18th May Current Affairs
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Fifth Tranche of the Economic Stimulus Package
U.P. withdraws notification on increased work hours
Govt. plan to sell airports may find few takers
Afghan President and rival sign power sharing deal
Pak. President issues order to hold polls in Gilgit-Baltistan
The fifth and final tranche of the Atmanirbhar Bharat Abhiyan stimulus package, announced by Finance Minister on 17th May 2020.
The total package amounts to almost ₹21 lakh crore by the Centre's accounting, but is heavy on credit-related measures, including ₹8 lakh crore worth of liquidity enhancing measures by the RBI.
Highlights of the Fifth Tranche
The Fifth Tranche included an additional ₹40,000 crore allocation for the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS).
It also included a new policy welcoming private companies into every sector of industry, while limiting public sector enterprises to strategic sectors only.
Corporate enterprises were also offered some relief via changes to the Insolvency and Bankruptcy Code (IBC) and the Companies Act.
The Centre has agreed to demands from States to hike their borrowing limits from 3% to 5% of their GDP in light of the COVID-19 crisis, but on the condition that they implement specific reforms.
Empowering MGNREGS and States
The decision to allocate ₹40,000 crore to the MGNREGS scheme in addition to the ₹61,000 crore allocated in the Budget is a measure that will support rural livelihoods at a time when returning migrants swell unemployment in the villages.
Since, States account for 40% of MGNREGS expenditure, including most upfront costs, they will also have to be willing to spend on the scheme.
State governments have been given more fiscal room in the current crisis with the hiking of their borrowing limits from 3% to 5% of Gross State Domestic Product (GSDP), which is particularly important as GSDPs are likely to contract, further shrinking possible borrowing at a time when States are at the frontline of containment and relief operations.
The hiked limits will be conditional on States implementing reforms related to ration portability, ease of doing business, power distribution, and urban local bodies.
Disinvestment
The new policy will notify specific strategic sectors in which at least one PSU will remain, although private companies will also be allowed. PSUs in all other sectors will be privatised.
Even in the strategic sectors, no more than four PSUs will be allowed, with the rest being privatised, merged or brought under holding companies.
Relief to protect defaults
Other announcements included changes to the IBC, to ensure that COVID-19 related debts will not be counted as defaults for the purpose of triggering insolvency proceedings. No bankruptcy proceedings will be initiated for a year.
MSMEs will get a special framework to insulate them from insolvency, including a raised threshold of ₹1 crore.
Already proposed amendments to the Companies Act, meant to decriminalise violations or shift them to internal adjudication, will now be pushed through the ordinance route.
The reforms announced promised increased public expenditure including infectious disease hospital blocks in every district and public laboratories in every block, without mentioning any specific financial outlay.
The Centre will also roll out the PM e-Vidya programme for multi-mode access to digital education, including e-content for school education, earmarked TV channels for each class from 1 to 12, and a previously announced plan to let the country's 100 top universities begin online classes by the end of the month.
The Uttar Pradesh government has withdrawn its recent order increasing daily work hour shifts in manufacturing units from the existing 8 hours to 12 hours.
The U.P. government had on May 8 passed a notification diluting provisions of the Factories Act of 1948 and increased work timings by providing certain exemptions to factories.
The decision was challenged in the Allahabad High Court through a petition by the U.P. Workers Front.
After the court issued the State a notice in the matter, the Labour department, in an order dated May 15 directed the Chief State counsel to inform the court that the notification to increase work hours was withdrawn.
States such as Madhya Pradesh, Uttar Pradesh and Gujrat had scrapped Labour laws During the First weeks of May 2020 as a move to bring about reforms to attract new investors who are looking to exit from China.
Click Here to read more about The Actions taken by States like U.P.
Click Here to read more about Labour Laws in India
Focus: GS-III Industry and Infrastructure
The government's move to raise capital by privatizing half a dozen airports through 50-year concessions might find few takers when the aviation industry is facing acute financial stress, industry experts said.
Very few serious bidders = No Fair value
It is expected that if the government proceeds with the privatization plan, it might find only two-three serious bidders that are able to raise the required debt and equity in a liquidity-starved market, lowering the chances of fair price discovery.
It will be difficult for buyers to do adequate due diligence during lockdown, which would particularly curtail foreign interest.
As the more profitable public airports are going under the hammer first, the government will get less than fair value on many of them.
Airport sale prospects might not improve till airlines can get their businesses in order.
Indian airlines need a direct cash infusion to pay salaries for the lockdown period, subvention on airport charges, relaxation on fuel taxes and statutory dues and government-backed credit lines that can stave off bankruptcy till passenger traffic revives and they can rebuild their balance sheets.
On 16th May 2020 the Finance Minister announced that the bid process for the six airports will start soon.
The six airports in the second round are likely to be Amritsar, Varanasi, Bhubaneswar, Indore, Raipur and Tiruchirapalli, which are owned and operated by state-run Airports Authority of India.
The airline industry has been grounded since 25 March due to the lockdown. Carriers are estimated to report a 44% drop in revenue this fiscal and net debt may rise to ₹46,500 crore by 2021-22.
-Source: Livemint
The Afghan President Ashraf Ghani and political rival Abdullah Abdullah have signed a power-sharing agreement two months after both declared themselves the winner of last September's presidential election.
The deal calls for Abdullah to lead the country's National Reconciliation High Council and some members of Abdullah's team would be included in Ghani's Cabinet.
Background: The Afghan Power Ties
Mr. Ghani and Mr. Abdullah both declared themselves president in parallel inauguration ceremonies in March.
They have been locked in a power struggle since then and the discord prompted the Trump administration to announce it would cut $1 billion in assistance to Afghanistan if the two weren't able to work out their differences.
A peace agreement between the U.S. and the Taliban signed February 29 calls for U.S. and NATO troops to leave Afghanistan.
It was seen at the time as Afghanistan's best chance at peace in decades of war.
Since then, the U.S. has been trying to get the Taliban and the Afghan government to begin intra-Afghan negotiations, but the political turmoil and personal acrimony between Mr. Ghani and Mr. Abdullah impeded talks.
India welcomes Ghani-Abdullah pact
India welcomed the agreement signed by Afghanistan President Ashraf Ghani and his political rival Abdullah Abdullah.
India hopes the Political Agreement and creation of the High Council of National Reconciliation will result in renewed efforts for establishing enduring peace and stability and putting an end to externally sponsored terrorism and violence.
New Delhi also called for an "immediate ceasefire" to help Afghanistan deal with the covid-19 pandemic.
The Taliban has thus far rejected all calls for a ceasefire.
Click Here to Read More About the U.S. – Taliban Deal
The Pakistan President has promulgated an order to form a caretaker government as well as to conduct elections in Gilgit-Baltistan province, a move strongly opposed by India.
The presidential promulgation came days after the Pakistan Supreme Court on April 30 allowed the federal government to amend a 2018 administrative order to conduct general elections in the region.
The Gilgit-Baltistan Order of 2018 provided for administrative changes, including authorising the Prime Minister of Pakistan to legislate on an array of subjects.
India has conveyed its strong protest to Islamabad for its efforts to bring "material change" to territories under its "illegal and forcible" occupation after the apex court allowed holding of elections in Gilgit-Baltistan.
Click Here to Read more about Gilgit-Balistan and India's Opposition to elections there
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