• Budget Offers Promising Times For Infra Sector

    Amidst growing speculation on the impact of the Budget for 2017-18 and whether it would bring a spiralled growth momentum for the Indian economy, the finance minister unveiled the first integrated Union Budget of Independent India that included the proposals for the railway sector as well.

    Similar to as was in 2016, the key focus in Budget 2017 continues to be infrastructure growth. The finance minister gave a booster shot to the country’s infrastructure with a record budgetary allocation of Rs. 3.96 lakh crore. This demonstrates clear commitment of the government towards the sector.

    Given that Railway Budget is now subsumed, one has to compare the subsumed Budget of last year which stood at approximately Rs. 3.43 lakh crore, thereby resulting in an increase of approximately 15.50 per cent in the budgetary allocation towards the infrastructure sector this year.

    While Railways get a lion’s share of allocation, the four major focus areas of railways include passenger safety, capital and development works, cleanliness and finance and accounting reforms. Further, the government anticipates an increase in commissioning of railway lines by 3,500 kilometres in 2017-18. There is also a major impetus on modernisation and redevelopment of stations with over 25 stations already in pipeline and plan for augmentation of 7,000 stations with solar power (with 300 stations already underway). Also, the endeavour to enact Metro Rail Act is a long shot for greater private participation in the sector.

    On the road sector, there has been an allocation of Rs. 64,900 crore as compared to Rs. 57,976 crore in 2016-17. There is a definitive commitment for connectivity of 2,000 kilometers of coastal roads with ports and remote villages. Further, under the PMGSY, the pace of construction of roads has increased to 133 kilometres per day as against 73 kilometres in 2011-14. In addition, there is a promise to set up a multi-modal logistics park and multi modal transport facility, to make the economy more competitive.

    On the airports side, the finance minister has promised certain policy measures by stating that select airports in Tier II cities will be taken up for operation and maintenance in PPP mode. The funds generated thereof would be utilized for airport upgradation.

    Turning towards the solar sector, the government proposes to start the second phase of solar park development for additional capacity of 20,000 MW.

    On the Policy front, the finance minister has granted infrastructure status (and grant of corresponding incentives) to affordable housing, a long-time demand from the industry. This will allow developers access to a larger pool of bank credit and that too at a lower rate with a hope that affordable housing will really become “affordable”.

    Further, plans for a new restructured central scheme viz. Trade Infrastructure for Export Scheme (TIES), with a focus on India’s export infrastructure, have been laid down.

    Moving further, as a part of its commitment last year, the government has proposed changes to the Arbitration and Conciliation Act, 1996, to settle disputes in infrastructure related construction contracts, PPP and public utility contracts. This should lead to speedier and transparent resolution of pending litigation in Infrastructure sector.

    On the tax front, the Budget has proposed to extend the concessional tax rate of 5 per cent on interest on foreign currency borrowings (including rupee-denominated bonds) up to June 30, 2020. In addition, while there have been certain relaxations to the domestic transfer pricing regulations, entities which are covered under profit liked incentives continue to be governed by the said provisions.

    On the indirect tax front, since GST or Goods and Services Tax is at the dawn of its implementation, the government has acknowledged that there are no significant changes to be made to the existing law.

    Given the current state of financial affairs of infrastructure sector, there was an expectation that more financial reforms would be announced. However, there was neither any such major announcement nor any direction on operationalising the National Investment and Infrastructure Fund.

    Through this Budget, the finance minister has continued to demonstrate its growth trajectory and commitment towards pro infrastructure environment. While there have been promising budgetary allocations and an optimistic roadmap for the sector, one could have expected some more investor-friendly tax and regulatory proposals to set the pace and momentum towards a conducive and non-adversarial tax regime. Martin Jones Authentic Jersey

    Share This
    Facebooktwitterlinkedinyoutube