Budget 2012: No breakthrough ideas for the infrastructure sector

By Vinayak Chatterjee, chairman, Feedback Infrastructure Services Private Limited

This budget has had a pretty heavy emphasis on the infrastructure sector. Seven key interventions deserve highlighting. They are:

1. Increase in scope of viability gap funding in new areas like irrigation, oil and gas pipelines, market terminals etc.

2. Significant increase in limits to raise tax free infra bonds by PSUs like NHAI, HUDCO, SIDBI, IIFCL, NHB, Indian Railways. The space goes up from Rs. 30,000 crores to Rs. 60,000 crores.

3. Opening up the ECB window across a wide range of of infra sectors.

4. Creating a new PSU, namely, the Water Resources and Irrigation Company. Hopefully, this will re-energize action in inland water, irrigation, river-linking and similar large programmatic initiatives.

5. High focus on rural infrastructure like drinking water, sanitation, warehousing etc.

6. Import duty exemption for imported fuels for power sector.

7. And finally, a slew of import duty exemptions for equipment imports in solar power, safety equipment for railways, aircraft maintenance equipment, road construction equipment in urban areas etc.


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However, the disappointments are in the lack of broad-brush reforms and institutional strengthening. The market was expecting raising of tax breaks for retail investments in infra bonds. That did not happen. In the power sector (in the ICU now) budget pronouncements on tackling bankrupt discoms or protection to domestic producers of power equipment did not find any mention. Finally, instead of the PM’s office fire-fighting on various infra fronts, a sustainable institutional intervention like an Infra Ministry or an Infra Fast Tracking Board were given the go-by.

In summary, a series of good interventions but no breakthrough ideas to kick start the investment cycle and investor confidence in the infrastructure sector.