MSMEs for possible layoffs.

“For the organised sector, the government has already issued advisories for paid leaves and no job or wage cuts. For the unorganised sector, the government could consider temporary direct cash transfers along with wage and layoff subsidies, especially for MSMEs. Loans at a lower rate could be extended to such MSMEs to cover the wage cost. Also, the government could look at implementing MGNREGS more effectively, especially for workers who are migrating back to their hometowns,” said K R Shyam Sundar, labour economist and professor of Human Resources Management at XLRI. He said social protection would be crucial, not only in the lockdown phase but also later when industries will require revival.

The Finance Ministry and the Reserve Bank of India did not reply to queries seeking details of the economic package.

On Tuesday, Finance Minister Nirmala Sitharaman had said the government would introduce a broader economic stimulus package “sooner than later”. She had announced a series of regulatory and compliance related relaxations for taxpayers, MSMEs, company directors and bank customers.

The government is also planning to suspend invocation of the Insolvency and Bankruptcy Code (IBC) “for a period of six months so as to stop companies at large from being forced into insolvency proceedings in such force majeure causes of default.”

The aviation industry, which has suffered a big hit, is likely to get relaxation in payment of statutory dues including taxes. The government plans to allow it to make payments in a staggered manner without any penalty or interest.
Javadekar said the central and state governments, at all levels, are doing what they can to help people. “States and central governments are not separate, they are together. And several state governments have led from the front with some initiatives, like free foodgrain etc, which is welcome,” he said.

Police provide masks to migrant workers.

He assured that “the poor will get the essential items and services”, and added that for “the poor who are contractual labourers or are daily wagers, there are systems to give them cheap and free foodgrains in the states”.

He said the Centre will provide 80 crore people with 7 kg ration per person. He said wheat, that costs Rs 27 per kg, will be provided at Rs 2 per kg; and rice, that costs Rs 37 per kg, at Rs 3 per kg. He said the Centre will provide the states three months of supplies in advance under the scheme.

Union Minister for Chemicals and Fertilisers D V Sadananda Gowda also tweeted about the scheme, saying a “total amount of Rs 1 lakh 80 thousand crore is being spent for the cause… the amount will be given in advance to the states for the coming 3 months”.

On migrant labourers trying to head back home, Javadekar said the government’s advice “is to stay wherever you are for 21 days, because if you go back what will happen” in the villages can also be an issue.

On reports that delivery of essential items has been stopped across the country, he said it may be happening in some districts only. He indicated that some of these initial issues would be resolved.

Javadekar reiterated that people should not resort to panic buying as all essential items will be available. “It is a time of crisis, everyone needs to support each other. People also need not go and buy in bulk in panic. These shops will remain open all 21 days and all essential items will be available,” he said.

He said shops selling essential items like milk, medicines, vegetables, grocery, ration, meat, animal fodder will not be shut. He, however, cautioned that people “need to follow discipline of maintaining social distance, if we go and crowd the shops then it defeats the entire purpose”.

Saying that the situation was discussed at the Cabinet meeting, Javadekar said “the country’s reaction was also taken into consideration, and a constructive view was taken regarding the central government, state government and district administration, coming together to move forward in sync to defeat this problem”.

He said “all these steps have been taken so that the situation in India does not become similar to the situation across the world”.

Javadekar said the state governments are working in tandem with the Centre, and they have to primarily execute the lockdown. “This is what cooperative federalism is,” he said, adding that the states have been asked to start helplines in every district and the Union Ministry of Home Affairs will also start a helpline.

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