Re-purposed old and existing initiatives mixed with new elements made up Tranche IV of Union Finance Minister Nirmala Sitharaman’s Rs 20 lakh crore economic stimulus for the economy. With the FM refusing to tie them to a timeline, how these measures will revive the economy in the midst of the Covid-19 pandemic remains a question.
“Announcements made today would push growth later on if pursued and implemented successfully. It will not bring immediate respite,” says DK Joshi, Chief Economist at Crisil.
Meanwhile, the biggest beneficiaries of Tranche IV will be business groups such as Adani, Vedanta, Mahindra, Kalyani, Godrej and Anil Ambani’s Reliance Group, besides companies like Tata Power, JSW Steel, GVK, Hindalco and GMR.
The biggest initiative was an approval for private sector mining in coal sector. It’s a decision that was taken by the Cabinet in February 2018. The decision to open up commercial coal mining for private sector was hailed as the most ambitious coal sector reform since the nationalisation of this sector in 1973 at that time. Hence Saturday’s announcement, even with additional allocation of Rs 50,000 crore towards coal evacuation infrastructure, isn’t a spanking new announcement.
The second one, self reliance in defence production and corporatisation of Ordinance Factory Board, was announced last year. Much before Covid-19 became a discussion point, the Ministry of Defence had announced its plans to corporatise the Ordinance Board, though the decision got delayed due to opposition from employee unions.
It is an idea in discussion for several years now. If indigenous defence production in the private sector has not taken off the way the government wants, it is not because there wasn’t any policy push before, but for lack of a concerted effort at local manufacturing.
The decision of ‘more’ world class airports under PPPs is not a fresh idea either. India has already announced privatisation of 12 airports, six of which have already been bid out. Adani group has already emerged as the highest bidder for at least 3 of them.
Space technology, another area where the minister announced a slew of reform measures will also qualify only as work in progress as PPPs have been driving India’s space mission in terms of indigenous component manufacturing for satellites and launch vehicles for a long time.
Re-purposed measures were also mixed with some new announcements. For instance, after mobile phones and electronic goods, the government has identified new items such as Solar PV and advanced cell battery storage which would be promoted in a big way. An incentive scheme would be worked out for promotion of these New Champion Sectors.
To facilitate foreign investment into the country especially in the manufacturing sector, Empowered Group of Secretaries (EGoS) would be formed to fast-track these proposals and hand-hold them in setting up units across various states. The states would ensure smooth transfer of land and a slew of concessions to attract them.
A Project Development Cell in each ministry would coordinate with investors and state governments.
As most of the announcements this week have been a mix of indirect support through bank loans and policy reforms which would not bring instant relief for the people, opposition parties have been quick to identify old wine in new bottle.
Even independent policy experts maintain that the actual additional spending as a result of the series of fiscal stimulus announcement, under the newly-coined Aatm Nirbhar Bharat, would be much less than Rs 20 lakh crore or 10% of GDP.
Meanwhile, as and when the initiatives do come into effect, private companies like Adani Power, Tata Power, JSW Energy and Reliance Power will lock horns in the bid for thermal coal blocks that will be auctioned as part of the package. They are expected to auction some of the coking coal mines also for steel companies.
All together, the plan envisages auction of 50 mines. The government wants to club the auctioning of bauxite and thermal coal mines so that aluminium makers can bid for them together. This will help companies like Hindalco and Vedanta Aluminium. About 500 minerals mining blocks will also be offered as part of the package.
The government also plans to remove the distinction between captive and non-captive mines.
It means existing capitve users like Tata Power, Reliance Power and Tata Steel will have to bid at regular intervals to retain the coal mining license with them.
Foreign Direct Investment (FDI) in defence production has been increased to 74 per cent from 49 per cent by the government. Indian companies had earlier formed many joint ventures with foreign defence manufacturers, but most failed to take up big projects as the foreign partner wanted majority stake because of their intellectual capital involved in the projects. In power distribution, the government wants to privatise their business in union territories. Adani and Tata Power are the major players in the segment.
Adani bought the Mumbai distribution business of Reliance Infrastructure in 2017 and has been ramping up the market share. Last week, Anil Ambani group put its Delhi power distribution business up for sale.
INDUSTRY BODIES HAIL MOVES
Reacting to a bouquet of relief for various sectors, Director General of the Federation of Indian Chambers of Commerce and Industry (FICCI), Dilip Chenoy, told a news agency, “Announcements by Finance Minister are significant and can have dramatic change for the future of India. They’re focusing on simplifying processes, attracting investment, creating jobs and improving productivity.”
“The sectors like Atomic Energy and Space, which were mentioned by Finance Minister, are amongst the ones where India can emerge as a global leader and really be futurefocused,” Chandrajit Banerjee, Director General, Confederation of Indian Industry (CII) was quoted as saying by a news agency.
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