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Budget 2016-17: The Uber moment in public transport

Jaitley has approved the following for the ministries falling under the category of public infrastructure: road transport and highways—`1.03 trillion; railways ministry—`1.03 trillion; and shipping ministry—`4,183 crore. Photo: Hemant Mishra/MintPremium
Jaitley has approved the following for the ministries falling under the category of public infrastructure: road transport and highways—`1.03 trillion; railways ministry—`1.03 trillion; and shipping ministry—`4,183 crore. Photo: Hemant Mishra/Mint

Govtannounces much-needed reforms in road transport; will adopt Kelkar panelsuggestion on framework for public-private partnerships

New Delhi: Finance minister Arun Jaitley gave public transport its “Uber" moment on Monday. Presenting Union budget 2016-17, while announcing the highest outlay of more than 2 trillion for infrastructure, Jaitley proposed supplementing it with much-needed reforms in road transport—seeking the abolition of the Permit Raj and the introduction of a legal framework for public-private partnership (PPP) projects.

The major highlight for the infra sector allocations was a proposal to reform what Jaitley called a “totally unreformed" sector—that of passenger traffic on roads, primarily buses. He said the sector suffers from several impediments and proposed the implementation of the Kelkar Committee’s recommendations on PPP.

Jaitley said the abolition of the Permit Raj will be the government’s “medium-term goal". As part of this, the government will introduce amendments to the Motor Vehicles Act in order to open up the road transport sector in the passenger segment.

An enabling ecosystem will be provided for states, which will have the choice of adopting the new legal framework. The reform was needed to make passenger traffic on roads more efficient for the common man and the middle class.

Explaining Jaitley’s proposal, a transport ministry official said on condition of anonymity, “At present, states issue permits to private bus operators to run on certain specific routes only. But when the amendment is made, these operators will be allowed to ply buses on all sections, increasing the competition for state transport corporations." However, the amendment can be implemented only if a state agrees to introduce it.

According to the transport ministry, at present, 70 million people travel in state transportation buses, and the changes proposed by Jaitley are likely to increase it to 120-150 million.

Road transport and highways minister Nitin Gadkari said the financial condition of state transportation is poor and that the reform was needed to infuse more capital and new technology in the form of battery-operated and bio-fuel buses. He added that the move will lead to a cost-effective and pollution-free substitute for people.

Jaitley said, “The major benefits of this game-changing initiative will be provision of more efficient public transport facilities, greater public convenience, new investment in this moribund sector, creation of new jobs for our youth, growth of start-up entrepreneurs and other multiplier effects. These measures will take us faster down the road to development."

Another measure to boost public transport was the proposed adoption of the Vijay Kelkar Committee’s recommendations on PPP projects. Jaitley said, “Our private sector plays an important role in the development of infrastructure, many of which are implemented in PPP mode. I would like to announce three new initiatives to reinvigorate this sector."

The initiatives are: a Public Utility (Resolution of Disputes) Bill to be introduced during 2016-17 for resolution of disputes in infrastructure-related construction contracts, as well as PPP and public utility contracts; guidelines for renegotiation of PPP concession agreements; and a new credit rating system for infrastructure projects.

Vikash Kumar Sharda, director-capital projects and infrastructure of PwC India, said enhanced allocation in the roads and highways sector by around 22% was positive news. Two of the initiatives—the public dispute resolution body and guidelines for renegotiation of PPP contract—will give an impetus to the PPP model of procurement in the roads and highways sector, he said.

Jaitley described infrastructure as a support pillar of the budget theme, ‘Transform India’, and allocated 2.29 trillion to infrastructure development.

He allocated 55,000 crore for the construction of roads and highways in 2016-17, with a top-up of 15,000 crore to be raised by the National Highways Authority of India through bonds and an investment of 27,000 crore under the Pradhan Mantri Gram Sadak Yojana, adding up to a total allocation for roads of 97,000 crore.

Jaitley approved the following outlays for the different ministries falling under the category of public infrastructure: road transport and highways— 1.03 trillion; railways ministry— 1.03 trillion and shipping ministry— 4,183 crore.

Last week, rail minister Suresh Prabhu unveiled the largest ever rail budget of 1.21 trillion, with three cornerstones of his strategy for 2016-17: Nav Arjan (new revenue), Nav Manak (new norms) and Nav Sanrachna (new structures).

Investment for railways in 2016-17 will include a transfer from the Union budget of 45,000 crore and internal resources of 12,700 crore. In addition, partnerships with states will bring in 18,000 crore, while the Life Insurance Corp. of India and Indian Railway Finance Corp. will contribute 23,000 crore and 21,700 crore, respectively. Prabhu had summed up his ambition thus: “We are talking about completely revamping the structure of railways over a period of time."

The proposed allocation for the shipping ministry saw a 25% increase over last year’s budget, standing at 4,183 crore for 2016-17. The proposed investment was expected to have been higher following a government focus on inland waterways and coastal transportation to decrease the logistic costs.

Jaideep Ghosh, head of transport and logistics, KPMG India, said investment in the infra sector is likely to grow the transport, warehousing and logistics businesses rapidly over the medium term.

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