Aatmanirbhar Bharat Abhiyan – Part 4 (Highlights)

“New Horizons of Growth” is the phrase that epitomises FM’s fourth tranche of Atmanirbhar Bharat Abhiyan. Some significant sectoral reforms were announced on Saturday. It covers eight major sectors in India – Coal, Minerals, Defence, Civil Aviation, Space, Power, Social Infrastructure, and Atomic Energy. Most of the measures relate to privatisation to attract more investments, making policy reforms, providing for specific production-linked incentives and subsidies through DBT.

These structural reforms can stir the Indian economy towards a self-reliant economy and increase its competitiveness globally. Although these measures do not seem to have an immediate impact may still help in job creation during the long run. One of the announcements that caught all eyes was the increase in FDI limit for defence production from the present 49% to 74%. 

Below is the complete coverage of the fourth tranche of the ambitious Atmanirbhar Bharat Abhiyan announced by the Union FM on 16th May 2020.

Coal Sector

• Private sector participation to be allowed:

Now, private players in the coal sector can bid for a coal block and sell in the open market. Earlier, only the captive consumers, who did not supply the coal further, could participate. The entry norms are liberalised with no strict eligibility criteria. Still, the interested players must make an upfront payment with a threshold limit. The revenue will be shared between the government and the private participant replacing the fixed rupee per tonne revenue regime. About 50 blocks will be offered to begin with.

• Commercial mining to be introduced:

Further exploration of the partially explored coal mines will be allowed through the auction system, giving opportunities to the private players to participate in the process. They can earn incentives by rebate in revenue sharing if the production schedules are achieved. 

• Rs 50,000 crore to be invested for coal infrastructure development:

The investment will cover for the evacuation of an estimated 1 billion tons of coal production by Coal India Limited (CIL) together with that of the private counterparts. It will also cover for the cost of transporting coal using the conveyor belts from mines to railway sidings through a mechanised system, thereby reducing the environmental side effects.

• Incentives for coal gasification/liquefaction giving rebate while sharing revenue.
• Auction of Coal Bed Methane (CBM) will be organised from the coal mines of CIL.
• Simplification of the mining plan will promote an automatic 40% increase in annual production.
• Rs 5,000 crore relief is offered by way of concessions in commercial terms by CIL to its consumers.

Mineral Sector

• A composite exploration-cum-mining-cum-production system to be introduced that allows seamless integration of multiple processes in the mineral industry. About 500 blocks will be auctioned through a transparent process to begin with.
• Joint auction of bauxite and coal mineral blocks to be launched. The initiative will boost the aluminium industry and reduce electricity costs.
• Captive and non-captive mines will no longer be differentiated since it will encourage a smooth transfer of mining leases and allow the sale of surplus minerals.
• Mining Index to be fixed for different minerals by the Ministry of Mining.
• The stamp duty payable will be rationalised for the purchase of the mining lease.

Also Read: Aatmanirbhar Bharat Abhiyan – Part 3 (Highlights)

Defence Sector

• The Foreign Direct Investment (FDI) limit in the defence production has been increased to 74%. It was raised from the earlier limit of 49% to promote self-reliance through domestic defence manufacturing and ‘Make in India’ initiatives. Further, a list of weapons/platforms shall be banned from imports while the spares will be indigenised to reduce a huge import bill. A separate budget shall be provisioned for domestic capital procurement.
• Union FM has announced the corporatisation of Ordnance Factory Board allowing it to be soon listed on the stock exchange, while still maintaining a 100% government of India stake.
• The defence procurement process to be henceforth time-bound through several initiatives such as setting up of Project Management Units (PMU) to manage contracts, framing a General Staff Qualitative Requirements (GSQRs) of weapons or platforms and undertaking trials and testing procedures.

Civil Aviation Sector

• Annual flying cost savings estimated is Rs 1,000 crore by removing the restrictions on Indian air space utilisation, which currently stands at 60% only. The new changes in airspace management, in turn, reduces the fuel use, saves time and induces a positive impact on the environment.
• Public-Private Partnerships (PPP) for the development of Indian airports:

On recognising the revenue opportunity by its first round of bids for PPP mode for operation and maintaining airports, second and third rounds are proposed. The second round of bidding shall commence shortly for six airports identified by the Airport Authority of India (AAI). At the same time, the third round shall also offer six more. The revenue expected through additional investment in 12 airports via the first two rounds stands at Rs 13,000 crore.

• India to soon be globally accepted as the Maintenance, Repair and Overhaul (MRO) hub:

While recently the GST Council reduced the GST rate on MRO activities to 5%, the government plans to merge the MRO of both the defence and the civil aviation. It will foster economies of scale by reducing the maintenance costs of airlines. Foreign engine manufacturers popular across the globe will set up engine repair facilities in India within a year, as the cost of repairs will rise by 1.5 times in the next three years.

Power Sector

• A new Tariff Policy will soon be released:

DISCOM inefficiencies will be addressed at length. It included standardisation of services across the board and the levy of penalty on DISCOM for load-shedding. It will ensure timely payments to power generation companies (gencos). A Direct Benefit Transfer (DBT) is being proposed for releasing subsidy. At the same time, the installation of smart prepaid meters is a part of the reform.

• Power distribution in Union Territories to be privatised:

The government is checking the feasibility of privatising the power distribution and supply on a pilot basis by starting with the UTs. The power departments and utilities will be privatised that is considered to lead to better customer service and financial efficiency in the distribution.

Social Infrastructure (Hospital & Healthcare) Sector

• Rs 8,100 crore to be invested by increasing the Viability Gap Funding limit:

The government enhanced the quantum of VGF up to 30% from the present 20% of the total project cost in the social infrastructure projects, in each of investment by centre, state and statutory bodies. The projects will be proposed by the central or state governments, including statutory entities and help such healthcare institutions financially sustain in its business. The VGF limit to remain 20% in other sectors.

Space Sector

• Private participation to be allowed in the space sector for the first time:

The activities to be privatised in the future will cover satellites, launches, and space-based services, planetary exploration, outer space travel, etc. The government will frame a policy, pass legislation and set up a suitable regulatory environment to govern these activities. Union FM Nirmala Sitharaman also announced that such private participants could utilise the assets, facilities and capacities of ISRO. It allows level-playing opportunity while exploring new space prospects for the country.

• Liberal geospatial data policy is being framed to provide remote-sensing data to tech-entrepreneurs.

Atomic Energy Sector

• A PPP model to be adopted for establishing research reactors and irradiation facilities:

Atomic energy will be used for encouraging better facilities for medical treatments for cancer patients and food preservation by farmers.

• Technology-cum-incubation centres to be set up across India to allow private research work by India’s tech startups.

There will be a press conference organised on 17th May 2020 at 11 a.m where FM is likely to announce the fifth tranche of relief measures under the Atmanirbhar Bharat Abhiyan.

For any clarifications/feedback on the topic, please contact the writer at annapoorna.m@cleartax.in