Setting a theme of opening up more space in the infrastructure sector for private players, the Budget has proposed a slew of measures with the aim of attracting private investment.
These include expanding public-private partnership (PPP) in physical and social infrastructure projects such as railways, highways, medical colleges and smart cities. This is in addition to laying down policy roadmaps for data centres, logistics, etc. Also, 100 per cent tax exemption has been proposed for interest, dividend and capital gains incomes to major FDI investments in infrastructure projects before March 31, 2024, with a lock-in period of three years.
Overall, the Budget proposed an allocation of Rs 1.70 lakh crore for the transport infrastructure sector in 2020-21. In her speech, Finance Minister Nirmala Sitharaman said the government would focus on infrastructure for economic development, and 6,500 projects across sectors under the National Infrastructure Pipeline (NIP) were envisioned towards ease of living for citizens.
As a follow-up to Prime Minister Narendra Modi’s 2019 announcement of an investment of Rs 100 lakh crore in the infrastructure sector over the next five years, the Finance Minister had launched the National Infrastructure Pipeline on December 31, 2019 of Rs 103 lakh crore.
Given the constrained fiscal situation of the government, particularly in context of the revised fiscal deficit target of 3.8% for 2019-20 due to revenue shortage, it was essential for the Budget to make a strong pitch to the private sector for putting investments in the country’s infrastructure. This is especially required considering the Rs 100 lakh crore infrastructure investment target announced by Prime Minister Narendra Modi.
Projects in the pipeline include those in housing, safe drinking water, access to clean and affordable energy, healthcare for all, educational institutes, modern railway stations, airports, bus terminals, Metro and railway transportation, logistics and warehousing, and irrigation. A sum of Rs 22,000 crore has already been provided to support the infrastructure pipeline.
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According to the Economic Survey for 2019-20, out of the total expected capital expenditure towards the National Infrastructure Pipeline, projects worth Rs 42.7 lakh crore were under implementation, projects worth Rs 32.7 lakh crore were in the conceptualisation stage, and the remaining were under development.
The Survey said that the central government and state governments were expected to have equal shares of 39 per cent each in the funding of the projects, followed by the private sector at 22 per cent.
“In addition to providing Rs 1.7 lakh crore for the transport sector and Rs 22,000 crore for the renewable energy sector, there is a focus on mobilising private capital. Private fund flows are sought to be increased through several measures: tax exemptions to sovereign wealth funds investing in infrastructure; lower tax rate for power generation companies; plans for further asset recycling; the corporatisation and listing of ports; and the promotion of a NIIF (National Infrastructure Investment Fund) sponsored NBFC (non-banking financial company),” said Arun M Kumar, Chairman & CEO, KPMG in India.
The Budget proposed the setting up of a “Kisan Rail” through PPP arrangements, to build a seamless national cold supply chain for perishable agricultural goods, including milk, meat, and fish. Four station redevelopment projects and the operation of 150 passenger trains would also be done in the PPP mode. Five new smart cities are proposed to be developed in collaboration with states in PPP mode.
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“The Budget’s focus on the development of transportation infrastructure, specifically on urban transportation through allocation of funds for Metro rail projects will help achieve Ease of Living through ‘Ease of Moving’. The transportation infrastructure development should also focus on accessibility to all, including senior citizens and persons with disabilities. Suburban rail will boost multi-modal connectivity and open up new economic opportunities for areas in and around cities like Bengaluru,” policy think tank Ola Mobility Institute said in a statement.
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Sitharaman said that the government would consider corporatising at least one major port, and subsequently list it on the stock exchanges. In line with the government’s plan to promote domestic air travel, particularly to places not on the air network map of India, the Finance Minister reiterated that 100 more airports would be developed by 2024 under the UDAN scheme. The Ministry of Civil Aviation has received Rs 465.17 crore towards the regional connectivity scheme for 2020-21, which will be utilised towards the revival of 50 airports and viability gap funding for the North East Connectivity plan.