The announcement of the five new ultra mega power plants of 4,000 MW each is certainly a big pipe-line enhancer for thermal projects
The infrastructure sector has good reason to cheer. Here are seven ways the finance minister has sought to re-energise the economy’s “elephant-in-the-room.”
Increased public expenditure: Economists, analysts and industry have all been advocating that in the current context of stressed domestic private sector balance-sheets and hesitant foreign investors, the only plausible strategy is to make public expenditure on infra projects the pivot of a sector revival plan as well as a turbo-charger for economy-wide investment-driven growth. The FM has rightly taken this macroeconomic advice on board and substantively increased public expenditure, particularly in road and rail sectors.
National Infrastructure and Investment Fund: The other key pre-budget recommendation was to recognise the limitations of fiscal space and go for creative “off-Budget” structures and SPVs to garner resources from external sources. The FM has indeed taken this suggestion seriously and set the ball rolling by structuring the National Infra and Investment Fund with a start-up corpus of R20,000 crore.
Tax-free infra bonds: Further pushing the idea of methods to raise funding outside the traditional budgetary sources, Tax-Free Infrastructure Bonds have been announced for the Road, Rail and Irrigation sectors. This is indeed an excellent idea to channelise domestic savings to this task of nation-building.
Re-jigging PPP Formats: The huge ‘angst’ which private developers had over PPP formats has finally been appreciated by government. The Budget talks about revisiting PPP structures with an open mind and recognising risks that should remain with the sovereign.
Corporatisation of govt-owned major ports: The FM has announced corporatisation of the 12 major ports owned by the government. This should lead to an operational rejuvenation for these traditional ports and allow them to move up the competitiveness ladder vis-à-vis their more aggressive private counterparts.
Plug and Play: The announcement of the 5 new ultra mega power plants of 4,000 MW each is certainly a big pipe-line enhancer for coal-thermal projects. But, more important is the associated direction for bidding out such projects; that henceforth, they will all have to be ‘plug and play.’
Making regulation effective: Finally, India’s disappointment with the effectiveness of the independent regulators in the infra space has been palpable for over a decade. Yet, in spite of widespread discontent, previous governments have tended to ignore this crucial condition that makes for sustainable PPPs. This Budget announces a Regulatory Reform Law to finally address this matter.
By Vinayak Chatterjee, Chairman, Feedback Infra