Policy changes in Light of the COVID-19 Pandemic

In light of the widespread economic loss caused by the COVID-19 pandemic, the government had announced a fiscal stimulus package in May. The announcement also gave us a glimpse of their plan to bring about large-scale reforms in manufacturing and labour sectors. The national health crisis has morphed and reared its head in the form of supply and labour chain disruptions, shut down of manufacturing units and travel embargos. MSMEs and small businesses have been hit the hardest and many have been forced to look at prospects of shutting down or being acquired by bigger fish.

While there is a significant package of measures for MSME’s – most notably the announcement of an outlay of Rs 3 lakh crores for collateral free loans, and revised definitions of MSMEs – there are several other Policy measures and reforms that will also help the MSME sector.

This article covers some of the major policy reforms and relaxations in the Corporate Law, Insolvency Act, Agricultural regulations and labour laws that will support SME and private businesses to deal with the crisis.


Liquidity and valuation of assets during and post the pandemic will become critical aspects in overhauling the functioning of the distressed businesses in India. In order to prepare for the onslaught of aggrieved debtors initiating insolvency proceedings, and to protect the MSME sector, the government has made the following amendments to the Insolvency and Bankruptcy code, 2016:

  • • The previous threshold limit of minimum debt amount, put in place to insulate MSME’s, has been increased from Rs. 1 lakh to Rs. 1 crore
  • • Section 10A has been inserted which provides that the initiation of fresh insolvency proceedings under Section 7,9 and 10, for defaults will be suspended for a period of 6 months to a year and creditors or corporations shall not have the right to file applications to initiate the corporate insolvency resolution process for any default during the Exemption Period.

The Government of India has temporarily relaxed a number of compliances and requirements for the corporate sector in order to improve the ease of doing business, provide relief to struggling MSMEs affected by lockdown and easing the stress on the National Company Law Tribunal. The major changes are:

• The MCA has published a circular decriminalising minor offences such as cheque bounce and repayment of loans in 19 legislations including the Negotiable Instruments Act, SARFAESI Act, LIC Act, PFRDA Act, RBI Act, NHB Act, Banking Regulation Act, Chit Funds Act, Insurance Act, Payment and Settlements Systems Act, NABARD Act.
• The Securities and Exchange Board of India has issued 3 circulars detailing the relaxation of numerous compliances, a major one being the periodic filing requirements for listed entities under the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015
• The MCA has proclaimed that contributions to the PM-CARES Fund and other expenditure’s towards COVID-19 relief is an eligible CSR activity under sub clause (i) and (xii) of Schedule VII of the Companies Act, which relates to promotion of health care, including preventive health care and disaster management.


The central government hasn’t presented the final drafts of their labour codes on social security and occupational safety, health and working conditions, and industrial relations as yet. However, some states have provided relaxations to establishments from their existing labour laws to permit some economic activities to start.

The Factories Act, 1948 allows state governments to exempt factories from limitations on work hours for a period of three months in the case of public emergencies. Utilising this provision, the governments of Uttarakhand, Haryana, Gujarat, Uttar Pradesh, Goa, Rajasthan, Himachal Pradesh and Assam have passed circulars to increase maximum weekly work hours from 48 hours to 72 hours and daily work hours from 9 hours to 12 hours.


The government has passed three ordinances to reform the agricultural sector in a substantial way and to empower producers and enable efficiencies in production, storage and distribution

• The Essential Commodities Act has been amended to remove the existing restrictions on stocking food produce.
• A new law called ‘The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Ordinance, 2020 or the FPTC Ordinance has been introduced. It aims at ending the monopoly of the Agricultural Produce Market Committees (APMC’s) and allow anyone to purchase and sell agricultural produce.
• The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Ordinance, 2020 or FAPAFS has been enacted to legalise contract farming, so that big businesses and companies can cultivate vast swaths of land on contract.

By Disha M.

Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of IndusGuru Network Partners

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