Highway developers are upbeat after Union Finance Minister Arun Jaitley presented his maiden budget in the Parliament on July 10th. The optimism and renewed vigor expressed by the road sector following presentation of the Union Budget 2014 – 15 need not come as a surprise.
As the National Highways Builders Federation, the representative body of highway developers, said in its reaction to the Budget, the policy paralysis that plagued the previous government had put the sector on hold. The present government, on the other hand, is sending the right signals through the Budget.
The Finance Minister in his budget speech recognized the road sector as an important artery of communication in the country and stressed on the need to feed its huge investment requirements as well as carry out debottlenecking from the maze of clearances. An amount of Rs. 37,880 crore, which includes Rs. 3,000 crore for the North East, has been proposed for investment in the National Highways Authority of India and state roads. The target for national highways construction in the current financial year has been set at 8,500 km. The Budget also emphasized that the country needs an efficient transport network to ensure faster travel and improve the supply chain in transporting goods across cities. The government would initiate work on select expressways in parallel to the development of industrial corridors. The NHAI would set aside a sum of Rs. 500 crore for project preparation. For improving access in rural India, a sum of Rs. 14,389 crore has been allocated for the Pradhan Mantri Gram Sadak Yojana.
Highway developers expect that in addition to the allocation for the road sector, some of the other measures announced in the Budget will go a long way in accelerating the pace of road construction in the country. The measures include providing a conducive tax regime for Infrastructure Investment Trusts to be set up in accordance with the regulations of the Securities and Exchange Board of India, encouraging banks to extend long term loans to the infrastructure sector with flexible structuring to absorb potential adverse contingencies, sometimes known
as the 5/25 structure, permitting banks to raise long term funds for lending to the infrastructure sector with minimum regulatory preemption such as Cash Reserve Ratio, Statutory Liquidity Ratio and Priority Sector Lending, focusing on harnessing of private capital and expertise through the Public Private Partnership model for development of infrastructure in various sectors and setting up an institution called 3P India with a corpus of Rs. 500 crore to provide support to mainstreaming PPPs.
The NHBF said the measure to exempt banks from maintaining CRR, SLR and PSL on funds raised to finance infrastructure loans could prove to be a game changer in infrastructure financing. The Finance Minister had mentioned in his budget speech that long term financing for infrastructure posed a major challenge to greater private sector participation in the sector.