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Wednesday, June 03, 2020

Tranche 4: Mining to aviation, Govt pushes reforms it has already pushed

The government announced a hike in FDI limit for automatic approval to 74 per cent from 49 per cent in defence production. At present, FDI is allowed under the automatic route for up to 49 per cent and above 49 per cent through the government route.

Written by Aanchal Magazine , Pranav Mukul , Anil Sasi | New Delhi | Updated: May 17, 2020 10:47:33 am
Finance Minister Nirmala Sitharaman, coronavirus pandemic, economic package, reform proposals, indina express news Nirmala Sitharaman announcing the fourth part of the Covid-19 economic package, in Delhi on Saturday. (Photo: PTI)

Most of the measures for eight sectors announced Saturday under the fourth tranche of Union Finance Minister Nirmala Sitharaman’s Covid economic package were either a new push to old reforms proposals or an aggregation of earlier decisions.

The latter includes: commercial coal mining; coal gasification projects; building a hub for aircraft maintenance, repair and overhaul (MRO); privatisation of airports, and optimisation of Indian airspace.

The renewed push for commercial mining is a proposal over two years old. A way to auction coal mines/blocks for sale of coal under the provisions of the Coal Mines (Special Provisions) Act, 2015, and the Mines and Minerals (Development and Regulation) Act, 1957, it was approved by the government in early 2018 and an order was issued on February 27, 2018. Subsequently, the Coal Ministry said it had identified “15 large coal blocks” for the pilot round of bidding in December that year.

In January this year, the Cabinet cleared an ordinance to introduce the amendments needed to relax conditions in the two laws to open up the sector to commercial mining.

The government said coal gasification and liquefaction will be incentivised through rebate in revenue share but project rollouts have already begun.

A revival of Talcher unit of Fertilizer Corporation of India Limited via a Joint Venture/ Special Purpose Vehicles of nominated PSUs for manufacturing of urea through Coal Gasification route was cleared in December last year.

Rashtriya Chemicals and Fertilizers Limited (RCF), Gas Authority of India Limited (GAIL) and Coal India Limited (CIL) entrusted PDIL to carry out a feasibility report for production of ammonia through coal gasification route.

On the liberalisation announced for other minerals, as per rules, all concessions have to be granted by respective state governments through e-auctions.

While the mineral index appears to be a new proposal, data for mineral-wise, state-wise reserves in leasehold and freehold areas is already available in the voluminous National Mineral Inventory (NMI) compiled by the Indian Bureau of Mines.

The government also announced a hike in FDI limit for automatic approval to 74 per cent from 49 per cent in defence production. At present, FDI is allowed under the automatic route for up to 49 per cent and above 49 per cent through the government route.

The inflows, though, have been dismal. As per data furnished by 79 companies in Defence and Aerospace sector, until December, 2019, FDI inflows of only around Rs 1834 crore were reported in Defence and Aerospace sector after 2014.

The reform announcements in civil aviation were largely covered on May 1 when the PM held a meeting “to review strategies that could help in making India’s Civil Aviation sector more efficient”, where it was decided that the Indian Air Space “should be effectively used in such a manner that the flying time is reduced benefiting the traveling public and also helping the airlines to save costs in close co-operation with the Department of Military Affairs”.

This move, Sitharaman announced Saturday, will result in savings of Rs 1,000 crore annually for the Indian aviation sector, in addition to reducing flight timings.

Also, for generation of more revenue as well as to bring in more efficiency at the airports, the Ministry of Civil Aviation was, in that meeting, asked to expedite the process of handing over six more airports on public-private partnership basis, by commencing the tender process within three months.

The government, however, announced that the Airports Authority of India will receive Rs 2,300 crore in down payment from revenue sharing by the party taking over the privatised airports.

Sitharaman spoke about the plans to make India a hub for aircraft MRO, something that was already announced in the full budget for 2019-20 back in July 2019.

Following this, the Goods and Services Tax (GST) Council, in March, had slashed GST on maintenance repair overhaul (MRO) services for aircraft to 5 per cent from 12 per cent with full input tax credit (ITC) and changed the place of supply for B2B MRO services to the location of recipient.

Asked whether any new measures were being announced for the aircraft MRO sector, Revenue Secretary Ajay Bhushan Pandey said: “In India, we have a very promising civil aviation sector so we want that MRO industry be located in India and as much (as possible) repairs should be done within the country. One problem used to be the competitiveness. the GST rate used to be 18 per cent.the rate had been brought down to 5 per cent with full input-tax credit. That is something that will make the MRO industry very competitive”.

The government announced viability gap funding (VGF) for social infrastructure with an aim to boost private investment – similar measures were outlined in this year’s Budget.

The government had in February announced setting up of VGF window hospitals in the PPP mode to improve coverage under Ayushman Bharat.

The government also announced ranking of industrial parks in 2020-21 along with mapping the land banks on Industrial Information System (IIS).

Though 3,376 industrial parks/estates/SEZs in 5 lakh hectares have been mapped on IIS, this proposal isn’t new.

The Department of Commerce, way back on September 13, 2013, had advised states to ensure that de-notified land of SEZs be utilised for the creation of infrastructure.

As on June 30, 2017, on the request of the Special Economic Zone (SEZ) Developers, the Board of Approval (BoA) on SEZs has approved 81 cases of de-notification of SEZs subject to the refund of all duties and tax benefits and on receipt of ‘No-objection’ from the state concerned given that land is a state subject.

An announcement on the privatisation of discoms (distribution companies) in Union Territories is also an extension of the changes proposed in the draft Electricity Amendment Bill 2020 released last month.

Said D K Srivastava, Chief Policy Advisor, EY India, said, “Once again, it is the supply side which has received emphasis while demand initiatives are still awaited.”

RSS-affiliated Bharatiya Mazdoor Sangh said the government stating that it has no option except privatization is a “show of dearth of ideas on economic revival in times of crisis. “Without any social dialogue,the government is bringing gross changes and is going in the wrong direction. Social dialogue is fundamental to democracy. Government becoming shy of consultation and dialogue with trade unions, social representatives and stakeholders shows lack of confidence in their own ideas and is highly condemnable,” it said. (with Nushaiba Iqbal)

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