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Downgrading credit rating amid pandemic limits policy options: FM Sitharaman

In the second session of the meeting, the G20 Finance Ministers and central bank Governors discussed the developments on G20 Finance Track deliverables under the Saudi Arabian Presidency.

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Nirmala Sitharaman

New Delhi, July 18 : Union Finance Minister Nirmala Sitharaman on Saturday made a strong case for rating agencies to refrain from frequent rating downgrades during the prevailing Covid-19 pandemic, which has put economies across the globe under stress and raised the need to increase spending even at the cost of enlarging deficits.

Participating in the 3rd G20 Finance Ministers and Central Bank Governors ( FMCBG) meeting under the Saudi Arabian Presidency through video conferencing , Sitharaman said that procyclicality of credit rating downgrades by the rating agencies was an issue in current times, especially with regard to its deterrent impact on policy options, particularly for emerging market economies such as India.

The economic stress which the Covid-19 pandemic has brought about has not been seen by the rating agencies differently as they downgraded their ratings for several economies, including India.

In early June, Moody’s downgraded India’s rating by a notch to ‘Baa3’ for the first time in two decades. Fitch Ratings has also revised downward its rating outlook for India from stable to negative, while S&P Global Ratings affirmed ‘BBB-‘ credit ratings for India.

A rating downgrade in current times puts extra stress on the governments and the industries to mobilise overseas funding for domestic spending. It also impacts the investment cycle.

Sitharaman said that the G-20 Action Plan in the Covid-19 times would require international coordination in addressing the spill-over effects of exit strategies.

Emphasising that the Action Plan needs to reflect on how the economies are balancing their supply side and demand side measures in response to Covid-19, the Finance Minister shared with her counterparts how India is working on ensuring this balance through credit schemes for greater liquidity, direct benefit transfers, and employment guarantee schemes.

In this regard, she specifically referred to India’s comprehensive economic package to address recovery and growth amounting to over $295 billion, about 10 per cent of the country’s GDP.

The G-20 meeting was organised to discuss the global economic outlook amid the evolving Covid-19 pandemic crisis along with other G20 Finance Track priorities for the year 2020.

In the first session, Sitharaman talked about the G20 Action Plan in response to Covid-19 which was endorsed by the G20 Finance Ministers and central bank Governors in their previous meeting on April 15.

This G20 Action Plan lays out a list of collective commitments under the pillars of Health Response, Economic Response, Strong and Sustainable Recovery and International Financial Coordination, aimed at coordinating G20 efforts to fight the pandemic.

In the second session of the meeting, the G20 Finance Ministers and central bank Governors discussed the developments on G20 Finance Track deliverables under the Saudi Arabian Presidency.

During this session, the Finance Minister shared some of the policy measures taken by the Government of India to fight the pandemic, including direct benefit transfers, special support to agriculture and MSME sectors, rural employment guarantee measures etc.

Sitharaman particularly highlighted how India has successfully employed technology-based financial inclusion by harnessing the nationwide digital payment infrastructure that India has built in the last five years, to make contactless cash transfers of over $10 billion into the bank accounts of 420 million people.

She also referred to the swift measures to provide free food grains to over 800 million people for eight months till November 2020.

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MTNL plans to sell assets in Mumbai through DIPAM

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MTNL chairman Purwar

New Delhi, Sep 19 : State-run telecom operator MTNL has submitted a set of assets for monetisation through the framework of the Department of Investment and Public Asset Management (DIPAM), which comes under the Finance Ministry.

The assets proposed for sale include land, staff quarters and telephone exchange in Mumbai, said Anurag Thakur, Minister of State for Finance and Corporate Affairs, in reply to a question in the Lok Sabha.

“MTNL has submitted a set of assets for monetisation through the DIPAM Framework…. No property in Delhi is presently under monetisation through the DIPAM Framework,” he said.

He informed the Lok Sabha that international property consultants have been appointed for end-to-end transaction advice on monetisation of these properties.

Noting that the asset monetisation process is a complex one involving multiple stakeholders and agencies, he said that a specific time frame for the completion of these monetisation transactions cannot be defined at present.

The value at which the assets would be monetised would depend on the feasibility of monetisation of the asset, the monetisation model and the market conditions prevailing at the time of monetisation, Thakur said, adding that it would be difficult to anticipate the sale proceeds presently.

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Centre mulls closure of PSUs up for sale on case-to-case basis

Thakur noted that the government has given ‘in-principle’ approval for strategic disinvestment of 34 CPSEs, including subsidiaries and units of CPSEs.

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Centre proposes Disinvestment

New Delhi, Sep 19 : The Union government may consider the closure of central public sector units (PSUs) even if they have been approved for strategic disinvestment on a case-to-case basis.

In a written reply to a question in the Lok Sabha, Minister of State for Finance Anurag Thakur said that the government follows a policy of closure of centre public sector enterprises (CPSEs) in terms of the approved revised guidelines dated June 14, 2018 issued by the Department of Public Enterprises (DPE).

“The government may consider the closure of the CPSEs even in cases earlier approved for strategic disinvestment on a case to case basis,” Thakur said, adding that the guidelines issued by the DPE on the closure of CPSEs addresses the concerns regarding the employees and assets.

Thakur noted that the government has given ‘in-principle’ approval for strategic disinvestment of 34 CPSEs, including subsidiaries and units of CPSEs.

Several of these CPSEs are loss making and sick entities where the government in the past had also faced difficulties in strategic disinvestment. Such companies which have lost value could be the ones that may be recommended for closure.

In certain other CPSEs, policy of minority stake sale without transfer of management control through various SEBI approved methods is being followed in order to unlock the value, promote public ownership and higher degree of accountability, he said.

The various modes of disinvestment commonly used for minority stake sale includes Initial Public Offer (IPO), Follow on Public Offer (FPO), Offer for Sale (OFS), buyback of shares and Exchange Traded Funds (ETF).

“Transaction receipts on conclusion of disinvestment transactions depend on the prevailing market conditions and investors’ interest,” the minister said.

The budget estimate (BE) of disinvestment receipts for 2020-21 from disinvestment of CPSEs was fixed at Rs 1.20 lakh crore.

The already lagging disinvestment plans, have been severely impacted by the ongoing pandemic and deadlines for submission of bids major PSUs on the block, such as oil major BPCL and national carrier Air India have been postponed.

The government is also coming up with a new strategic disinvestment policy as announced by the Finance Minister in May. According to sources, the Cabinet may soon take up and approve the new strategic disinvestment policy, which would include the banking and insurance sector.

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Doubts raised on transparency of 2 PM funds; LS passes Taxation Bill

The Congress raised questions on creation of PM CARES when PMNRF was already present and it was used to help states during various disasters from 2015 to till now.

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tax

New Delhi, Sep 19 : The Lok Sabha on Saturday passed Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Bill, 2020 amid counter allegations levelled by both the BJP and the Congress members on their top party leadership.

Linking the present government’s PM CARES Fund and Prime Minister National Relief Fund (PMNRF) set up by India’s first Prime Minister Jawaharlal Nehru in 1948, both the parties raised suspicion over transparency of both the funds.

The cross allegations created uproar for the second consecutive day in the lower House when Union Minister of State Anurag Thakur on Saturday again raised question on the transparency of PMNRF alleging Congress of utilising the money received in the fund for the benefit of Nehru-Gandhi family while participating in the debate over the Bill which was moved by Finance Minister Nirmala Sitharamn on Saturday for consideration and passage.

The Minister made allegation against Congress’ interim President Sonia Gandhi and her family of utilising the fund of PMNRF being members of the trust.

He also alleged that funds received in PMNRF were transferred in Rajiv Gandhi Foundation and from their it was transferred into various other trusts.

Thakur also alleged that fugitive controversial televangelist Zakir Naik donated Rs 50 lakh into Sonia Gandhi-led Rajiv Gandhi Foundation in 2011.

Though the amount was returned in 2014 it clarified links of the party with Naik, Thakur alleged.

However, the Congress raised questions on creation of PM CARES when PMNRF was already present and it was used to help states during various disasters from 2015 to till now.

Congress leaders Adhir Ranjan Chowdhury and Gaurav Gogoi alleged that there are many “loopholes” in Prime Minister’s Citizen Assistance and Relief in Emergency Situations (PM-CARES) fund.

The party also sought details of Vivekanand Foundation and some other trusts related to the BJP.

The Bill was later passed with voice vote during over four hour long counter allegations by both the parties on each other.

The Bill was introduced in the Lok Sabha on Friday to replace the Taxation and other Laws (Relaxation of Certain Provisions) Ordinance, 2020 which was promulgated on March 31 this year.

Speaking on the Bill, Sitharaman said we are raising questions on Rajiv Gandhi Foundation because Congress gave money to the trust from PMNRF.

Countering Congress allegations, the Minister said what names the party has taken are not given money from PM-CARES fund on which the opposition has raised question on several occasions earlier after it was set up to undertake and support relief or assistance of any kind relating to a public health emergency during the Covid-19 pandemic.

“You are a responsible political party. Don’t spread rumours. It’s not good for your credibility.”

Citing Rafale fight jet deal, the Minister said Congress indulged in “rumour mongering” and it got back replies. “You will again get answers.”

The government came with the Bill which seeks to amend the Income-tax Act, 1961, the Central Goods and Services Tax Act, 2017; the Finance Act, 2019; the Direct Tax Vivad se Vishwas Act, 2020 and the Finance Act, 2020 which are administered by the Department of Revenue through two boards, namely, the Central Board of Direct Taxes and the Central Board of Indirect Taxes. Thus, no additional expenditure is contemplated on the enactment of the Bill.

The Bill provides for extension of various time limits for completion or compliance of actions under the specified Acts and reduction in interest, waiver of penalty and prosecution for delay in payment of certain taxes or levies during the specified period.

The Finance Act, 2020 is also proposed to be amended to clarify regarding capping of surcharge at 15 per cent on dividend income of the Foreign Portfolio Investor.

The Bill also proposes to empower the Central government to remove any difficulty up to a period of two years and provide for repeal and savings of the Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020.

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