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THE ECONOMIC TIMES | NEW DELHI

SUNDAY | 1 MARCH 2015

Budget 2015 Rebooting India

IMPACT ON INFRASTRUCTURE

BUDGET AT A GLANCE

POWER
Five Giant Projects
Govt to invite bids for five new ultra mega power
projects worth `1 lakh crore with acquired land,
coal supply and all approvals in place. This will
rule out delays on account of clearances and
attract Indian and foreign investors. It also
announced that off-grid solar plants and other
sources will help electrify the remaining 20,000
unlit villages by 2020. Anomaly related to
depreciation of power plants has been removed,
helping companies charge unaccounted
depreciation in the next financial year.

COAL
Clean Cess Doubled
Clean cess on coal has been doubled to `200 per
tonne to raise `13,118 crore in 2015-16. This
highlights Indias commitment to tackle climate
change ahead of the UN conference on climate
change in Paris later this year. The impact on
tariffs is not much, estimated to be about 6
paise per unit. Budget provides for raising the
cess to `300 per tonne before March 2016.
Customs duty on high-grade coal has been
slashed to 10% from 55%.

PORTS
Smarter Ports to Dock Here

The Budget sharply increases the outlays

for roads and railways. Outlays on roads
have been raised by `14,031 crore and
budgetary support to railways has been
increased by `10,050 crore to boost
transportation. It also allows tax-free
infrastructure bonds for railway and road
projects and has sanctioned 1,00,000 km of
new roads in addition to an equal number of
roads under construction to link 1,78,000
unconnected habitations. Excise duty on
petrol and diesel to the extent of `4 per litre
has been converted to road cess to fund
investment in this sector.

THE
CONTEXT
Hit By The Downturn

STILL A BIG PIPELINE

OF STUCK PROJECTS
Amount In ` Lakh Crore

Imaging: Arindam

ROADS & RAIL

Rolling in Big Funds

ANGELA MERKEL DISCOVERING A NEW ANGELA IN EUROPE

7.25

205
Projects:
all issues
resolved

ONCE BUOYANT ROAD

SECTOR STRUGGLING
Achieved

2011-12 5824

5013

2012-13 6187

5732

2013-14 6330

4260
1984*

2014-15 6300
*(TILL OCTOBER)

PVT INVESTMENT IN
INFRA HAS SLOWED
Investment In $ Million

2009 37,229
2010 71,967

FIRING ON ALL CYLINDERS Budget promises rapid construction of roads, ports, UMPPs, airports & green
in the required equity and more technological inputs
for timely implementation and enable efficient operation of these projects, the agency said.
nfrastructure development is poised to take a giShubhranshu Patnaik, senior director with Deloitte,
ant leap as the Budget promises rapid construc- said land acquisition for giant projects may be an issue.
tion of highways, ports, ultra mega power plants, Committing to bid out five UMPPs is creditable but it
airports and renewable energy projects with the isnt clear how soon this can be done, given the need
help of massive public funding made possible by to acquire land for the plant and mines, he said. The
delaying fiscal belt-tightening.
Budget proposals include a massive expansion and acAnalysts expect foreign direct investment, which has celeration of road-building by completing 1 lakh km of
been lukewarm towards Indian infrahighways already under construction
structure, to flow into the sector. The
and another 1 lakh km of new projects,
A
GIANT
LEAP
FOR
optimism stems from the belief that the
which will boost demand for inputs,
INFRASTRUCTURE
promised transparent auction and abincluding cement and steel.
sence of uncertainty over clearances
Jaitley also promised tax-free bonds
New Roads Planned
will calm overseas investors, who offor various infrastructure projects
lakh km
ten say it is difficult to compete with
and the setting up of the National
local firms that are adept at navigating
Investment and Infrastructure
Capex of PSUs
bottlenecks and roadblocks.
Fund, which will have an annual
`
lakh
cr
With projects worth `8.7 lakh crore
flow of `20,000 crore to it. This will
stalled due to difficulties in clearenable the trust to raise debt and, in
Rise in Govt Spending
ances, litigation, poor performance of
turn, invest as equity, in infrastruc`
cr
contractors or financial difficulties,
ture finance companies such as IRFC
Infrastructure Fund
Finance Minister Arun Jaitley said
and NHB. These companies can then
the major slippage in the past decade
leverage this extra equity, manifold,
`
cr
has been on the infrastructure front.
Jaitley said. Further, PSUs will raise
There is a pressing need to increase
capital expenditure by `80,444 crore to
public investment.with private investment in in- `3,17,889 crore in 2015-16. In fact, all told, investment
frastructure via the public-private partnership (PPP) in infrastructure will go up by `70,000 crore in 2015model still weak, public investment needs to step in, to 16, over 2014-15 from Centres funds and resources of
catalyse investment, he said.
CPSEs (central public sector enterprises), the minisThe minister focused on steps to fund infrastructure ter said. Jaitley also said the government plans to inand rule out delays and corruption steps which ana- troduce a Public Contracts (Resolution of Disputes) Bill
lysts said can lure foreign companies to invest in Indian to resolve disputes, which have delayed many projects.
projects. A key initiative is the plug-and-play model,
Analysts and industry executives said that the steps
in which projects will be offered after securing all announced in the Budget will boost infrastructure
clearances. Jaitley said he expects `1 lakh crore invest- investment and improve business sentiment, even as
ment in five ultra mega power projects (UMPP). India they added that they will keenly watch how effectively
Ratings said domestic companies may not participate the promised measures are implemented.

2012 33,140
13,519

SOURCE: World Bank

GOVT HAS BEEN UNABLE

TO STEP UP SPENDING
Plan Expenditure, In ` Crore
2010-11
2015-16 (BE)

Transport 61692
86143
Energy

3.2

70,000

20,000

2011 40,916
2013

z Govt-led push in infrastructure

z Plug-and-play model eases business

Adding Muscle to the Core

Himangshu.Watts@timesgroup.com

Target
(Km)

MODIS IMPRINT

The godmother of Europe is waiting. Waiting for your visit, German Chancellor Angela Merkel tweeted to PM Modi late last
year. In two months, her wait will be over. Hanover will host the worlds largest industrial fair in April that will be jointly
inaugurated by the new M&M: Modi and Merkel. As Europe totters, Merkel can bank on a muscular India for trade & markets.

energy projects with the help of massive public funding while weeding out delays and corruption
enthusiastically in these projects due to weak lending
and equity sentiment in the sector. However, this could
IN FOCUS
POWER PUNCH Plan to auction 5 UMPPs with clearances & linkages
boost the foreign interest in the sector which will bring

24.9

501 Projects
taken
up for resolution by PMG

Ports in public sector to be encouraged to

corporatise and become companies under the
Companies Act. This could help ports introduce
efficiency in operations including autonomy in
tariff fixation. Budget says major ports should
utilise their huge land resources. Analysts say
this could facilitate airport-type concessions. Real
estate monetisation could boost revenue for
major ports. There are 12 major ports in India.
Port unions have opposed privatisation and
threatened indefinite stir from March 9.

10389
12549

Rural devlp. 42060

3110
Communication 621
5051
Irrigation & 476
ood control 772

by Invite

ANIL AGARWAL
GROUP CHAIRMAN,
VEDANTA RESOURCES

Budget 2015 is the

right enabler to
achieve growth

Absence of Tax Holiday Sends Infra Scrips into a Tizzy

Shares of most infrastructure companies fell on Saturday despite the
Budgets focus on the sector. Traders
felt the policies were not exciting enough to
attract private investment as many were ex-

pecting a tax holiday. Shares of GMR, GVK, JP

Associates, Tata Power, Reliance Power and
Lanco Infra fell between 0.4% and 4.5% while
that of Reliance Infrastructure closed 2.7%
up. L&T shares rose 0.5%.

Plug-and-Play Model
Strikes the Right Notes
Sarita Singh & Karnika Bahuguna

New Delhi: The Union Budget has

proposed a plug-and-play model for
big-ticket infrastructure projects
such as power plants, airports and
roads, where all regulatory clearances will be put in place before they
are awarded to private developers
through a transparent auction.
Finance Minister Arun Jaitley, during his Budget speech on Saturday,
announced plans to set up five ultramega power projects (UMPPs) of
4,000 mw each under the plug-andplay model. This means winners of
the contract can start implementing
the project immediately, without
worrying about all the regulatory
clearances and coal or gas linkages
the biggest causes for so many
stalled projects in the country.
This should unlock investments to
the extent of `1 lakh crore, Jaitley
said, adding that the government will
consider plug-and-play model for
other projects such as roads, ports,
rail lines and airports as well.
Industry players said the move is in
line with long-term industry demand
and will help the government attract
foreign and domestic investments
into much-needed infrastructure
projects as it will significantly cut
down project implementation time
and cost and time overruns.
The plug-and-play model is one of
the most important announcements
made by the government. It impresses upon the bureaucracy a huge bur-

den to do the homework before bidding out the projects, said Vinayak
Chatterjee, chairman, Feedback
Infra. He pointed out that setting up
an infrastructure project at present
requires a minimum 70 statutory
clearances from central and state authorities. Eliminating such processes would send positive signals to
Indian and global investors across all
sectors, he said. This is also good
for the people of India as there will be
Stalled projects at the end of Dec 14

`8.8 lakh cr or 7% of GDP

SECTORS
Electricity,
Highways,
Airports,
Construction,
Coal, Iron,
Steel, Cement,
Drugs,
Garments,
Processed
Food

REASONS FOR
DELAY Environment, land, fuel
clearances, lack of
demand, funds

better price discovery with healthy

competition and the projects will
come up on time, eliminating extra
costs, Chatterjee added.
Arvind Mahajan, head of infrastructure at KPMG, said the key for the
model lies in implementation. The
government has to spend a fair
amount of time to do feasibility studies and the preparation required to
incubate before it puts out the bids
for private sector, Mahajan said.

Govt to Bear
Major Part of
Risk in PPP

New Delhi: The government

has promised to bear a major
part of the risk of public-private-partnership projects to
revive the PPP model and attract much-needed private
investment in the infrastructure sector.
The PPP mode of infrastructure development has to be
revisited and revitalised,
Finance Minister Arun
Jaitley said in his Budget
speech on Saturday. The major issue involved is rebalancing of risk. In infrastructure
projects, the sovereign will
have to bear a major part of
the risk without, of course,
absorbing it entirely, he said.
Many projects under the PPP
model have failed, leading to
complaints from the private
sector that companies bear
brunt of the setback while the
government is not under
pressure to help resolve difficulties of a stranded project.
Improving the PPP model
and introducing plug-andplay model are widely seen as
attractive options to channelise more private funds for
infrastructure.

Govt Willing to Walk the Talk Through Higher Public Investments

India is one of the worlds fastest-growing
economies. However, it operates far below its potential. Over the past few years,
investments have slowed and there is an
urgent need to revive the economy.
I believe the first full Budget of the new
government is the right enabler to achieve
growth. Special focus on infrastructure,
both social and physical, would have significant benefit for our nation.
It is heartening to note that the government is willing to walk the talk through
higher public investments. Higher public
investments will be a catalyst for higher
private investments and support a swift
recovery, as private spending is key to
long-run growth.
Manufacturing is a key policy objective of
the new government, which identifies this
sector as the engine of long-run growth.

To this end, Budget 2015 has announced a

series of cuts in customs and excise duties.
This has the potential to promote domestic manufacturing and Make in India for
creation of more jobs.

Checking the Right Boxes

Even as we embark on a high economic

growth trajectory, our special emphasis
should be on social infrastructure to bring
the marginalised and poor sections of society into the mainstream. This is because
21.9% of our population is living below the
poverty line. We are in the bottom 25% of
all countries on the Human Development
Index, and bottom 20% on the Gender
Inequality Index.
Women account for nearly 48% of
Indias population. Thus, focus on women should be a priority for any budget.
The vision of each house in the country
having clean drinking water and a toilet by 2022 is commendable. There is a
very close interdependence between
water, sanitation, health, nutrition, and
human well-being. We view water as a
central resource for a sustainable India

and are in the process

of playing a very transformational role. We are
successfully executing
a crucial pilot in the
state of Rajasthan and
working together with
the government and the
community to improve
water access and availability, and as a result
transform lives of rural
communities.
India is one of the
worlds youngest nations and it is blessed
with a demographic dividend. It is important for us to harness this immense potential. Thus, it is heartening to see that the
government will soon launch a National
Skills Mission. It is a step in the right diSocial security measures,
particularly
the universal
social security
system, announced in
Budget 2015
will have farreaching benefits for
all Indians

rection and numerous initiatives on skill

development will help improve employability and generate greater employment
opportunities.
Numerous social security measures, particularly the universal social security system, announced in Budget 2015 will have
far-reaching benefits for all Indians and
poorer sections of society.
To conclude, the new government has
pursued pro-growth initiatives and I believe Budget 2015 will continue the impetus to further boost economic growth and
re-establish investor confidence.
The government is well positioned for a
swift and efficient execution of pro-growth
initiatives. Not only will this help bring in
more capital and employment, it will significantly benefit society at large and help
achieve aspirations of millions of Indians.