Budget 2018: Will infra industry get an allocation boost from FM Jaitley?

Industry wants the government to focus on reducing timelines from project conception to completion

It is believed that investment in India’s infrastructure industry would yield more impact if all related projects are planned and delivered on the same timeline. This is seen as key to the success particularly of industrial corridors and nodes being planned. Under the Sagarmala initiative, ports are now being integrated with roads, railways, and coastal industrial zones/SEZs. Dedicated freight corridors could be a key component, though there appears to be limited progress after the first two corridors.
 
Business Standard and PwC look at the present situation of the infrastructure sector, key issues facing it, and what the industry wants from Finance Minister Arun Jaitley in the upcoming Union Budget 2018-19.
 
Key issues facing the sector
 
Integrated planning and delivery of projects
 

• Investments in infrastructure would yield more impact if all related projects are also planned and delivered on the same timeline
• This will be key to the success of Industrial Corridors and Nodes being planned
• Under the Sagarmala initiative, ports are now being integrated with roads, railways and coastal industrial zones/ SEZs. Dedicated Freight Corridors could be a key component of this approach

 
Revival of private investment
 

• Despite the Hybrid Annuity Model has restarted PPP in National Highways, hurdles to large-scale private investment remain
• Both Banks and Developers are still financially constrained
• Project pipeline outside the road sector appears to be limited
• The promise of opening up Railways to private investment in a range of activities is still to translate into projects
• In Airports, investment opportunities have not emerged, and there is no model to attract private investment into regional airports

 
Pricing of infrastructure
 

• Uncertainty in pricing is still key concern for commercial financiers.
• In Airports, key orders of AERA are under legal challenge; the amendment of TAMP’s role in Ports is in abeyance
• Tolls on roads are occasionally disrupted; Railway Development Authority not operationalised; metro tariff determination through Fare Fixation Committee still to be gain credibility.

 
What industry wants
 

• Sector specific mechanism to fast-track addressing of financial stress. This should include addressing large amounts under dispute
• NIIF could play a catalytic role in furthering the secondary market, as well as creating new opportunities for channeling private investments.
• Single-window approach for clearances in highway projects, and digitisation of revenue records.
• Use of technology in collecting user-charges and monitoring performance, to minimize disputes
• Revival of PPPs through recommendations in Kelkar Committee report, as also by opening up new sectors. Use of HAM model with strong counter-party; and leveraging existing cashflows, where user-charges are predictable

PwC View

Foreign investor interest in the infra sector is visible, but opportunities have been limited.

A focused coordinated emphasis on implementation of several initiatives announced earlier is required to attract investors

—    Manish Agarwal, Partner and Leader Infrastructure PwC India

 

Industry view
 

The Centre should focus on reducing timelines from project conception to completion. This will significantly bring down the cost of infra.

Insurance firms should be permitted to contribute equity capital for infra projects.

Additionally, the Centre could mobilise funds directly from retail investors by issuing tax-free ‘Build India Bonds’.

Also, the Centre should abolish MAT for companies undertaking development of infra projects

—     Shailesh Pathak  CEO, L&T IDPL