Privatisation drive set to speed up economic activity
NEW DELHI: Amidst hopes that the finance minister would announce the ‘real stimuli’ characterised by cash transfer to the needy as well as financial packages and additional borrowing window for the states, the FM Niramala Sitharaman chose the fourth tranche on Saturday to announce reforms big time in basic sectors of the economy right from mineral mining sector, defence manufacturing through space and aviation.
The opposition leaders have taken strong exception to the way the finance minister used the COVID 19 package route to cleverly sneak privatisation process, which otherwise would have met with tough resistance.
These are easier said than done as implementation of these announcements will essentially need parliament’s green signal which would inevitably face hurdles in the Rajya Sabha where the ruling front is yet to establish majority.
Eight Basic Sectors
The eight critical sectors that came for Saturday’s (May 15) proposals are Coal, Minerals, Defence Production, Airspace management, Power Distribution companies, Social Infrastructure Projects, Space sectors and Atomic Energy.
The key announcements that caught attention in the earlier tranches of the Rs20-trillion-package include extending credit facilities to MSME sector, NBFCs, Discoms, street vendors etc, measures to improve farmers’ prospects in terms of pricing of their produce and food security announced for the distraught migrant workers for the next two months.
“The government may be thinking that this is the opportune time to push through these reforms while Delhi enjoys an emotional edge at the expense of COVID,” an opposition leader noted wryly.
Sitharaman said India must prepare for tough competition that will enable the country to counter challenges of global value chains.
Policy reforms to overhaul mines and minerals have been on top of the Modi government’s priorities for some time now. Government is introducing the commercial mining of coal. India needs to reduce import of substitutable coal and increase self-reliance in coal production. Nearly 50 blocks will be auctioned. An investment of Rs50,000 crore is for the evacuation of enhanced CIL’s (Coal India Limited) target of 1 billion tonne of coal production by 2023-24 plus coal production from private blocks
Nirmala Sitharaman also explained the rationalisation of stamp duty payable at the time of award of mining leases. FM said 500 mining blocks would be offered through an open and transparent auction process. There is move to introduce a joint auction of Bauxite & Coal mineral blocks to enhance aluminium industry’s competitiveness.
The whole aim is to enhance self-reliance in defence production- Indigenization of imported spares, separate budget provisioning for domestic capital procurement. The government believes these steps will improve autonomy, accountability and efficiency in the sector. Importantly, foreign direct Investment (FDI) limit in defence manufacturing under automatic route is being raised from 49 per cent to 74 per cent. Corporatisation of Ordnance factory board was also announced.
Civil Aviation and MRO
As of now, only 60 per cent of the air space is effectively used. Restrictions on the utilisation of Indian Air Space will be eased so that civilian flying becomes more efficient. These measures will bring a benefit of Rs1000 crore per year for the aviation sector.
Construction of world-class airports through PPP route is being considered seriously. Government intends to grow India into a global hub for aircraft maintenance, repair and overhaul (MRO). Airports Authority of India (AAI) has already awarded three airports out of 6 bids received for operation & maintenance on PPP basis. Additional investments to the tune of around Rs13,000 crore is expected to be brought in by private players in 12 airports as part of the new government initiative.
Power Sector Reforms
FM has announced plans to speed up the privatisation of Power Distribution Companies (Discoms) in Union Territories in line with the new tariff policies. This is expected to strengthen industries and bring in efficiency in the entire power sector. However, the move is likely to invite in a lot of resistance from Opposition.
The new package has steps to boost private sector investment in Social Infrastructure through revamped Viability Gap Funding Scheme and an amount of Rs8100 crore has been earmarked against this.
Government is keen to boost private participation in space sector which has always been a fiefdom of public sector. The FM said Government is working on a liberal geo-spatial policy by taking private sector along with it as co-traveller in India’s space sector journey through launches, satellite services.
The government intends to link India’s robust start-up ecosystem to the nuclear sector – Technology Development cum Incubation Centres will be set up for fostering synergy between research facilities and tech entrepreneurs, according to the plans envisaged. Establishment of research reactor in PPP mode for production of medical isotopes is a priority in this area.