This Article is From May 16, 2020

10 Takeaways From Nirmala Sitharaman's Announcements For Defence, Aviation

The government has invited private sector investment in space exploration, offering ISRO's facilities and resources to improve private companies' capacities

10 Takeaways From Nirmala Sitharaman's Announcements For Defence, Aviation

Finance Minister Nirmala Sitharaman revealed fourth tranche of announcements today

New Delhi: Finance Minister Nirmala Sitharaman detailed reforms to eight sectors today in the fourth tranche of announcements related to the government's Rs 20 lakh crore package for the coronavirus-hit Indian economy. Among today's big-ticket measures were a 25 per cent increase in FDI in the defence sector and removal of government monopoly on coal mining. On Friday Ms Sitharaman announced 11 measures aimed at boosting agriculture and allied activities. Earlier, the Finance Minister gave MSMEs (micro, small and medium enterprises) Rs 3 lakh crore in collateral-free loans and the middle class received tax benefits.

Here are the top 10 takeaways from today's announcements:

  1. Foreign Direct Investment (FDI) in the defence manufacturing under automatic route will be increased to 74 per cent from the existing 49 per cent. FDI under the automatic route excludes investment by China and other nations that share a border with India, after the government amended the FDI policy last month.

  2. Import of specific weapons/weapons platforms will be banned with year-wise timelines; this list will be developed in consultation with Department of Military Affairs. Manufacture of spare parts for weapons, vehicles and planes will be indigenised, with a separate budget to be maintained for domestic procurement. This will help reduce the defence import bill as well as provide employment, the government said.

  3. Procurement process for defence will be made time-bound and faster decision-making will be encouraged. This will include establishing a project management unit (PMU), realistic setting of qualitative requirements of weapons/platforms and overhaul of trial/testing procedures. The Ordnance Factory Board, which makes weapons for the armed forces, will be corporatised, but not privatised.

  4. Pitching for "efficient management of airspace for civil aviation", the government proposed easing of restrictions on Indian airspace, of which only 60 per cent is freely available for commercial use. Ms Sitharaman said optimal utilisation of airspace would lead to reduction in fuel use and travel time, leading to Rs 1,000 crores per year benefit to an aviation sector left crippled by the coronavirus crisis.

  5. India will become a global hub for aircraft maintenance, repair and overhaul, with value of component repairs and airframe maintenance to increase from Rs 800 crores to Rs 2,000 crores over the next three years. Major engine manufacturers will set up engine repair facilities in coming years, also leading to a convergence with the defence sector. Maintenance cost for airlines will come down, the government said.

  6. Six new airports will be offered for auction by the Airports Authority of India (AAI) under private-public partnership, with six others being listed for a third round of auctions. Additional investment by private players in 12 airports is expected to be around Rs 13,000 crores, the government said.

  7. "Coal is a government monopoly. That government monopoly is being removed," Ms Sitharaman said, adding that coal beds were to be auctioned (50 were to be made available immediately) and Rs 50,000 crores set aside for developing infrastructure to evacuate mined coal. Ms Sitharaman also said the government, keeping in mind environmental concerns, would offer incentives for companies to turn coal into gas. In addition, 500 new mining blocks to be offered through "transparent auction".

  8. Private participation in space exploration and related activities will be encouraged, with private sector companies offered use of ISRO (Indian Space Research Organisation) facilities to improve their capacities. Future space exploration projects - such as planetary travel and outer space travel - will also be opened up to the private sector, the Finance Minuster said. Allied to this, Ms Sitharaman also said the country's geo-spatial data policy would be liberalised, to help entrepreneurs access remote sensing data that could help with weather prediction and agriculture.

  9. Research in atomic energy via public-private partnership will be encouraged as well, Ms Sitharaman said, noting that this would promote production of medical isotopes and irradiation technology for better food preservation. The country's "robust start-up ecosystem" will be linked to the nuclear sector via Technology Development/Incubation Centres to develop better synergy between atomic research and tech-entrepreneurs.

  10. Private sector investment in social infrastructure to be boosted via Rs 8,100 crore Visibility Gap Funding Scheme. The government will enhance quantum of visibility gap funding by up to 30 per cent of total project cost. Projects to be benefitted will be proposed by central ministries, state governments and statutory bodies. 

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