The infrastructure sector was one of the thrust areas in the Budget, as Finance Minister Mr Pranab Mukherjee announced a slew of proposals, including allowing financial institutions to raise about Rs 60,000 crore from tax-free bonds and envisaging a greater private participation.

Mr Mukherjee said investment in the sector during the 12th Five-Year Plan (2012-17) will go up to Rs 50 lakh crore, about half of which is expected from the private sector.

“Lack of adequate infrastructure is a major constraint on our growth. The strategy we have followed so far is to increase investment ... For the year 2011-12, tax free bonds for Rs 30,000 crore were announced for financing infrastructure projects. I propose to double it to raise Rs 60,000 crore,” Mr Mukherjee said while tabling the Budget in Parliament here on Friday.

These include Rs 10,000 crore each for NHAI, IRFC, IIFCL and power sector, besides Rs 5,000 crore each for HUDCO, National Housing Bank, SIDBI and ports.

Analysts feel the government has given a much-needed push to the infrastructure sector.

“He (the Finance Minister) has stressed importance to flagship programmes and nodal organisations such as NHAI responsible for spread-heading the progress in the sector.

By allowing these organisations to raise Rs 60,000 crore through tax-free bonds, he has also showcased government’s commitment to provide required financial support to these organisations,” Mr Vishwas Udgirkar, Senior Director, Deloitte in India, said.

Increase in investment in the sector has been envisaged through a combination of public investment and public private partnerships (PPP).

To attract private investment, more sectors like irrigation, oil and gas storage facilities and telecommunication have been made eligible for viability gap funding under the scheme ‘Support to PPP in Infrastructure’

“The Finance Minister reiterated need for significant investment in various infrastructure sectors. Government’s dependence on private sector for augmenting the investment through PPP route was also restated.

“To this effect FM widened the ambit of VGF scheme by including new infrastructure areas. He also provided more avenues of raising funds with measures like relaxing ECB guidelines, reductions in WHT, proposal to remove cascading effect of DDT,” Mr Udgirkar said.

Also, the government has approved guidelines for establishing joint venture companies by defence public sector undertakings in PPP mode.

To encourage PPP in road construction projects, he announced allowing external commercial borrowings (ECB) for capital expenditure on the maintenance and operations of toll systems for highways.

The allocation to the highways sector has also been enhanced by 14 per cent to Rs 25,360 crore in 2012-13 and the government has set a target of covering a length of 8,800 km roads under NHDP next fiscal.

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