Signature Sponsor
India: Government Unleashes Major Privatization Reforms for Coal, Defense, Power Distribution and Space



May 18, 2020 - Union Finance Minister Nirmala Sitharaman said crucial sectors such as coal production and exploration, defense production and space would see an increased participation from private entities.

Spelling out the government’s fourth tranche of initiatives towards achieving Prime Minister Narendra Modi’s vision of ‘Atmanirbhar Bharat’, Union Finance Minister Nirmala Sitharaman on Saturday announced significant structural reforms in eight sectors of the economy — coal, minerals, defense production, aviation, power distribution in Union territories, space and atomic energy.


Union Finance Minister Nirmala Sitharaman addressing a press conference on Saturday

Addressing her fourth and the second-last press conference, Sitharaman said crucial sectors such as coal production and exploration, defense production and space would see an increased participation from private entities.

Coal Sector

In the realm of coal exploration, the government has decided to liberalize the entry norms for private entities, which would mean that any interested party could bid for a coal block and sell it in the open market. The minister said that the government would do away with all the eligibility conditions at the time of bidding for a coal block, except requiring an “upfront payment with a ceiling.”

Nearly 50 coal blocks would be offered to private players immediately, revealed Sitharaman.

She further said that Rs 50,000 crore would be spent by Centre in creating ‘coal evacuation’ infrastructure, which would expedite the transport of mined product to the destination.

Defense Sector

In defense production, Sitharaman revealed that the government would raise the foreign direct investment (FDI) limit in the sector from current 49 percent to 74 percent. Further, the government would also work towards corporatizing the ordnance factory boards. “Corporatizing doesn’t amount to privatization,” added Sitharaman.

In a bid to boost indigenous production of defence products and gave an impetus to Make in India, Sitharaman said that the government was in a process of notifying a list of weapons/platforms for an import ban with year-wise timelines.

These decisions would also help in reducing huge import bills, the finance minister said.

Privatization of Electricity

In another announcement that could have an effect on electricity charges in the union territories, Union Finance Minister Nirmala Sitharaman announced on Saturday that power departments and utilities in all the centrally administered territories would be privatized.

Sitharaman said that the proposed move would lead to better service to consumers and improvement in operational and financial efficiency in distribution.

The finance minister said that decision was guided by 'sub-optimal' utilization of performance of power distribution and supply'.

She said that the move to that effect would provide a model for emulation by other utilities across the country, in what could be an indicator of what's in the pipeline for utilities in other states as well.

Sitharaman said that the privation reform was in line with the tariff policy reforms and would help in enhancing consumer rights, promote industry and improve the overall sustainability of the sector.
Space Sector

Sitharaman also announced the opening up of the space exploration sector for private players. Till date, the government-run Indian Space Research Organisation (ISRO) has held a monopoly on all activities concerning space exploration and satellite launches.

The Indian private sector will be a co-traveller in India's space sector journey, said Sitharaman, while announcing a series of structural reforms in eight crucial areas of the economy. The Union Finance Minister was addressing her fourth press conference in as many days, as a follow-up towards realizing Prime Minister Narendra Modi's vision of 'atmanirbhar Bharat', which was spelled out in his video address on May 12.

Sitharaman said that the reforms in the space sector will provide a level-playing field for private companies in satellite launches and space-based services.

She said that the private sector would be allowed to use ISRO facilities and other assets to improve their capacities. Stating that the government would provide predictable policy and regulatory environment to private players, Sitharaman also disclosed that future projects for planetary exploration and outer space travel among others would be opened up for private entities.