FDI limits in defence manufacturing raised from 49% to 74%, says Nirmala Sitharaman

New Delhi: Finance Minister Nirmala Sitharaman on Saturday focused on structural reforms in eight sectors while announcing the fourth tranche of economic stimulus package with an aim to boost growth and create jobs.

The eight sectors are coal, minerals, defence production, civil aviation sector, power distribution companies in Union Territories, social infrastructure, space sector and atomic energy sector.

She said steps taken during the recent past include fast track investment clearance through an empowered group of secretaries.

Project development cell has been set up in each ministry to prepare investable projects and coordinate with investors and central/state government.

States are being ranked on investment attractiveness to compete for new investments, she said adding incentive schemes for the promotion of new champion sectors will be launched in sectors such as solar PV manufacturing and advanced cell battery storage.

As many as 3,376 industrial parts/estates/SEZs in 5 lakh hectares have been mapped on Industrial Information System (IIS). Following are the reforms announced in each sector:


Watch Live: Nirmala Sitharaman unveils fourth tranche of economic package

Sitharaman said the government will introduce commercial mining of coal by the private sector, ending government monopoly on the sector.

It will be done on revenue sharing mechanism instead of the regime of fixed rupee/tonne.

Nearly 50 blocks will be offered for bidding, she said.

This is being done to reduce import of substitutable coal and increase self-reliance in coal production.

Also, the government will invest Rs 50,000 crore for building evacuation infrastructure.

Coal gasification and liquefication will be incentivised through rebate in revenue sharing, she said adding coal bed methane (CBM) production would also be encouraged.

Mineral mining

Sitharaman announced major reforms in the mining of minerals through a seamless composite exploration-cum-production regime.

She said 500 blocks of minerals will be auctioned in a composite exploration-cum-mining-cum-production regime.

Also, a joint auction of bauxite and coal blocks would be done to enhance the aluminium industry's competitiveness by reducing electricity costs.

She said the distinction between captive and non-captive mines will be removed to allow the transfer of mining leases and sale of surplus unused minerals, leading to better efficiency and production.


To boost Make in India in defence production, Sitharaman said FDI limit in defence manufacturing will be hiked to 74 per cent from 49 per cent while some weapons and platforms will be banned for imports.

Items banned for imports can only be purchased from within the country, she said.

Also, there will be indigenisation of some imported spares, she said adding separate budget provisioning for domestic capital procurement will be done. This, she said, will reduce the huge defence import bill.

Ordnance Factory Boards will be corporatised for better management and eventually get listed on the stock market, she said adding corporatisation is not privatisation.

Discoms in UTs

Sitharaman said electricity distribution companies in Union Territories (UTs) will be privatised.

A tariff policy that does not burden consumers with distribution companies' inefficiencies will be guaranteed, she said.

Social infrastructure

Sitharaman announced a hike in viability gap funding (VGF) for development of social infrastructure.

In her fourth tranche of economic stimulus, she said Rs 8,100 crore will be provided as viability gap funding for development of social infrastructure.

She said social infrastructure projects suffer from poor viability. Therefore, the government will enhance the quantum of viability gap funding up to 30 per cent each of the total project cost as VGF by central and state/statutory bodies.

For other sectors, existing VGF support of 20 per cent each from the government of India and state/statutory bodies shall continue.


Sitharaman on Saturday announced giving the private sector a role in India's space programme, including in satellites, launches and space-based services.

For boosting private participation in space activities, government will provide level playing field for private companies in satellites, launches and space-based services.

Also, the government will provide predictable policy and regulatory environment to private players.

Private sector will be allowed to use ISRO facilities and other relevant assets to improve their capacities.

Future projects for planetary exploration and outer space travel would be open for private sector, she said, adding liberal geo-spatial data policy will provide remote sensing data to tech-entrepreneurs.

Atomic energy

India will set up a research reactor in PPP mode for the production of medical isotopes, finance minister said.

This will produce medical isotopes and make available affordable treatment for cancer and other diseases, she said unveiling the fourth tranche of the economic stimulus package.

She said the research reactor in public-private partnership (PPP) mode would use irradiation technology for food preservation - to compliment agricultural reforms and assist farmers.


The finance minister announced easing of restrictions on utilisation of Indian air space, benefiting civil aviation sector by about Rs 1,000 crore per year.

She said only 60 per cent of Indian airspace is freely available. More air space available would reduce travel time and save on fuel.

The finance minister said six more airports will be auctioned for private participation.

Also, an additional investment of Rs 13,000 crore will be made by private players in 12 airports auctioned in first and second rounds.

She also said tax regime for aircraft Maintenance, Repair and Overhaul (MRO) has been rationalised. Aircraft component repair and airframe maintenance are expected to increase from Rs 800 crore to Rs 2,000 crores in three years, she added.

Earlier this week, Prime Minister Narendra Modi announced a cumulative package of Rs 20 lakh crore, nearly 10 per cent of GDP, to provide relief to various segments of the economy battered by the nationwide lockdown in the wake of the coronavirus pandemic.

While this included March 27 announcement of Rs 1.7 lakh crore package of free foodgrain and cash to poor for three months and RBI's Rs 5.6 lakh crore worth of monetary policy since March, the government in three tranches over the last three days announced a cumulative package of Rs 10.73 lakh crore.

The measures announced have largely been about liquidity with negligible extra budget spending.

The three tranches provided for a variety of steps for small businesses, street vendors, farmers and poor migrants as well as shadow banks and electricity distributors, but they have largely been either credit guarantee schemes or new fund creations to be shouldered by banks and financial institutions.

The government cash outgo is limited to a maximum of Rs 18,500 crore on free foodgrain and affordable housing to migrant workers as well as limited tax relief and marginal dole to some companies on employee retiral benefits.

Beginning March 25, India imposed a three-week-long nationwide lockdown, the most far-reaching measure undertaken by any government to curb the spread of the pandemic.

The lockdown, which brought most of the economic activities to a standstill as factories and businesses were shut while rendering thousands temporarily unemployed, has since been extended twice through May 17, with some relaxations to allow resumption of economic activities.

According to estimates, the lockdown may have led to 12.2 crore people losing jobs in April and consumer demand evaporating.

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