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Aspiring for urbanisation and enhanced public investment in social infrastructure, Finance Minister Arun Jaitley made a slew of announcements for road & air connectivity and improved financing measures for the same. The Union Budget allowed National Highway Authority of India (NHAI)eate Special Purpose Vehicles (SPVs) to monetise its road assets. At the same time, budgetary provision to regional air connectivity scheme was increased by five times.
"Government’s estimated budgetary and extra-budgetary expenditure on infrastructure for 2018-19 is being increased to Rs 5.97 trillion against the estimated expenditure of Rs 4.94 trillion in 2017-18,” Jaitley said in his Budget Speech.
To raise equity from the market for its mature road assets, NHAI will consider organising its road assets into SPVs and use innovative monetising structures like Toll, Operate and Transfer (TOT) and Infrastructure Investment Funds (InvITs). The budgetary allocation for the NHAI has been increased by 10 per cent to Rs 916.63 billion for 2018-19 from Rs 831.70 billion in 2017-18.
Government allocation to the Modi government’s flagship scheme on regional air connectivity — UDAN was increased by almost five times in the Union Budget. For 2018-19, the centre allocated Rs 10.14 billion against last year's Rs 2 billion. "Even those who wear 'hawaii chappal' can now travel by 'hawaii jahaj,” Jaitley said.
The FM announced that the Centre would leverage the India Infrastructure Finance Corporation Limited (IIFCL) to help finance major infrastructure projects, including investments in education and health infrastructure, on strategic and larger societal benefit considerations.
“We are confident to complete National Highways exceeding 9,000 kilometres length during 2017-18. Ambitious Bharatmala Pariyojana has been approved for providing seamless connectivity of interior and backward areas and borders of the country to develop about 35,000 kms in Phase-I at an estimated cost of Rs 5.35 trillion,” Jaitley said.
Last year, the Cabinet Committee on Economic Affairs had authorised the NHAI to monetise 111 publicly-funded National Highway (NH) projects that were operational and were generating toll for at least two years after the Commercial Operations Date (COD) through the TOT model. Around 75 operational NH projects completed under public funding have been preliminarily identified for potential monetisation using the TOT model, this paper reported.
The Budget also mentioned that the government would initiate monetising select CPSE assets using InvITs from next year.
The boost in fund allocation to UDAN is likely to solve the scarcity of funds problem faced by the programme due to the increasing number of participatory airlines. As reported by Business Standard, the increase in participation from airlines saw the civil aviation ministry in a fix as it faced fund shortage to provide for Viability Gap Funding (VGF). Under the scheme, 15 airline and helicopter operators will operate on 502 routes connecting 70 airports and heliports. The government has till yet spent Rs 8.33 billion for UDAN. The total requirement for the second round of UDAN was Rs 6.2 billion.
Infrastructure sector cheered the doles offered by the FM. “Rs 5 trillion for infrastructure is welcome is as it reaffirms continued funding of various initiatives in Roads, Railways, and Urban Infrastructure. Quantum leap in airport capacity is the key requirement to keep pace with the rapid growth in aviation. Other initiatives, outside the budget, to revive private sector play in these sectors, will complement and further the impact of the budget allocations,” Manish Agarwal, Partner and Leader- Infrastructure, PwC India said.
The FM also complimented the efforts made under the two flagship schemes on Urbanisation – Smart City Mission and AMRUT program for providing water supply to all households in 500 cities. The Government also proposed to set up 500,000 wi-fi hotspots which will provide broadband access to 50 million rural citizens and allocated Rs 100 billion in 2018-19 for augmentation of telecom infrastructure.