In 4th Tranche of Stimulus, FM Announces Reforms in Coal Mining, Defence, Aviation Sectors

The announcements made on Saturday primarily consisted of a mix of existing and new reform measures that will be implemented over a longer horizon.

New Delhi: Finance minister Nirmala Sitharaman on Saturday unveiled a slew of policy simplification and structural reforms as part of a broader economic plan to tackle the adverse effects of the COVID-19 lockdown.

These announcements include steps to boost commercial mining in India’s coal sector – including doing away with the difference between captive and non-captive mines and a Rs 50,000 crore plan for evacuation of the mined fuel – and raising the foreign direct investment (FDI) caps on defence production to 74% from the existing 49%.

“PM Modi had said that we should prepare for tough competition. When we speak of “self-reliant India”, we are not looking inwards, it is not isolationist policy, it is making India rely on its strengths, ready to face global challenges,” Sitharaman said.

“Many sectors need policy simplification, to make it simpler for people to understand what sector can give, participate in activities and bring transparency. Once we decongest sectors, we can boost the sector, for growth and jobs.”

The announcements made on Saturday add weight to the growing narrative by economists and market experts that the massive Rs 20 lakh crore ‘Aatma Nirbhar’ package is less about trying to intervening on the ‘demand-side’ or providing direct relief to affected industries and sections of the population. Instead it leans more heavily on using this opportunity to push through reforms and infrastructure projects that will have a beneficial effect over a longer horizon once economic activity is back to normal.

The package’s announcements therefore draw heavily from Modi’s new governance theme of ‘self-reliance’.

For instance, during the defence sector portion of the press conference, Sitharaman announced that the Centre would soon put out a list of items that would only be purchased from the domestic industries and not from foreign vendors. This list would be expanded every year in consultation with the armed forces, she said.

Another measure that the finance minister announced was the corporatisation of the ordnance factory boards.

Old wine in a new bottle?

A number of the fourth tranche’s initiatives, however, are reiterations of announcements made in the last year or an expansion of existing programmes.

This is particularly true of many of the smaller announcements made for the aviation sector – privatisation of airports, better utilisation of air space and modernisation of air traffic management.

Even the move to privatise discoms in union territories was announced first by the power minister to industry heads on Friday.

A list of important steps announced today can be read in full below:

Commercial mining to be introduced in the coal sector

  • Introduction of commercial mining in the coal sector
  • Government to introduce competition, transparency and private sector participation
  • Commercial mining on a revenue-sharing base will end ownership bid. Any party can bid for coal block and seek in open market
  • Entry norms will be liberalised with government to offer 50 blocks immediately
  • No eligibility conditions required, only upfront payment with a ceiling
  • Rs 50,000 crore will be spent for creating evacuation infrastructure
  • Coal gasification, liquefaction will be incentivised

Also read: Centre Opts for Long-Term Agricultural Reforms, Leaving Farmers ‘Atmanirbhar’ in Crisis

Proposed reforms in the mineral sector

  • Introduction of seamless composite exploration-cum-mining-cum-production regime
  • 500 mining blocks would be offered through open auction process
  • Introduction of a joint auction of Bauxite and coal mineral blocks to enhance the aluminium industry’s competitiveness.
  • Remove the distinction between captive and non-captive mines
  • Ministry of Mines developing a Mineral Index for difference minerals
  • Rationalisation of stamp duty payable at the time of award of mining leases

Govt to notify a list of weapons/platforms for a ban on their import focus on indigenisation. Being done in consultation with the Department of Military Affairs

  • Make in India for self-reliance in defence production
  • Notify a list of weapons/platforms for the ban on import with year-wise timeliness
  • Indigenisation of imported spares
  • Separate budget provisions for domestic capital procurement
  • Will help reduce the defence import bill
  • Improve autonomy, accountability, and efficiency in Ordnance supplies by Corporatisation of Ordnance Factory Board
  • Ordnance Factory Board to be corporatised
  • FDI Limit being raised from 49% to 74%
  • Time-bound defence procurement process and faster decision making to be done.

Also read: MSMEs Face Unbelievable Disaster, Poor Forgotten: Karan Thapar Interviews Jayati Ghosh

Aviation sector reforms proposed by the government

  • Only 60% of Indian airspace freely available. Restriction on the utilisation of the Indian air space will be eased so that flying becomes more efficient
  • It will bring a benefit of about Rs 1000 crore per year for aviation sector
  • Optimal utilisation of airspace, prediction in fuel use, time
  • Will have a positive environmental impact
  • Six more airports are up for auction on PPP basis. Bid process to begin soon
  • Additional investment worth Rs 13,000 crore expected by private players in 12 airports
  • AAI will get a down payment of Rs 2300 crore
  • Plan to make India a hub for Maintenance, Repair, and Overhaul (MRO)
  • Aircraft component repairs and airframe maintenance to increase from Rs 800 crore to Rs 2,000 crore
  • Major engine manufacturers in world would set up engine repair facilities
  • Convergence between defence sector and civil aviation
  • Maintenance costs will come down.