Budget wish list: Infra Sector - Roads

KEY DEVELOPMENTS

* Clearances: The highway development programme focused largely on the PPP mode of procurement until 2011-12. It has faced troubles since, because of land acquisition issues, statutory and environment clearances and lack of liquidity with private promoters. These issues have stalled the construction activity in the past two to three years.

* Steps taken: To rejuvenate the sector, some important measures have been taken by the road transport & highways ministry. These are:

• Public spending has been increased through the EPC mode of procurement.
   
• One-time funding support to be provided for some PPP projects that have achieved some level of progress
   
• Complete exit allowed from the projects awarded during the pre-2009 period
   
• New model (hybrid annuity model) for PPP procurements to be adopted

KEY ISSUES

• Private participation: Bringing back the interest of the private sector through PPP will require resolving the current financial stress in the banking system due to existing stressed road projects, and kick-starting stalled road projects. While work is going on over the latter, progress on addressing financial stress is slow.
   
• Funding: Despite efforts to encourage insurance and pension funds to finance the roads & highways sector, these institutions have not been able to step up financing to the sector. It would be important to bring these ideal financiers into the financing stream for roads and highways.

EXPERT VIEW

Vikash Kumar Sharda
Director (capital projects and infrastructure), PwC India

PwC expert answers Business Standard readers' questions on what to expect from the Budget

BADRI: Should the govt bite the bullet on fiscal deficit and go full steam with public expenditure in the infra sector, especially when the private sector still appears to be dealing with delays and stuck projects?

Infrastructure is a key to economic growth. And infra investment's proportion in GDP has come down over the past few years due to a sluggish private sector investment. Therefore, the government might have to consider higher public-sector spending on infra, considering current issues of financing with developer and banker. This might, however, have some impact on the fiscal space.

SARDA: Experts have opined the government should look into tax issues in relation to infra investment trusts. What can the government do in the current Budget to address this issue?

InvIT was introduced in Budget 2013 and subsequently the Sevcurities and Ecxchange Board of India issued final regulations on September 26, 2014. There is an issue with respect to tax implication on income to be received by an investor in InvIT. However, there is an expectation from this Budget to bring out some solution/clarification on the same to make InvIT an attractive source of finance.

ANIL CHAUDHRY
Managing director & country president, Schneider Electric India

"While various policy changes have already been issued by the government to drive reforms, the Indian industry is keenly awaiting the announcement of positive legislative reforms like GST, the real estate regulatory Bill and the land acquisition Bill. Some positive steps, especially in the direction of GST, will boost infra development. Meanwhile, as the Smart City programme gains momentum, a higher Budget allocation will ensure faster implementation of projects on the ground across India"