Infrastructure development has been one of the focus areas of the Narendra Modi government. Starting with an allocation of around Rs1.81 trillion in 2014-15, expenditure towards infrastructure reached Rs4.94 trillion in 2017-18.
“Our country needs massive investments estimated to be in excess of Rs50 lakh crore in infrastructure to increase growth of GDP, connect and integrate the nation with a network of roads, airports, railways, ports and inland waterways and to provide good quality services to our people," Jaitley said.
To raise resources, state-owned firms will access the equity and bond markets. The budget also levied a Rs8 per litre road and infrastructure cess on imported petrol and diesel.
“The government and market regulators have taken necessary measures for development of monetizing vehicles like Infrastructure Investment Trust (InvIT) and Real Estate Investment Trust (ReITs) in India. The government would initiate monetizing select CPSE (central public sector enterprises) assets using InvITs from next year," Jaitley announced.
These measures will be operationalised given that India will face a $526 billion infrastructure investment gap by 2040, according to the latest Economic Survey.
“Reserve Bank of India has issued guidelines to nudge corporates to access the bond market. Sebi (Securities and Exchange Board of India) will also consider mandating, beginning with large corporates, to meet about one-fourth of their financing needs from the bond market," he added.
As part of the new integrated infrastructure planning model, the National Democratic Alliance government unveiled the largest-ever rail and road budget of Rs1.48 trillion and Rs1.21 trillion, respectively in 2018-19.
Jaitley said that during 2017-18, the cabinet approved the ambitious Bharatmala (roads) scheme to strengthen the roads network, for which the government will raise Rs5.35 trillion as equity from the market. India needs funds for ambitious plans such as Sagarmala (ports) and Bharatmala to improve its transport infrastructure.
“To raise equity from the market for its mature road assets, NHAI will consider organizing its road assets into special purpose vehicles and use innovative monetizing structures like toll, operate and transfer (TOT) and Infrastructure Investment Funds (InvITs)," Jaitley said.
While the total investment for Bharatmala is estimated at Rs10 trillion—the largest ever outlay for a government road construction scheme—an additional Rs8 trillion of investments will be needed for Sagarmala until 2035.
“We are confident about complete national highways exceeding 9000km length during 2017-18," Jaitley said.
The country has a road network of 3.3 million km, the second largest globally. India has been constructing highways at a rate of 27-28km per day, with the aim of speeding up the construction rate to 41km per day.
The finance minister also announced the government’s new roadmap for infrastructure, which included plans to introduce seaplanes and a passenger-friendly toll policy. Jaitley said the government was working on a “pay as you travel" policy for toll plazas. Mint first reported on this policy in May last year.
Even as a budgetary allocation of Rs73.31 crore has been made for Airports Authority of India (AAI) from Rs149.93 crore in 2017-18, AAI is to raise Rs4,086 crore.
Apart from creating infrastructure for seaplanes to boost connectivity, the push will also be towards the government’s regional connectivity scheme, that has already connected 16 new airports and aims to connect 56 unserved airports and 31 helipads. The scheme, Ude Desh Ka Aam Nagrik (UDAN), which loosely translates to “Let the common man fly", proposes that at least half the seats on every flight should have a fare cap of Rs2,500 per seat per hour of flying.
Udan partly subsidizes such fares through a cess on flights to metro cities. It will cost the government about Rs800 crore annually, some of which is being recovered through the cess on metro flights.
“The budget demonstrates a very significant push on infrastructure, including rural infrastructure, as well as for immediate job creation as well as supporting long-term employability through education and skill development is very encouraging," said Jaijit Bhattacharya, partner and head, economics and regulatory at consultancy firm KPMG.