Budget 2018: Will infra industry get an allocation boost from FM Jaitley?

Budget 2018

It is believed that investment in India’s infrastructure industry would yield more impact if all related projects are planned and delivered on the same timeline. This is seen as key to the success particularly of industrial corridors and nodes being planned. Under the Sagarmala initiative, ports are now being integrated with roads, railways, and coastal industrial zones/SEZs. Dedicated freight corridors could be a key component, though there appears to be limited progress after the first two corridors.

Business Standard and PwC look at the present situation of the infrastructure sector, key issues facing it, and what the industry wants from Finance Minister Arun Jaitley in the upcoming Union Budget 2018-19.

Key issues facing the sector

Integrated planning and delivery of projects

Investments in infrastructure would yield more impact if all related projects are also planned and delivered on the same timeline

This will be key to the success of Industrial Corridors and Nodes being planned

Under the Sagarmala initiative, ports are now being integrated with roads, railways and coastal industrial zones/ SEZs. Dedicated Freight Corridors could be a key component of this approach

Revival of private investment

Despite the Hybrid Annuity Model has restarted PPP in National Highways, hurdles to large-scale private investment remain

Both Banks and Developers are still financially constrained

Project pipeline outside the road sector appears to be limited

The promise of opening up Railways to private investment in a range of activities is still to translate into projects

In Airports, investment opportunities have not emerged, and there is no model to attract private investment into regional airports

Pricing of infrastructure

Uncertainty in pricing is still key concern for commercial financiers.

In Airports, key orders of AERA are under legal challenge; the amendment of TAMP’s role in Ports is in abeyance

Tolls on roads are occasionally disrupted; Railway Development Authority not operationalised; metro tariff determination through Fare Fixation Committee still to be gain credibility.

What industry wants

Sector specific mechanism to fast-track addressing of financial stress. This should include addressing large amounts under dispute

NIIF could play a catalytic role in furthering the secondary market, as well as creating new opportunities for channeling private investments.

Single-window approach for clearances in highway projects, and digitisation of revenue records.

Use of technology in collecting user-charges and monitoring performance, to minimize disputes

Revival of PPPs through recommendations in Kelkar Committee report, as also by opening up new sectors. Use of HAM model with strong counter-party; and leveraging existing cashflows, where user-charges are predictable

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