In an indication of things to come in Budget 2015, Finance Minister Arun Jaitley on Friday said the government is working on a new innovative model of financing infrastructure in the country, and will ensure an investor-friendly tax regime. He also spoke about the need for rationalisation of expenditure, saying the government does not believe in living on borrowed money.
Addressing a gathering of top industrialists, bankers and the state administration led by Chief Minister Devendra Fadnavis at a conference, ‘Mumbai Next’, Jaitley said the time was opportune to explore all models of financing for infrastructure and that the government was considering a few.
Several foreign visitors to the country had shown great interest in financing infrastructure in India, provided a particular model is created, he said. “I am not going into the details of the particular model. These are under active consideration of the present government and you will soon hear from us,” Jaitley said through video-conferencing. He was responding to a question from Reliance Industries chairman Mukesh Ambani on how the government planned to fund infrastructure projects in Mumbai, especially the Navi Mumbai airport, coast freeway, and trans-harbour link.
On the government’s plan to rationalise expenditure, he said, “We do not want the government to live indefinitely on borrowed money. The whole concept of spending beyond your means and leaving the next generation in debt is never a prudent fiscal policy.” He said a government-appointed committee headed by former RBI Governor Bimal Jalan has submitted an interim report in which it has recommended merging many central schemes, and a move towards routing most subsidies through the Direct Benefit Transfer (DBT) scheme.
Plans were also underway to convert the huge pool of domestic savings, which is more than 30 per cent of GDP, to be channelised into infrastructure, Jaitley said, adding that the government would also focus on boosting public investment to help build more roads, ports, airports and power plants. He said that sectors such as energy, highways, railways, ports, and irrigation will be high on the government’s priority list.
Union Minister of State for Finance Jayant Sinha, who also attended the conference, said the show-piece projects of Mumbai would top the Union government’s list under the proposed new model of infrastructure financing. “The Finance Minister this morning has already spoken about a new model for infrastructure financing. There will be real innovations and real breakthroughs there. Let me tell you as we move towards this new model for infrastructure financing, the important iconic projects for Mumbai, whether it is the trans-harbour link, the coastal road or the various Metro lines, these infrastructure projects are going to be on the top of the list,” he said.
More than 370 projects with an investment of Rs 18, 47, 266 crore are stuck for want of various approvals and the project Monitoring Group or PMG is reviewing these. State-owned lenders and private banks have been weighed down because of lending to several infrastructure groups, who have been affected because their projects have been hit either by a slowdown or lack of approvals.
Jaitley said the Modi government is development friendly and business friendly. “So whether it is the development of airports or it is the completion of the sea link in Mumbai or development of coastal roads or expansion of education network, or skill development, these are all priority issues as far as the Union government is concerned,” he said.
He spoke about the need for an investor-friendly taxation policy, assuring investors that taxes would be collected only where necessary and the state would make no unfair effort to to harass investors.
The Finance Minister assured all help to the states. “We have told to each one of our states, irrespective of the political conception that governs the state, that in every step of economic development, the Union government will very actively support them,” he said. Jaitley said India has entered an era of competitive federalism rather than cooperative federalism, with states such as Madhya Pradesh, West Bengal, Gujarat, Rajasthan and Maharashtra vigorously promoting themselves to investors.