Union Finance Minister Nirmala Sitharaman, having announced economic packages and relief measures for farmers, migrant labourers, MSMEs, SMEs, NBFCs, MFIs and other categories in the past three days, today released the fourth tranche of her Rs 20 lakh crore economic package where the focus was on structural reforms, especially in the sectors of coal and defence manufacturing. Rather than continuing with the language of reliefs and sops, the finance minister unveiled a massive reforms package for the sectors of coal, minerals, defence production, airports and civil aviation, power distribution in union territories, space and atomic energy.
“Today’s announcements focus on structural reforms,” the finance minister said towards the beginning of her presentation.
“Today’s tranche is related to exploring new horizons of growth,” Sitharaman said.
Prime Minister Narendra Modi had announced on 12 May an economic booster package so that India makes money even in a world hit by China-origin coronavirus. As the prime minister had said that day, the finance minister is revealing the details of the package, while being equal in worth to 10% of India’s GDP, covering a few sectors of the economy at a time.
The package contains both fiscal and liquidity measures aims at realising the prime minister’s dream of ‘Aatmanirbhar Bharat’ (self-reliant India).
Read Paavani Sinha’s article: Atmanirbhar Baniye, Atmaghati Nahin (Be Self-Reliant, Not Suicidal)
In today’s press conference, Sitharaman said she would release the details of the last tranche of the economic package tomorrow at 11 AM, moving the time from her regular 4 PM addresses to the media.
Reforms in science & technology sector
The finance minister announced that the atomic energy sector would be reformed with permission for a PPP mode of developing research reactors. Even a startup ecosystem will be linked to the nuclear sector, she said.
Sitharaman, announcing future projects for planetary exploration, opened the outer space travel to the private sector. The private sector, the minister said, would be allowed to use ISRO facilities to improve their capabilities.
Boosting private participation in space activities, the minister said the government would provide a competitive field for private companies in satellites, launches and space-based services.
On the question as to how the state cost will be shared, Sitharaman said the government would enhance the quantum of viability gap funding to 30% each out of the total project cost viability gap when it is funded by the centre, states and/or statutory bodies. She announced a total outlay of Rs 8,100 crore for the scheme.
Social infra reforms
Sitharaman said, “India needs to ramp up social infrastructure,” and added that her reforms in power tariff policy would include consumer rights, promote industry and ensure the sector’s sustainability.
With this, the minister also announced the privatisation of power distribution companies in union territories.
Announcing an upgrade in the industrial infrastructure, Sitharaman said she was making policy reforms for fast-track investment. “The government will fast-track investment clearance through an empowered group of secretaries,” the finance minister said.
The finance minister sought pride in the fact that “no cronyism has developed through banks”, implying that the decisions to extend credit to seekers no longer depend on a motley group’s high connections and racketeering.
The minister said the maintenance cost of airlines would come down and the travellers were likely to pay less as a result when India becomes a “global hub for aircraft maintenance, repair and overhaul (MRO)”. Sitharaman said that the tax regime for MRO had been rationalised.
Sitharaman foresees an additional investment that is likely to arrive in 12 airports while six more airports will be auctioned. The Airports Authority of India (AAI) develop these facilities on a PPP basis, the minister said.
The civil aviation industry, the minister said, will benefit by Rs 1,000 crore with efficient airspace management.
Sitharaman said that the government would ease restrictions on utilisation of the Indian air space to make civilian flying more efficient. “Only 60% of Indian airspace is freely available,” the minister said, implying this was not a desirable scenario.
Changes in defence manufacturing
The finance minister today announced an increase in the FDI limits in defence manufacturing from 49% to 74%.
“We hope that the ordnance factory boards can be listed in stock exchanges,” Sitharaman said, adding that the Ordnance Factory Board would be corporatised but not privatised.
Raising the concern of the high cost India bears for being one of the largest importers of defence equipment, the minister said the defence sector could reduce the import bill.
‘Coal will no more be monopoly of government’
Announcing reforms for the coal sector, the finance minister said, “India has the third-largest valued coal mines, but still we import it. Regulation is required when there is a shortage.”
“We have been suffocating the sector by regulating it and preventing it from producing what is required by the industry,” Sitharaman said.
Sitharaman said, “The government will introduce competition, transparency and private sector participation in the coal sector through a revenue-sharing mechanism and liberalisation of entry norms.”
The minister said any part could now bid for a coal block and sell it in the open market.
“Coal will no more be the monopoly of the government,” the finance minister declared, adding that the government would bring in commercial mining in the coal sector.
The finance minister announced that private investments will be enhanced in the mineral sector too.
The government will introduce joint auction of bauxite and coal mineral blocks to enhance the aluminium industry’s competitiveness, the minister said.
Sitharaman announced rationalisation of the stamp duty, which is payable at the time of award of mining leases.
She also said that the government would remove the distinction between captive and non-captive mines.
Sitharaman envisaged the introduction of a “seamless exploration-cum-mining-cum-production regime”, saying that the government would offer 500 mining blocks through an open and transparent process.
Opposition strikes a jarring note
Former Indian National Congress president Rahul Gandhi has asked Sitharaman to reconsider the package and think about direct cash transfer, 200 working days under MNREGA, money for farmers, etc after the finance minister yesterday announced three major reforms in the agricultural sector — amendments to the Essential Commodities Act to enable better price realisation for farmers, agriculture marketing reforms and agriculture produce price and quality assurance.
Yesterday’s announcements have otherwise been hailed by the media, which said India took more than seven decades to offer economic freedom to farmers who have for long been bogged down by a plethora of rules and regulations, abeyance to government wholesale markets, highhandedness of brokers and, most importantly, not being able to determine the price of one’s own production.