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Startup Policy Rundown: Startups Demand Financial Aid To Survive Covid-19 Fallout

Startup Policy Rundown: Startups Demand Financial Aid To Survive Covid-19 Fallout

The government has announced INR 1.7 Lakh Cr package for poor and regulatory measures for startups

Ecommerce and other startups have been badly affected by the lockdown due to restrictions of movement

DPIIT invited startups to build a one-stop repository of innovative solutions for ready access

Despite a complete lockdown, India’s Covid-19 numbers are fast increasing and crossed the 3000 mark. And, in the case of the Indian scenario which has entered 11th day of the lockdown today, let’s look at the two observations, which could be the deciding factors behind the further extension of lockdown.

  1. Some of the recent deaths and confirmed cases are from the events which occurred almost 20 days ago. This implies that the lockdown aftereffects are yet to be quantified in numbers. And we might expect a downward trend from April 10 onwards, if at all.
  2. The number of confirmed cases is directly proportional to the number of people being tested. As the number of testing is increasing, so is the number of confirmed cases.

While India’s union commerce minister Piyush Goyal recently tweeted that India has the capability to conduct 70K tests weekly, the truth is that till March 30, India had tested only 35K people, which is too small even for a small country like South Korea which had tested over 320K by then. The US had tested over 555K people which has now gone over 14 Lakhs.

The government has so far approved 123 government hospitals and 47 private labs including startups for the testing. The discrepancies in terms of policies and their implementation has further worsened the scenario and India currently badly needs the basic equipment, masks, PPEs and surgical gloves to fight against the Covid-19 pandemic.

Till March 22, India was seen as taking reactive measures such as only screening at airports with a very few testing centres and isolation wards across the country. Many of the people in power were openly seen flouting the ICMR recommendations. Despite all the unpreparedness at home, India in February 2020, even partially lifted the ban over the export of masks to supply millions of surgical masks and surgical gloves to China. A complete ban on ventilators including artificial respiratory apparatus or oxygen therapy apparatus was imposed only on March 24.

This is when WHO and other studies had earlier shown in advance that India needed around 200K ventilators against the existing around 15K,  6.2 Mn PPEs against existing 800K and 38 Mn masks against the available 9.1 Mn. Clearly, there was very less groundwork, than it needed.

#StartupsVsCovid-19: Startup India Challenge

The Indian startups soon jumped into the fight at various levels. While healthtech startups such Portea Medical, Practo, Mylab have joined the fight offering teleconsultation and testing as well, other startups are also pitching in. Staqu is building thermal cameras which may detect COVID-19 cases from 100 metres away. Boson Machines, a Mumbai-based 3D printing firm, is making 3D printed face shields to be used by doctors treating patients in the country.

While a number of Indian startups have been acting pro bono, the Department for Promotion of Industry and Internal Trade (DPIIT), states such as Karnataka and Kerala have already approved and infused some of the startup solutions into the practice. For instance, Portea Medical, in collaboration with the Karnataka government, is offering free teleconsultation on Covid-19.

Under DPIIT, Startup India has invited applications from startups to build a series of innovative solutions. The last date of applications has now been extended to April 15. With this Challenge, the government aims to build a one-stop repository of innovative solutions for ready access by the government and the private sector for further development and deployment.

Govt Announces INR 1.70 Lakh Cr Relief Package 

Besides INR 15000 Cr for the healthcare support, finance minister Nirmala SItharaman has also announced INR 1.70 Lakh Relief package which aims to provide some economic/immediate relief to the around 80 Cr Indian residents. However, the relief fund heavily depends on the ongoing subsidy plans and some of the announcements such as MNREGA wage increment were already made which are now being offered under the relief package.

The package includes the funding

  • Insurance cover of INR 50 Lakh per health worker fighting COVID-19 to be provided under Insurance Scheme
  • 80 crore poor people will to get 5 kg wheat or rice and 1 kg of preferred pulses for free every month for the next three months
  • 20 crore women Jan Dhan account holders to get INR 500 per month for next three months
  • Increase in MNREGA wage to INR 202 a day from Rs 182 to benefit 13.62 crore families
  • An ex-gratia of INR 1,000 to 3 crore poor senior citizen, poor widows and poor disabled
  • Government to front-load INR 2,000 paid to farmers in first week of April under existing PM Kisan Yojana to benefit 8.7 crore farmers
  • Central Government has given orders to State Governments to use Building and Construction Workers Welfare Fund to provide relief to Construction Workers

Startups Pledge To Raise Funding For PM CARES Fund

While the PM National Relief Fund has already been in place, to fight against Covid-19 pandemic, Modi has set up a separate relief fund named Prime Minister’s Citizen Assistance and Relief in Emergency Situations Fund (PM CARES Fund) and appealed to everyone to donate to the fund.

Besides the legacy groups such as Tata and Wipro having pledged to contribute to the tune of INR 1500 Cr and INR 1125 Cr, fintech companies such as Paytm pledged to raise INR 500 Cr, and PhonePe, Google Pay and Amazon pay have pledged to raise INR 100 Cr each for the PM CARES Fund.

India’s startup community has further launched the Action COVID-19 Team (ACT) with INR 100 Cr corpus for Grants to COVID-19 innovations from India.

Covid-19: Regulatory Announcements For Startups And SMBs

Covid-19 has only accelerated the ongoing economic slowdown and the startups running short on liquidity have already started layoff and other cost cutting measures as part of long terms measures.

The finance minister therefore has also announced a host of immediate measures and announcements to help business communities sustain the long-term slowdown.

Among these are:

Relaxation for startups’ MCA filings: In respect of the MCA 21 registry, there is a moratorium issued from April 1 till September 30, 2020. Sitharaman said there will be no additional fees on late filings. It is worth noting that MCA 21 provides secure access to MCA services to corporate entities.

According to the current norms, startups and businesses are required to invest 15% of debentures maturing during a particular year in specified instruments before April 30, 2020. Now, they can do this until June 30, 2020, to comply with this norm. These new rules will be notified officially by the ministry in the next few days.

Threshold for bankruptcy default increased: Speaking to the media, through video conferencing, Sitharaman also announced that the government has increased the threshold for default from existing INR 1 Lakh to INR 1 Cr. The government believes that by this, it can prevent triggering of insolvency proceedings against MSMEs. This will be implemented straight away.

She also assured the startups that necessary measures will be taken by the government to help the startup community among coronavirus slowdown. “If the situation continues like this beyond April 30 as well, then we may consider suspending, Section 7,9,10 of the IBC [Insolvency and Bankruptcy Code] for a period of six months,” the finance minister added. With these rules, companies can be stopped from being forced into insolvency proceedings in such forced measure causes of default

No interest, penalty or late fee for GST filings for SMBs: It was also announced that no interest, penalty, or a late fee will be levied on companies with a turnover less than INR 5 Cr for filing goods and service tax (GST) returns for March, April, and May 2020 until June 30, 2020. However, companies, with turnover over INR 5 Cr, will have to pay a reduced interest rate of 9% on their GST filings for these months, even though there will be no penalty or late fee.

The last date for opting for the compensation scheme under GST is also extended to June 30.

Aadhaar-PAN Linking Extended To June 30:  The government has also extended Aadhaar-PAN linking date to June 30, 2020. “The Aadhaar-PAN linking will be extended to 30 June,” Sitharaman said. However, with the lockdowns due to coronavirus, the government has revisited the decision. Now the government has extended the deadline to June 30, giving relief to many who had not adhered to the deadline or could not because of various reasons.

RBI Regulatory packages 

The Reserve Bank of India has also announced a slew of measures as part of its regulatory package to minimise the economic impact from Covid-19.

The RBI has announced a three-month moratorium on term loans taken by corporates and individuals. According to the statement, the moratorium will apply on corporate loans, home loans, and car loans, among others. However, credit card owners have not been included in this relief scheme, and they will need to pay their dues on time as RBI doesn’t consider this a term loan.

The RBI has also enhanced the state government’s short-term liquidity needs and the relaxed export repatriation limits from nine months to 15 months. It has also clarified that the capital conservation buffer will not be activated for a year.

Further, the central has also extended the realisation period of export proceeds. “The time period for realization and repatriation of export proceeds for exports made up to or on July 31, 2020, has been extended to 15 months from the date of export” RBi said.

Govt Must Address Startups’ Ailing Health 

The ongoing lockdown has directly hit the startups particularly in the areas of ecommerce, logistics and agritech. Amazon, Flipkart and Bigbasket have not been able to deliver most of their products due to the supply chain issues and the lockdown.

Zomato and Swiggy delivery boys were beaten in many parts, according to various reports. However, this was very soon addressed at the city level by issuing duty passes to the essential services delivery professionals.

In the new WFH model which has badly affected the companies’ sales practices, startups and businesses at large have been struggling to survive the lockdown.

In a fresh letter addressed to the finance minister, the startup community has demanded an urgent intervention from the government to address the situation.

Among the major demands are:

  • Fiscal support to ensure no job losses or creation of jobs
  • Innovative credit measures for business continuity
  • Relaxation by the statutory authority for better operations and cash flow
  • Access to capital for startups
  • Liquidity for funding startups

“Covid crisis threatens to destroy all of the progress and future potential of our startup ecosystem in a few short months. Unfortunately, our startup companies across the nation are inherently young, less resilient, and most vulnerable. Many of them face likely devastation during this extraordinary economic downturn. At this dire moment, Indian startups need a robust relief package from the government, lest all our collective efforts of the past few years are in vain,” said the letter signed by the likes of Kris Gopalakrishnan, Debjani Ghosh, Rajan Anandan and Mohandas Pai.

The DPIIT, meanwhile, has set up a control room to monitor the status of transportation and delivery of goods, manufacturing, and delivery of essential commodities.