Bold reforms: 75% FDI in Def, pvt investment in coal
Privatisation of 6 more airports
Finance Minister Nirmala Sitharaman on Saturday opened up the coal sector for private investment and allowed 74 per cent foreign direct investment (FDI) in defence sector through automatic route from the present 49 per cent.
The Centre also announced privatisation of six more airports and opening up of more air space as part of the Government’s push to revive the economy in the wake of coronavirus crisis. The Government also unveiled several other structural reforms and policy simplifications.
In her fourth tranche of the economic package, she said commercial mining will be done on revenue sharing mechanism instead of the regime of fixed rupee/tonne. She said the difference between captive and non-captive mines will be done away with and a Rs 50,000-crore plan for evacuation of the mined fuel will be put in place.
Nearly 50 coal blocks will be offered for bidding, she said. This is being done to reduce import of substitutable coal and increase self-reliance in coal production. Also, the Government will invest Rs 50,000 crore for building evacuation infrastructure. Coal gasification and liquefication will be incentivised through rebate in revenue sharing, she said adding coal bed methane (CBM) production would also be encouraged.
“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,” Siharaman said.
Moreover, a cap on import on notified weapons will come into force to boost domestic product and Ordnance Factories undergo corporatisation for efficiency.
Announcing these major reforms in the defence sector, Finance Minister Nirmala Sitharaman also said here the selection process of weapon systems will also undergo overhaul. The main objective of this step is to reduce delays by having realistic goals including quality and other specifications of the weapons systems to be procured.
“Sometimes the general staff qualitative requirement (GSQR) could be unrealistic. We will make it more realistic that matches with the needs. Weapon trial and testing procedures will also be overhauled,” she said. The GSQR is among the first steps in buying capital equipment, which contains why the equipment is needed and its expected quality standards.
On hiking the FDI to 74 per cent from 49 per cent through automatic route, Sitharaman said it will have the security clearances and everything else as always. Incidentally, even 100 per cent FDI is already allowed in the defence sector but on case to case basis. The latest decision will definitely attract global giants as they have all along been seeking higher FDI for the last many years. Moreover, India stands to gain as it is one of three biggest spenders on defence and the domestic and foreign players want to have a sound footing within the country.
In another critical reform in the defence sector, she announced a time-bound defence procurement process and faster decision making by setting up of a Project Management Unit to support contract management. This will also include a “realistic” setting of General Staff Qualitative Requirements (GSQR) of weapons/platforms and overhauling of trial and testing procedure, the Minister said.
“Sometimes unrealistic quality requirements are established and quite a lot of time is spent in searching for suppliers who will meet all those requirements, you will end up with just one supplier and since buying from a single supplier is not permitted, you do the entire circle all over again,” said Sitharaman.
As regard ban on import of notified weapons to boost domestic production, Sitharaman said the Government will notify list of weapons with year-wise timelines. This will entail the Indian industry developing technology for those defence systems/platforms thereby giving a big boost to the ‘Make in India’ initiative.
In another major reform, the Government has decided to go ahead with corporatisation of the ordnance factories to bring in more efficiency, autonomy and accountability besides reduced costs. This announcement comes even as the various employee unions of the 40-odd ordnance factories spread all over the country had protested against this move some months back.
The Government, meanwhile, also announced some other important measures like indigenisation of imported spares and separate budget provisioning for domestic capital procurement to bring down the huge defence import bill.
The Finance Minister also 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.
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 aluminum industry’s competitiveness by reducing the cost of electricity generation.
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.
Sunday, 17 May 2020 | PNS | New Delhi
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