The success of the government’s ambitious National Infrastructure Pipeline (NIP) depends on adequate availability of long-term funding and better on-ground project implementation. The NIP envisages an investment of ₹111 lakh crore over FY20-25 in the country’s infrastructure, to be funded by the Centre, States and the private sector.

Higher allocation, progress on funding 

In a repeat from last year, the government is widely expected to raise the allocation for infrastructure including for key segments such as roads, highways, and railways in Budget 2023. With many States due for elections in 2022, one can expect some big bang new project announcements.

Long-term finance from National Bank for Infrastructure Financing and Development (NaBFID), along with proceeds from asset monetisation (InvITs and other sources), is expected to fund 15-17 per cent of the planned NIP outlay. NaBFID was proposed in last year’s Budget and is expected to commence lending from Q1 FY23. Following the success of NHAI’s privately placed InvIT issue, the upcoming Budget is expected to open this investment avenue to retail investors too.

As monetisation of road assets, which account for 27 per cent of the monetisation pipeline, gains further traction, it should free up NHAI’s resources for funding new projects. This should add to the order inflows of construction players such as KNR Constructions, PNC Infratech and G R Infraprojects which are better placed than other highly leveraged players.

Beyond the Budget

Measures such as introducing single-window system for clearances and timely dispute settlement can go a long way in attracting private investment. While these may fall outside of the Budget, any announcements in this regard will be a big sentiment booster. What is also needed is better project implementation. According to the Ministry of Statistics and Programme Implementation, one-third of 1,657 Central government projects of ₹150 crore and above were behind schedule as of January 2022.

While the post-pandemic labour shortages and supply disruptions have eased, delays in land acquisition, environment clearances and tie-up of financing continue to be roadblocks. Progress on this front is critical for NIP targets to be met.

Set for a recharge

The government’s aim to raise the country’s renewable power capacity from the current 150 GW to 500 GW by 2030 will have to be supported by significant investments into the sector. The Budget is expected to announce measures to provide greater access to long-term funding. Given that large-scale use of renewable power will have to be backed by energy storage capacity for it to work as a steady source of power, incentives for promoting investments in this segment too are expected.Most leading power producers such as NTPC, Tata Power and Adani Power have committed to massive renewable power capacity expansions. Any budgetary measures on this front will provide a leg-up to these efforts.

Despite the government’s reform programmes for the state power distribution utilities, much remains to be desired. More than additional measures, continued focus on the already introduced reforms can strengthen this segment.

Key expectations
Higher spend on infra
Retail investors to get access to road assets
Incentives for renewable power and energy storage