Big-bang reforms II: Govt opens up coal mining, defence

The Narendra Modi government is not letting the Covid-19 crisis go waste. A day after it opened up agriculture to ensure higher earnings for the farmer, it brought forth the much-needed structural reforms as part of the Rs 20-lakh crore stimulus package.

Finance Minister Nirmala Sitharaman, in her fourth tranche of the stimulus package today, allowed commercial mining in the coal sector and increase of foreign direct investment (FDI) from 49 per cent to 74 per cent in defence production through the automatic route. Besides, coal and defence sectors, non-coal mining and civil aviation too got a huge boost to make India more self-reliant.

“The structural reforms being announced today will impact those sectors which are new horizons of growth, unleashing new investment, boosting production and creating jobs,” Sitharaman said while addressing the media.

<strong>Coal</strong>

Addressing the media, Sitharaman said that coal will not remain a monopoly of the government. Private firms can now bid for a coal block and sell in the open market, she said, adding that about 50 blocks will be put up for bidding. In a significant step, foreign companies will also be given a go-ahead to invest up to 74 per cent in defence manufacturing under the automatic route.

India, despite being the among the largest coal producers, faces a huge shortage in its supply every year, leading to an increase in imports, thanks to faulty mining policy and the subsequent cancellation of coal block allocations in 2014 following the Comptroller Auditor General’s (CAG) report.

These reforms in the mining sector will attract investments while boosting growth and jobs.

<strong>Defence FDI</strong>

Sitharaman said that weapons that can be made at home will not be imported. “We will notify a list of weapons and platforms for ban on their imports and fix deadlines to do it.” This will boost self-reliance on defence manufacturing and every year the list will be increased, she said.

She further said that the Ordnance Factory Board (OFB) that manufactures weapons for the military will be made more professional. “We will work to improve autonomy, accountability and efficiency of OFB by corporatization and not privatization,” she said.

<strong>Aviation</strong>

The Finance Minister said that current restrictions on utilization of the Indian airspace will be eased significantly. As of now, only 60 per cent is freely available. This move is expected to lead to a total benefit of about Rs 1,000 crore per year in the aviation sector. Easing of restrictions will also reduce fuel use and flying time.

Sitharaman also said that India will now become a global hub for aircraft Maintenance, Repair and Overhaul (MRO). “The tax regime for the MRO ecosystem has been rationalized. Aircraft component repairs and airframe maintenance will increase from Rs 800 crore to Rs 2,000 crore in three years,” she said.

“The fourth installment of Finance Minister’s announcement contained a stimulus of Rs 63,100 crore of which the direct budgetary cost was only Rs 8,100 crore relating to enhanced viability gap funding to support augmenting 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,” D.K. Srivastava, Chief Policy Advisor, EY India said..