The Finance Minister of India, Mr. Arun Jaitley, has laid down the Union Budget 2018-19 on 01.02.2018 in the Parliament of India. The Budget has made an allocation of Rs. 5.97 lakh crore for infrastructure sector including roads, railways, airports, ports and inland waterways (Sector). The Government of India considers this Sector as the growth driver of the economy. Thus, the Budget allocation for this Sector has been increased in 2018-19 (Rs. 5.97 lakh crore) against an estimated expenditure of Rs 4.94 lakh crore in 2017-18.
The Budget has focused on development of the following infrastructure projects:
- Development of existing infrastructure: The Budgetary allocation is more focused on developing the existing infrastructure projects, both urban and rural, thereby, providing maximum livelihood and long term employment opportunities through education and skill development and has, therefore, refrained from making any new project announcements.
- Development of rural infrastructure: This includes development of rural roads, rural houses, household electric connections, animal husbandry sector, irrigation, rural electrification, potable drinking water and access to toilets etc.
- Creation of infrastructure for seaplanes: For the purpose of boosting regional connectivity, the Government has planned to introduce seaplanes and a passenger-friendly toll policy. It has also planned to encourage investments in seaplane services for tourism and emergency medicare purposes.
- Facilitating air travel: Under the Government’s Regional Connectivity Scheme that has already connected 16 new airports and aims to connect 56 unserved airports and 31 helipads, the Government proposes that at least half the seats on every flight should have a fare cap of Rs. 2,500 per seat per hour of flying.
- Railway infrastructure: The Government has pegged at Rs. 1,48,528 crore for 2018-19 to enhance railways’ carrying capacity and to strengthen the railway network. It has aimed to redevelop 600 major railway stations, provide WiFi and CCTV at railway stations, etc.
- Connectivity in border areas: The Government has aimed to enhance the connectivity in border areas by construction of tunnel under the Sela Pass in Arunachal Pradesh.
- Development of industrial corridors: This includes development of roads and services, administrative and business centre, water treatment plant, common effluent treatment plant and sewage treatment plant in Dholera Special Investment Region (Gujarat), Shendra Bidkin Industrial Area (Maharashtra), Dighi Port Industrial Area (Maharashtra), Multi Modal Logistics Hub, Nangal Chaudhury (Haryana), Vikram Udyogpuri (in Ujjain). The Government expects to allot plots measuring 350 hectares to industrial units by March 2019, as this may open avenues for development of greenfield industrial area.
- Execution of Bharatmala Pariyojana and Sagarmala Projects: The Government had approved this roads and highways Project during 2017-18 for providing seamless connectivity to interior and backward areas of India and to develop about 35,000 km in Phase-I at an estimated cost of Rs. 5,35,000 crore. While the total investment for Bharatmala is estimated at Rs. 10 trillion, but an additional Rs. 8 trillion of investments will be needed for executing the Sagarmala Project, focused on development of ports, coastal economic zones, etc, until 2035.
- Tourism: The Government has proposed to develop ten prominent tourist sites into iconic tourism destinations
- Enhancement of digital connectivity: The Budget has allocated Rs 10,000-crore for creation and augmentation of telecom infrastructure and to roll out 5 lakh WiFi hotspots to boost broadband connectivity. It has further stated that under the BharatNet initiative, around 2.5 lakh villages already have optical fibre connectivity and that the Government aims to expand it to remaining 1.5 lakh villages.
The Government has proposed to raise and arrange for finances for execution and completion of the infrastructure projects in the following manner:
- Creation of Special Purpose Vehicles and use of innovative monetising structures like Toll, Operate and Transfer (TOT), Infrastructure Investment Trust (InvIT), etc by National Highways Authority of India (NHAI). The Government has also permitted NHAI and Metro to raise bonds from the market.
- Development of monetizing vehicles like, InvIT and Real Estate Investment Trust by the Government and market regulators.
- Proposal to make necessary amendments to the Indian Stamp Act 1899 with regard to stamp duty leviable on financial securities transactions.
- Access of equity and bond markets by state-owned firms to raise resources.
- Levy of road and infrastructure cess of Rs. 8 per litre on imported petrol and diesel by the Budget.
- Government to purchase surplus solar power, generated by solar water pumps installed by farmers to irrigate their fields. Allocation of Rs 4,200 crore for capacity addition in wind, solar and green energy corridor projects.
- Finance from India Infrastructure Finance Company Ltd, a wholly-owned Government of India Company, to help finance major infrastructure projects including investments in educational and health infrastructure.
- Market regulators to consider investments in A-rated bonds.
- Securities and Exchange Board of India to consider mandating, beginning with large corporates, to meet about one-fourth of their financing needs from the bond market.
- Listing of 14 Central Public Sector Enterprises (CPSEs), including two insurance companies, on the stock exchanges; Initiation of strategic disinvestment process in 24 CPSEs; Strategic privatization of Air India; Merger of 3 public sector general insurance companies namely, National Insurance Company Ltd., United India Assurance Company Limited and Oriental India Insurance Company Limited into a single insurance entity and then the subsequent listing of such entity on the stock exchanges.
There have been mixed responses from various industry experts. A few experts have stated that they do not see any significant job creation from the Budget proposals. Whereas others have stated the focus of the Government on execution and completion of the existing infrastructure projects and increase in Budget allocation towards the same may have a positive outcome on the economy, and that the investments in such projects may lead to employment generation.
Thus, the aforesaid Budget proposal and allocation to the infrastructure sector reflects the Government’s firm commitment to boost investment for growth and development of the Sector.
Senior Legal Associate