Infrastructure on top agenda with national fund, tax free bonds, PPP reboot and more

Anemic investments in infrastructure has been one of the biggest problems affecting economic growth and in his maiden full-term Budget, Finance Minister Arun Jaitley sought to tackle the problem with several measures including a new national infra fund, hike in PSU capital expenditure and new power projects.

Indeed, the FM stuck to the tune of Economic Survey, released a day before, which talked about boosting public expenditure in the short term to crowd-in private investments in the economy.

One big move was creation of a National Investment and Infrastructure Fund (NIIF), which will maintain an annual flow of Rs 20,000 crore. This will enable it to raise debt and invest through equity route in companies such as IRFC and NHB. The infrastructure finance companies can then leverage this extra equity, many times to back several projects.

The FM also intends to permit tax free infrastructure bonds for the projects in the rail, road and irrigation sectors and said the PPP mode of infrastructure development has to be revisited.

“The major issue involved is rebalancing of risk. In infrastructure projects, the sovereign will have to bear a major part of the risk without, of course, absorbing it entirely,” he said.

Arvind Mahajan, head of infrastructure and government services, KPMG in India, said, “While there is no immediate relief for stalled infrastructure projects the plan to create a Bankruptcy code, re-booting of PPP model, public contracts (resolution of disputes) bill are steps in the right direction.”

Meanwhile, Jaitley increased outlays on both the roads and the gross budgetary support to the railways, by Rs 14,031 crore, and Rs 10,050 crore respectively.

Moreover, the capex of the public sector units is expected to be Rs 3,17,889 crore, an increase of approximately Rs 80,844 crore over the revised estimates for 2014-15.

“In fact, all told, investment in infrastructure will go up by Rs 70,000 crore in 2015-16, over 2014-15 from the centre’s funds and resources of CPSEs,” Jaitley said.

The FM also proposed to set up five new Ultra Mega Power Projects, each with capacity to generate 4,000 MWs in the plug-and-play mode and said this would absorb investments of around Rs 1 lakh crore.

Jaitley said projects across roads, ports, rail lines, airports in plug-and-play mode will also be considered.

In another move the FM said he proposes to rationalise the capital gains regime for the sponsors exiting at the time of listing of the units of Infrastructure Investment Trusts (InvITs), subject to payment of Securities Transaction Tax (STT).

The Budget also laid emphasis on the participation of private investors in ports and the FM assured that ports in public sector will be encouraged to corporatise and become companies under the Companies Act.

Pirojshaw Sarkari, chief executive officer, Mahindra Logistics, said:

"The decision to increase public investment in infrastructure development including national highways is pragmatic. Better surface connectivity will provide better speed and cost efficiency for the logistics service providers and consumers alike.”

(Edited by Joby Puthuparampil Johnson)

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