Experts Welcome Major Reforms in Defence Production, Coal, Mining, Airports
India Inc and sector experts have welcomed the slew of measures announced by the Finance minister Nirmala Sitharaman on May 16 as part of the Rs 20 lakh crore economic stimulus package, as shared by the Prime Minister Narendra Modi during his May 12 address to the nation. It comprised of administrative and regulatory reforms across 8 sectors - Coal, Minerals, Defence Production, Airspace management, MROs, Power distribution companies, Space sectors and Atomic energy.
Sambitosh Mohapatra, Leader – Power and Utilities, PwC India. “Power distribution in UTs to be privatised is an exciting step ahead. These are smaller and manageable entities. It will assist in generating private sector appetite amongst Indian and international investors; various PPP models will be tested; and quick demonstration of possible efficiency improvement and customer engagement models. It will provide confidence to larger states and utilities to undertake privatization based on improvements achieved here.”
D.K. Srivastava, Chief Policy Advisor, EY India, said, “The fourth instalment of Finance Minister’s announcement contained a stimulus of Rs 63,100 crore of which the direct budgetary cost was only INR 8,100 crores 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.”
Vishesh C Chandiok, CEO, Grant Thornton India termed the increase in FDI in defense and private sector participation in coal mining as "path-breaking reforms", which, he said would have the potential to act as a multiplier for several sectors. "We need to see more details on the tax simplification, which will help in making India an MRO hub. I would have also liked to hear more relief measures for the civil aviation sector to keep it alive post-COVID-19,” Chandiok said.
Devraj Singh, Associate Partner – Tax & Regulatory Services, EY India, said, “Defence sector has a huge potential to attract FDI but with current FDI limit of 49%, the overseas investors were not comfortable sharing their technology without having the majority stake in the Indian JV company. This was one of the reasons why the sector despite having the huge potential, could not attract many foreign investors.”
Rajesh Ivaturi, Partner – Power & Utilities sector, EY India said: “Privatisation of distribution sector would bring in significant efficiency gains, the state governments too must take a cue and extend this to all key metros so that the quality of power supply goes up significantly.”
Announcing the details, the finance minister Nirmala Sitharaman said that the government has decided to increase the foreign direct investment limit in defence—from 49 per cent to 74 per cent. In coal mining sector, the government said it is opening it up for private sector participation. In the power sector, the FM said that power distribution in the Union Territories will be privatized.
Restrictions on the utilisation of Indian air space will also be eased so that civilian flying becomes more efficient, the FM said. "This will bring a total benefit of Rs 1,000 crore per year for the aviation sector," she said. Staying with aviation, the FM also announced that six more airports will be auctioned for private participation entailing an additional investment of Rs 13,000 crore to be made by the private players for the 12 airports that came up for auction in the 1st and 2nd round. In the 3rd round, 6 more airports will be auctioned, the FM said. The Airport Authority of India (AAI) would get a down payment of Rs 2300 crore. "This will bring in optimal utilisation of airspace and reduce fuel costs and flying time," she said.
The FM also announced steps required to be taken for the commissioning of an Industrial Information System with GIS based mapping of land parcels in over 3,776 industrial parks across the country.
Arindam Guha, Partner, Leader – Government and Public Services, Deloitte India, while commenting on 4th tranche of economic stimulus package welcomed the fast-track clearance mechanism through an empowered group of Secretaries. “Empowered group of secretaries for fast track clearance is a welcome step as it is likely to facilitate “single window clearance” for approvals involving more than one Ministry or agency like Central Pollution Control Board, Ministry of Environment and Forests etc." However, Guha said since many of the approvals needed would need to be taken at the State level, "it remains to be seen how this mechanism is extended in a seamless manner to cover States".
“The announcement around scheme for upgrade of industrial infrastructure on challenge mode is interesting since it may enable prioritization of clusters / parks with lower land and utility prices thereby increasing overall industry competitiveness,” he added.
