BackInfrastructure hogs the limelight
Capital outlay for roads and transport increased to `82,600 crore in FY16 from `43,100 crore in the previous year
Premium(Pradeep Gaur/Mint)
Expectations: HIGH
Delivery: HIGH
Measures
l Plug-and-play model for infrastructure projects; initial thrust on five ultra mega power projects.
l Capital outlay for roads and transport increased to ₹ 82,600 crore in FY16 from ₹ 43,100 crore in the previous year. Proceeds from road and petrol cess and duties set to nearly double to ₹ 43,100 crore.
l To complete 100,000km of under-construction roads and award new road contracts of equivalent length.
l To allocate ₹ 25,000 crore for the Rural Infrastructure Development Fund. Satellite town development attracts an outlay of ₹ 7,000 crore.
l Port development: 16 new port projects, Kandla and Jawaharlal Nehru Port Trust to have special economic zones and ₹ 11,635 crore outlay to develop Tuticorin Port.
l Continued emphasis on housing for all by 2022—20 million houses planned in rural areas and 40 million in urban areas, with electricity and roads.
l Tax-free infrastructure bond issuance to fund roads, railways and irrigation projects.
l A National Investment and Infrastructure Fund with an annual flow of ₹ 20,000 crore will be set up for the government to invest in infrastructure.
l Customs duty on steel increased from 10% to 15% and on metallurgical coke from 2.5% to 5%.
l Pass-through status for rental income of real estate investment trusts (REITs) from its own assets. REIT sponsors will pay capital gains in the same manner that a person pays on sale of his shares in a special purpose vehicle.
Impact
l Clear direction to improve ease of doing business and develop infrastructure.
l Sustained commitment to housing will boost demand for dwelling units, and rationalization of REIT operations will help ailing real estate companies improve cash flows.
l New projects in roads, ports, railways with new public-private partnership models and with clearances in place, will revive interest and widen base of construction firms. It will also improve demand for capital goods, cement and steel.
l Higher duty on steel imports gives domestic firms additional protection from cheap imports, though the increase in metallurgical coke imports is a small negative.
Stocks in focus
Larsen and Tourbo Ltd, NCC Ltd, Simplex Projects and Infrastructure Ltd, Sadbhav Engineering Ltd will gain from new orders.
l DLF Ltd may benefit from REITs, while others would see demand improve gradually.
l Ambuja Cement Ltd and UltraTech Cement Ltd will gain as demand should improve with more infrastructure investment.
l In the short term, the import duty hike should benefit Tata Steel Ltd, Steel Authority of India Ltd and JSW Steel Ltd. This is contingent on steel prices not falling, negating the support from higher duties. Higher demand and better realizations are needed to improve the sector’s financial health.
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