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MODERATOR:
Hello and welcome to the chat with Manish Agarwal, Leader (Infrastructure), PwC, on what to expect for infrastructure in Budget 2017
MANISH AGARWAL:
Hello, everyone
RAVI JAIN
I expect huge growth in infrastructure budget, what's your thought on this?
MANISH AGARWAL
I do expect it to increase, too
ANAND
Projects in the road and shipping sector are said to cross over Rs 6 lakh crore by the end of March this year. What Budgetary support support do you see Nitin Gadkari's ministry getting this time?
MANISH AGARWAL
While Road sector is likely to remain the largest, I would expect to see increase in share for Sagarmala and for Inland Waterways. Also, with the Railways now being part of the same budget, it would be interesting to see if an integrated approach to transport & logistics is getting converted into budget allocations accordingly.
BHASWAR
Will the demonetisation move have an impact on investments in the infrastructure sector in the coming financial year? Preliminary reports have shown that companies have held off on investment announcements since the note ban was introduced.
MANISH AGARWAL
I am not sure if demonetisation has had an impact since private investment in infrastructure was slow even before that. There would be disruption in construction activity, but I expect it will smoothen out over time. Issues like stress in the Banking sector continue to be key to bringing private investments back into infrastructure
DANIEL
The debt position and debt servicing capabilities of infrastructure companies, which had already been weak for a while, may have worsened after the govt's demonetisation exercise. How do you see this affecting infra projects?
MANISH AGARWAL
Toll roads would certainly have had an impact. The compensation for Toll road operators could be part of the Budget (or maybe left to be addressed bilaterally). Which other sectors do you expect demonetisation to have impacted revenues ?
FALGUNI JEJANI
Is it time now, in the 2017 Budget, to reintroduce deduction for investment in long-term infrastructure bonds? Will that help the government and sector in securing long-term finances?
MANISH AGARWAL
Tax incentive to attract long term retail capital into infrastructure could help, particularly with volume of operating assets now being large. However, the overall approach seems to be of reducing tax concessions. In line with that, I would be more keen to see steps for creating a market for long term bonds. The Kelkar Committee report on reviving PPPs has several good suggestions towards addressing the need for long term capital.
RUPALI MAJUMDAR
The government is going to introduce a new credit rating system for infrastructure and this system is reportedly going to give emphasis on in-built credit enhancement structures instead of relying on a standard perception of risk. What impact will we see on the sector with such a system in place?
MANISH AGARWAL
Would wait to see how this system would be different from the approach that credit rating agencies have been using for several years. I expect there could be a more nuanced evaluation of construction period risks (eg extent of land acquisition completed could be a differentiator). This could help Banks and other institutional financiers. I wouldn't expect bond financing of greenfield risk, initially.
REKHA MEHTA
Is the merger of Rail Budget with Union Budget a wise decision? Will it in any way change the fortunes of loss-making Indian Railways?
MANISH AGARWAL
It certainly helps to bring more focus on the key issues relevant to the Budget, i.e sources of funds and what they will be used for. Over the last few years, using it for making populist announcements had reduced. Pricing of railways has also largely moved out of the Budget speech, into a regular commercial decision taken from time to time. Of course, this change alone will not have any impact on performance; but I do see progress against the 5 year plan set out by the Railways.
GAURAV JINDAL
PM Narendra Modi's speech on New Year's eve suggested Budget 2017 may allot major funds to subsidies and tax sops to offset the demonetisation pain. Will it hit infra spend in the Budget?
MANISH AGARWAL
I would expect the fiscal space for additional subsidies to be created through higher tax revenues. So, wouldn't expect it to hit infra spend. On the contrary, increased infra spend would be n line with the messaging in the New Year's eve speech.
RIDHAM KHANNA
Protecting the environment and growing the economy go hand in hand. But so far we have seen that Budget allocations have been insufficient and India's full potential of green bond market remains untapped. Do you think it's time the government looked for new ways to expand and green the economy?
MANISH AGARWAL
In India's context, alignment of development goals and environmental goals is perhaps more critical than making a choice between the too. The emphasis on Solar in case of energy, and on Railways / Coastal shipping / Inland Waterways in case of Transport, are examples of such alignment. Steps that further enable these sub-sectors would be useful in creating the underlying assets for Green financing.
STACEY GREENE
Last year, the government had allotted a total of Rs 97,000 crore (including PMGSY) for investment in road sector. Total outlay for infrastructure was Rs 2,21,246 crore. Do you think Finance Minister needs to extend the amount allocated?
MANISH AGARWAL
I do expect it to be extended. Public sector spending is expected to remain the prime driver for infrastructure build out next year too, as private sector investment is still to come back. Also, programs like Inland Water Transport and Sagarmala will need initial funding from the Budget