In the fourth allotment of India’s response package aggregating INR 20 lakh crores to help the economy recover from the impact of Covid 19, on May 16, 2020, the Finance Minister released, today, measures with special focus on the following eight key (including coal, mineral, defence production, civil aviation areas, space sector, and atomic energy) sectors:
- Policy reforms to fast-track investments – Empowered Group of Secretaries (EGoS) would be given the responsibility to fast track investment clearances and project development cells would be setup in each Ministry to prepare investible projects, coordinate with Investors as well as State Governments. A process for ranking of various States on their investment attractiveness based on key metrics would be setup to encourage FDI. For promotion of ‘New Champion Sectors’, such as Solar PV manufacturing and advanced cell battery storage, incentive schemes will be launched.
- Affordable Industrial Space – The Central Government will create land banks to boost industrial development. The scheme will be implemented in states through challenge mode for industrial cluster upgradation of common infrastructure facilities and connectivity.
- Coal – Commercial mining would be introduced on revenue sharing basis instead of earlier regime of fixed rates. Earlier only captive consumers with end-use ownership were permitted to bid for coal blocks, however the entry norms would be liberalized now. Nearly 50 coal blocks are to be offered immediately and there would be no eligibility condition with only upfront payment required with a ceiling. The liberalized regime would provide for auction of partially explored blocks and private participation would be permitted in exploration as well. Incentive would be provided for production earlier than the schedule through rebate in revenue share. In addition, Mining Plan is proposed to be simplified to enable a 40% increase in annual production. Coal gasification/ liquifaction will also be incentivized through rebate in revenue share, which is expected to significantly lower the environmental impact. INR 50,000 crores is proposed to be spent on development of evacuation infrastructure for moving coal from the mines (including INR 18,000 crores on mechanized transfer of coal via conveyor belts) and coal bed methane extraction rights would be auctioned by Coal India Limited.
- Minerals – Composite regime for exploration mining and production of minerals was announced. Under this regime 500 mining blocks would be offered through open and transparent auction process. For example, to increase aluminum production, bauxite and coal mines would be jointly auctioned. The distinction between captive and non-captive mines would be removed to allow captive mining leases to be transferred to allow effective utilization of surplus mineral blocks. Rationalization of stamp duty on mining leases would also be undertaken.
- Defence Production – To encourage production of weapons and equipment in India the government would notify a list of weapons and equipment, the import of which would be prohibited. This list would be updated based on development of domestic production capacity. Indigenization of imported spare parts was also announced and the Finance Minister has stated that the corporatization of ordinance factory boards would be undertaken to increase efficiency. Reforms to ensure faster decision making in defence procurement were also announced which includes setting realistic quality requirements, setting up contract management units, and overhauling trial and testing procedures for defence equipment.
- FDI limit for Defense sector – The FDI limit for defense would be increased from the current limit of 49% to 75%. The final notification would have to be analysed as FDI in defense also includes other conditions such as technology access requirements, etc.
- Civil Aviation – Rationalization of airspace, by easing restrictions on utilization, was announced to allow for overall fuel saving and reduction in travel time. The Finance Minister also announced that up to 12 airports would be auctioned on public private partnership basis in two rounds. The government has further reiterated its intent to make India a MRO (maintenance, repair and overhaul) hub for aircrafts.
- Power Distribution – Power distribution companies in Union Territories would be privatized in line with the new power tariff policy to be announced soon.
- Social Infrastructure projects – INR 8100 crores would be provided in the form of viability gap funding (through an increase from the existing 20% to 30%) to social infrastructure projects such as hospitals.
- Space – Private sector would be provided level playing field in terms of access to satellite launch services and other space based services, including access to facilities of ISRO to improve capabilities of the private sector. Further a liberal geo-spatial data policy will be developed to providing remote sensing data to technology startups and entrepreneurs.
- Atomic energy – Research reactor would be setup on public private partnership (PPP) model for development of medical isotopes. Further, facilities for use of radiation technology for food processing would also be developed on PPP model to increase shelf-life of perishable goods. Indian start-ups and tech entrepreneurs will be linked up with nuclear research facilities through tech development-cum-incubation centres to foster synergies.
The next press conference is expected to be held on 17th May, 2020 (Sunday).
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