Sitharaman unveils policy reforms in coal, aviation, defence production, power sectors

New Delhi, May 16, 2020

Union Finance Minister Nirmala Sitharaman today unveiled a slew of policy reforms for the coal mining, civil aviation, defence production and power distribution sectors, among others, in a bid to fast-track investment and move towards the "Aatmanirbhar Bharat" (Self-Reliant India) that Prime Minister Narendra Modi spoke about a few days ago.

Addressing a press conference here today for the fourth day in a row to give out details of the Rs 20 lakh crore special economic package that Modi announced in his address to the nation on Tuesday, Sitharaman said the Government would fast-track investment clearance through an Empowered Group of Secretaries (EGoS).

There would be a Project Development Cell in each Ministry to prepare investible projects, coordinate with investors and the Central and State Governments.

She said States would be ranked on Investment Attractiveness to compete for new investments and incentive schemes would be launched for promotion of new champion sectors such as solar PV manufacturing, advanced cell battery storage, and so on.

Sitharaman said the scheme would be implemented in States through Challenge mode for Industrial Cluster Upgradation of common infrastructure facilities and connectivity.

Industrial land and land bank would be made available for promoting new investments and information would be made available on Industrial Information System (IIS) with GIS mapping.

She said 3,376 industrial parks, estates and special economic zones (SEZs) in five lakh hectares would be mapped on the IIS and all of them would be ranked in 2020-21.

Sitharaman said that, in the area of policy reforms, commercial mining would be introduced in the coal sector, underlining the need to reduce import of substitutable coal and increase self-reliance in coal production.

She said the Government would introduce competition, transparency and private sector participation in the coal sector through, among other things, revenue sharing mechanism instead of the regime of fixed rupee/tonne.

She said that, unlike earlier when only captive consumers with end-use ownership could bid, now any party can bid for a coal block and sell it in the open market.

She said entry norms would be liberalised and nearly 50 blocks would be offered immediately. There will be no eligibility conditions, only upfront payment with a ceiling.

Sitharaman said that there would be an exploration-cum-production regime for partially explored blocks and, against the earlier provision of auction of fully explored coal blocks, now even partially explored blocks would be auctioned.

She said the Government would allow private sector participation in exploration and production earlier than scheduled would be incentivised through rebate in revenue-share.

The Minister said coal gasification and liquefication would be incentivised through rebate in revenue share, resulting in significantly lower environmental impact and assisting India in switching to a gas-based economy.

She also announced an investment of Rs 50,000 crore in infrastructure development for evacuatin of the enhanced Coal India Limited (CIL) target of one billion tonnes of coal production by 2023-24 as well as production from private blocks.

This would include Rs 18,000 crore of investment in mechanised transfer of coal (conveyor belts) from mines to railway sidings.

Sitharaman said coal bed methane (CBM) extraction rights will be auctioned from CIL's coal mines. Ease of doing business measures, such as Mining Plan simplification, will be taken. The reforms will allow for automatic 40% increase in annual production.

The Government has also offered relief worth Rs 5,000 crore to CIL's consumers through concessions given in commercial terms. The reserve price in auctions for non-power consumers has been reduced, credit terms eased, and lifting period enhanced, she said.

The Minister also announced structural reforms to enhance private investments in the mineral sector to boost growth and employment and bring state-of-the-art technology, especially in exploration.

She said a seamless composite exploration-cum-mining-cum-production regime would be introduced and 500 mining blocks would be offered through an open and transparent auction process.

The Government will introduce joint auction of bauxite and coal mineral blocks to enhance the aluminium industry's competitiveness. It will help the aluminium industry reduce electricity costs.

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

She said the Ministry of Mines is in the process of developing a Mineral Index for different minerals. Stamp duty payable at the time of award of mining leases would be rationalised.

As part of the efforts to enhance self-reliance in defence production, the Government will notify a list fo weapons and platforms for ban on import with year-wise timelines. There will be indigenisation of imported spares and a separate budget provisioning for domestic capital procurement. This will help the huge defence import bill, she said.

The Minister said the Ordnance Factory Board would be corporatised to improve autonomy, accountability and efficiency in ordnance supplies.

Sitharaman said the foreign direct investment (FDI) limit in the defence manufacturing sector under the automatic route would be raised from 49% to 74%.

She said time-bound defence procurement process and faster decision-making would be ushered in by setting up a Project Management Unit (PMU) to support contract management.

There will be realistic setting of General Staff Qualitative Requirements (GSQRs) of weapons/platforms and overhauling of Trial and Testing procedures, she said.

The reforms in the Civil Aviation sector would result in a reduction in flying cost of Rs 1,000 crore per year for the civil aviation sector through efficient airspace management, Sitharaman said.

At present, only 60% of Indian airspace is freely available, she said, adding that restrictions on its utilisation would be eased so that civilian flying becomes more efficient. There would be optimal utilisation of airspace and reduction in fuel use and time, along with a positive environmental impact, she said.

Sitharaman said more world-class airports would be set up in the country through the public-private partnership (PPP) mode.

The Airports Authority of India (AAI) has awarded three airports out of six bid for operation and maintenance on PPP basis. The annual revenue of the six airports in the first round will be Rs 1,000 crore (against current profit of Rs 540 crore per year). AAI will also get a down payment of Rs 2,300 crore, she said.

Six more airports have been identified for the second round of bidding, which will commence immediately, she said. The additional investment by private players in the 12 airports in the first and second rounds of bidding is expected to be around Rs 13,000 crore.

Another six airports will be put out for the third round of bidding, she said.

The Minister said the tax regime for the Aircraft Maintenance, Repair and Overhaul (MRO) ecosystem had been rationalised as part of the efforts to make India a global hub for MRO.

She said aircraft component repairs and airframe maintenance would increase from Rs 800 crore to Rs 2,000 crore in three years.

She said major engine manufacturers in the world would set up engine repair facilities in India in the coming year. Convergence between defence sector and the civil MROs will be established to create economies of scale, and the maintenance cost for airlines will come down.

In the area of power distribution, Sitharaman said that a tarriff policy laying out various reforms would be released.

For instance, in consumer rights, DISCOM inefficiences would not be allowed to burden consumers, there would be standards of service and associated penalties for DISCOMs and they will have to ensure adequate power. Load-shedding will be penalised.

For industry, there will be progressive reduction in cross subsidies; time-bound of open access; and competitive selection of generation and transmission project developers.

For sustainability of the sector, there will be no regulatory assets, there will be timely payment of GENCOs and direct benefit transfer for subsidy, along with smart pre-paid meters.

Sitharaman also said that power departments and utilities in Union Territories would be privatised because of the sub-optimal performance in the areas of power distribution and supply. This is expected to lead to better service to consumers and improvement in operational and financial efficiency in distribution. It will also provide a model for emulation by other utilities across the country.

Sitharaman also announced a revamped Viability Gap Funding scheme worth Rs 8,100 crore to boost private sector investment in social infrastructure.

She said that social infrastructure projects currently suffer from poor viability.

The Government will enhance the quantum of Viability Gap Funding upto 30% each of Total Project Cost as VGF by Centre and State/statutory bodies. For other sectors, existing VGF support of 20 % each from GoI and States/Statutory Bodies shall continue.

Sitharaman also announced steps to boost private participation in the Space sector.

"Indian private sector will be a co-traveller in India’s space sector journey," she said, stating that the Government would provide a level playing field for private companies in satellites, launches and space-based services.

She said the Government would provide a predictable policy and regulatory environment to private players, who would be allowed to use ISRO facilities and other relevant assets to improve their capacities.

"Future projects for planetary exploration, outer space travel etc will be open for private sector," she said, addinng there would be a liberal geo-spatial data policy for providing remote-sensing data to tech-entrepreneurs.

In the area of atomic energy, the reforms woudl enable the establishment of research reactors in PPP mode for production of medical isotopes. This will promote welfare of humanity through affordable treatment for cancer and other diseases, she said.

Sitharaman said facilities would also be established in PPP mode to use irradiation technology for food preservation to complement agricultural reforms and assist farmers.

India's robust start-up ecosystem will be linked to the nuclear sector and Technology Development-cum-Incubation Centres would be set up for fostering synergy between research facilities and tech-entrepreneurs, she added.

NNN