Govt speeding up industrial reforms; private sector to enhance operational efficiency: Experts

New Delhi, May 16

The government was fast-tracking industrial reforms and increased role of the private sector in coal, minerals, defence, power, aviation and space sectors was aimed at overall efficiency enhancement, experts said.

EY India Chief Policy Adviser D K Srivastava said the fourth instalment of Finance Minister Nirmala Sitharaman’s announcement contained a stimulus of Rs 63,100 crore, of which the direct budgetary cost was only Rs 8,100 crore relating to enhanced viability gap funding to support augmenting social infrastructure.

“In this tranche, the focus was more on industrial reforms rather than providing stimulus. The government seems to be relying on this crisis to fast-track industrial reforms which might otherwise face resistance. The enhanced role of the private sector in coal, minerals, defence, energy, aviation and space sectors is an element of medium-term efficiency-improving reforms. Once again, it is the supply side which has received emphasis while demand initiatives are still awaited,” he said.

In the fourth tranche of the Rs 20 lakh crore economic package, Finance Minister Nirmala Sitharaman, on Saturday, announced bold reforms aimed at boosting the sagging economy by easing foreign investment limit in defence manufacturing, privatisation of six more airports, opening up of more air space and allowing private sector in commercial coal mining.

Finance Minister Nirmala Sitharaman also announced allowing commercial mining of coal by the private sector, ending government monopoly in the sector. She said commercial mining would be done on revenue sharing mechanism which would help more coal availability at market prices.

Shardul Amarchand Mangaldas & Co, Partner Arvind Sharma said the government recently permitted 100 per cent FDI in commercial coal mining and, pursuant to the recent announcement, the auction process for commercial coal mining is to be kickstarted.

“This is a good measure and should ensure better availability of coal. We will also see a lot of foreign investment in this sector as global players will also participate in these auctions. Since the auction seems to be based on revenue share and not a fixed price model, we should see better participation,” he said.

Deloitte India Partner Leader (Energy, Resources and Industrial Products) Debasish Mishra said the government has announced some good reform measures in the mining sector today.

Single licensing policy, removal of captive non-captive distinction, revenue-sharing model and stamp duty rationalisation had been the demand of the industry for a long time, Mishra said.

EY India Partner and National Leader (Metals & Mining) Saurabh Bhatnagar said the introduction of competition, transparency and private sector participation in the coal Sector would automatically build transparency of mine valuations, force rigorous mine planning and compliance, invite investments for enhancing operational efficiency to justify the bids made at the time of mine acquisition.

“Elimination of distinction between captive mines and non-captive will ensure a level playing field for players in the integrated metals space. All firms will now compete through measures of efficiency and deploying best practices for running a mining business. These were much-needed reforms in the mining sector as India is a mineral-rich country and any sectoral reforms to attract investment which adds to India's GDP through this sector and save precious foreign exchange are welcome,” Bhatnagar added.

KPMG in India Partner and National Head, Energy and Natural Resources Anish De said on power, the past two decades of tepid results despite corporatisation and regulation had clearly indicated that the state-owned enterprises have been unable to deliver the efficiency, customer service and governance standards required from a modern power sector.

“In times of disruption like the present COVID-19 pandemic, it ends up posing a huge additional burden on the beleaguered state exchequers. Private ownership should bring in greater efficiency and better governance and help address some of the deep-seated problems of the sector. The Union Territories are a good place to start, though it should be propagated further into the state-owned discoms,” De added.

PwC India Leader (Power and Utilities) Sambitosh Mohapatra privatisation of power distribution in Union Territories will assist in generating private sector appetite amongst Indian and international investors.

Grant Thornton India CEO Vishesh C Chandiok said the increase in FDI in defence from 49 per cent to 74 per cent under automatic route and private sector participation in coal mining were path-breaking reforms, which have the potential to act as a multiplier for several sectors. PTI

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