Regulations untangled in defence, civil aviation & coal sectors

MAJOR TAKEAWAYS

 Focus on policy simplification & structural reforms

 Impetus to eight sectors, including coal

MINING

 India deregulates coal mining; last great monopoly gone

 Seamless composite regime for mining to be introduced

 Joint auction of bauxite, coal blocks for aluminium industry

 Commercial mining of coal on revenue share basis

 Incentives to be provided to convert coal into gas

 Rs 50,000 crore to be spent on coal evacuation

DEFENCE

 FDI limits in defence manufacturing raised from 49% to 74%

 Corporatisation of ordnance factory board announced

 Centre to notify list of weapons not be imported

 Convergence between defence, civil MROs

AIRPORTS

 Six more airports to auctioned on PPP basis

 Indian air space availability to be eased

SPACE

 Private sector participation in Space sector encouraged

 Liberal geo-spatial data policy to be brought in

MISCELLANEOUS

 A Rs 8,100 crore revamped-up viability gap funding scheme announced for social infrastructure projects

 Reforms to empower consumers, provide quality power on cards

 All industrial parks to be ranked in FY 21

 Power Discoms in UTs to be privatised

NEW DELHI: Union Finance Minister Nirmala Sitharaman on Saturday gave a massive reform boost to mining, defence, civil aviation and power distribution sectors. The deep structural refroms drive are part of the fourth tranche of announcements under the Rs 20 lakh-crore economic package for the 'Self-reliant India Movement' announced by Prime Minister Narendra Modi on Tuesday.

The Finance Minister detailed reforms for eight key sectors which will be supported and promoted via structural reforms.

However, the biggest reform measure was taken for the coal sector, whose mining was deregulated, thereby, ending one the last remain great Central monopolies. The Minister further announced that nearly 50 blocks will be offered for immediate auction. In fact, coal-based methane gas reserves will also be auctioned.

The Rs 50,000 crore infrastructure development will be instituted for evacuation of coal to help Coal India's (CIL) achieve the 1 billion tonnes output target by 2023-24, plus the coal produced from private blocks.

Minister Sitharaman also said that time-bound defence procurement process and faster decision-making will take place under the new policy. The government will set up a project management unit to support contract management.

On the civil aviation sector, the Centre will ease the air space availability to allow airlines to save cost and passengers to spend less time while travelling.

Furthermore, private sector participation in space sector will be enouraged throuh collaboration with ISRO and a libral geo-spatial data policy. Besides, viability gap funding has been provided for the creation of social infrastructure like hospitals, while PPP model has been proposed for the country's space programme.

The government also decided to establish research atomic reactor in the PPP mode for the production of medical isotopes to provide affordable treatment for cancer and other diseases.

A Rs 8,100 crore revamped-up viability gap funding scheme was also announced for social infrastructure projects.

These announcements have been made under Prime Minister's mega stimulus package amounting to 10 per cent of the gross domestic product (GDP).

Here are the details:

COAL & ALUMINIUM MINING: In a big reform initiative aimed at attracting global investment in the mineral sector, the government on Saturday decided to allow offering composite mineral exploration licences to bidders.

Speaking to the media here on Saturday, Finance Minister Nirmala Sitharaman said to introduce competition, transparency and the private sector participation in the coal sector, the government would go for the revenue sharing mechanism instead of the fixed rupee or tonne mechanism.

Earlier, only captive consumers with end-to-end ownership could bid for the coal mines. Now any one can bid and sell the produce in the open market on commercial terms.

Stating that nearly 50 blocks will be offered immediately, Sitharaman said there would be no eligibility conditions apart from upfront payment with a ceiling.

Also, against the earlier provision of auction of fully explored coal blocks, now even partially explored blocks could be auctioned. Production, earlier than schedule, will be incentivised through rebate in the revenue share.

The government will also incentivise coal gasification or liquefaction through rebate in the revenue share. It would significantly lower environment impact and also help India switch to a gas-based economy, she added.

The Rs 50,000 crore infrastructure development will be carried out for it. This will help Coal India (CIL) raise production from 600 million tonnes to 1 billion tonnes by 2023-24.

Accordingly, 500 mineral blocks would be offered to companies under a seamless composite exploration-cum-mining-cum-production regime.

Also, to enhance the competitiveness of the aluminium sector, joint auction of bauxite and coal blocks will be done. This will help aluminium producers to become compatible and reduce their electricity cost.

The government has also decided to do away with the concept of captive and non-captive mines allowing companies with captive mines to sell surplus mineral in open market on commercial terms. Captive miners will also be able to transfer or sell their lease to other players.

FDI LIMIT FOR DEFENCE MANUFACTURING TO BE RAISED TO 74%: In a big-bang reform measure, the Union government has decided to raise the limit for foreign direct investment (FDI) for defence manufacturing from 49 to 74 per cent under the automatic route. Union Finance Minister Nirmala Sitharaman said that time-bound defence procurement process and faster decision-making will take place under the new policy.

The government will set up a project management unit to support contract management. Further, realistic setting of general staff qualitative requirements of weapons or platforms will be taken up.

Under the new regime, the government will also overhaul the trial and testing procedures.

In a bid to enhance self-reliance in defence production, the government will notify a list of weapons and platforms for a ban on import with year-wise timelines. Indigenisation of imported spares will also be taken up.

Further, the government will take up separate budget provisioning for domestic capital procurement. All these measures, according to the government will help reduce India's huge defence import bill.

The government has also decided to corporatize Ordnance Factory Board to improve autonomy, accountability and efficiency in ordnance supplies.

PVT SECTOR TO BE ALLOWED IN INDIA'S SPACE EXPLORATION MISSIONS: Union Finance Minister Nirmala Sitharaman on Saturday said that private companies will be allowed to take part in planetary exploration, outer space travel among other space activities, and the government will take steps to encourage private participation in the Indian space sector.

Sitharaman said that the government will provide a level-playing field for private companies in satellite launches and space-based services.

The Centre will come up with a predictable policy and regulatory environment to private players.

The private sector will be allowed to use ISRO facilities and other relevant assets to improve their capacities. She further announced that liberal geospatial data policy will be framed for private sector to access remote sensing data to tech-entrepreneurs.

INDIAN AIRSPACE TO BE FREED FURTHER, MORE AIRPORTS FOR PPP AUCTION: The Union government has decided to further relax the Indian airspace restrictions for civilian flying and auction more airports on a PPP (Public-Private Partnership) basis. Union Finance Minister Sitharaman has said that six more airports will be put to bid for the second round of bidding for operation and maintenance on PPP basis.

Noting that currently only 60 per cent the Indian airspace is freely available, Finance Minister Nirmala Sitharaman said that the move will bring a total benefit of about Rs 1,000 crore per year for the aviation sector.

Optimal utilisation of airspace will lead to reduction in fuel use and time, she said.

On the operation and maintenance of airports in PPP mode, the minister said that the bidding process will commence immediately.

She said that additional investment by private players in 12 airports in the first and second rounds are expected to be around Rs 13,000 crore.

Laying down the government's plan to make India a global hub for aircraft maintenance, repair and overhaul (MRO), she said the tax regime for MRO ecosystem has been rationalised.

As a result of the move, aircraft component repairs and airframe maintenance will increase from Rs 800 crore to Rs 2,000 crore in three years.

Major engine manufacturers in the world would set up engine repair facilities in India in the coming year on the back of the reform measures, she said.

Sitharaman also announced that convergence between defence sector and the civil MROs will be established to create economies of scale.

Another major result of the decision will be that the maintenance cost for airlines will come down, as per the government.

ATOMIC ENERGY RESEARCH REACTOR, FACILITIES TO BE SET UP UNDER PPP MODE: Announcing reforms in the atomic energy sector, Finance Minister Nirmala Sitharaman on Saturday said the government will establish a research reactor and also set up facilities in the PPP mode. Under the reforms, the government will establish a research reactor in PPP mode for production of medical isotopes and promote welfare of humanity through affordable treatment for cancer and other diseases.

Facilities will be set up in the PPP mode to use irradiation technology for food preservation to compliment agriculture reforms and assist the farmers. Sitharaman said India's robust start-up ecosystem will be linked to the nuclear sector and Technology Development-cum-Incubation Centres will be set up for fostering synergy between research facilities andtech-entrepreneurs.

DISCOMS REFORMS: The government has decided to privatise the power distribution sector (DISCOMS) in Union Territories to set a model for adoption of similar reforms initiatives in States.

Announcing the structural reform initiatives as part of the Rs 20 lakh-crore economic package, Finance Minister Nirmala Sitharaman said privatisation of power distribution would be carried out completely involving all power departments and utilities.

Power distribution in the Union Territory of Delhi had already been privatised. This experience will be shared with other Centre-governed territories to carry forward privatisation.

The existing electricity legislation mandated unbundling in the power sector to corporatise it, dividing power generation, transmission and distribution segments. This has happened in most states, but privatisation is moving slowly.

The government's latest move is on account of sub-optimal performance of power distribution and supply.

It is expected to lead to better service to consumers and lead to improvement in operational and financial efficiency in distribution.

It will also provide a model for emulation by other utilities across the country.

REFORMS TO EMPOWER CONSUMERS, PROVIDE QUALITY POWER ON CARDS: In the next wave of reforms, the government plans to ensure quality power to consumers and empower them against poor services and inefficiencies.

Through a new tariff policy, the Centre will introduce regulations that will define the consumer rights to protect them from discoms' inefficiencies.

Under these set of regulations, standard of service would be prescribed and deviations would result in penalties for discoms (power distribution companies). The distribution entities would also need to ensure adequate power, while load-shedding will be penalised.

Finance Minister Nirmala Sitharaman said the new tariff policy would also promote the industry as it would also progressively reduce cross-subsidies, making industrial power tariffs more transparent and market-driven.

Industry will also be provided time-bound grant of open access and the selection of generation and transmission project developers will also be done competitively.

The tariff policy will also bring in guidelines for elimination of regulatory assets, timely payment of Gencos.

Another major reform, proposed for the power sector, is introduction of direct benefit transfer (DBT) of the power tariff subsidy to identified consumers. A pilot project has already been tested. But all States need to be brought on board to allow consumers to buy electricity at market rates, while the government provides subsidy to certain consumers directly into their accounts.

The government will also bring a new electricity bill to incorporate various other reform initiatives for the power sector. (IANS)