Budget 2022: Icra expects enhanced support for waterways, logistics sectors

An increased budgetary support from the government for flagship projects including Sagarmala and inland waterways will provide a boost to the execution pace and investments, Icra said

An increased budgetary support from the government for flagship projects including Sagarmala and inland waterways will provide a boost to the execution pace and investments, domestic ratings agency Icra said on Monday in its pre-budget expectations note on ports, shipping and logistics sectors.

According to the ratings agency, the government is also expected to continue its focus on improving connectivity across India and speedy implementation of projects like Bharatmala for the road logistics sector, dedicated freight corridor (DFC) for the railways and Sagarmala for the waterways.

The Union government is set to present Budget 2022-23 on February 1.

There has been a traction in policy initiatives for the ports sector in the current fiscal with the operationalisation of the Indian Major Ports Act, 2021 and notification of market-based tariffs under the Act, notification of the revised Model Concession Agreement for PPP projects and passage of the Inland Vessel Act, 2021 in both houses of Parliament, Icra said.

While these measures are favourable for the sector and will aid in attracting private sector investments, increased budgetary support from the government for flagship projects such as Sagarmala, inland waterways, among others, will provide a boost to the execution pace and investments, it stated.

In the past few years, the allocation to Sagarmala and the inland waterway projects in terms of budgetary support has remained low (about Rs 500-600 crore) compared to the cost of planned initiatives under these schemes, indicating a high reliance on private sector participation, Icra said.

"In this context, even if the government continues with its past policy and does not introduce higher budgetary allocation to these plans, some incentives or other measures to boost private investor interest that facilitate more active participation could be expected," it noted.

Further, any budgetary support for the modernisation of shipyards (public as well as private) or other incentives which will help in meeting the government objective of greater indigenisation of naval contracts will boost manufacturing under the 'Make-in-India programme', as per the note.

Icra, in its note, also expects the government to reduce taxes on diesel in the forthcoming Union Budget while at the same time looking for a push for higher absorption of EVs (electric vehicles) particularly for last-mile connectivity through subsidy /incentives.

The ratings agency also said there is a need for finalization and implementation of National Logistics Policy for continued push for reforms in the sector to reduce inefficiencies and improve global competitiveness for the logistics sector.

Icra also said that the logistics sector requires continued push for higher digitisation and automation to lower compliance costs through policy support besides push towards creation of a skilled workforce for the sector as well as reforms towards upliftment of livelihood of the workforce.