Even as the UPA government has attached a lot of importance to fill the gaps in infrastructure spending through public-private participation (PPP), the Budget for 2008-09 has left many private players in the sector disappointed.
Major players in the sector like Soma Enterprises and Transport Corporation of India (TCI) were expecting introduction of certain financial mechanisms like long- term debt markets and restructuring of taxes to help fund infra projects.
?The biggest disappointment is the lack of any new thoughts or incentives, for ramping up PPP in infrastructure. Budget 2008 completely ducks the most serious challenge – funding and giving incentivising high-level skill development for designing, delivering and monitoring service delivery,? R S Ramasubramaniam vice chairman Feedback Ventures said.
?The finance minister has announced a populist budget, with key focus on relief to farmers and development of rural areas. The increased outlay for national highways, power transmission and distribution, and urban infrastructure is a positive step. However, the Budget has not provided any indication of the role of private sectors in the development of the same,? Ankineedu Maganti, director, Soma Enterprise said.
Furthermore, the lack of cost effective financial instruments in allowing long term funding of large-scale infrastructure projects continues to be an area of concern for the private sector.
?We were expecting relief on import duty, on construction equipment for all infrastructure projects and clarity on service tax applicability in several sectors of infrastructure, Maganti said.?
However, according to government officials, the Budget is not the key instrument in infrastructure funding.
The strategy that the government has been following, is essentially a strategy in which first of all there has to be a big increase in investment in infrastructure and the Budget would primarily provide the money, where the private sector would not go, essentially in the less commercially viable projects like rural roads, which it has done.
According to DP Agarwal, vice chairman & managing director, TCI, the Budget has been an all encompassing one. ?However, in order to achieve a GDP growth of over 8% and ensure a ?double digit? growth in manufacturing, there needs to be a greater and expeditious development of infrastructure.?
?We were hopeful of announcements on restructuring of taxes such as service tax, MAT on sale of vessels and VAT on ship supplies, that would have benefited the shipping sector. Also, the high rate of dividend distribution tax – 15%, should have been reduced to avoid reduction in distribution surplus and consequently, reduce the tax amount paid by the shipping companies?, Agarwal said.