Frequent changes in taxation system affect projection: GM Rao, Chairman, GMR Group

As an infrastructure conglomerate we would like the finance minister to give directions on the long-term issues affecting business in some way or the other. The government’s attention is required to fill void in four major macro dimensions:

Institutional voids

The government targets are not getting converted into project pipelines in many infrastructure sectors. For example, water, waste management, railway etc. need clear initiatives and policy support for private investment.

Multiple approval and overlap of jurisdiction.

High rates of illiteracy makes it difficult for effective communication at the ground level. For example, this is one of the key constraints in land acquisition.

Independent consumer-information organisations are rare, and government watchdog agencies are not well developed. In some of the recently commissioned projects traffic is significantly below projection.

Weak dispute resolution

Law enforcement is often capricious and extremely slow. The dispute between GMR and TNEB took several years to get interim settlement.

Unlike in advanced markets, there are few extra judicial arbitration mechanisms to which one can appeal.

Financing

Underdeveloped debt capital markets

India’s Sovereign rating (S&P BBB-) is low and lack of institutional set up makes it difficult for foreign
insurance and pension funds to participate.

Frequent changes in taxation system affect projection

Non-uniform definition of “infrastructure” makes it difficult to avail fiscal benefits.

Inadequate ECB limits through automatic route.

Execution

Lack of policy support on land acquisition and right of way.

Uncertainty in fuel security—gas allocation, coal block development and coal supply.

Delay in permits and clearances.

Uncertainty in environmental clearances.

Lack of inter-agency co-ordination—many surprises after project investment.

Inadequate/insufficient qualifying criteria for the bidders to mitigate execution challenges.