SOURCE: TNN
The government on Saturday announced a major opening up of defence production, power, space and coal and mining sectors for private participation as part of finance minister Nirmala Sitharaman’s fourth set of announcements aimed at spurring investment and buffering the economy against the Covid-19 shock.
Though the reform moves do not immediately address concerns over the need to spur demand, Sitharaman said steps to provide funds to MSMEs as well as tax refunds, which is money that belongs to taxpayers, and deferred payment will leave more money in the hands of individuals. Saturday’s measures were intended to signal India’s readiness to pro-actively seek investment and instil confidence in business circles.
“I am not saying I have done everything possible, we are trying to help people so that they can have money in their hands now and that is definitely going to help in boosting demand,” she told reporters adding that the measures being announced by the government will create a better environment for investment and enable companies to get back to business as soon as the lockdown is relaxed.
The reforms across several sectors, led by defence, have been previously discussed but the severe stress in the economy seems to have provided the goad to reconsider the reluctance to let in the private sector even in areas like space development. In a major boost for the ‘Make in India’ initiative, the government is now issuing a list of items where imports will be banned and indigenisation of spares promoted. Sitharaman said this list will be expanded every year.
At the same time, to address concerns related to inadequate foreign-holding, the government has decided to increase the FDI limit for defence production under the automatic route to 74%, from the current 49%.
Along with the defence sector, the government also decided to push privatisation of power distribution companies after a gap of over a decade and said discoms in Union Territories will be privatised, an experiment that has previously helped consumers in Delhi. The move will open lucrative markets such as Chandigarh and Pondicherry, with the possibility of power distribution in Jammu and Kashmir also being run by the private sector. But to ensure that consumers are not short-changed, the FM said the step will come with the new tariff policy, which will ensure that inefficiencies of discoms do not burden consumers.
The move to privatise the discoms again signals the Modi administration’s efforts to get the government out of areas where it should not operate. While Air India and BPCL privatisation initiatives were steps in this direction, Covid-19 has impacted the initiative and the discom move is unlikely to see aggressive bidding, immediately.
Nevertheless, the FM’s announcement to auction blocks for coal and other mining were again meant to attract private participation in areas which have hitherto been dominated by Coal India and other public sector entities. Some of the steps in mining and coal sector were a reiteration of earlier announcements although the government indicated that it will provide a fresh impetus to coal gassificaiton and coalbed methane extraction.
A big change in policy came in the space sector, where the government for the first time announced its intent to allow the private sector to be a co-partner in future planetary exploration and outer space travel initiatives such as Chandrayaan and Mars mission. This came with the promise to provide a level-playing field for private companies in satellites, launches and space-based services.
https://defencenewsofindia.com/govt-opens-doors-to-greater-private-role-in-defence-power-space/
