FM Sitharaman hikes FDI Limits for Defence Equipment to 74% from 49%, Allows Commercial mining of Coal

Finance Minister Nirmala Sitharaman in her address to the press in New Delhi today announced the fourth tranche of Rs 20 lakh crore economic package that was announced by Prime Minister earlier in the week.

At the start of the conference, FM Sitharaman said that the fourth tranche will focus on agriculture structural reforms in the sectors that are going to be the new horizon for growth. She said that she will be talking about eight sectors where reforms will be held. The eight sectors include coal, minerals, defence production, air space management, airports & MRO, power distribution companies in Union Territories, space sector, and atomic energy.

Highlights of the Press Conference

Coal Sector

Commercial mining will be allowed in the Coal Sector. The state monopoly on coal will be removed and private players will be allowed to participate. This will be done based on a revenue-sharing mechanism instead of the regime of a fixed rupee per tonne. Any party can bid for a coal block and sell in the open market. This will bring coal on market prices. Liberalized people will be allowed to participate and incentives to be provided who produce before the deadline. Rs 50,000 crore allotted for coal creating evacuation infrastructure for coal. Coal bed methane extraction will be auctioned. Nearly 50 coal blocks will be available for auction in the near future. Upfront payment ceiling will be applicable. For gasification, new allotments will be done for new diversified investments.

Mineral Sector

Private investments will be enhanced in the mineral sectors. Reforms will be introduced to bring a seamless composite mining-cum-exploration-cum-production regime in the mineral sector. 500 mining blocks will be allocated for this and joint auction will take place. We will introduce a joint auction of bauxite and coal mineral blocks to enhance the aluminium industry's competitiveness. It will help in saving electricity, boost employment, and develop state of the art technology. The distinction between captive and non-captive mines will be removed to allow the transfer of mining leases and sale of surplus unused minerals, leading to better efficiency in mining and production. A mineral index to be made and stamp duty will be rationalized.

Defence Sector

A restriction will be put on import of certain weapons and there is a need to be self-reliant in the defence sector. High tech equipment can be imported but some of the weapons can be made in India. Certain weapons to be restricted from imports and will be bought only from India. In addition, a separate budget will be given for domestic capital procurement of weapons, so that the armed forces can reduce the import bill. Ordinance factory board will be corporatized and will be listed in stock markets. FM Sitharaman clarified that listing doesn't mean that it will be privatized.

Apart from this, the FDI limit in defence manufacturing under the automatic route has been raised to 74 per cent from 49 per cent. Also, time-bound defence procurement process and faster decision making will be ushered. And, contract management in defence management will be supported by a project management unit that will be created. Overhauling trial and testing procedures will also be available.

Civil Aviation

Steps will be taken for optimum utilization of the airspace as only about 60 per cent of airspace is freely available. Restrictions on the utilisation of the India airspace will be eased so that civilian flying becomes more efficient. This optimum utilisation of the airspace will reduce air distance and fuel consumption, which is necessary. This is likely to reduce the flying cost by Rs 1,000 crore.

Airports and Maintenance, Repair and Overhaul (MRO)

AAI has awarded 3 airports out of 6 for operation and maintenance on PPP basis and six more airports will be put on auction in the second round bid that will commence soon.

India has the capacity - workforce and skills - and it can be a hub for many flights heading to South-East Asia and westwards. The tax regime for MRO ecosystem has been rationalized. Convergence between the defence sector and the civil MROs will be established to create economies of scale. This will help in bringing down the maintenance costs for airlines. Aviation sector to get the benefit of Rs 800 crore to Rs 2,000 crore from aircraft maintenance and airframe repair in the country from MRO hub.

Power Distribution Companies in Union Territories (UTs)

Power distribution companies in Union Territories will be privatised. Tariff will be applicable according to the government's guidelines. Consumer rights, promotion of industries and sustainability of sector will be the major salient points of the new tariff policy. Privatisation of the Discoms will bring stability in the power sector. Will help timely payment too

Space Activities

Private participation in space activities will be boosted and a level field will be created for them as the government will allow the private space tech companies can now use the facilities of ISRO. The government has aimed to make predictable policy for private players to make them co-travellers for Atma Nirbhar Bharat. Future projects for planetary exploration, outer space travel etc to be opened for the private sector and liberal geospatial data policy for providing remote-sensing data to tech entrepreneurs

Atomic energy

A research reactor in the PPP model for the production of medical isotopes will be established. India has earned a lot of goodwill from countries where India has exported them. PPP mode facility will be provided for irradiation technology for food preservation to compliment agriculture reforms and assist farmers. India's Startup ecosystem to be linked with the nuclear sector - technology development cum incubation centres will be set up for fostering synergy between research facilities and tech entrepreneurs.

Viability gap funding in social infrastructure increased: Government has increased the viability gap funding in the social infrastructure by increasing the quantum to 30 per cent from 20 per cent. It has an outlay of Rs 8,100 crore.

Sitharaman has already announced several measures in the last three days to boost the economy and bring relief to the people facing hardship due to Coronavirus outbreak in the country. FM Sitharaman held her first press conference and shared details of the stimulus package on Wednesday and the second and third announcement of Centre's economic package was made on Thursday and Friday respectively.

In her first tranche, Finance Minister Nirmala Sitharaman had announced measures for relief and credit support related to businesses, especially Micro, Small and Medium Enterprises (MSMEs) to support Indian Economy's fight against COVID-19.

In her second tranche, FM Sitharaman had announced short term and long-term measures for supporting the poor, including migrants, farmers, tiny businesses and street vendors. She had also announced that the government will launch a scheme for migrant workers and urban poor to provide ease of living at an affordable rent.

The third tranche had taken care of the interests of the toiling Ann-Datta of the country- the farmers and those working in the fields. The sectors focused have been agriculture, fisheries, animal husbandry, Bee Culture, Medicinal plants and supply chain.

What did she announce in the third Tranche?

Agriculture infrastructure fund of Rs 1 lakh crore.

Scheme for micro food enterprises of Rs 10,000 crore.

Rs 20,000 crore allocation for fisheries.

Rs 15,000 crore for animal husbandry infrastructure.

Amendment to the Essential Commodities Act.