Finance minister Nirmala Sitharaman on Saturday announced structural reforms across eight key sectors — coal, minerals, defence, power, civil aviation, space, atomic energy and social infrastructure — while announcing the fourth tranche of a Rs 20 lakh crore relief and stimulus package to help companies and individuals cope with the coronavirus disease (Covid-19) pandemic and the ongoing lockdown to fight its spread.
She also announced a Rs 58,100 crore financial package, largely in the infrastructure space.
The reforms — some very significant such as commercial mining, and an increase in foreign investment limits in defence equipment manufacturing units — follow those in agriculture announced on Friday, and were welcomed by experts . However, they also pointed out that the fiscal cost of the package is a fraction of the overall number .
Also Read: Real estate sector hit, must remedy it: Puri
At a press conference, Sitharaman said the government has raised foreign direct investment (FDI) in defence manufacturing units to 74% from 49% under the automatic route. Other key announcements included introduction of commercial mining in the coal sector, corporatisation of the Ordnance Factory Board, easing of restrictions on the Indian air space and privatisation of six more airports.
She announced fiscal support of Rs 50,000 crore for coal infrastructure development, Rs 8,100 crore viability gap funding (VGF) in social infrastructure development and rationalisation of stamp duty on mining leases for power distribution. The estimated revenue implication on account of the stamp duty forgone could not be immediately ascertained.
“The direct budgetary cost was only Rs 8,100 crore relating to enhanced viability gap funding to support augmenting social infrastructure,” DK Srivastava, chief policy advisor at consultancy firm EY India, said.
He said the fourth tranche was focused more on pending 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.”
Sitharaman also announced the government’s decision to allow private sector companies in the space sector — satellites, launch vehicles and other space-based services. Private entities will also be allowed to use state-run Indian Space Research Organisation’s (Isro) facilities to improve their capacities. Even in the atomic energy field, the government has decided to allow setting up a research reactor in public-private-participation (PPP) for the production of medical isotopes meant for treatment of cancer and other diseases, she said.
In order to encourage domestic manufacturing of defence equipment, she said the government will prepare a list of weapons and platforms that will not be imported and the list will be increasingly expanded to boost local manufacturing.
Sitharaman said six more airports will be bid out for operation and maintenance on PPP mode. She informed that additional investment by private entities in 12 airports, already bid out in the first two rounds, is expected to be around Rs 13,000 crore.
She said the government’s decision to open up air space for commercial flights would help airlines save about Rs 1,000 crore operational costs. Currently, only 60% of domestic airspace is freely available, she added. HT first reported on May 2 that the government was considering this.
So far, the government has unveiled fiscal measures worth about Rs 18.76 lakh core under the Atmanirbhar Bharat Abhiyan (Self-reliant India Initiative). Prime Minister Narendra Modi on May 12 said that the government will announce economic revival packages worth Rs 20 lakh crore under the initiative. This includes Rs 1.7 lakh crore welfare package announced on March 26 under the Pradhan Mantri Garib Kalyan Yojana (PMGKY) and subsequent monetary measures announced by the Reserve Bank of India (RBI) since March 27. A Credit Suisse equity research report of May 13 estimated the combined value of fiscal and monetary actions taken in March at around Rs 7.5 lakh crore.
Industry, however, expressed concerns about sectors badly battered by over 50-day long lockdown to check the spread of Covid-19. Federation of Indian Chamber of Commerce and Industry (Ficci) president Sangita Reddy said, “While Ficci is fully appreciative of the measures announced today (Saturday), we would like to reiterate the need to support Covid-19 impacted sectors such as tourism, civil aviation, hospitals, etc. We really look forward to some economic measures to help support these sectors. We hope that in the economic package to be announced tomorrow (Sunday), these areas will be looked at by the finance minister.”