Daily Financial News Analysis – 21st May’20

Table of Contents

Cabinet

The cabinet chaired by Prime Minister Narendra Modi approved key parts of the ₹20 lakh crore Covid-19 relief package.
It approved 7/54 elements of the package already announced, including ₹41,000 crore government support for the MSME credit guarantee scheme for FY21-24.
All 54 parts may not require cabinet approval.
₹30,000 crore special liquidity scheme for NBFCs and housing finance companies (HFCs)
The National Credit Guarantee Trustee Co Ltd (NCGTC) will provide 100% guarantee coverage in the form of a guaranteed emergency credit line (GECL) facility for MSMEs.

Nod to Commercial Coal Mining

The Cabinet Committee on Economic Affairs has approved a mechanism that will pave the way for commercial coal and lignite mine auctions in the country.
Mines will be auctioned based on the revenue share they offer to the government.
Until now, coal and lignite mines were auctioned to those who had end use for these resources, such as a steel or power plant.
The commercial coal mines, on the other hand, will be allowed to sell coal in the open market.
The introduction of commercial coal mining was announced by Finance Minister Nirmala Sitharaman as a reform measure in the Aatmanirbhar Bharat package.
She said nearly 50 coal mines will be offered this immediately and that there will be no eligibility conditions; only upfront payment with a ceiling.
To plug under-reporting of revenue by bid winners, and lowering the government’s take, the price of coal mined will be estimated based on a National Coal Index (NCI).
“The revenue share will be calculated on the NCI. It will reflect movement of prices of coal in domestic coal market and will be the weighted combination of monthly prices of coal in various channels like notified prices, e-auction prices and import prices. The NCI will be reported twice every month,” a Coal Ministry official told BusinessLine.
The firms that win bids for coal mines will have to make monthly payments based on the percentage of revenue share (final bid), quantity of coal on which the statutory royalty is payable during the month and notional price (based on NCI) or actual price of coal realised through sales, whichever is higher.

Domestic Airlines

The government said domestic flight operations will start in a “calibrated manner” from Monday.
Passengers will have to contend with new Covid-19 norms for checking in, boarding and seating among other changes.
While the SOP for resumption of operations and details of flights to be operated is still awaited, we are sure that this much-awaited move will help a large number of passengers by providing them access to the safest and quickest means of transport.
The home ministry has removed ‘domestic air travel’ from the list of items that are prohibited during the lockdown 4.

Ola Fires 1400

Ride-hailing service Ola has asked over a quarter of its workforce in India to leave the company.
Country’s most valuable startups are trimming headcount in a bid to combat the economic disruption wrought by Covid-19.
Ola has seen revenue drop by 95% in the past two months.
The prognosis ahead for business is very unclear and uncertain.
The world is not going to revert to the pre-Covid era anytime soon.

15th FC

A committee to review fiscal consolidation, led by Finance Commission chairman NK Singh, will hold its first meeting on Thursday to workout the fiscal consolidation roadmap for the government from 2021-22 to 2025-26.
The meeting takes place at a time when the government is facing an extraordinary fiscal constraint due to the Covid-19 pandemic.
The Finance Commission is expected to make recommendations on the fiscal consolidation roadmap of the Centre and States, taking into account their responsibility to adhere to appropriate levels of debt and deficit levels, while fostering higher inclusive growth, guided by the principles of equity, efficiency and transparency.

Finance Minister to India Inc

Finance minister Nirmala Sitharaman on Wednesday asked industry to reset its relations with workers, and work on solutions to map migrants.
She said the government had addressed banks’ hesitation in lending to industry, particularly MSMEs, with full and partial credit guarantees.
While the Covid-relief package took care of the bleeding MSMEs sector, concerns of large companies, especially those in stressed sectors such as hospitality, tourism, automotive and aviation, should also be addressed to protect jobs and increase demand, industry members said.
Interacting with members of the Confederation of Indian Industry three days after she unveiled the fifth and final instalment of the ₹20 lakh crore package, Sitharaman put the onus on industry for engaging with labour more professionally.
Most urban centres have seen large-scale reverse migration, as workers have returned to villages even as the government has allowed a staggered opening of economic activity.
“Mindsets in industry need to set examples in handling workers in a way that is acceptable to all,” she told members of CII.
The government will push the ₹1 lakh crore National Infrastructure Pipeline and front-load projects in order to create demand and have a multiplier effect, while fast-tracking the ₹90,000 crore liquidity infusion in the power sector, the minister said.

Covid-19 may change life in our cities

Cities are and have always been the economic and social engines of the national economy.
They are incredibly efficient hubs of economic activity, offering unique mechanisms for supercharging innovation.
By design, they are dependent on highly specialized individual production, super-efficient supply chains, and a high degree of mutual interdependence to achieve the economic prosperity that they generate.
The efficiency of a city is a function of its density.
The worst hit spots on the planet—Mumbai, Milan, Madrid, London and New York City—have also been the world’s most densely populated.
As economically efficient as these cities might be, the pandemic has shone a light on their vulnerability to a disease that runs rampant through metropolitan settings.
In the aftermath of the pandemic, it is inevitable that demands will arise to fundamentally redesign the way these urban spaces function.
The white-collar workforce has seen that it can achieve remotely from home much of what office-goers thought they needed to go to office for.
Some employers have already declared that, going forward, as much as 75% of their workforces can continue to work from home even after the immediate coronavirus crisis has passed.
By de-emphasizing work districts, cities have a remarkable opportunity to promote a more local lifestyle.
Cities can begin to promote smaller local markets that address the limited needs of the area’s proximate community.
At the same time, technology-enhanced logistics solutions allow for the delivery of hyperlocal products to the far corners of an urban area without buyers needing to travel long distances from home.
Will we all have to live in small suburban or rural localities, connected to one another only via digital communication facilities and technology-enhanced delivery networks?
Urban living offers levels of efficiencies that cannot be ignored.
In order to do this, cities of the world need to learn how to reduce contact between their residents while still maintaining current levels of urban efficiency.
No examination of the future of life in an Indian city can be complete without discussing how the lives of migrant populations, the people who keep urban conglomerations running, will be affected.