Transport infrastructure is the backbone for economic growth and sustainability. India’s urgent need for infrastructure development—both basic and advanced—requires considerable investments and support from the Government; and the Union Budget announcements of 2020-21 by Finance Minister Mrs. Nirmala Sitharaman seem to provide impetus to enable further development of transport infrastructure in the coming year. Keeping in line with the National Infrastructure Plan (NIP) which set the context for the budget expectations this year, the budget also stresses on resource mobilization through private sector participation and asset monetization.
The Budget speech re-iterated that transport infrastructure investment and development forms part of the main set of priorities of the Government, with a total outlay of ₹1,69,637 crores for 2020-21. In addition to providing reasonable budgetary allocations, the budget also tried to address the financing issues being faced by the sector by announcing ₹22,000 crores in equity support to Infrastructure Finance Companies such as IIFCL and a subsidiary of NIIF. Additionally, 100% tax exemption has been provided to sovereign wealth funds for interest, dividend and capital gains income with respect to their investment provided they say invested for more than three years.
Roads & Highways and Shipping have been key beneficiaries in terms of percentage increase with their budgets increased by 10.6% and 18.2% increase over FY20 outlay. In absolute terms allocation to Roads & Highways has been increased by ₹8,807 crores and Railways has been increased by ₹2,248 crores. Further plans to undertake development of highways was outlined by proposed development of 2500 Km access control highways, 9000 Km of economic corridors, 2000 Km of coastal and land port roads and 2000 Km of strategic highways. Other significant projects announced included Delhi-Mumbai Expressway to be completed by 2023 and a proposed Chennai – Bengaluru expressway. The focus on rural and last mile connectivity was also evident with increased outlay of ₹19,500 crores. to PMGSY – a significant increase of 39% over the FY20 (RE).
For Railways, 27,000 km of further electrification has been proposed along with a high-speed train between Mumbai and Ahmedabad. Further, emphasizing focus on private sector involvement in Railways, four station re-development projects and operation of 150 passenger trains are proposed to be undertaken through PPP mode. A 148 km long Bengaluru Suburban transport project at a cost of 18600 crore is proposed to be commissioned, wherein the Central Government would provide 20% equity.
There was focus on asset monetization and recycling with the FM proposing to monetize at least 12 lots of highway bundles of over 6000 km before 2024. The government had introduced Toll –Operate- Transfer (TOT) model in 2016, and since then, has successfully auctioned TOT bundles to private companies for the purpose of monetizing public funded highways. It is also actively pursuing the InVIT route of asset monetisation and the Union Cabinet has already approved a proposal from National Highways Authority of India (NHAI) for the same. Future expansion of both the models augurs well for the health of the road sector and replication of this asset monetization model in other infrastructure sub sectors may be explored.
The spend on shipping and ports sector has increased marginally in absolute value terms compared to FY20. However, one of the crucial announcement in the Budget was regarding corporatizing at least one major port and listing on the stock market.
While the Union Budget addressed some pressing issues, announcements related to other issues such as Electric Vehicles, Urban Mobility and innovative financing mechanisms such as Value Capture Financing could have helped some of the other concerns regarding the sector.
In all, the Budget announcements seem to uphold the need-of-the-hour of infrastructure development in the country. They seem to provide the required impetus to the economy, which shall hopefully have the desired multiplier effect. However, the conversion of these announcements in to reality and the subsequent impact will have to be monitored regularly at the highest level.
Kushal Kumar Singh is Partner, Deloitte India