1 INTRODUCTION
In a bid to stimulate and strengthen the Indian economy amidst the nationwide lockdown to contain the coronavirus (Covid - 19) pandemic, the
2. KEY ASPECTS OF THE STRUCTURAL REFORMS TO THE ENERGY AND INFRASTRUCTURE SECTOR
2.1 A brief outline of the relief measures announced for the energy and infrastructure sectors is discussed below.
2.1.1 Coal
The Mineral Laws (Amendment) Act, 2020, promulgated as an ordinance in January, 2020, was passed by the
- To reduce dependency on import of coal and increase self-reliance in coal production, the Central Government proposes to allow private players in the coal sector, and plans to introduce competition, transparency and private sector participation in the coal sector through a revenue sharing mechanism. Further, the Central Government also proposes to liberalise entry norms for private players and offer nearly 50 (fifty) blocks immediately for allocation. The liberalisation of entry norms would see the removal of the eligibility conditions apart from upfront payment with a ceiling. The Central Government proposal envisages setting up an exploration-cum-production regime for partially explored blocks, as opposed to the prevailing provision of auction of only fully-explored coal blocks. This is expected to allow and incentivise private sector participation in exploration. Additionally, the Central Government has decided to grant incentives by means of a rebate in revenue share if the production occurs earlier than scheduled.
The Cabinet Committee on Economic Affairs has approved the adoption of methodology for auction of coal and lignite mines/blocks for sale of coal / lignite on revenue sharing basis, and has increased the tenure of coking coal linkage.
- To create the required infrastructure to support coal mining, the Central Government has also proposed to infuse INR
50,000 Crores (Rupees fifty thousand crores ) for the evacuation ofCoal India Limited's target of 1 billion tonnes of coal production by 2023-24 as well as coal to be produced from private blocks. This investment amount includes INR18,000 Crores (Rupees eighteen thousand crores ) worth of investment in mechanised transfer of coal from mines to railway sidings. The Central Government is also planning to incentivise coal gasification and liquefaction through granting rebate in revenue sharing. Both these measures will help in reducing environmental impact. - The extraction rights of coal bed methane are proposed to be auctioned to private participants from
Coal India Limited's mines. Additionally, the Government also proposes to adopt measures to ease business operations in the coal sector - such as mining plan simplification, which will allow for automatic 40% (forty percent) increase in annual production. - To benefit the consumers of
Coal India Limited , the Central Government also plans to provide relief worth INR5,000 Crore (Rupees five thousand crore ) in relation to concessions in commercial terms. The proposed measures include reduction of reserve price in auctions for non-power consumers, easing of credit terms, and enhancement of the lifting period.
2.1.2 Power
In addition to the measures announced for easing the liquidity pressure on distribution companies ("DISCOMs") on
(a) Introduction of a new tariff policy
The Central Government intends to roll out a new tariff policy ("Tariff Policy") which will address the following:
- Consumer rights : The Tariff Policy will ensure that the inefficiencies faced by DISCOMs do not affect the consumers and that consumers have adequate rights. Further, the Tariff Policy will also prescribe standards of service and associated penalties for the DISCOMs. The Tariff Policy will include provisions to ensure adequate power for consumers and penalise DISCOMs for load-shedding.
- Promotion of the industry : Progressive reduction in cross-subsidies would be a fundamental aspect of the Tariff Policy. Further, it would also provide for time bound grant of open access. In order to guarantee transparency, the selection of generation and transmission project developers would happen on a competitive basis.
- Sustainability of the sector: The Tariff Policy would aim to provide better payment security to the generating companies. Introduction of direct benefit transfer for electricity subsidy and the mandatory usage of smart prepaid meters are also in consideration which will be incorporated in the Tariff Policy. Further, provisions of creation of "regulatory assets" will be excluded from the Tariff Policy.
(b) Privatisation of DISCOMs in union territories
The financial distress faced by DISCOMS and consequent payment delays have had a negative impact on the investment sentiment in the power sector. The bad financial condition of DISCOMs adversely affects their ability to buy power for supply, and the ability to invest in improving the existing distribution infrastructure, consequently impacting electricity distribution quality - past measures such as the Ujwal DISCOM Assurance Yojana have not been very successful in fixing the underlying issues faced by DISCOMs across India.
To undertake structural reforms in functioning of DISCOMs, the
It is anticipated that the privatisation of DISCOMs will be a significant step towards resolving the structural issues faced by the power sector, and is expected to lead to better service to consumers and is also likely to bring about improvement in operational and financial efficiency in power distribution.
2.1.3 Minerals
In relation to the minerals sector, the following measures were announced:
(a) Private investments in the mineral sector
The Central Government has introduced structural reforms aimed at the mineral sector to boost growth, employment and promote use of state of the art technology. These reforms are intended to bring about greater private investments in the sector and are expected to benefit companies involved in the business associated with aluminum, iron ore and limestone.
Primarily, the Central Government has planned to introduce a seamless composite explorationcum-mining-cum-production regime - under the proposed new regime, 500 (five hundred) mining blocks would be offered through an open and transparent auction process. Further, to enhance the competitiveness of the aluminum sector, the Central Government has resolved to conduct joint auctions of bauxite and coal mineral blocks.
(b) Policy reforms
The distinction between captive and non-captive mines is set to be removed to permit the transfer of mining leases and sale of excess unused minerals - this is a very welcome step which is expected to cause better efficiency in mining and production.
2.1.4 Nuclear Energy
Under the Atmanirbhar Bharat Abhiyan, the Centre intends to establish a research reactor under the PPP model for the production of medical isotopes. The Central Government also intends to establish facilities to use irradiation technology for food preservation, which would also be implemented under the PPP model. Additionally, the Central Government intends to set up
2.1.5
The civil aviation sector has been one of the hardest hit sectors by the ongoing coronavirus pandemic and the nationwide lockdown. Consequently, the airline revenues have plummeted and the sector is unable to service its fixed costs and other liabilities. Further, despite falling aviation turbine fuel prices internationally, high taxes on fuel have been a pain point for airlines. As a response to the crisis in the aviation sector, the Central Government has proposed the following measures to revive the sector:
(a) Efficient airspace management
Currently, only 60% (sixty percent) of the Indian air space is available for usage by the civil aviation sector. Consequently, airlines have been forced to ply on longer routes. Since 2014, the
The restrictions on the utilisation of Indian air space are proposed to be eased in order to make civilian flying more efficient. By encouraging efficient air space management for civil aviation, the Central Government intends to bring about optimal utilisation of the airspace and a total benefit of about INR
(b) More airports through PPP
The Central Government intends to develop world-class airports in
Under the first round, which is already underway, the AAI had awarded 3 (three) airports out of 6 (six) bids for operation and maintenance on a PPP basis. In this first round, the annual revenue is expected to be INR
With regard to the second round, the Central Government has identified 6 (six) more airports. The bid process for the second round is slated to commence immediately. The Central Government expects that additional investment by private players will gather around INR
(c) Making India a hub for MRO
The aircraft maintenance, repair and overhaul ("MRO") industry, which forms a core component of the aviation ecosystem, was in focus in the Union Budget.
As a measure to uplift the domestic MRO industry, the Central Government has promised to take steps to position
2.1.6 Social Infrastructure
To boost private sector investments in the social infrastructure projects, the
2.1.7 Apart from the measures across sectors mentioned above, the Central Government also proposes to introduce incentive schemes for promotion of new 'champion sectors' such as solar PV manufacturing and advanced cell battery storage.
Originally published
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