Budget FY23: A massive push towards infrastructure and logistics under PM Gati Shakti

The first of the four priorities of the union budget FY23 was the PM Gati Shakti which focused and emphasized on modernizing infrastructure and building digital infrastructure in India. Within the seven engines for growth in Gati Shakti, the focus of budget FY23 has been on roads, railways, mass transport, and logistics.

Infrastructure

Roads and railways have received strong mention in the budget with National Highways Network to add 25,000 km and introduce about 400 Vande Bharat trains in FY23. Mass urban transit such as Metros has also been a key area with an increased focus on transit-oriented development and town planning schemes to benefit the urban population and reduce time to commute. Parvatmala (ropeway network) has received a significant push in areas such as hilly and congested regions where road public transportation is difficult. Launched on the back of Sagarmala (ports network) and Bharatmala (road network), it is a considerable push towards utilizing public transportation.

The energy sector has received a significant mention on the renewable side with dedicated support for solar manufacturing under the PLI scheme in highly efficient solar cells and modules. Biomass pellets to be co-fired in thermal plants to reduce emissions and support a carbon-neutral economy. Further, energy efficiency and energy audit for large commercial buildings would be undertaken under the energy service company (ESCO) model to build a focus on energy savings.

Digital infrastructure has received a strong thrust with 5G spectrum auctions planned in FY23 and an optical fiber push to reach all villages via Bharat Net by 2025. Data centers and energy storage systems including dense charging infrastructure and grid-scale battery systems have been given infrastructure status.

Logistics

On the logistics front, data exchange among all mode operators is to be brought on a Unified Logistics Interface Platform (ULIP) for improving efficiency and reducing logistics costs. Further, four multi-modal logistics parks (MMLP) would be awarded in FY23 in addition to the exiting MMLPs which are at various stages of planning and construction.

The shift from roads towards using railways as an efficient mode for logistics has been planned with the integration of postal and rail networks for parcel movement. Along with the railway’s plan to develop new products for small farmers and SMEs and the concept of One-Station-One Product to help local businesses and supply chains. Further, about 100 cargo terminals are being planned for multimodal logistics over the next three years.

The focus for the logistics sector is clearly towards efficiency, cost-effectiveness, and digitalization across various modes.

Skill Development and Financing

This year’s budget has also emphasized skill development within the infrastructure sector as well as technical support in capacity building for infrastructure projects. On financing, the National Bank for Financing Infrastructure and Development (NaBFID) and National Asset Reconstruction Company (NARC) have commenced their activities. Furthermore, as a part of the government’s overall market borrowings in FY23, sovereign Green Bonds will be issued for mobilizing resources for green infrastructure. This is a positive step in the overall focus towards green and sustainable infrastructure.

Over the past 2-3 years, the government has been clear on its direction for the infrastructure and logistics sector with the National Infrastructure Plan (NIP) and National Monetization Plan (NMP), bringing in modern and digital frameworks and private players via the PPP route to develop the entire ecosystem.

In our view, infrastructure and logistics have again been at the forefront of the Union Budget FY23 under the PM Gati Shakti master plan. The government has clearly articulated the need for efficient, cost-optimized, and digital focus for the transportation of both people and goods. Innovative business models and how to engage with private players for implementation would be the real test of these identified focus areas.

Authored by:

Savio Monteiro, Senior Vice President, Infrastructure