Nirmala Sitharaman on Economic Package: Centre hikes FDI in defence, allows commercial mining of coal, opens space sector for private players in 4th tranche; key takeaways

Union Finance Minister Nirmala Sitharaman on Saturday announced a slew of structural reforms in eight sectors -- coal, minerals, defence production, civil aviation sector, power distribution companies in Union Territories, space sector and atomic energy sector -- in the fourth tranche of the Rs 20-lakh-crore economic stimulus package with an aim to boost growth and create jobs.

Some of the measures included opening of space sector for private players, commercial mining of coal, raising FDI limit in defence sector through automatic route from 49 percent to 74 percent, privatisation of power discoms in the Union Territories, offering more airports on a PPP model as well as boosting private sector investment in social infrastructure projects through revamped viability gap funding scheme of Rs 8,100 crore.

Here are some of the key takeaways from the FM's fourth presser to kick-start the economy:

Centre to open up more air space for civil aviation

A major focus of Saturday's announcements by the finance ministry focussed on helping the civil aviation sector which has been hit hard due to suspension of all air traffic due to the coronavirus-induced lockdown.

The FM on Saturday proposed opening up more air space for civil aviation, auctioning of six more airports under the PPP model and ramping up the aircraft maintenance infrastructure to cut maintenance costs for airlines.

Sitharaman said that the easing of restrictions on utilisation of Indian air space will bring benefits of about Rs 1,000 crore per year to the civil aviation sector.

She said that currently, only 60 percent of Indian airspace is freely available, and more air space available would reduce travel time and save on fuel,.

The finance minister also said that an additional investment of Rs 13,000 crore will be made by private players in 12 airports auctioned in first and second rounds.

She also said tax regime for aircraft Maintenance, Repair and Overhaul (MRO) has been rationalised.

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Aircraft component repair and airframe maintenance are expected to increase from Rs 800 crore to Rs 2,000 crores in three years, she added.

Centre hikes FDI in defence production, bans import of certain weapons

Sitharaman on Saturday said that the FDI limit in defence manufacturing under automatic route will be hiked to 74 percent from 49 percent while some weapons and platforms will be banned for imports.

Items banned for imports can only be purchased from within the country, she said presenting the fourth tranche of the economic stimulus package.

Also, there will be indigenisation of some imported spares, she said adding separate budget provisioning for domestic capital procurement will be done.

This, she said, will reduce the huge defence import bill.

Stating that corporatisation is not privatisation, the FM also said that Ordnance Factory Boards will be corporatised for better management and eventually get listed on the stock market.

For the time-bound defence procurement process and faster decision-making, project management unit (PMU) to support contract management will be set up.

Reforms in coal and mineral mining

Some of the major reforms announced on Friday were in the mining sector with the govt allowing commercial mining of coal by the private sector on a revenue sharing basis, ending government monopoly on the sector. Nearly 50 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.

 The FM also said that the govt will auction 500 blocks of minerals in a composite exploration-cum-mining-cum-production regime. The FM also said that a joint auction of bauxite and coal blocks would be done to enhance the aluminium industry's competitiveness.

This, she said, will help the aluminium industry reduce electricity costs.

She said the distinction between captive and non-captive mines will be removed to allow the transfer of mining leases and sale of surplus unused minerals, leading to better efficiency and production.

Privatisation of discoms in UTs

Sitharaman on Saturday said electricity distribution companies in Union Territories (UTs) will be privatised.

A tariff policy that does not burden consumers with distribution companies' inefficiencies will be guaranteed, she said while presenting the fourth tranche of economic stimulus package.

Opening of space sector for private players

The FM said that the Centre has decided to give the private sector a role in India's space programme, including in satellites, launches and space-based services.

For boosting private participation in space activities, government will provide level playing field for private companies in satellites, launches and space-based services.

Also, the government will provide predictable policy and regulatory environment to private players, she said while announcing the fourth tranche of the economic stimulus package.

Private sector will be allowed to use ISRO facilities and other relevant assets to improve their capacities.

Future projects for planetary exploration and outer space travel would be open for private sector, she said, adding liberal geo-spatial data policy will provide remote sensing data to tech-entrepreneurs.

Set up research reactor for affordable treatment of cancer, other diseases

The FM also said that India will set up a research reactor in PPP mode for the production of medical isotopes in order to make available affordable treatment for cancer and other diseases.

She said the research reactor in public-private partnership (PPP) mode would use irradiation technology for food preservation - to compliment agricultural reforms and assist farmers.

Measures to ramp up social infrastructure

Referring to the challenges faced in the ongoing COVID-19 pandemic, Sitharaman said that Rs 8,100 crore will be provided as viability gap funding for development of social infrastructure in the country.

She said social infrastructure projects suffer from poor viability. Therefore, the government will enhance the quantum of viability gap funding up to 30 percent each of the total project cost as VGF by central and state/statutory bodies.

For other sectors, existing VGF support of 20 percent each from the government of India and state/statutory bodies shall continue, the FM said.

The fifth and final presser detailing the Centre's proposals as part of the Rs 20-lakh-crore stimulus package will be held on Sunday at 11 am, the ministry said.

With inputs from PTI

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FP Staff