The acceptance of the 14th Finance Commission´s recommendations could well be a watershed moment for the country´s infrastructure sector. When Narendra Modi was CM of Gujarat, he had to request the Centre time and again to issue funds for the State, based on local requirements. But the mandarins at Delhi in previous dispensations preferred the one-size-fits-all approach. This often caused a lot of heartburn among State finance ministers (even those who were part of the same party which was in power at the Centre). Now States can design, implement and package their finance programmes tailored to their specific needs.
Here the States that are proactive and have been able to create a good pipeline of projects and have a good track record of project execution will benefit, but many others will continue to sit on this allotted cash pile. A disincentive in the form of withdrawal of funds should be instituted to reward the ones that move quickly and qualitatively over those which procrastinate or have a poor record in timely project completion.
The share of Central taxes that States will receive from the divisible pool is now a whopping Rs 1.78 crore. But there´s more in the fine print. Not only will States be empowered with the monies coming in, Panchayats stand to receive around Rs 2 lakh crore (for a five-year period, till 2020) for provision of basic amenities like sewage, sanitation and water supplies. Municipalities also stand to gain a substantial sum. Here there is a risk that many States would not be able to cobble up a PPP proposal for implementing a project and precious time may be lost. But if NITI Aayog could be mandated to work as an advisor in such cases, this challenge could be tackled. However with this in effect, a large number of projects (like sewage treatment and biomass, and desalination plants) can be planned keeping in mind micro-local issues. Infrastructure project planners will not land up building bridges to nowhere. But there are a few elements (or rather, the lack of them) in the Budget that I would like to point out.
First, since the Planning Commission has been disbanded, its role as a negotiator of funds for the States has become irrelevant. NITI Aayog as stated earlier should don the hat of an advisor and an agency facilitating project pipeline build-up and project execution guide.
Second, the stalled projects which constitute 7 per cent of GDP need to see the light of day and a deadline for ground-breaking would help build faith of the private sector which is holding back any further initiative in infrastructure.
Third, although a bankruptcy law has been announced, a fast track dispute resolution is the need of the hour as over Rs 20,000 crore of private sector money is stuck in litigation and arbitration.
Fourth, corporate debt has begun crossing all limits and considering a huge percentage has been held up for infrastructure projects which have had issues with the government´s inability to provide land and permissions, there is a need for an ´Infra Debt Resolution Tribunal´ which has the powers to examine awarding relief on such cases.
Finally-and that´s the most crucial point and the focus of our Cover Story-the Budget does not clearly specify the vision of the ´one trillion dollars´ to take our GDP into double digit growth and how the Centre plans to raise the huge amounts of capital required to finance the ambitious infrastructure targets.
But having said all this, I commend the focus on agenda of building infrastructure under the existing limitations with a few radical ideas. Going forward the success of the Budget would be in its delivery. We are aiming to be a superpower; we have focused on building our infrastructure, now we need to pull the trigger. Time to execute.