Infrastructure: The second pillar in Budget 2021, standing tall
02 Feb 2021
The infrastructure sector has
received a much-needed boost in this budget. The Government launched the
National Infrastructure Plan (NIP) in Dec 2019 with a focus on 6,835 projects.
Of these, 217 projects have been completed which contributes to over INR 1.1 Lakh
Cr of capital outlay.
The list of projects to be
undertaken has been increased from 6,835 projects to 7,400 projects. The
capital outlay has increased from INR 4.39 Lakh Cr to INR 5.54 Lakh Cr.
Increase in capital expenditure has been given prime focus in the budget
clearly indicating the focus on Infrastructure to rebuild a pandemic-hit India.
The three pillars for
Infrastructure laid down in the budget are as follows:
an infrastructure financing Institution-The focus on
creating a development financial institution (DFI) with an outlay of INR 20,000
Cr. and having a lending portfolio of about INR 5 lakh Cr. in 3 years would
provide the much-needed fillip for new Infrastructure projects that are facing
funding difficulty on account of the sector reeling from the banking and
stressed asset crises.
existing infrastructure assets- Monetization of
existing assets pipeline and dashboard creation is a good step toward the
PPP/privatization route. The focus on roads, power transmission, airports, and
railways operation & maintenance would create significant private interest
and build capital for Govt to create new infrastructure projects. Projects
under NHAI, PGCIL, GAIL, IOCL, HPCL, Airports of Tier 2 and 3 cities, warehouses
under central warehousing company, and sports stadiums etc. would be under this
asset monetization scheme.
the outlay for capital expenditure in state and central budgets-The capital
outlay for the central Government has been increased to INR 5.5 Lakh Cr. which
is almost 35% above last year's budget estimates. Further state Government CAPEX
has been provided above INR 2 Lakh Cr. The capital expenditure outlay across center
and state is a significant step toward building infrastructure projects across
Roads & Highways
Focus on Bharatmala projects has been significant.
National highways of about 8,500 km are expected to be awarded and about 11,000
km to be completed in FY2021-22. Apart from this, the focus has been on states
like Tamil Nadu, Kerala, West Bengal, and Assam where a huge capital outlay is
planned to develop/upgrade roads in these states.
NHAI has sponsored an InvIT to attract domestic and
international institutional investors, and 5 operational roads worth INR 5,000
Cr. are being transferred to the NHAI InvIT.
The National Railway Plan (2030) has been released by
the Indian Railways which would be the focus area for Railways in this new
decade. PPP focus in certain areas is a welcome step for the railways in
increasing efficiency as well as creating capital needed for the overall growth
of this sub-sector. 100% electrification of broad-gauge routes is expected by
2023-end, thereby creating opportunities for EPC firms in the sector.
DFCCIL corridor (East and west) which is expected to
be commissioned by mid-2022 would create large opportunities in logistics and
industrial corridors. New DFCCIL routes planned over the next few years such as
the East Coast corridor, North-South corridor, etc. are expected to develop the
economy as well as job creation. This would enable to balance the logistics
tilt from road transportation to railways and help to bring down the logistics
cost significantly across routes.
The focus on privatization/PPP of ports and terminals is
a clear indicator of the Government’s focus on monetization of existing assets
to raise capital and create new infrastructure. About 7 projects are expected
to be offered under the PPP route by major ports worth INR 2,000 Cr. in FY22.
Focus has also been providing subsidies to Indian shipping companies in global
tenders floated by ministries and CPSEs.
The shipbreaking industry has also received
considerable focus with plans to double the Light Displacement Tonne (LTD)
capacity from 4.5M by 2024 and creating over 1.5 Lakh jobs for the youth.
The privatization of Tier 2 and Tier 3 city airports
of AAI is on the anvil for asset monetization. These Airports will be monetized
for operations and management concession, creating the necessary capital for
upgrading and creating new/existing airports across the country. Udaan scheme
has been one of the fundamental programs of the Government and raising the
capital for this program would be a key priority.
Waste & Water
The focus on waste management has been substantial
with a focus on faecal sludge management and waste-water treatment, source
segregation of garbage, reduction in single-use plastic, reduction in air
pollution by effectively managing waste from construction-and-demolition
activities, and bioremediation of all legacy dump sites. The Urban Swachh
Bharat Mission 2.0 will be implemented with a total financial allocation of INR
1,41,678 Cr over five years from 2021-2026.
Underwater supply, the Jal Jeevan Mission (Urban), will be
launched which aims at a universal water supply in all 4,378 urban local bodies
with 2.86 Cr household tap connections, as well as liquid waste management in
500 AMRUT cities. This will be implemented over 5 years, with an outlay of INR 2,87,000
The direction of the Government
has been clear and focused on Infrastructure development in this post-pandemic
era. The Budget also keenly looks at the financing of Infrastructure with a new
DFI on the anvil to fund projects, easing certain issues of foreign wealth
funds such as the prohibition on private funding, restriction on commercial
activities, and direct investment in infrastructure. These are a step over and
above the 100% tax exemption to increase sovereign wealth fund investments in
The decisions taken via these
steps are a clear indicator of the Government’s vision on Infrastructure growth
and development over the next few years.
Aryaman Tandon, Practice Leader, Infrastructure, Praxis Global Alliance