FM is giving reform pills to a sick economy with privatization, policy adjustments

Union Finance Minister Nirmala Sitaraman continued to make regular statements and launched on Saturday a series of measures as part of the Rs. 20 trillion stimulus package to help businesses cope with the stress of the blockade, although many of the measures are major long-term reforms that were embodied in Kovid’s agreement.

In the last statement, the government focused on structural reforms in sectors such as coal, minerals, aerospace, defence, space, energy and social infrastructure. For example, the ceiling for foreign direct investment in arms production was raised from 49% to 74%, imports of certain military equipment and weapon systems were banned, and electricity distribution in the Allied territories was privatised.

M. Seetharaman also said the centre would end the monopoly on coal mining by auctioning 50 blocks, Rs. 50,000 would encourage investment in coal infrastructure, widen the gap in the financing of social infrastructure and allow greater private sector participation in the aerospace industry.

Important sectors such as coal, minerals, defence, aerospace and nuclear energy were featured in FM commercials today (Saturday). The measures and reforms announced will create many business opportunities and promote economic change, Maudie tweeted after Seetharaman’s press briefing.

IT’S STILL READABLE: Public authorities end the monopoly on coal; open up the mining sector to private operators

However, in addition to the measures mentioned above, many statements by the Minister of Finance have been made, either earlier or in the context of the long-awaited reforms.

Analysts also agreed that these measures were essentially medium- and long-term and would not respond to the demand crisis caused by the pandemic and the national blockade in the seventh week of the crisis.

The government seems to be counting on this crisis to accelerate the industrial reforms that might otherwise be thwarted. Strengthening the role of the private sector in the coal, mining, defence, energy and aerospace sectors is part of the medium-term efficiency reforms. The proposal to restrict imports of specific defence equipment in order to ensure self-sufficiency was long overdue. It’s also on the supply side, although demand-side initiatives are still expected, said D.K. Shrivastava, Senior Policy Advisor, East Coast India.

IT’S STILL READABLE: An electricity distribution company is being privatised on the territory of the Union.

FM indicates a reform pill for an economy sick with privatization, politician adjusts

Madan Sabnavis, chief economist at CARE Ratings: These measures are of a medium-term nature and are not linked to the provision of assistance in response to the pandemic. They are therefore more in line with the economic reforms announced on several occasions and do not cover the specific sectors mentioned by Kovid which could be included in the next round.

Sabnavis and Srivastava said the size of Saturday’s package was Rs.62,000 to Rs.63,000. The center will introduce commercial mining into the coal sector, Sitaraman said.

All that time there was a state monopoly on coal mining. It’s going to stop, she said.

IT’S STILL READABLE: Social infrastructure : An increase in funding due to lack of resources could facilitate the provision of 45 km of hospital beds.

The Minister said that about 50 blocks of coal will be offered to the private sector, that the centre will move to the revenue-sharing mechanism and that Rs. 50,000 will be invested in infrastructure development in the coal sector.

However, the proposal to offer blocks of coal to private operators and the auctioning of rights to extract methane from coal beds, which she also mentioned, was approved by the Cabinet of EU Ministers in January.

With regard to the minerals sector, the Minister has stated that 500 blocks will be auctioned. This requires an amendment to the Minerals and Metals Act (development and regulation).

IT’S STILL READABLE: Launch bay: The Centre opens up the space sector to the growth of private actors

She said the Centre will establish a seamless regime for the exploration and production of composite materials and distinguish between captured and non-captured mines.

The Centre will notify the list of weapons/platforms whose importation will be banned, a separate budget will be allocated for the purchase of national assets, the quality requirements of the General Staff weapons/platforms will be simplified and the Equipment Manufacturers Council will be co-opted, Sitaraman said.

However, the last proposal was announced by the Ministry of Defence in November last year.

The most important step in this sector was the increase in the FDI limit in defence production from 49% in automatic mode to 74%.

Safety conditions and other tolerances remain in place, she said.

For the aviation sector, the minister said: Only 60% of Indian airspace is freely accessible. Restrictions on the use of Indian airspace will be relaxed to make civil aviation more efficient.

According to Sitaraman, six more airports will be tendered out for operation and maintenance under the public-private partnership (PPP) model.

She explained how India can become a centre for aircraft maintenance, repair and overhaul. However, the initiative was announced in the 2019-2020 budget. Proposals for airspace management and the privatisation of six airports in Phase 3 have also been opened to the public and have been announced by the Ministry of Civil Aviation.

Today’s announcement has indeed given impetus to the civil aviation sector affected by the pandemic, but no mention of an immediate rescue can provoke a mixed response from the sector. While easing airspace constraints in the long term would certainly bring efficiency and some relief to airlines in the near future, more intervention may be needed if the airline industry is not quickly on the road to recovery, said Ajay Sonny, a partner of Cyril Amarhand Mangaldas.

The center will privatize the distribution of electricity in the territory of the Union, Sitarman said.

The Minister noted that the centre will increase funding for viable projects to 30 percent of the cost of social infrastructure projects, such as hospitals and schools. This increase will cost Rs 8,100, which seems to be the only direct cost announced on Saturday.

According to Sitaraman, the private sector will benefit from a level playing field in the space sector, while private space companies will be allowed to use the facilities and assets of the Indian Space Research Organisation.

In the field of nuclear energy, the centre will build a PPP research reactor for the production of medical isotopes and take steps to connect India’s robust source ecosystem with the nuclear sector, Sitaraman said.

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