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Order inflows in the construction sector have been subdued for the last 2-3 years. Policy paralysis and land acquisition have been the key problems so far.
This Budget is expected to usher in solutions – be it higher allocation across segments such as roads, irrigation, urban infra, ports, airports and power. To improve viability of infrastructure projects, industry expects MAT (minimum alternative tax) to be abolished for the tax holiday period.
According to Sumit Mazumder, Vice-Chairman and MD, TIL Ltd, the road infrastructure sector has completely come to a standstill because of numerous problems with the National Highways Authority of India (NHAI).
“In 2012-13, around 9,700 km of land was to be released but orders were placed for 1,100 km. Except in airports, not much of anything else is moving,” Mazumder told Business Line .
Ports
In the port segment, the issue is primarily on funding for development of infrastructure across all major ports, with a focus on privatisation and implementation of technology.
According to a senior official of the Kolkata Port Trust (KoPT), nearly Rs 20,000-30,000 crore needs to be allocated annually across all the major ports.
“Last year, ports were asked to raise Rs 5,000 crore worth of tax-free bonds. But there were no guidelines on how to go about it. We hope there will be some clarity this year,” the official said.
Dredging also has been a major issue. While nearly Rs 400 crore was allocated last year, market sources claim that dredging work was “unsatisfactory”. Allocations have to be increased with a focus on dredging.
NBFCs role
The other expectation from this Budget is clarity on availing financing for the sector.
According to Hemant Kanoria, Chairman and MD, Srei Infrastructure Finance Ltd, this Budget should aim at expediting infrastructure development through non-banking finance companies (NBFCs).
These companies, which are into infrastructure financing, are handicapped with rules being mostly in favour of the banks.
In order to facilitate financing by NBFCs, granting relief from taxation (tax deducted at source) for those involved in infra projects should help growth in the sector.
According to Kanoria, NBFCs are also subject to higher taxation since they are not allowed to provision their NPA (non-performing assets).
The issue too, should be looked into. Other benefits (at par with banks) include deductions in income tax, abolishing amendments relating to MAT, granting greater utilisation of the external commercial borrowings window.
Revising hedging norms for NBFCs involved in the financing infrastructure projects too needs to be re-looked (from 75 per cent of the exposure to 100 per cent).
Market sources indicate that the industry is expecting tax offsets from loss-making special purpose vehicles (SPVs).
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