Discussing Budget 2016-17 | Infrastructure and Investment

In this section, we will deal with the sector that holds the potential to transform India – Infrastructure and Investment Sector.

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Focus Area

Road Sector

The process of road construction will be accelerated and govt. has allocated Rs. 55,000 crore in the Budget for roads and highways. Govt. will approve nearly 10,000 kms of National Highways in 2016-17 and nearly 50,000 kms of State highways will also be taken up for up-gradation as National Highways.

Read more about Developments In Road Sector.

Port

Govt has started a series of measures for modernizing the ports and increasing their efficiency. Govt. is planning to develop new greenfield ports both in the eastern and western coasts of the country along with expedition of National Waterways.

Read more about Sagarmala Project.

Civil Aviation

Govt. is drawing an action plan for revival of un-served and under-served airports. There are some 160 airports and air strips which can be revived at an indicative cost of Rs. 50 crore to Rs. 100 crore each. Union govt. will partner with the States to develop some of these airports for regional connectivity.

Read more about Developments In Civil Aviation Sector.

Oil and Gas

Govt is planning to incentivise gas production from deep-water, ultra deep-water and high pressure-high temperature areas, which are presently not exploited on account of higher cost and higher risks.

Read more about Ministry of Petroleum and Natural Gas: Important Updates.

Power Sector

Govt. will diversify the sources of power generation for long term stability. A comprehensive plan will be prepared to augment the investment in nuclear power generation.

Read more about India’s Nuclear Dilemma at the World’s Stage and Policy Wise: India’s Power Sector and recently launched UDAY scheme.

Financing

Govt will permit mobilisation of additional finances by various institutions such as NHAI, PFC, REC, IREDA, NABARD and Inland Water Authority to the extent of Rs. 31,300 crore through raising of bonds during 2016-17.

New Initiatives

Abolition of Permit-Raj

Govt. will bring necessary amendments in the Motor Vehicles Act and open up the road transport sector in the passenger segment. An enabling eco-system will be provided for the States which will have the choice of adopting the new legal framework. Entrepreneurs will be able to operate buses on various routes, subject to certain efficiency and safety norms.

Impact: It will lead to more efficient public transport facilities, greater public convenience, new investments, creation of new jobs, growth of start-up entrepreneurs and other multiplier effects.

Reviving the Public Private Partnership

Govt. will take various measures to revive the PPP sector:

  • It will introduce Public Utility (Resolution of Disputes) Bill to streamline institutional arrangements for resolution of disputes in infrastructure related construction contracts, PPP and public utility contracts
  • Guidelines for renegotiation of PPP Concession Agreements will be issued without compromising transparency
  • A new credit rating system for infrastructure projects will be developed, instead of relying upon a standard perception of risk which often result in mispriced loans

Read more about recently released Kelkar Committee Report.

Reforms in FDI policy

100% FDI will be allowed through FIPB route in marketing of food products produced and manufactured in India, as lot of fruits and vegetables either do not fetch the right prices or fail to reach the markets. This move will benefit farmers, give impetus to food processing industry and create vast employment opportunities.

Govt. has also proposed changes in the areas of insurance and pension, Asset Reconstruction Companies, Stock Exchanges, etc

Public Sector Enterprises

Govt. has approved a new policy for management of its investment in PSUs, including disinvestment and strategic sale. Govt. will leverage the assets of CPSEs for generation of resources for investment in new projects. The NITI Aayog will identify the CPSEs for strategic sale.

The Department of Disinvestment is being re-named as the Department of Investment and Public Asset Management (DIPAM).

Challenge

There is a need for consolidation, starting from approval to implementation, apart from an institutional mechanism for fair pricing and competition in infrastructure policy.

Criticism

There are no big reforms or major policy turnarounds in this regard.

PS: Please click on the green hyperlinked text to read more about the concepts. Revise and revise & feel free to ask pertinent questions.


Published with inputs from Pushpendra | Image: Finmin

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