Union Budget 2011:Lion's share of Central Plan outlay for Infra

NEW DELHI: Energy and transport will get a lion's share of the Central Plan's outlay in the next fiscal even as Finance Minister Pranab Mukherjee on Monday announced several key initiatives for giving a boost to the infrastructure sector.

The government proposes to spend Rs 2.72 lakh crore on the transport and the energy sectors out of Rs 5.92 lakh crore earmarked in the Central Plan for 2011-12. The allocation for the sectors account for 45.95 percent of the plan outlay.

This marks an increase of 9.68 percent over the budget estimates of the previous year.

However, since the full outlay of Rs 2.48 lakh crore could not be spent last year, the increase in outlay in 2011- 12 was 21.43 percent compared to the revised estimates for 2010-11.

Since investment in infrastructure is critical for maintaining the growth trajectory of the economy, the government intends to continue its focus on the sector.

Besides raising the outlays in the Central Plan, the Budget announced other important initiatives for funding the projects, including those in the private sector and the PPP models.

"Infrastructure is critical for our development," Finance Minister Pranab Mukherjee said while tabling the Budget in Parliament on Monday.

The major initiatives include creation of an infrastructure debt fund and raising the limit of foreign institutional investors (FII) in corporate bonds.

The government also announced issuance of tax-free bonds worth Rs 30,000 crore and extending income tax exemption on tax-saving infrastructure bonds up to a maximum of Rs 20,000 crore for one more year.

The Budget proposes to take the FII limit for investment in corporate infrastructure bonds to $25 billion and also permits foreign portfolio investment in SEBI-registered mutual funds.

With raising FII limit, Mukherjee said they will be eligible to invest up to $40 billion in corporate bonds, including a total of $25 billion in the infrastructure sector.

"... the FII limit for investment in corporate bonds, with residual maturity of over five years issued by companies in infrastructure sector, is being raised by an additional limit of $20 billion taking the limit to $25 billion," he said. "This will raise the total limit available to the FIIs for investment in corporate bonds to $40 billion,"he added.

Besides, Mukherjee said since most of the infrastructure companies are organised in the form of SPVs, FIIs would also be permitted to invest in unlisted bonds with a minimum lock-in period of three years.