The cabinet has liberalised the crude oil purchase rules for state firms, which can help them grab cheap cargoes with the help of modern, flexible trading practices that save costs substantially.
The cabinet also approved liberalisation of spectrum in some states, paving the way for Reliance Communications to share or trade bandwidth with Reliance Jio Infocomm.
Oil industry executives said this was a long-awaited reform. They said state firms such as Indian Oil, Hindustan Petroleum and Bharat Petroleum have been stifled by the antiquated norms and tendering system for spot purchases.
The Union cabinet approved a recommendation of the Fourteenth Finance Commission (FFC) to give more fiscal room to states subject to them meeting some conditions. The commission had suggested additional headroom to a maximum of 0.5% over and above the normal limit of 3% in any given year to the states that have a favourable debt-GSDP and interest payments-revenue receipts ratios in the previous two years to meet specific development needs.This window is available over the five-year award period of the commission ending 2020. It will give states room to raise additional funds for their development needs.
The states will also need to have zero revenue deficit in the year they want this additional room and the preceding years, which will ensure funds are used for development needs.