Coal , Minerals and Mining

Structural Reforms-Tranche 4 of Economic Package Due To COVID 19

Finance Minister Ms. Nirmala Sitharaman on Saturday 16th May 2020 delivered  tranche 4 of the relief package promised by Hon. Prime Minister. The focus in this series was more on the structural reforms like mining sector, defence, civil aviation & space  and power distribution companies.

*Coal , Minerals and Mining *

1. Policy reforms –commercial mining in coal sector- To improve coal production  resulting in self reliance on domestic coal production and cutting down the coal import. The government will introduce revenue sharing mechanism instead of fixed income/ tonne formula. Entry norms will be liberalised and any party will be able to bid for coal mines and not only the end users. 50 blocks will be put on lease immediately. Further even the partially explored blocks will be up for lease as against the fully explored blocks being eligible for lease.

2. Diversified opportunity in coal sector- Investment of 50k crore to help in this. Out of the above amount 18K crores will be earmarked for investment in mechanized transfer of coal from mines to rail sidings (conveyor belts). This will help very environment as well.  The remainder will help in enhancement of CIL target of 1 Billion coal evacuation plus the production at private coal mines. Further the coal gasification will be incentivised through rebate in revenue sharing.

3. Further policy reforms in coal sector–  Coal bed Methane (CBM) extraction to be auctioned.  Coal mining plan to be shortened, allow automatic 40% increase in annual coal production, concessions to CIL consumers worth 5K crore  would be further measures in liberalised world.

4. Enhancement of private investment in mineral sector –Introduction of seamless composite exploration cum mining cum production regime. 500 blocks to be offered immediately. This will help in reduction in cost of production through cheaper allied minerals being available.

5. Policy reforms in mineral sector–Distinction between captive and non captive mining to be removed, this will results in transfer of mining lease and sale of surplus unused minerals, ultimately better utilisation of mineral resources. Rationalisation of stamp duty will be further help for the bidders

* Defence *

6. Self reliance in Defence production– There will be a notified list of weapons / platforms for ban on import with year wise timelines.  Spares to be produced indigenously, separate budget for domestic capital procurement. This will help in cutting down the huge defence import bill.  Ordinance factories to be made more accountable, responsible and autonomous with the corporatisation of its Board.

7.Policy reforms in defence sector-FDI limits in defence manufacturing under automatic mode to be raised from 49% to 74%.  Time-bound defence procurement process and faster decision making will be ushered to enhance savings.

* Air space and civil aviation *

8. Efficient airspace management–  Only 60% of the Indian airspace is being used effectivity as on date. Governmentwill ease the restrictions on utilisation of the Indian air space so that civilian flying can be more efficient . This will result in lessening of flying time, save Air turbine fuel and also be environment friendly by saving on carbon emission.  Estimated savings of 1K crores annually.x

9. More airports on PPP module -. Public –Private –Partnership (PPP) already has seen 3 airports in India under its modularity.  6 more airports have been identified to start the bidding process on PPP basis immediately. Another 6 airports will be put under PPP in round 3 of this regime. The annual turnover and profits have seen substantial jump, 1k crore instead of 540 crores year before. This is also getting up front payment to AAI and is also expected to yield an additional investment to the tune of 13k crore by the private players.

10. Creating global hub in aircraft Maintenance, repair and overhaul (MRO)- Tax regime for MRO to be rationalised. India to be made into a global hub for MRO, by making it attractive for major engine manufacturers to set up engine repair facilities in India. The market for MRO is expected to increase from 800 cr to 2000 cr in India itself and making India global hub, will help the domestic airlines reduced repair and maintenance costs. Economies to scale will also happen with the synchronisation of civil aviation with defence on the MRO set up.

11. Tariff policy reforms-A policy to be announced soon will focus on Sustainability of the sector, protection of consumer rights and promotion of the industry. A proper mix in the policy will ensure  that consumers are overburdened with hike in tariff due to inefficiency of DISCOMs, standard of services are kept high and load shedding is penalised. To promote industry and improve sustainability the government will  reduce cross subsidy , no regulatory assets, timely payment of power generating companies,  DBT for subsidy etc. are host of policy reforms.

12. Privatisation of Power distribution in Union Territories- The power departments and utilisation of UTs to be privatised soon.  This will lead to better service to consumers an improvement in operational and financials in the field of power distribution.

13. Private Sector in Social infrastructure–  Since many social infrastructure projects suffer from poor viability  the government will enhance the quantum of viability Gap funding (VGF) by up to 30%. This will have a outlay of 8.1K crore rupees. The VGF for the non social infrastructure project will be pegged at 20%.

14. Private participation in space activities- Indian private players have been made as co-travellers in projects including satellites, launches and space based services. Private sector will be allowed to use ISRO facilities and other relevant assets to improve on their own efficiencies.  Future projects such as planet exploration, outer space travel etc. will all be now open for private sector to invest.

15. Atomic Energy related reforms-  Establishment of research reactor on PPP mode  for production of medical isotopes. This will also enable affordable treatment for cancer and other diseases. Link robust start-up  ecosystem to nuclear sector for fostering synergy between research facilities and tech- entrepreneurs.

In short focus in this tranche is majorly on structural reforms with package costing to Government- INR 8100 crore