Govt unleashes bold reforms; to raise FDI in defence production; open coal, mineral mining

New Delhi: In bold reforms aimed at boosting sagging economy, the government on Saturday announced an easing of limits on foreign direct investment in defence manufacturing, privatisation of six more airports, opening up of more air space and allowing private sector in commercial coal mining.
Also, the list of weapons that cannot be imported will be expanded to give Make in India a boost.
The private sector will also be involved in the Indian space programme including in future projects for planetary exploration and outer space travel as well as satellite launches.
Announcing the fourth tranche of the economic stimulus package that largely dealt with reforms and almost negligible new investment, Finance Minister Nirmala Sitharaman said foreign investors would be allowed to own up to a 74 per cent stake in defence manufacturing ventures under the automatic route, up from the current 49 per cent limit.
This would be subject to security clearance norms, she said.
Also, the government will expand the list of weapons/platforms banned for imports with year-wise timelines and indigenisation of some imported spares. This, she said, would boost domestic manufacturing and cut huge defence import bill.
To improve autonomy, accountability, and efficiency in ordnance supplies, the government will Corporatise Ordnance Factory Board, which will ultimately lead to listing on domestic stock exchanges.
“Corporatisation is not privatisation,” she said.
The Finance Minister said six more airports will be bid out for operation and maintenance on public-private partnership (PPP) basis. Also, additional investment by private players in 12 airports bid out in the first two rounds is expected to be around Rs 13,000 crore.
She said more air space will be opened for civil aviation, helping airlines save Rs 1,000 crore in flying cost through reduced flying time and lower fuel consumption. Currently, only 60 per cent of the Indian airspace is freely available.
Restrictions on the utilisation of the Indian air space will be eased in consultation with the defence so that civilian flying becomes more efficient, she said.
Steps would also be taken to make the country a hub for Maintenance, Repair, and Overhaul (MRO) of aircraft, she said adding a tax on MRO operations had already been cut in March.
For the coal sector, she announced allowing the private sector in commercial mining as well as auction of even partially explored coal blocks.
Also, turning coal into liquid or gaseous fuel will be incentivised while rights to exploit of gas lying below coal bed (CBM) in blocks owned by state-owned Coal India Ltd (CIL) will be auctioned.
Production earlier-than-scheduled will be incentivized through rebate in revenue share. An investment of Rs 50,000 crore is envisaged in coal evacuation infrastructure to help meet CIL’s target of 1 billion tonnes of production by 2023-24.
Sitharaman announced structural reforms in the mining of minerals through the introduction of a seamless composite exploration-cum-mining-cum-production regime under which 500 mining blocks would be auctioned.
Also, a joint auction of bauxite and coal mineral blocks would be done to enhance the aluminium industry’s competitiveness by reducing the cost of electricity generation.
The government will also remove the distinction between captive and non-captive mines to allow the transfer of mining leases and the sale of surplus unused minerals, leading to better efficiency in mining and production.
For the electricity sector, the finance minister said a tariff policy laying out consumer rights such as inefficiencies of distribution companies not burdening consumers and penalising load-shedding is on the anvil.
The policy would also promote the progressive reduction in cross-subsidies, a time-bound grant of open access, timely payment to generating companies and DBT for subsidy.
Also, electricity distribution in union territories will be privatised, she said.
For boosting private sector investment in social infrastructure, a Rs 8,100 crore revamped Viability Gap Funding Scheme will be launched by raising the share of government funds in such projects to 30 per cent from the current 20 per cent.
Sitharaman said for boosting private participation in space activities, the government will provide a level playing field for private companies in satellites, launches and space-based services.
The private sector will be allowed to use ISRO facilities and other relevant assets to improve their capacities.
“Future projects for planetary exploration, outer space travel, etc will be open for the private sector,” she said.
In atomic energy, a research reactor in PPP mode for the production of medical isotopes that can be used for affordable treatment for cancer and other diseases will be established.
Earlier this week, Prime Minister Narendra Modi announced a cumulative package of Rs 20 lakh crore, nearly 10 per cent of the GDP, to provide relief to an economy battered by the coronavirus lockdown imposed since March 25.
While this included March 27 announcement of Rs 1.7 lakh crore package of free foodgrains and cash to poor for three months and RBI’s Rs 5.6 lakh crore worth of monetary policy since March, the government in three tranches over the last three days announced a cumulative package of Rs 10.73 lakh crore.
The government cash outgo is limited to a maximum of Rs 18,500 crore on free foodgrain and affordable housing to migrant workers as well as limited tax relief.

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