The phase-wise outbreak of Covid-19, which includes the deadliest second wave consuming over 4 lakh lives so far, has necessitated large-scale economic measures not only to give impetus to the economic recovery process but also ramp up infrastructure building in the healthcare sector.
The government rolled out yet another stimulus package, which is 4th in series, in a bid to neutralize the impact of the devastating second Covid wave. The package contains relief measures in terms of providing concessional loans, extending loan guarantees and ramping up investments to empower severely pandemic-hit sectors such as small-scale industries, healthcare and tourism sectors, etc. The total financial implications of the stimulus package amount to Rs. 6.29 lakh crores, which includes Rs. 1.1 lakh crore for healthcare investments in non-metropolitan areas, an additional sum of Rs. 1.5 lakh crore for emergency Credit-Link Guarantee Scheme, new Rs. 7,500 crore scheme to guarantee loans to 25 lakh small borrowers and indirect support for exports worth Rs. 1.21 lakh crore.
The relief measures are expected to alleviate the Covid-induced economic distress in various sectors of the economy, particularly in travel & tourism, small businesses, MSMEs, unorganized sectors etc. Remarkably, the up-gradation of infrastructure in the health sector would help to strengthen the fight against the virus.
Remarkably, the package contains a separate investment worth Rs. 23,220 crores allocated to expand pediatric care by increasing ICU beds, oxygen supply, augmenting medical care professionals, etc. This has been done to mitigate the risk of 3rd wave, which health experts say will hit children.
How is this package going to boost the tourism sector?
With easing of restrictions following a decline in fresh Covid cases, the tourism sector facing the biggest crisis of all time has an opportunity to plan a recovery process. The stimulus 4.0 package has allocated Rs. 60,000 crores as financial support to the most stressed tourism industry. Registered tourist guides and travel agencies recognized by the Ministry of Tourism, and tourist guides by the States Governments are going to get benefitted as they would be getting working capital funding/ personal loans to restart their business. The package guarantees working capital or personal loans of up to Rs.10 lakh for travel and tourism players and up to Rs.1 lakh for travel guides. The beneficiaries won’t be charged any processing fees and there is waiver for foreclosure/prepayment, or any additional collateral. Another major boost for the tourism sector is the issuance of free 5 lakh tourist visas for a month. The total financial implication for the free visa scheme sums around Rs. 100 crore and regular visa fees will be resumed after the expiry date. The free visa scheme signals re-opening of the tourism sector for world communities.
Notably, experts link the bouncing back of the tourism sector to the rise in vaccination in the country. With improved vaccination rates, the experts expect opening up in the second half of this fiscal (FY2022), but that would also be contingent on policies of foreign countries. "Domestic travel though should start to bounce back, as state-level lockdowns ease," said an expert with a Crisil rating agency and added that the tourism industry could claw back to at least 35-40% of its pre-pandemic level revenue during the fiscal.
So the tourism players in J&K such as travel agencies, individual travel agents, car rental agencies and tourist guides whose businesses were practically wiped out by the pandemic have an opportunity to restart their business. They should get in touch with their respective banks to seek financial assistance under the scheme. However, it’s imperative that the funding they receive under the scheme should be invested in the business and not diverted to other areas. At the end of the day, the funding is a loan which they have to repay along with interest.
How is this scheme going to ramp-up medical infrastructure?
As already mentioned above, the package has earmarked Rs. 1.1 lakh crore financial aid for healthcare investments in non-metropolitan areas. Out of this amount, Rs. 50,000 crore has been allotted to ramp up healthcare infrastructure across the country. The financial assistance intends to provide support to the hospitals in tier 2 and tier 3 cities facing severe challenges. The Rs. 50,000-crore loan guarantee scheme is expected to encourage the private sector healthcare groups to invest further for expansion in remote areas and smaller cities while enhancing the quality of treatment care. Besides, the allocation of Rs. 23,200 crore will be beneficial for strengthening pediatric healthcare facilities by strengthening ambulance services, enhancing testing capacity, enabling enhanced access to tele-consultation, etc. so that the third wave is firmly neutralized.
When will the facility in the healthcare segment be made available to the borrowers in J&K and Ladakh? What are the eligibility criteria for healthcare service providers to avail financial assistance under the scheme?
The primary banking player, J&K Bank, has already rolled out the scheme, Guaranteed Emergency Credit Line (GECL) 4.0, in response to the announcement of stimulus 4.0. Existing Hospitals/ nursing homes/clinics/medical colleges / units engaged in manufacturing of liquid oxygen, oxygen cylinders etc. for setting up of on-site oxygen producing plants enjoying credit facility with the bank with days past due upto 90 days as on 31.03.2021 are eligible to avail the facility.
However, it’s to be noted that it is not a pre-approved loan facility. Eligible borrowers under the scheme are required to formally apply for grant of financial assistance under the scheme. Notably, the borrower account otherwise eligible under the scheme should not be NPA as on date of sanction/disbursement.
What are the exact healthcare activities covered under the scheme?
It covers loans in the shape of Term Loan or non-fund based facility for setting up of on-site oxygen generation plants by existing hospitals/nursing homes/clinics/medical colleges/units engaged in manufacturing of liquid oxygen, oxygen cylinders etc. The Scheme would be applicable till 30.09.2021 or till guarantees for an amount of Rs 3.00 lakh crore are issued (taking into account GECL 1.0, 2.0 3.0 & 4.0), whichever is earlier.
How much loan would be granted under the scheme?
The quantum of finance is upto Rs.2 crore for setting up of on-site oxygen generation plants.
There is no bar on the borrowers who have availed assistance under earlier packages. But they should meet the eligibility criteria of this current package (version 4.0).
What type of security which the borrower has to submit to the bank against the said facility?
The additional Term loan facility granted under the scheme shall rank second charge with the existing credit facilities in terms of cash flows (including repayments) and security.
The borrowers won’t be asked for any additional collateral for additional funding.
However, borrowers availing assistance under the scheme shall be required to open an ESCROW A/c on which Bank shall have its charge. All cash inflows arising out of usage of the oxygen plant installed should be routed through this escrow account. In this way, the bank would be monitoring the cash flows from the project financed.
What is the repayment period of the loan?
The loan is to be repaid with a maximum period of 5 years, including moratorium period of upto 6 months , from the date of first disbursement of fund based facility or first date of utilization of non-fund based facility, whichever is earlier.
Disclaimer: The views and opinions expressed in this article are the personal opinions of the author. The facts, analysis, assumptions and perspective appearing in the article do not reflect the views of GK.