Aatma Nirbhar Bharat: Reforms in power sector

Reading time: 8-10 minutes.

The Indian government announced a special economic package worth 20 lakh crore rupees which amounts to about 10% of the country’s GDP (Gross-Domestic-Product) in 2019-2020. The package includes measures which were earlier announced by the finance ministry and steps taken by the RBI. The package is focused mainly on the sectors of land, labour, liquidity and laws. The ‘Atmanirbhar Bharat package’ was explained by Finance Minister Nirmala Sitharaman in the course of five days following the PM’s announcement.

The Finance Minister’s explanation articulated the pillars of the scheme to be the Economy, Demand, Vibrant Demography, Infrastructure, Tech-driven system and also introduced reforms in various sectors such as agriculture, tax system, simplification of laws, human resource and the financial system in order to promote business, attract investment and further strengthen the resolve for ‘Make In India’.

What are the reforms introduced?

The package is divided into five tranches; the first tranche focuses on MSMEs (Micro, Small and Medium Enterprises), NBFCs (Non-Banking Financial Company), salaried workers and contractors which has a budget outlay of 5.94 lakh crores. The second tranche focuses on migrant workers, extension of credit facilities to urban housing, street vendors and interest-subvention for small businesses, this has a budget outlay of 3.1 lakh crore; the third tranche focuses to strengthen Infrastructure logistics, capacity building, governance and administrative reforms for the agriculture sector, fisheries and the food processing sector, this has a budget outlay of 1.5 lakh crores; the fourth and fifth tranches collectively have a budget outlay of 48,100 crore, and focuses on the coal, mineral, defence, civil aviation, power distribution companies, atomic energy, measures for providing employment, support to businesses and increase ease of doing business and also reforms in the education and health sectors.

The scheme also revised the definition of MSME which had been pending for long, now the micro enterprises are defined as businesses having investment of less than 1 crore and a turnover of lesser than 5 crores, similarly the small enterprises are businesses with an investment lesser than 10 crores and a turnover of lesser than 50 crores, and the medium enterprises are businesses with investment of less than 20 crores and a turnover of less than 100 crores.

The Atmanirbhar Bharat scheme introduces policy reforms to fast-track investment through the Empowered Group of Secretaries, Project Development Cell in each ministry to prepare investable projects and coordinate with investors and the government.

The scheme also introduces reforms that aim at upgradation of industrial infrastructure by challenge mode implementation for the industrial cluster through the upgrade of common infrastructure facilities and connectivity.

The government also seeks to introduce competition, transparency and private sector participation in the Coal sector as the government introduces Commercial mining in the sector. The government seeks to achieve this through revenue sharing mechanism instead of the regime of fixed rupee per ton and the liberalization of entry norms.

Relevant legal provisions and their basis:

The article 41 of the constitution of India specifies the government to take sufficient measures and effective provisions within the limits of its economic capacity and development for securing right to work, to education, and to public assistance in cases of unemployment, etc.

The article 43A of the Constitution states that the state shall take steps by suitable legislation or in any other way to secure the participation of workers in the management of undertakings, establishments or other organizations engaged in any industry.  

The section 35 of the Disaster Management Act, 2005 allows for the Central/Union Government to take measures it deems necessary or expedient for the purpose of the disaster management, in this case the economic downfall caused due to the corona virus (COVID-19) pandemic.

The ministries of the Departments under Government of India also has responsibilities under section 36 of the Disaster Management Act such as taking measures for prevention of disasters and respond effectively and promptly to any threatening disaster situation in this case the disaster of going into recession. 

The whole plan/scheme can be considered as following section 37 of the disaster management act, 2005, as the government has prepared a disaster management plan specifying the measures to be taken by it for the prevention and mitigation of disasters, its roles and responsibilities in relation to preparedness and capacity building to deal with the threatening disaster of being in recession once the pandemic can be said to have ended which would trigger a domino of loss of employment, opportunity, livelihood and competence.

The section 101 (a) of the Consumer Protection Act allows for the Central Government to make rules without prejudice to the generality of the foregoing power, such rules may provide for classes including public utility entities.  The section 106 of the Consumer protection act provides for the removal of difficulties that may arise in giving effect to the provisions of the Act, in this case reduce/eradicate the deficiency in service.

Objective of the Reforms:

As mentioned earlier, the package helps to indemnify the losses caused due to this pandemic. It mainly uses this long lockdown period to achieve economic self- reliance in the country. The intention involves mainly fiscal policy and the industries undertake certain relief measures to overcome the situation. The PM of India during his address to the nation concentrated on the promotion of local products and also to fill the critical economic gaps. The package also focuses on providing service to the agricultural sectors by issuing Kisan credit cards with concessional credit access to the farmers.

The scheme helps in the reduction of dependency level with the international trading sectors and increases the production and development within the Indian Economy. The target of the package is to provide utmost benefit to the cottage sectors, MSMEs, labourers, farmers and economically unstable people and also the industries. This package specifying fiscal policy includes the steps taken by the RBI and the actions of Central Bank. The country instead of borrowing money from other foreign sources, can park with the RBI for the enforcement of any particular schemes.

Relevance in law

The growing population in India led to consumption of more power in domestic households and industries. Earlier the laws relating to the power sector were governed by the Indian Electricity Act, 1910 and the Electricity (Supply) Act, 1948.  Later, the reforms in power sectors necessitate the Enactment of the Electricity Act, 2003 – A consolidated laws relating to generation, transmission, distribution, trading and use of electricity.  It also provided for promoting competition, rationalization of the tariffs to all areas, ensuring transparent policies regarding subsidies.

The tariff policy brought towards the power sector is in accordance with the Electricity Act, 2003 paved way to protect the consumer rights by penalising the DISCOMs.  Amendments relating to the Electricity Act were drafted in 2014 and 2018. The Electricity Amendment of 2014 Bill introduced a number of measures to promote the generation of renewable energy and also proposed an amendment in the role of distribution companies.  Finally this amendment led to an increase in the penalty rates for the non-compliance with any provisions relating to the act. However, these amendments were rejected on the ground as only few critical issues were targeted which led to the weakening of the commercial and investment activities.

The DISCOMs which utilised lesser power than provided and any the non- compliance with the provisions were penalised under Section 142 and 146 of the Act. Further for the promotion of Industries in this sector, recommending a progressive reduction in cross subsidies and grant of licenses and open access shall be presented to maintain an efficient and co-ordinated development of the economy (Section 42). Privatisation of the power sector to the Union Territories and recommendation of new tariff plans and National Electricity Policies by the Central Government are made in conformity with section 3 of the Act. Several contingencies were faced by the Distributed Companies (DISCOMs) and the Power Project Agreements (PPAs), where they were forced to pay money as fixed costs, when they do not use even a single unit of power.

This prompted to amend certain guidelines and provide clear definitions to certain vague terms in the Electricity Amendment Bill, 2020. Later the Electricity Amendment Bill of 2020 was introduced by Ministry of Power on 17th April 2020. It focuses on improving the enforcement of contracts by establishing the Electricity Contract Enforcement Authority (ECEA) to boost the enforceability of Power Purchase Agreements (PPA) and to make the laws more stringent for usage.

Critical analysis:

The economic crisis triggered by the Covid-19 pandemic is much like the 1991 economic crisis, which was a harbinger of a shift in paradigm via liberalization, privatization and globalization. If implemented properly the post Covid-19 era promises to usher unprecedented plethora of opportunities to industry, infrastructure, social and developmental infrastructure, etc.

Any stimulus package would fail to reflect the trickle-down effect, until it is backed by reforms in various sectors. The Atmanirbhar plan encompasses the unfinished agenda of holistic reforms which would include Civil services, Education, Skill, Labour, etc.

The package of 20 lakh crores comprises both fiscal and monetary measures, the monetary ones being in the nature of credit guarantees and liquidity infusions into banks and other financial institutions in the sector rather than the economy itself. The lockdown has initiated a lowering of aggregate demand and thus, fiscal stimulus is the need of the hour. The government also claims that the stimulus package is around 10% of India’s GDP. However, financing it would be difficult as the government is worried about containing the fiscal deficit. 

For financing the stimulus package, the country’s foreign reserves are supposed to be at an all-time high which could be strategically used to finance its needs. The rest of the amount may have to be raised through privatization, taxation, loans and international aid.

Conclusion:

The reforms to the tariff policy essentially promotes consumer rights by creating penalties for the DISCOMs for load-shedding or any other deficiencies in service hence, reducing burden on the consumers i.e. the customers. This makes leaps and bounds in the field of consumer rights as it reduces deficiency in service which would normally result in various consumer complaints and cases filed before the court.

The competitive selection of the transmission project developers and offering of incentives to DISCOMs such as reduction in cross subsidies to promote participation in the industry thus reducing barriers to the entry into the industry meaning increased entrants to the industry promoting competition in the industry leading to higher efficiency. Enhancing products such as smart prepaid meters and ensuring timely payment to generation companies to ensure long term sufficient and sustainability of the sector and avoid downfall of the sector’s returns.

The privatization of the power distribution services in the Union territories would certainly provide higher man power and lesser time taken for decisions to be made about essential instruments of business such as efficiency and quality of service. What does privatization in these sectors mean for the management of these sectors? It means the implied sharing of power between the private and the public sector where the public sector provides the facilities and the private sector manages the services. This sharing of power turns a new leaf in the division of power for the public and private sector by giving the private sector a higher role.

Authors: Abinaya Sankaran from School of Law, Sastra Deemed to be University, Thanjavur and Prajwal V and School of Law, Christ (Deemed to be University), Bengaluru.

Editor: Anmol Mathur from Symbiosis Law School, NOIDA.

Aatma Nirbhar Bharat: Reforms in coal sector

Reading time: 8-10 minutes.

Atma Nirhar Bharat Abhiyan, a movement seeking to make India self-reliant was announced by the Prime Minister of India on 12th May, 2020. He highlighted Economy, Infrastructure, System, Demography and Demand as the focus areas of self-reliance. For this purpose, an economic package of Rs 20 lakh crore was also promised. Reforms in coal sector are a sequel to this announcement. 

Finance Minister Nirmala Sitharaman, on May 16, 2020, introduced structural reforms in the key sectors- coal, defence, space, power, civil aviation, atomic energy and social infrastructure.

She released the fourth tranche of a Rs.20 lakh crore overall package to cope with the Covid-19 pandemic’s economic fallout. The government announced a reduction in foreign direct investment in defence production, the privatization of six more airports, the starting of more airbases and the privatization of   commercial coal mining. The aim was to boost the sagging economy.

Reforms introduced

The reforms introduced in the coal and minerals sector include the following:

  1. Starting commercial mining in coal sector
  2. Liberalising entry norms-nearly 50 blocks to be offered for auction
  3. Incentivising coal gasification/liquefaction through rebate
  4. Earmarking Rs.50,000 crore for infrastructure development in coal sector
  5. Auctioning Coal Bed Methane extraction rights in Coal India’s mines
  6. Introducing seamless composite exploration-cum-mining-cum-production regime in minerals sector, 500 blocks to be auctioned
  7. Joint auctioning of bauxite and coal mineral blocks
  8. Rationalising stamp duty payable at the time of award of mining leases.

Relevant legal provisions related to the reforms

The relevant provisions, Acts, Ordinances and Rules regarding the coal sector reforms are as follows:

The Mines and Minerals (Development And Regulation) Act, 1957- This Act provides for the production and management of Union regulated mines and minerals. It claimed that it would be convenient in the public interest for the Union to take charge of mining policy and mineral production extent hereinafter provided.

The Coal India (Regulation of Transfers And Validation) Act, 2000– This Act empowers the Central Government to direct the transfer of the land, or of the rights in or over land or in reference to a coal mine, coking coal mine or coke oven factory, owned by Coal India Limited or a subsidiary company by any subsidiary of Coal India Limited or any other particular activity and validating such transfers of such property or assets.

The Coal Mines (Special Provisions) Act, 2015- This Act provides for the assignment of coal mines and the transfer of rights, title and interest in and over property and mining assets in accordance with mining leases to successful bidders and allocated parties with a view to ensuring consistency in coal mining projects and coal production and facilitating the optimal use of coal resources in line with national requirements, interest and for matters connected therewith or incidental thereto.

Mineral Laws Ordinance, 2020-

On 10th January, 2020of the  Mineral Laws (Amendment) Ordinance 2020 was promulgated  to amend the Mines and Minerals (Development and Regulation) Act 1957 and Coal Mines (Special Provisions) Act 2015.

 The Ordinance completely opens up the coal sector to commercial mining. It also plans to wipe out limits on end-use involvement in coal mine auctions. It permits coal mining by any organization existing in sectors apart from steel and electricity, and the captive end-use requirements were scrapped. The Ordinance was converted into an Act on 13th March, 2020.

Coal Blocks Allocation (Amendment) Rules, 2020- On 18th May, 2020; the Ministry of Coal issued a notification, which was an amendment to the Coal Block Allocation Rules, 2017. The notification was issued in exercise of the powers under the Mines and Minerals (Development and Regulation) Act, 1957. The amendment brought about some changes in the methodology for auction of coal and lignite mines/blocks for sale of coal / lignite on revenue sharing basis and tenure of coking coal linkage

All the aforesaid legal provisions were introduced to give shape to  the newly announced reforms on 16th May, 2020, for the Aatma Nirbhar Bhaarat Plan.

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Objectives of reforms

The objectives of the reforms in the coal sector are as follows:

  • They will bring transparency, ease of doing business and ensure that natural resources are used for national development;
  • Will usher in efficiency into the coal sector by moving from an era of monopoly to competition;
  • Would help India gain access to high-end technology for underground mining used by miners across the globe.
  • This will speed up the process of implementation of projects, simplification of procedure and benefit all the parties in areas where minerals are located.
  • This would open up the sector to players outside steel and power as well as remove end-use restrictions.
  • It will create an efficient energy market and bring in more competition as well as reduce coal imports.
  • Sectorial reform for mining of minerals will boost growth, employment and bring state-of-the-art technology, especially in exploration.
  • Large mining investment would build employment and ignite demand in critical sectors including mining equipment and heavy commercial vehicles.
  • If multinationals decide to invest, the country could profit from the infusion of sophisticated mining technology, especially for underground mines.
  • The reforms are also aime at lowering environment impact.

Relevance in law

  • Company Law

Announcing measures under the fifth and final tranche of the Rs 20-lakh crore stimulus package for the economy hit hard by the coronavirus pandemic, the minister also said an Ordinance would be promulgated to amend the Act. The government will promulgate an Ordinance to amend the Company’s law to decriminalise various provisions, permit direct overseas listing for Indian corporates and changes to further improve the ease of doing business.

As many as 58 Sections under the Act would be dealt with under the mechanism compared to 18 earlier. Also, seven compoundable offences would be dropped altogether and five would be dealt under the alternative framework. Amendment would be carried in Section 23 of the Act for including an enabling provision to allow direct listing of securities by Indian public companies in permissible foreign jurisdictions. This would provide alternative source of capital for domestic companies and also broaden their investor base.

  • Coal Mining

The Cabinet has approved promulgation of Mineral Laws (Amendment) Ordinance 2020 to amend Mines and Minerals (Development and Regulation) Act 1957 and Coal Mines (Special Provisions) Act 2015.

The ordinance will seek to amend the law that allows only companies in the coal mining industries to bid for coal mines. Post amendment, any company meeting the minimum criteria will be allowed to bid for coal mines, the first auction of which under the liberalized rules is set open within this month.

Critical analysis

One school of thought believes that introduction of coal reforms is misdirected because most of the industries are shifting to renewable sources of energy, so there will be hardly any buyers or investors for coal. The current investors are, moreover, burdened with loans and other financial hardships.  

Even though coal is considered to be a cheap resource, there are external factors like social, health and environmental hazards, which haven’t been taken into account. If the externalities were factored, it would double or triple the price of coal, which would make it more expensive than the renewable sources of energy.

The gasification of coal is unviable because the process involves pulverisation which turns coal into smaller particles and synthetic gas, under pressure, which is corrosive in nature. Aggregate gaseous carbon intensity is much worse than coal mining. Coal gasification is also an intensive extraction process which uses large quantities of water, which is already scarce in our country.

Critics argue that these reforms undermine the energy security of the country by removing the requirement of end use for sale of coal and also compromise with the safety and security of workers in coal mines.

Although the reforms were introduced to boost the sagging economy, the government didn’t possibly take into account the factors that would sabotage the motive of such measures in long term.  

Conclusion

As is the case with any reform initiative, coal sector reforms have also generated mixed reactions from different quarters. The government has been extolling the reforms as phenomenal as it strikes at the very root of age-old monopoly and resultant inefficiency in the coal sector. The claim is that  it will in the long run be in consumer interest and make India self-reliant on energy front. The critics on the other hand have been arguing that the initiatives are devoid of the current reality and ignore the trend of movement towards renewable sources of energy. Despite criticism, the intent of the reforms cannot be doubted. Given the socio economic condition of India, the country has to depend on coal in near and medium term. Hence, the reforms are timely. The challenge, of course, lies in implementation of the reforms in true sense. But we can and should hope for the best.

Author: Tannishtha Chatterjee from Amity Law School, Noida.

Editor: Muskaan Garg from Jindal Global Law School, O.P. Jindal Global University, Sonipat, Haryana.

Aatma Nirbhar Bharat: Reforms in mineral sector

Reading time: 8-10 minutes.

On the eve of May 12th, the Prime Minister, brought tidings and an exceptional present for the sluggish Indian Economy. The PM announced a relief package worth 20 lakh crore rupees with an aim to uplift the economy and provide relief to those most battered by the onslaught of the fiscal crisis brought about by the fear inspiring COVID-19. This package, as per the PM, was aimed towards making India ‘Atma Nirbhar’ i.e. Self-Reliant without becoming a ‘self-centered’ economy. The PM zealously stated that this monument of self-reliance will stand tall upon the five pillars of demand, demography, infrastructure, technology and economy. The PM stated that the goal of the government was of ensuring the holistic development of the economy by leaps and bounds. He also added that this relief package would focus mainly upon the parameters of law, labour, land and liquidity.

True to his words, the Finance Minister appeared before the inquisitive lenses, the very next day, to discuss the first of five tranches of the anodyne economic policies. The Government thus presented before the world the details of the relief package which in totality amounted to 10% of the Indian GDP, making it one of the most inspiring packages around the globe. The Finance Minister brought relief for many sectors such as the MSMEs, the NBFCs, the migrant labourers, the DISCOMs, the Corporate Employees and Employers, the mining industry and the others, to name a few. These reliefs were distributed amid well-structured and detailed tranches consisting of one or the other sectors. The relief package had been thought on for quite some time, making certain sections call it ‘too late’. However, the details and orientation of the package are self-evident and praiseworthy.

In this explanatory we would be focusing upon the mineral sector aspect of the fourth tranche of the relief package presented by the Finance Minister on the 16th of May 2020. The fourth tranche entailed a stimulus of a little over Rs. 63,000 crore, of which, surprisingly, the cost to the exchequer is only about Rs. 8,100 crore. The focus was more on industrial reforms but it should be mentioned that many of these measures have already been mired in implementation issues. This set of the assuaging policies focused upon 8 sectors including mineral mining, civil aviation, space exploration, defence investment, social infrastructure, atomic energy, coal and power distribution. The mineral sector was in much need of attention and reformation. This pending reformation was required at the present instance for increasing foreign investment to bolster the economy. 

What are the reforms which have been introduced?

While delivering the fourth tranche of the relief package the Finance Minister had remarked that, “Many sectors need policy simplification. Once we decongest sectors, we can also provide the necessary boost for growth and employment.”

Through this stimulus package, the government not only aims towards the recovery of a somewhat stagnant economy but also the reformation of many outdated laws and processes. In such tiring times, the government wishes to open up the economy and smoothen the creases for foreign investors. Just like the panacea of the 1990s economic crisis was the opening of the market to the world, similarly the government is planning to rein in the free hand of the market or the laissez faire. The government has opted for privatizing the mineral sector.

Through the fourth tranche, the government has introduced commercial mining of coal on a revenue sharing basis in India. The companies in the private sector have also been allowed to carry out exploration. This has effectively ended the government monopoly on coal.  For the aforementioned purpose, the government has decided to auction nearly 50 blocks of coal. On the mineral front, the government has announced composite exploration cum mining cum production regime. To rein in the free market in the mineral sector, the government has decided to auction nearly 500 mining blocks of certain major minerals.

The government had also said that coal gasification and liquefaction will be incentivized through rebate in revenue share. Infrastructure worth 50,000 crore has been promised by the government for these purposes. On the liberalization announced for other minerals, as per rules, all concessions will have to be granted by the respective state governments through e-auctions. The mineral index happens to be a creative new proposal with an already prepared base as the data for mineral-wise, state-wise reserves in leasehold and freehold areas is already available in the voluminous National Mineral Inventory compiled by the Indian Bureau of Mines. The government has also removed all differences between the captive and non-captive mineral mines to allow transfer of mining leases and transfer of surplus mineral.

Relevant legal provisions

The mining sector in India operates as a federal structure ensuring the efficiency of work and the grass root level implementation of laws and policies. Under the seventh schedule to the Constitution, the administration of mining sector falls under entry 54 of the union list to the extent, necessary in public interest, as declared by the Parliament. However, the same topic is mentioned under entry 23 of the state list subject to the power of the center.

Under entry 54, the Parliament enacted the Mines & Minerals (Development and Regulation) Act in 1957. The MMDR Act happens to be the principal legislation governing the mineral sector exclusive of petroleum and natural gas in India and governs the development of minerals and the regulation of mines. This Act was amended as recently as 2015 and 2016 to bring about a transparent and non-discretionary regime regarding the process of acquisition of mineral concessions.

As per Article 294 and 295 of the Constitution of India, the State governments hold the rights and obligations attached to the properties and assets of the governments that previously ruled the area within the boundaries of the State. However in the case of Threesiamma Jacob v. Geologist, Department of Mining and Geology, the Apex court had recognized the rights of private land owners to own subsoil and mineral wealth. The issue of mineral ownership is not completely answered as issues relating to payment of loyalties by private landowners are pending before the Supreme Court. These judgments can however form the basis of private ownership of mineral blocks and shift focus from the previous captive consumer end user ownership.

The legal relevance

It can be said that most of the reformations announced by the government recently are but an assimilation of previously discussed and enacted legislations. The renewed push for commercial mining happens to be a proposal over two years old. A way to auction coal mines/blocks for sale of coal has already been provided under the provisions of the Coal Mines (Special Provisions) Act, 2015, and the Mines and Minerals (Development and Regulation) Act, 1957. This Act was approved by the government in early 2018 and an order was issued on February 27, 2018. Subsequently, the Coal Ministry had informed that it had identified “15 large coal blocks” for the pilot round of bidding in December that year. As early as in January this year, the Cabinet cleared an ordinance to introduce the amendments needed to relax conditions in the two laws to open up the sector to commercial mining.

The coal gasification and liquefaction projects had also already started in the form of revival of the Talcher unit of Fertilizer Corporation of India Limited via a Joint Venture/Special Purpose Vehicles of nominated PSUs for manufacturing of urea through Coal Gasification route. This project had already been cleared in December last year. Gas Authority of India Limited, Rashtriya Chemicals and Fertilizers Limited and Coal India Limited entrusted PDIL to carry out a feasibility report for the production of ammonia through the coal gasification route.

Thereby, it can be concluded that the legal adaptations and modifications had been initiated beforehand and the 2018 amendments are a base, necessary to understand the objective and reasoning of the later modifications. The 2018 rules were laid down to increase the efficiency of mining works by prescribing a timeline for general exploration. These rules were also aimed towards ensuring that the mineral extraction process is not affected due to lease time limits. The 2019 ordinance and the present day announcements construct upon this base by further simplifying laws. The now redundant provisions of the mining laws will have to be either modified or abrogated. As the monopoly of the government ends, some new rules and laws would be required to be enacted in the coming days to ensure the rule of law. Till such time, the judgments of the Apex court and the objectives and directions of these reform measures could be taken as a new base.

Critical analysis

It is not hard to decipher that the relief measures mentioned under the fourth tranche of the acclaimed relief package are in actuality reformation measures, privatizing the government dominated minerals sector. The labour unions have called the government out for this action and accused it of clandestinely passing such ordinances and reformations without having due discussions with various stake holders. They are of the view that the government, under the shadow of the ongoing pandemic, have modified the existing structure at this time to get away with it without any protest or accountability. To some extent, the concerns raised by these unions are valid and important. An elected government must show faith in the democratic process of due discussion. However, it can be argued that the time was for action and not discussion, which happens to be usually coloured with politics.

These reforms will not have an immediate effect upon the economy of the country and will take at least half a year to a year to accrue and be visible. Therefore this so called relief stimulus will not have any direct bearing on the present economic situation, which happens to be quite contradictory to its purpose. These reformations could have come at a later time and should not have used up the space and the opportunity in the relief stimulus. However, it can also be argued that the reformations were required at the present time due to the ongoing Sino-American trade war which could open up some interesting opportunities for India. The Chinese manufacturing hub might undergo a recession as companies decide to shift their base of operations. With lucrative and seamlessly efficient bureaucratic processes, these companies might set up their base in India.

The benefits of these reformations would also include transparency, increase in foreign investment, creation of more jobs, increase in government revenue and many more. The drawbacks would be the same as those that plagued the Free Market economies resulting in the Great Depression of the 1930s. The free forces of the market can at times result into the breakdown and collapse of the sectorial economy. It should always be remembered that India is a labour intensive market having a surplus of unskilled labourers. As a labour intensive sector is privatized, most of these labourers might become unemployed due to a rise in demand for skilled labourers. This unleashes its own Pandora’s Box in terms of macroeconomics. On the social front the rights and interests of these workers might also be threatened as such.     

Conclusion

Whilst it is indisputably true that the intricate web of mineral sector laws needed to be reformed for saving the economy, the same could have been done after taking the stakeholders into confidence, after following the due process of a democratic discussion. The timings of these reforms are also somewhat murky with many parties casting aspersions on the intention of the government. What fruits this move bears is yet to be seen, but what has always been known is that India has a resilient, adaptive economy with a modern age developing legal philosophy and system i.e. a very conducive environment for leading the global industrial front.

Author: Shivani Panda from Amity Law School, Delhi.

Editor: Avani Laad from Symbiosis Law School, Pune.

  

Aatma Nirbhar Bharat: Reforms in space sector

Reading time: 8-10 minutes.

The Coronavirus (Covid-19) pandemic has a disruptive impact on the economic condition of India. Different agencies like World Bank and Moody have downgraded India’s growth for the fiscal year 2021, leading to the estimation of India’s GDP in negative figures. The government of India then announced the special economic and comprehensive package of 20 lakh crores, introducing it as a call for Self-Reliant India or Aatma Nirbhar Bharat. This Aatma Nirbhar Bharat is to create an economy that is self- reliant, ultimately emphasizing the sale and purchase of domestic goods. The economic package of 20 lakh crores is worth 10% of the GDP of India.

Five pillars were outlined for the Aatma Nirbhar Bharat package- Economy, Infrastructure, Vibrant Demography, system, and Demand. All this was done to bring a structural reform, with a focus on public participation and greater transparency which will bring growth in the sector. Nirmala Sitharaman, the Finance minister of India, highlighted eight(8) core sectors in an effort towards Aatma Nirbhar Bharat. These eight (8) sectors are-

  1. Coal- The government will introduce more commercial mining in the coal sector, which will provide more diversified opportunities in the coal sector with the ultimate aim of augmenting transparency and competition with greater sector participation.
  2. Minerals- The economic package will enhance private investment in the mineral sector and the policy reforms that are introduced in the mineral will lead to better efficiency in running the mining sector. These structural reforms also aim at boosting employment, growth, and bring state of the art technology towards the sector.
  3. Defence production- The Aatma Nirbhar Bharat will strengthen self-reliance in the Defence Sector, promoting weapons to be “Make in India” which will reduce the defence bill of importing goods, bringing autonomy, efficiency, and accountability in the sector.
  4. Civil Aviation- The improvements in the civil aviation sector will pursue streamlined airspace management with building world-class airports on a public-private partnership basis. The main aim is to make India a global hub for aircraft maintenance, overhaul, and Repair. 
  5. Power Sector- In the power sector, the government is trying to lay down power sector reforms promoting consumer rights, industry, and sustainable sector.
  6. Social Infrastructure- The government has aimed at boosting the private sector investment in the social infrastructure through the Gap funding scheme.
  7. Space- The government here also aimed at partaking by private investors and their participation in Space related activities. There will be an area provided to companies that are involved in Space satellites, launchers, and activities. These private companies will be allowed to use ISRO facilities to work on their project.
  8. Atomic Energy- research reactors would be established with the help of public-private partnerships. This would lead to the growth of the sector.

What are the reforms introduced?

The Aatma Nirbhar Bharat focuses on bringing reforms to the space sector. The finance minister announced that the same will be done by allowing greater participation of private companies in the activities performed under this sector. These private companies will be authorized to use the infrastructure and facilities of the Indian Space Research Organization (ISRO) to provide them with the level playing field for competition. The reforms introduced in the space sector particularly focuses on the participation of the private sector with the ISRO which will be done with proper control so that the technologies do not fall into the wrong hands. This will not only lead to greater profit for the space sector but will also provide the private sector with greater technologies and facilities.

The package introduced has the following implications:

  1. For the start-up sector- They will be able to allude to the start-up sector of the Indian space as a grantee for the utilization of the Indian space and research organization infrastructure and facilities.
  2. For the Indian armed forces- This will provide a real opportunity to meet India’s defence needs with the help of the space sector.

Objectives of reforms

The objectives of bringing reforms to the space sector were to provide the economy with profits that are expected to provide losses as of yet.

Providing a platform for risk-taking- The government provided this sector with reform by being in the private sector and letting the private sector with access to facilities technologies and foreign direct investment ultimately meaning to the growth of the private sector providing greater profits to the government.

The Finance Minister elaborated on the objectives of the reform which includes encouragement to exploration in this sector by giving access to private partnerships who will be provided with working resources and facilities, ultimately improving their capacities to work. The future outer space travel would be provided to the private sector so as the objective of giving level playing field to companies

It’s relevance in law and legal provisions

The shift of government policy which has led to the encouragement of the private sector to work with Indian space research organization was exclusively done due to the Covid-19 pandemic. There were consultations on the space activities Bill from 2017 which is yet to become a law. The space activities Bill, 2017 will lead to the encouragement of the private sector in the space activities and dismantle of government control over the same. There was a need to include the private sector in the technologies as is done in other countries. This bill is yet to become a law due to the complexities related to space activities.  This bill is a step to bring transparency and accountability towards the government and from the government also leading to technological advancement and cost reduction benefiting the profits of the government. The main aim is that the provision of the bill is introduced in the Aatma Nirbhar Bharat scheme.

Critical analysis and Conclusion

The Aatma Nirbhar Bharat Special Economic Stimulus Package introduced by Smt. Nirmala Sitharaman, as demonstrated, is very promising and effective. It would lead to catalyze the growth of Indian economic status and would attempt to cover the losses faced during the pandemic COVID-19. However, every reform introduced brings with it several implications. In this case as well, the reform deserves scrutiny, a healthier implementation, and appropriate policy and regulatory reform.

  • The space start-ups as a contributor to the Research and Development for the armed services in the private sector:

As a contributor for the armed services by the space start-ups to the Research and Development sector, the urban centers in India, which incorporates these space start-ups have been adhering to a different path for the development of the space sector, unlike the others. Moreover, several space start-ups have already been working with the assistance of the Indian Space Research Organisation. The aim is to commercialize critical technologies and the Atma Nirbhar scheme will catalyze the vision. However, still, a proper mechanism needs to be found for effective implementation and the attainment of the vision.

  • Extensive the outreach for the armed services:

Due to the scheme granted, the Indian armed sector cannot be far away from contributing to the exploitation of the emerging possibilities which will be generated in due time by the Atma Nirbhar Scheme, introduced by Smt. Nirmala Sitharaman. Consequently, the armed services, the scheme, and the space services should collectively exploit the change. For this, the government should further grant an extensive outreach by the services. As a result, this will allow us to foresee the inventions accruing from the start-ups in the private sector. Furthermore, a partial contribution can be made towards the Indian armed forces’ ‘Intelligence, Surveillance, and Reconnaissance’ requirements.

  • An independent regulatory environment needs to be established:

The reform made by the Atma Nirbhar grant is very promising. However, an issue that needs to be deliberated upon is the establishment of an independent regulatory environment in India. Why such an establishment should be made? The activities associated with the space sector are complex and involve several intricacies. The UN’s Outer Space Treaty also suggests the establishment of an independent regulatory environment due to the multi-layered projects of the space services. Some of the complex intricacies involved are as follows: frequencies, ability to import products, licensing of satellites which will be used later for operations, and imagery. An independent regulator will be able to control these complex, multi-layered projects effectively and would lead to the enhancement of India’s rank in the ease of doing business index.

The reforms in the space sector provide a level playing field for private firms in launches of satellites and space-based activities. These private firms will be allowed to use the facilities of the Indian research space organization and other relevant resources to improve and provide them with proper capacities. Future outer space activities will also be open to the private sector. This will ultimately lead to the growth of the nation and better rankings in the world for space-related activities.

Author: Abhay Raj from Jindal Global Law School, O.P. Jindal Global University, Sonipat.

Editor: Yashika Gupta from Rajiv Gandhi National University of Law, Patiala.

Aatma Nirbhar Bharat: Reforms in Defence Sector

Reading time: 8-10 minutes.

India’s Finance Minister Nirmala Sitharaman in a press conference declared that the Government is planning structural reforms in various sector of the economy to give a push to the economy of the country which is being affected a lot during the Covid-19 pandemic, and for this work has already been started by the government.

Aatma Nirbhar Bharat is a weapon launched by the government to fight the economic battle arose due to the pandemic which has eaten up thousands of jobs and also, has disrupted the business houses of the country. In this project the prime focus of the government will be on those industries mainly which have the potential to create wealth, employment and other benefits in the long run.

For this the government has started their part of work which includes, Investment clearance which will be done in a speedy and effective manner through the empowered secretaries. A project development cell will be established in each ministry to prepare investible projects and coordinate with the investors as well as government at central and state level. Also, for the development of the states the state will be ranked as per the investment attractiveness so that each state will compete for the investment which will lead to effective investment schemes by the states. Industrial cluster upgradation will be done through challenge mode in states, 3,376 industrial parks and SEZs in 5 lakh hectares will be mapped on Industrial Information System.

The reforms which are announced by the finance minister will affect the following eight sectors but we will be dealing with defence sector mainly in this article:

  1. Coal
  2. Mineral sector
  3. Defence
  4. Civil aviation
  5. Making India an MRO hub
  6. Power distribution companies in union territories
  7. Space
  8. Atomic energy

Reforms introduced:

Defence sector:

  1. Negative list: the list of the weapons and platforms which will be banned for import will be prepared and as per the capacity of domestic industry the list will be increased every year.
  2. Capital budget: the separate budget needs to be prepared for regarding procuring indigenous weapons and platforms.
  3. FDI limit: the major change which was announced was the increment in cap size from 49% to 74% under automatic route and also the security clearance.
  4. Ordnance Factory Board: the 41 functioning units under OFB will be corporatized to improve the accountability and efficiency.
  5. Maintenance and spares: liberalisation in the scheme for the import of expensive spares.
  6. Procurement process: a project management unit would be set up for the effective and time bound decisions, realistic framing of technical parameters and overhauling trial procedures

Objectives of reforms:

Following are the major objectives of the reforms introduced with respect to the defence sector:

  1. To attract FDI in defence:

FDI limit is increased which will lead to more investment by global companies in Indian economy. As several global arms major has for long being demanding the hike in the FDI limit on the ground that they need more management control of the JV’s to set up investment and provide top notch military technologies to India. Earlier, due to this cap the country was suffering because there was no proper investment which is being made, the countries capacity to invest was much larger but it is being underestimated, which will not remain the same in present scenario.

  • Corporatisation of Ordnance Factory Board:

There were reports earlier regarding inefficiency in work by the board and due to which corporatisation was essential so that good quality of goods can be produced and there remains proper accountability for the goods that is weapons given to the army. Also, the export field will get the expansion if the quality and quantity of goods will increase, the turnover will see a high rise and the major scheme which is being promoted, Make in India will get a good response which will be helpful for the economy in short as well as long run.

  • Promoting self-reliance:

The objective behind reform in defence sector was to promote the Made in India project so that instead of import, export can be expanded which will lead to more money in the economy as well as more job creations. The Make in India project will get a huge support from different sectors as the most critical sector that is the defence sector, from now would be buying weapons from the local market instead of international market this will lead to a push in economy as the currency will flow in Indian market only.

  • Effective and efficient results:

The establishment of project management unit which will work as a supervisor would be helpful for the sector as that will help in time bound effective results which will be essential and also, the demand for the field because the major weapons would be produced in India for the first time so to get effective results are important.

Laws and legal provisions involved:

Since the advent of the Industries (Development and Regulation) Act, 1951, the Defence sector was treated as the domain of the Government, and private industry was not permitted to participate in its development. The sector was first opened and only 26% FDI was allowed. Most foreign original equipment manufacturers were uninterested in forming ventures as there was no proper control given to foreign companies to settle and also, they have no choice in choosing their partner industry. However, increase in the sectoral cap on investment in defence remained the much-voiced industry demand.

The most significant reforms for FDI in the Defence sector came in the year 2014. By way of Press Note 3 of 2014, a list of defence items requiring industrial license under the IDRA was notified. Thereafter, by way of Press Note 7 of 2014, the sectoral cap for FDI in Defence was permitted up to 49% under the approval route, and beyond 49% on a case-to-case basis, wherever it was likely to result in access to modern and ‘state-of-art’ technology

The significant change came in the year 2015, where in an unprecedented move by way of Press Note 12 of 2015, the Government allowed FDI up to 49% in the Defence sector under the Automatic route of investment. As opposed to the previously prescribed onerous conditions on FDI in Defence, investment was subjected to only 4 conditions.

  • Requirement for Approval
  • Licensing
  • Security Clearance
  • Self-sufficiency

In 2016, the applicability of the FDI regulations governing the Defence sector was expanded. By way of Press Note 5 of 2016, the sectoral caps and conditions on FDI in Defence were extended to “Manufacturing of small arms and ammunition under the Arms Act, 1959”.

Foreign investment numbers released by the Department of Industrial Policy and Promotion (“DIPP”), the nodal agency responsible for approving and regulating foreign investment in the country, show that in spite of the liberalisation of the FDI cap, foreign investment in the sector between April 2000 and March 2017 was merely USD 5.12 million. This, when the Government is actively promoting its “Make in India” initiative with a particular emphasis on the Defence sector, and the Prime Minister personally taking up the issue of investment in the sector at each of his numerous diplomatic meets since coming to power.

For defence sector, Department of Promotion of Industry and Internal Trade, FDI flow in India did not increased even after policy change in India in 2016 and therefore the cap was increased. The draft note for the cabinet committee regarding corporatization of Ordnance Factory Board is pending.

Critical analysis:

India has an annual defence budget of Rs. 4,04,365 and this figure stands behind USA and China. It is also the second largest importer of weaponry after Saudi Arabia and has imports approximately 9.2% of the total arms during the year 2015-2019 but now the scenario will no longer remain same as now only the weapons which cannot be produced in India in present scenario will only be imported and for the rest country will produce its own weapon under Make in India scheme this will lead to reduce in huge defence import bill. India has attracted a paltry Rs. 1,834 crores as FDI in defence and aerospace sector since 2014. In the same span of time the country has gain a capital procurement contract of over 120 crores and Rs. 2 lakhs crore with foreign armament companies.

The cap demand which is increased, whether it is attractive and financially remunerative would depend upon the fine print and conditions regarding liberalisation in the field. It is also important to know that whether the companies would be willing to invest 74% FDI at par with the other Indian companies who are the majority stakeholder.

The corporatization of Ordnance Factory Board will lead to more autonomy and accountability but here corporatization did not mean the privatization of the board in anyway. There were many causalities and accident which were reported taking place in the field due to poor quality and defective ammunition being supplied for tanks, air defence and other guns by Board. The bill which is pending related to corporatisation of Board claims that the entities which are owned by state their turnover will be increased to Rs. 30000 crores by 2024-25, export will be enhanced to 25% of the turnover and the bar of self-reliance in technology will be increased by 55% i.e. from 20% to 75% by 2028-29.

But this cannot be said that whatever results are expected from this reform will emerge in the same way only because numerous other issues are to be settled to make the plan effective. The present budgetary support to OFB’s are not sufficient as and can pose an immediate financial challenge.

Conclusion:

For the development of the country and the economy the steps are essential and the sectors stated are the major sector where there is scope for investment by the investors and elimination of the long procedure for filing of documents will lead to elimination of middle men who are the ones breaking the circular flow of money in an economy.

Although the liberalisation is made in the defence sector but the overlapping rules and regulations by government will continue to affect the growth of industries. India is having a huge scope for development in the defence sector but the delay in decision making leads to the hindrance in getting big projects to India. The defence sector is a sector where there is no scope for mistake and therefore the government will never loose the control over this sector but the process can be simplified so as to attract more investors.

Liberalization process is always welcomed by the investors and a boost in investment is seen in each sector where liberalization is being done. Also, the quality of work given by private sector is always either equal to or better then public sector and the job creations would be increased as Make in India projects are promoted in sectors like defence where there is no scope for mistake, so the steps should be welcomed by all the stakeholders who are directly or indirectly linked to this process as the demand now is “united we stand and divided we fall”.

Author: Tushti Pande from Jagran Lakecity University, Bhopal.

Editor: Dhawal Srivastava from Rajiv Gandhi National University of Law, Patiala.