FM Sitharaman fast tracks industrial reforms to aid growth recovery
Experts said the measures announced on Saturday were much needed industrial reforms addressing the supply side rather than being stimulus measures
Finance minister Nirmala Sitharaman on Saturday announced plans for liberalising the mining, defence production and aerospace industries in a bid to make investments easier in the post-Covid-19 world.
She also announced immediate plans for privatising six more airports and offered financial support for making social infrastructure projects viable. The focus of reforms on the core sectors of coal, mining and electricity comes at a time official data showed last month a sharp 16.7% contraction in India’s industrial output in March. India went into a national lockdown on 25 March.
Experts said the measures announced on Saturday were much needed industrial reforms addressing the supply side rather than being stimulus measures.
According to DK Srivastava, chief policy advisor at EY India, the fourth instalment of the package announced by Sitharaman contained a stimulus of ₹63,100 crores of which the direct budgetary cost was only ₹8,100 crores relating to enhanced viability gap funding to support creation of social infrastructure.
“In this tranche, the focus was more on industrial reforms rather than providing stimulus. The government seems to be relying on this crisis to fast-track industrial reforms which might otherwise face resistance," said Srivastava.
Businesses, which are expecting more measures from the government in tiding over the Coronavirus crisis, welcomed the reform measures. Chandrajit Banerjee, director general, Confederation of Indian Industry (CII) said Saturday’s announcements focused on investment promotion in a big way in key sectors of the economy. “We believe that the policies announced today would incentivise India's global engagement with more fund inflows and higher competitiveness of domestic industry," said Banerjee.
India will further open up commercial coal mining with revenue share arrangement to boost the fuel’s production in the country. Promoting coal gasification through revenue share rebate, auctioning 50 new coal and 500 mineral blocks and liberalising entry norms were among the reforms announced in the energy sector. In addition, an investment of ₹50,000 crore will be made for creating transportation infrastructure for evacuating 1 billion tonnes of coal from state run Coal India Ltd.’s (CIL) mines. Sitharaman also announced privatization of electricity distribution companies in all its eight union territories as part of the fourth tranche of the Rs20 trillion stimulus package. According to Saurabh Bhatnagar, partner at EY India, these were much need reforms in the mining sector as India is a mineral rich country.
Promoting domestic production of defence equipment and raising foreign direct investment cap in the sector from the existing 49% to 74% through the automatic route was also announced. Sitharaman said the government would also put out a list of weapons and platforms that would only be purchased from domestic producers. This list would be expanded every year.
Sitharaman said India plans to provide a level-playing field for the private companies in country’s space activities and allow tech start-ups to access geo-spatial data. She also announced plans to rationalise the use of air space to cut short flying time and to make airline operations more efficient as part of reforms.
The government will soon start the bid process for awarding six more airports to private players for operation and maintenance. Industry experts said the Coronavirus pandemic has had a huge impact on the aviation industry including passenger traffic. “For this initiative to be successful in upcoming rounds, it would be critical to go back to the drawing board on a number of aspects and tailor the structure and timing with respect to the potential ‘new normal’ in the sector as well as private sector interest and appetite at this time," said Peeyush Naidu, partner, Deloitte India.
India will also take steps to encourage the maintenance and the repair and overhaul (MRO) industry, she said.
With inputs from Elizabeth Roche, Srishti Choudhary and Utpal Bhaskar
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