Current Affairs Feb 2

/ Current Affairs

FDI limit in Insurance sector increased

Why in News?

  • While presenting the Union Budget 2021-22 in Parliament the Union Minister for Finance & Corporate Affairs, announced that the Government will amend the Insurance Act, 1938 to increase the permissible FDI limit from 49% to 74% and allow foreign ownership and control with safeguards.
  • Under the proposed new structure, the majority of Directors on the Board and key management persons would be resident Indians, with at least 50% of Directors being Independent Directors, and specified percentage of profits being retained as general reserve.

Stressed Asset Resolution by setting up a New Structure

  • The Finance Minister stated that an Asset Reconstruction Company Limited and Asset Management Company would be set up to consolidate and take over the existing stressed debt and then manage and dispose off the assets to Alternate Investment Funds and other potential investors for eventual value realization.
  • The move will help the Public Sector Banks to manage their stressed assets.

Recapitalization of PSBs

  • In order to consolidate the financial capacity of Public Sectors Banks, the Government has proposed further recapitalization of Rs. 20,000 crore during the fiscal 2021-22.

Deposit Insurance

  • The Finance Minister further stated that the Government had, last year, approved an increase in the Deposit Insurance cover for bank customers from Rs. 1 lakh to Rs. 5 lakhs.
  • In order to help depositors of banks that are currently under stress, the Government will move an amendment to the DICGC Act, 1961 in the current Parliament Session to streamline the provisions, so that if a bank is temporarily unable to fulfil its obligations, the depositors of such a bank can get easy and time-bound access to their deposits to the extent of the deposit insurance cover.
  • To improve credit discipline while continuing to protect the interest of small borrowers, for NBFCs with minimum asset size of Rs. 100 crores, the minimum loan size eligible for debt recovery under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002 is proposed to be reduced from the existing level of Rs. 50 lakhs to Rs. 20 lakhs.

PIB

 

 

Single Securities Markets Code

Why in News?

  • While presenting the Union Budget 2021-22 in Parliament today the Union Minister for Finance & Corporate Affairs, announced that the Government will consolidate the provisions of SEBI Act, 1992, Depositories Act, 1996, Securities Contracts (Regulation) Act, 1956 and Government Securities Act, 2007 into a rationaliszed single Securities Markets Code.
  • The Government will support the development of a world class Fin-Tech hub at the GIFT-IFSC.
  • In order to instill confidence amongst the participants in the Corporate Bond Market during times of stress and to generally enhance secondary market liquidity, Union Budget 2021-22 proposes to create a permanent institutional framework.
  • The proposed body would purchase investment grade debt securities both in stressed and normal times and help in the development of the Bond Market.

 

 

 

  • In the Budget 2018-19, Government had announced its intent to establish a system of regulated gold exchanges in the country.
  • For the purpose, SEBI will be notified as the regulator and Warehousing Development and Regulatory Authority will be strengthened to set up a commodity market eco system arrangement including vaulting, assaying, logistics etc in addition to warehousing”.
  • With an objective to provide protection to the investors, the Finance Minister proposed to introduce an investor charter as a right of all financial investors across all financial products.
  • In order to give a further boost to the non-conventional energy sector, the Finance Minister stated that the Government will provide additional capital infusion of Rs 1,000 crore to Solar Energy Corporation of India and Rs 1,500 crore to Indian Renewable Energy Development Agency.

PIB

 

 

Policy of Strategic Disinvestment announced

Why in News?

  • The government aims at making use of disinvestment proceeds to finance various social sector and developmental programmes and also to infuse private capital, technology and best management practices in Central Government Public Sector Enterprises.
  • Union Minister for Finance and Corporate Affairs, announced that government has approved a policy of strategic disinvestment of public sector enterprises that will provide a clear roadmap for disinvestment in all non-strategic and strategic sectors.

Policy on Strategic Disinvestment

  • Fulfilling the governments’ commitment under the AtmaNirbhar Package of coming up with a policy of strategic disinvestment of public sector enterprises, the Minister highlighted the following as it’s main features :
  1. Existing CPSEs, Public Sector Banks and Public Sector Insurance Companies to be covered under it.
  2. Two fold classification of Sectors to be disinvested :
    1. Strategic Sector: Bare minimum presence of the public sector enterprises and remaining to be privatised or merged or subsidiarized with other CPSEs or closed.Following 4 sectors to come under it :
      1. Atomic energy, Space and Defence
      2. Transport and Telecommunications
      3. Power, Petroleum, Coal and other minerals
      4. Banking, Insurance and financial services
    2. Non- Strategic Sector: In this sector, CPSEs will be privatised, otherwise shall be closed.

 

 

 Strategic Disinvestment in FY 2021-22

  • “A number of transactions namely BPCL, Air India, Shipping Corporation of India, Container Corporation of India, IDBI Bank, BEML, Pawan Hans, Neelachal Ispat Nigam limited among others are proposed to be completed in FY 2021-22”.
  • Other than IDBI Bank, a proposal of privatization of two Public Sector Banks and one General Insurance company will be taken up in the year 2021-22.
  • The IPO of LIC would also be brought in through requisite amendments in the session itself.
  • Further to fast forward the policy, NITI has been asked to work out on the next list of Central Public Sector companies that would be taken up for strategic disinvestment.
  • She had estimated Rs. 1,75,000 crore as receipts from disinvestment in BE 2020-21 .

Incentivising states for disinvestment

  • The Minister also announced that to similarly incentivise States to take to disinvestment of their Public Sector Companies, an incentive package of Central Funds for them will be worked out.

Special purpose vehicle for monetising idle land

  • Recognising that Idle assets will not contribute to AtmaNirbhar Bharat and the non-core assets largely consist of surplus land with government Ministries/Departments and Public Sector Enterprises, the Minister proposed to use a Special Purpose Vehicle in the form of a company to carry out monetization of idle land.
  • This can either be by way of direct sale or concession or by similar means.
  • Sitharaman also proposed to introduce a revised mechanism that will ensure timely closure of sick or loss making CPSEs.

PIB

 

 

 

Key initiatives in Petroleum & Natural Gas sector

Why in News?

  • The Government had kept fuel supplies running uninterrupted across the country during the COVID19 lockdown period. Taking note of the crucial nature of fuel requirement in the lives of people, the Union Finance and Corporate Affairs Minister  announced key initiatives in the  Petroleum & Natural Gas Sector:
  • Ujjwala Scheme, which has already benefitted 8 crore households, will be extended to cover 1 crore more beneficiaries.

 

 

  • 100 more districts will be being added to the City Gas Distribution Network in the next three years.
  • A Gas pipeline project will be taken up in the Union Territory of Jammu and Kashmir.
  • An Independent Gas Transport System Operator will be set up for facilitation and coordination of booking of common carrier capacity in all-natural gas pipelines on a non-discriminatory open access basis.

 

 

Public Transport in Urban Areas

Why in News?

  • Public transport system in urban areas got a major boost in the Budget for the year 2021-22, tabled in the Parliament by the Union Minister for Finance and Corporate Affairs.
  • She said that the Government would work towards raising the share of public transport in urban areas through expansion of metro rail network and augment of city bus service. A new scheme will be launched at a cost of `18,000 crore to support augmentation of public bus transport services.

 

 

  • It will facilitate deployment of innovative PPP models to enable private sector players to finance, acquire, operate and maintain over 20,000 buses.
  • The scheme will boost the automobile sector, provide fillip to economic growth, create employment opportunities for the youth and enhance ease of mobility for urban residents.
  • Government plans to deploy two new technologies i.e. ‘MetroLite’ and ‘MetroNeo’ to provide metro rail systems at much lesser cost with same experience, convenience and safety in Tier-2 cities and peripheral areas of Tier-1 cities.

Budget proposed Central counterpart funding to:

  • Kochi Metro Railway Phase-II of 11.5 km at a cost of `1957.05 crore.
  • Chennai Metro Railway Phase –II of 118.9 km at a cost of `63,246 crore.
  • Bengaluru Metro Railway Project Phase 2A and 2B of 58.19 km at a cost of `14,788 crore.
  • Nagpur Metro Rail Project Phase-II and Nashik Metro at a cost of `5,976 crore and `2,092 crore respectively.

 

 

SWAMITVA scheme to extend to all States/UTs

Why in News?

  • In a slew of steps to support the Agriculture Sector, Union Minister for Finance & Corporate Affairs announced 9 measures for Agriculture Sector as part of inclusive development for aspirational India while presenting the Union Budget 2021-22 in Parliament.

SWAMITVA Scheme

  • Sitharaman proposed to extend SWAMITVA Scheme to all States/UTs.
  • Earlier this year, Prime Minister had launched SWAMITVA Scheme to bring transparency in property ownership in villages.
  • Under the Scheme, a record of rights is being given to property owners in villages. Up till now, about 1.80 lakh property-owners in 1,241 villages have been provided cards.

Agricultural credit target enhanced to Rs 16.5 lakh crore in FY22

  • To provide adequate credit to our farmers, the Finance Minister enhanced the agricultural credit target to Rs 16.5 lakh crore in FY22. Smt.
  • The Government will focus on ensuring increased credit flows to animal husbandry, dairy, and fisheries.
  • 33% increase Rural Infrastructure Development Fund
  • The Finance Minister also announced the enhanced the allocation to the Rural Infrastructure Development Fund from Rs 30,000 crore to Rs 40,000 crore.

 

 

Micro Irrigation Fund doubled

  • Proposed to double Micro Irrigation Fund, started with a corpus of Rs 5,000 crore under NABARD, by augmenting it by another Rs 5,000 crore.

Operation Green Scheme – ‘TOPS’ to include 22 more perishable products

  • To boost value addition in agriculture and allied products and their exports, Smt. Sitharaman proposed to increase the scope of ‘Operation Green Scheme’ that is presently applicable to tomatoes, onions, and potatoes (TOPS), to be enlarged to include 22 perishable products.

1,000 more mandis to be integrated with e-NAM

  • Around 1.68 crore farmers are registered and Rs 1.14 lakh crore of trade value has been carried out through e-NAMs.
  • Keeping in view the transparency and competitiveness that e-NAM has brought into the agricultural market, the Finance Minister proposed to integrate 1,000 more mandis with e-NAM to bring transparency and competitiveness.

APMCs to get access to Agriculture Infrastructure Fund

  • The Finance Minister proposed to make available the Agriculture Infrastructure Fund to APMCs for augmenting their infrastructure facilities.

To develop 5 major fishing harbours proposed

  • Sitharaman proposed substantial investments in the development of modern fishing harbours and fish landing centres.
  • The Finance Minister said that to start with, 5 major fishing harbours – Kochi, Chennai, Visakhapatnam, Paradip, and Petuaghat – will be developed as hubs of economic activity.
  • Also proposed to develop inland fishing harbours and fish-landing centres along the banks of rivers and waterways.

Multipurpose Seaweed Park to be established in Tamil Nadu

  • Recognising the potential in Seaweed farming the Finance Minister said that it is an emerging sector with potential to transform the lives of coastal communities – it will provide large scale employment and additional incomes.
  • To promote seaweed cultivation, Smt. Sitharaman proposed a Multipurpose Seaweed Park to be established in Tamil Nadu.

PIB

 

 

Qualitative Strengthening of 15,000 Schools

Why in News?

  • More than 15,000 schools to include all components of the National Education Policy will be qualitatively strengthened; to enable them to emerge as exemplar schools in their regions, handhold and mentor other schools to achieve the ideals Policy.
  • This was stated by Union Minister for Finance and Corporate Affairs, while presenting the budget 2021-22 in Parliament.
  • Also stated that 100 new Sainik Schools will be setup in partnership with NGOs/private schools/states.

Higher education

  • Proposed to set up a Higher Education Commission of India as an umbrella body having 4 separate vehicles for standard setting, accreditation, regulation, and funding.
  • Many cities have various research institutions, universities, and colleges supported by the Government of India.
  • Hyderabad for example, has about 40 such major institutions.

Central University in Leh

  • Proposed to set up a Central University in Leh for accessible higher education in Ladakh.

 

 

 

 

Decriminalisation of the Limited Liability Partnership (LLP) Act, 2008 proposed

Why in News?

  • Union Minister for Finance & Corporate Affairs proposed reforms for small companies and MSMEs to strengthen Start up ecosystem, while presenting Union Budget 2021-22 in Parliament.

Decriminalisation of the Limited Liability Partnership (LLP) Act, 2008

  • The Finance Minister proposed to take up decriminalisation of the Limited Liability Partnership (LLP) Act, 2008 on similar lines of the decriminalising of the procedural and technical compoundable offences under the Companies Act, 2013, which is now complete.

 Revision in ‘Small Companies’ definition

  • Proposed to revise the definition under the Companies Act, 2013 for Small Companies by increasing their thresholds for Paid up capital from “not exceeding Rs 50 lakh” to “not exceeding Rs 2 crore” and turnover from “not exceeding Rs 2 crore” to “not exceeding Rs 20 crore”.
  • This will benefit more than two lakh companies in easing their compliance requirements.

Proposed easing of rules in ‘One Person Companies’ for Start-Ups, Innovators

  • As a further measure which directly benefits Start-ups and Innovators, the Finance Minister proposed to incentivize the incorporation of One Person Companies (OPCs)
  • By allowing OPCs to grow without any restrictions on paid up capital and turnover,
  • Allowing their conversion into any other type of company at any time,
  • Reducing the residency limit for an Indian citizen to set up an OPC from 182 days to 120 days and also allow Non Resident Indians (NRIs) to incorporate OPCs in India.

Strengthening of NCLT framework for faster debt resolution

  • To ensure faster resolution of cases, the Finance Minister stated that NCLT framework will be strengthened, e-Courts system shall be implemented and alternate methods of debt resolution and special framework for MSMEs shall be introduced.

Launch of new MCA21 Version 3.0

  • During the coming fiscal 2021-22, the Finance Minister said the Government will launch a data analytics, artificial intelligence, machine learning driven MCA21 Version 3.0. This Version of MCA 3.0 will have additional modules for e-scrutiny, e-Adjudication, e-Consultation and Compliance Management.

PIB

 

 

Public Private Patnership Mode for Operational Services at Major Ports

Why in News?

  • Seven projects worth more than Rs 2,000 crore will be offered by the major ports on Public private partnership mode in FY21-22.
  • This was stated by the Union Minister for Finance and Corporate Affairs, while presenting Union Budget 2021-22 in Parliament.
  • Major ports will be moving from managing their operational services on their own to a model where a private partner will manage it for them.

 

 

  • To promote flagging of merchant ships in India, in her budget speech, also proposed to launch a subsidy support scheme of Rs 1624 crore in global tenders floated by Ministries and CPSEs over 5 years to Indian shipping companies.
  • This initiative would enable greater training and employment opportunities for Indian seafarers besides enhancing Indian companies share in global shipping.
  • Proposed to double the ship recycling capacity of around 4.5 Million Light Displacement Tonne (LDT) by 2024.
  • Efforts will be made to bring more ships to India from Europe and Japan, as around 90 ship recycling yards at Alang in Gujarat have already achieved HKC (Hong Kong International convention) compliant certificates.
  • This is expected to generate additional 1.5 lakh jobs for the youth of the country.

PIB

 

 

Mega Investment Textiles Parks (MITRA) scheme

Why in News?

  • The Government has proposed a scheme of Mega Investment Textiles Parks (MITRA) to enable the textile industry to become globally competitive, attract large investments, boost employment generation and exports.
  • Presenting the Union Budget 2021-22 in the parliament, Union Finance and Corporate Affairs Minister said that this will create world class infrastructure with plug and play facilities to enable create global champions in exports.
  • MITRA will be launched in addition to the Production Linked Incentive Scheme(PLI).
  • Along with the Production Linked Incentive (PLI) scheme, MITRA will lead to increased investments and enhanced employment opportunities.

 

 

  • Mentioning about the need to rationalize duties on raw material inputs to man-made textile, the Finance Minister announced of bringing nylon chain on par with polyester and other man-made fibers.
  • Announcing uniform deduction of the BCD rates on caprolactam, nylon chips and nylon fiber and yarn to 5 per cent, the Minister said that the move will help the textile industry, MSMEs and exports too.

PIB

 

 

Start-ups to get tax holiday till March 2022

  • The Union Budget proposes to extend tax holiday for start-ups until the end of March next year.
  • It also proposes to extend the capital gains exemption for investment in start-ups by another year, to encourage funding in the sector.
  • The budget also proposes to incentivise One Person Companies (OPCs) by allowing them to grow without any restrictions on paid-up capital and turnover.
  • OPCs will also be allowed to change the ‘type’ of the company at any time.
  • Also, the residency limit has been brought down to 120 days from 182 days, making investments in India more convenient to NRIs.
  • Increasing the paid up capital limit from ₹50 lakh to ₹2 crore and turnover from ₹2 crore to ₹20 crore would certainly help start-ups in terms of easing pressure on reporting compliance.

THE HINDU

 

 

Govt. plots fiscal deficit reduction from 9.5% in FY21 to 4.5% by FY26

  • Finance Minister Nirmala Sitharaman has pegged fiscal deficit for the coming year 2021-22 at 6.8% of GDP and aims to bring it back below the 4.5% mark by 2025-26.
  • The original fiscal deficit target for 2020-21 was 3.5%.
  • However, in reality, the deficit shot up to a high of 9.5% of GDP due to the double impact of the COVID-19 pandemic — low revenue flows due to the lockdown and negative economic growth clubbed with high government spending to provide essential relief to vulnerable sections of society, as well as a stimulus package aimed at reviving domestic demand.
  • The government also took the opportunity to bring the food subsidy bill back on the budget books, which includes a one time payment of more than ₹2 lakh crore to the Food Corporation of India to deal with its accumulated loan from the National Small Savings Fund.
  • The Centre proposes to make amendments to the Fiscal Responsibility and Budget Management (FRBM) Act, 2003, to reflect these changes to the fiscal consolidation roadmap.
  • Centre hopes to return to the path of fiscal consolidation by higher tax buoyancy through improved compliance on the one hand, and increased monetisation of its assets, including Public Sector Enterprises and land, on the other hand.
  • Proposed to augment the Contingency Fund of India from ₹500 crore to ₹30,000 crore.
  • This year’s fiscal deficit has been funded through government borrowings, multilateral borrowings, Small Saving Funds and short term borrowings.
  • States are being allowed a net borrowing ceiling of 4% of GSDP in 2021-22, and will be expected to consolidate their fiscal deficits to 3% of GSDP by 2021-22, as recommended by the Fifteenth Finance Commission.

The Hindu

 

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