New Delhi: There has been a growing realisation that India’s post-pandemic economic recovery will be led by huge infrastructure spending. And with many big ticket projects in highways, railways and ports in the pipeline, the infrastructure sector is expected to get a big push in the upcoming Union Budget 2021.
In last year’s Budget, the allocation for the infrastructure sector was Rs 1.7 lakh crore, an 8.3 per cent jump over the previous fiscal. Industry experts now expect the allocation to go up further when Finance Minister Nirmala Sitharaman presents the Budget on 1 February, given projects like the Delhi-Mumbai Expressway, Dedicated Freight Corridor and Mumbai-Ahmedabad bullet train are under way.
The experts believe that an infra push now will not only be the right antidote to check the slowdown in the economy, but will also create jobs and boost growth. The government has already shown signs of such a push, because despite imposing expenditure curbs during the lockdown on most departments, the finance ministry reached out to infrastructure ministries like highways and railways to step up spending.
The thrust, a senior official in one of the infrastructure ministries said, will be on the National Infrastructure Pipeline (NIP), announced by Finance Minister Sitharaman in December 2019. Already, 7,000 projects have been identified in different sectors that will be part of the NIP.
“The government has proposed investment to the tune of Rs 20 lakh crore in the road sector under NIP. This is about 18 per cent of total capital expenditure envisaged under NIP during the period 2020-25,” said a senior highway ministry official, who did not want to be named.
The vision under NIP includes development of overall 60,000 km of national highways, including 2,500 km of expressways; 9,000 km of economic corridors; 2,000 km of coastal and port connectivity; bypasses for 45 towns; and enhanced connectivity for 100 tourist destinations by 2024.
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Highways, metro, Jal Jeevan Mission set for boost
Senior officials told ThePrint that the highway ministry has sought an allocation of Rs 1.6 lakh crore in the upcoming Budget.
“Work on many big ticket projects, including Bharatmala and the Delhi-Mumbai expressway, is already under way and will require steady flow of funds,” said a second highway ministry official, who did not want to be named.
Under the first phase of the Bharatmala project, which has already been approved, NHAI’s target is to develop 27,500 km of highways.
“There is going to be a big thrust on public-private partnership projects. Currently, a bulk of the ongoing projects in the highway sector are being taken up on ‘engineering procurement and construction’ mode, where 100 per cent funding comes from the government. This is not sustainable,” said a third highway ministry official.
To meet the large funding requirement envisaged in NIP, different stakeholders including banks are pushing to establish a dedicated development finance institution, on the lines of similar agencies established for the power sector such as the Power Finance Corporation and the Rural Electrification Corporation.
Railways is another sector that will see a lot of momentum in the 2021-22 fiscal, the proposed Mumbai-Ahmedabad high-speed train project, among others, set for a push. The railway ministry has sought budgetary allocation of Rs 75,000 crore, which, if granted, will be about 7 per cent higher than 2020-21.
The allocation for metro rail projects is also likely to see an increase. “Construction is picking up. Currently, metro projects are underway in 27 cities. And fund requirements will be crucial at this stage,” said a senior official of the Union Housing and Urban Affairs Ministry, which implements metro projects.
Another focus area in the Budget could be Jal Jeevan Mission, the government’s flagship scheme to provide drinking water to each and every household. While Nal Se Jal, the rural leg of the Jal Jeevan Mission, is going full steam, the Centre is planning a similar scheme to cover all statutory towns in urban areas.
“The programme is likely to be announced in the upcoming Budget,” said the housing and urban affairs ministry official.
Key challenges
Despite the expected infra push, industry experts point out that ‘fundability’ continues to be the biggest challenge in the sector.
Pravesh Minocha, managing director of the transportation business at Feedback Infrastructure Services Private Limited, said with projects in highways, railways, metro in full swing, there has never been a greater thrust for the sector. But the flip side is that cash flow has never been this bad, especially amid the Covid-19 pandemic.
“From April to July 2020, revenue collection was hit badly. But there has been no compensation to cover the drop in toll collection, no GST compensation. Contractors have not been paid. The government did announce some relief measures, but it is not enough,” Minocha said.
He added that at present, bad loans have been “hidden” under various moratorium schemes, but most of these will be “exposed” by the middle of the next financial year.
“Lot of bids for projects are being taken up at very competitive rates, which is not good. The government needs to give fair compensation to all infra stakeholders. Cash needs to be disbursed now because projects are getting stalled; contractors and subcontractors are not getting paid,” Minocha explained.
The government has been trying to rope in global pension and insurance funds for longer investments. Prime Minister Narendra Modi, last year, held a meeting with some top global fund houses to ramp up investments.
According to Abhaya Agrawal, partner, government infrastructure, strategy and transaction, at EY LLP, the government needs to put far more money into the infrastructure sector.
“It will give economic benefit like in no other sector. In the road sector for instance, government is spending more money, but NHAI will need more capital to execute the proposed projects,” Agrawal said.
The government, he added, has promised a lot on paper, but not much has materialised on the ground. “An MSME needs to be paid in 45 days, but the government is not paying in 45 days. There is an urgent need to increase liquidity to developers.”
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