Roads: Refocus on 20 km/day

Sudhir Hoshing, CEO—Roads Reliance Infrastructure

This is the penultimate budget of the government before elections. The last budget usually is not one where big ticket reforms can be kicked in. Political com­pulsions make those budgets populist and are also subject to consent of the new government. Hence this budget is a good opportunity for the government to usher in reforms, specially in infrastructure.

The ambitious goal of achieving 20 km of road construction per day has lost its focus due to bottlenecks like permissions, clearances and funding issues. The budget is an opportunity to re-focus on the goal as road infrastructure will lead to inclusive growth from improved connectivity between rural and urban India.

Making the sector attractive to private sector needs policy initiatives and budget sops. The following measures need to be considered in the budget:

Initiatives for bond market: Initiatives are needed to deepen the infrastructure debt market.

a) FII investment: There have been initiatives like reducing lock in period of infra bonds to three years. However, foreign investors are wary of currency risk as rupee depreciation can wipe out their returns. Through some mechanism of sharing currency risk, government needs to attract much needed foreign capital into infrastructure sector.
b) Credit rating rethink: Tax free infrastructure bonds or bonds to be placed with pension funds and insurance companies (who can invest for longer tenure compared to banks) need higher credit rating. Through state and central authorities, government. needs to provide credit enhancements and guarantees for infrastructure debt to improve credit rating and make debt investible.

Tax Benefits: Looking at the overwhelming response to tax saving scheme of Infrastructure bonds under section 80CCF,
the limit for the same should increase from Rs 20,000 (in case of individuals) to Rs 30,000 or more. This will help in attracting more funds to infrastructure sector. There has been uncertainty over section 80IA which gives tax exemptions to infrastructure companies as to its withdrawal when DTC comes in. Commitment to this exemption going forward will be a welcome announcement.

MAT exemption: it must be noted that even though infra­structure companies enjoy 80IA benefits, they still pay MAT. Exemption under MAT too should be available or there should be a lower applicable MAT rate in case 80IA benefit is being availed.

Indirect tax sops like concessions on CST and excise on purchases will give much needed boost to the sector. This is especially true for road sector where there is not much import and hence exemptions on customs or foreign lending on imports are not advantages that road sector enjoys.

Single tax policy: The infrastructure sector specially roads wherein construction of national highways passes from various states has resulted in lot of tax ambiguity due to diffe­rent tax laws for different states. In order to remove this ambiguity there should be single tax policy at least for national highway projects.

The ambitious goal of achieving 20 km of road construction per day has lost its focus due to bottlenecks like permissions, clearances and funding issues. The budget is an opportunity to re focus on the goal as infrastructure is a catalyst to growth.