Government’s spending in the infrastructure sector will go up by a smart R70,000 crore in 2015-16 with increased allocation...
Government’s spending in the infrastructure sector will go up by a smart R70,000 crore in 2015-16 with increased allocation to sectors like roads, railways, rural infrastructure, the Delhi Mumbai Industrial Corridor (DMIC), and also creation of a large R20,000-crore infra fund. Finance minister Arun Jaitley on Saturday said the government would contribute an additional R5,000 crore to the fund.
The National Investment and Infrastructure Fund (NIIF), as it will be called, can raise debt, and in turn, invest as equity, in infrastructure finance companies such as IRFC and NHB. The government has also allocated R25,000 crore in FY16 to the corpus of Rural Infrastructure Development Fund (RIDF) set up in Nabard. Widening the scope for investments in infrastructure, the government permitted tax-free infra bonds for rail, road and irrigation projects.
Calling it a “good initiative”, NS Venkatesh, executive director (treasury), IDBI Bank, said, “The cost of borrowed capital for implementing the infra projects will come down due to tax-free infrastructure bonds.”
The finance minister increased the allocations to the roads and railways sectors by R14,031 crore and R10,050 crore, respectively. Satish D Parakh, managing director, Ashoka Buildcon, said, “The government’s intention is to push the infrastructure sector. All funding-related announcements are in that direction. However, it remains to be seen how these Trusts will function and whether they will help in releasing equity pressures on the infrastructure players.”
The rationalisation of taxation in Infrastructure Investments Trusts (InvIT) should also broaden the investor base for the sector. Amitabh Sharma, partner, Khaitan, said: “This move should benefit the road segment of infrastructure space, more than any other sector as there is a sizeable number of projects that could get into the kitty of infrastructure trusts.”
To further fund investments, the government plans to include conversion of existing excise duty on petrol and diesel to the extent of R4 per litre into ‘Road Cess’. Jaitley said that an additional sum of R40,000 crore will be made available through this measure for these sectors.