The finance minister has kept his promise of enhancing the financial support to key flagship infrastructure programmes like the National Urban Renewal Mission, National Highways Development Programme, Bharat Nirman and ulta-mega power projects. It is this continuity of support that gives the confidence to private investors and developers to take a long-term view of the sector. Announcements of the Transmission & Distribution Fund, a regulator for the coal sector, and a dedicated fund for rural roads under RIDF are also the right moves, though we will reserve judgement on such announcements to see if they actually get implemented in the next 12 months.
Although the finance minister did not offer any more tax sops to the infrastructure sector, what was good was that he did not disturb the existing concessions either. It would have been nice if we had heard a statement from him that the existing sops will remain for a fairly long time and the long-term investors (particularly the international infrastructure developers) need not fear a change in tax policies. Our infrastructure investor surveys have always shown that consistency of policies and processes is as important as the actual concessions themselves.
The finance minister has also very kindly changed his mind and given the much sought-after concessions on double taxation of dividends (the holding company-subsidiary issue). On the infrastructure financing side, there were much hope of an announcement from the finance minister that he has accepted all or most of the Parekh Committee recommendations, but it was regrettable that we didn?t hear much on this topic in the Budget speech. While moves to encourage the corporate bond market announced in the Budget will help in financing infrastructure projects, the small print in the announcements will decide the actual extent of immediate boost to the infrastructure financing market where long-term corporate bonds are needed.
One appreciates the increased budgetary support for the crucial water and sanitation sectors (Rs 7,300 crore for the Rajiv Gandhi Drinking Water Mission, Rs 1,200 crore for Total Sanitation Campaign and Rs200 crore for the School Water Scheme), but what, perhaps, need more debate is the huge budgetary support that was announced for a water desalination project in southern India. Such large grants invariably raise the question if the government is right about supporting a technology that is financially non-sustainable. It would be really appreciated if the government carries out a justification exercise from the technological, economic and social points of view.
We have often seen that implementation of big infrastructure schemes on the ground is quite a challenge requiring a lot of coordination amongst the state and central agencies, and calling for very close scrutiny. The announcement by the finance minister to focus on a nationwide monitoring of all important programmes and budgetary support for the same are, therefore, a most welcome step. Again, one hopes that such monitoring systems are put in place quickly.
?The writer is leader, transportation & infrastructure practice, Pricewaterhouse-Coopers