Budget 2021

Road-building target: Miles to go, yet

| | Updated on: Jul 10, 2014
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Finance Minister announces plans to build 8,500 km of roads but no strategy to achieve it

Finance Minister Arun Jaitley announced construction of 8,500 km of roads this year, but there are doubts on whether this target can be met since he did not elaborat on the steps to be taken to speed up clearances.

Road Transport and Highways Minister Nitin Gadkari said he was moving a proposal to allow expenditure of up to ₹1,000 crore at the Ministry-level without having to take additional approvals. He also said that he propose flexibility in awarding projects on either public-private partnerships or engineering procurement contract basis.

“There are just not enough awarded projects to achieve that level of construction…,” sources in the know from both Government and private sector said. In his Budget speech the Finance Minister said: “The sector again needs huge amount of investment along with debottlenecking from a maze of clearances…. I propose investment in National Highways Authority of India (NHAI) and State Roads of an amount of ₹37,880 crore, which includes ₹3,000 crore for the North East.”

More support The ₹37,881 crore increase includes a budgetary support of ₹26,238 crore, which is higher than ₹22,478 crore. “The proposal to have a 3P body is welcome, but we will have to see how it emerges,” said Gammon Infrastructure’s Managing Director KK Mohanty.

However, two proposed moves are expected to make road construction cheaper and make the process simpler. The first is a clarification that road construction machinery that is imported duty-free can be sold within five years of import, subject to payment of Customs Duty on depreciated value. Also, individual constituents of the consortium whose names appear in the contract can import goods without paying duty.

The second is developers will not require certification from the Road Ministry or NHAI for availing Customs Duty exemption on specified goods. According to Vinayak Chatterjee, Chairman, Feedback Infrastructure, the announcement of new infra lending format — 25 year loan with five-year resets — by commercial banks will remove, at one stroke, many ills affecting bank lending to the infra sector.

He added that the announcement on Real Estate Investment Trusts and Infra Investment Trusts would be a major facilitator for raising equity, by bundling operating projects together and provide the much-needed liquidity option for developers’ equity.

Published on July 10, 2014

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