Finance Minister Nirmala Sitharaman’s push for a ₹100 lakh crore investment in infrastructure is a welcome move but questions over execution remain.

Sitharaman in the Budget speech said that an action plan to deepen the market for long-term bonds, including for deepening markets for corporate bond repos, credit default swaps, with specific focus on infrastructure sector, will be put in place.

The Minister also laid emphasis on infrastructure development funds, deepening of bond market and expressing intent to consolidate relationships with global pension and sovereign funds to meet the long-term investment requirements in infrastructure sector that can pull in more investment. This is coming in the backdrop of the government struggling to sell road assets under the toll-operate-transfer model, which it has now opened up to private operators.

According to Manish Aggarwal, Partner, Special Situations Group, KPMG in India, the Budget has put out a positive tone and intent for infrastructure sector overall. “While the integrated infrastructure development articulated as vision is positive, execution, however is key and a big ‘if’,” he said.

Some in the industry believe that this outlay is an aspirational one but nevertheless underscores the importance of this sector on the economy. “It will also be dependent on the private sector’s ability to mobilise financing which looks subdued as of now,” said Sandeep Upadhyay, MD & CEO, Centrum Infrastructure Advisory.


Highway programme

The FM is laying out a path to consider generating financing pools for the vast capital requirements, when the Government has stated its goal of the country becoming a $5 trillion economy by 2025. This requires high investment in the infrastructure sector, which is undergoing stress due to high debt. “I am optimistic that the proposed restructuring of the national highway programme will prove to be another significant boost for infrastructure with renewed focus on dedicated freight corridors and road and waterways development,” said Puneet Dalmia, MD, Dalmia Bharat Group.

To address some of the issues, the government has proposed that a Credit Enhancement Guarantee Corporation and linkages to bond market will be set up in 2019-20. The infrastructure credit enhancement initiative which has been in the works for some time now, seems to be underway. “While from a timing perspective it is apt, I would closely watch out for its scoping and overall envisaged roll-out model since we have seen other models like take-out financing meeting limited success,” said Upadhyay.

Some in the industry believe that while fund infusion is welcome, some tax-related concerns need to be looked at. “The application of direct and indirect taxes on this sector needs to be analysed carefully,” said Sohrab Bararia, Associate Partner/ Indirect Tax, BDO India.

The government’s short-term recapitalisation of public sector banks for ₹70,000 crore could boost lending in the infrastructure segment.

India has had a reasonable success in brownfield asset monetisation and several InvITs and a REIT transaction have been completed. NHAI carried out one toll-operate-transfer transaction. The cumulative resources garnered are around ₹24,000 crore.