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Budget 2017: “Big Bang” on Infrastructure

By: Ramesh Vaidyanathan

The budget has been big bang as far as infrastructure is concerned, as is evident from the increased allocation for the sector. The sizable government spend on this sector is expected to have a multiplier effect in kick-starting consumption and increasing economic activity.  Some of the specific initiatives proposed are the following:

  1. New Metro Rail Policy and Metro Rail Act to be enacted to increase participation of private parties in creating and operating metro rails. This will hopefully give the necessary fillip to urban transport infrastructure and help decongest our cities. Since the success of metro projects depend heavily on the state governments, private capital will only step in where there is a buy in from all key stakeholders.

  2. The idea to build a 2,000 kilometre coastal road to improve connectivity between villages and major ports is welcome. This will hopefully provide SMEs and MSMEs located in rural areas access to world markets.

  3. A new wave of PPP airport projects are envisaged for Tier-2 cities.  In addition to this, the Airports Authority of India Act, 1994 is proposed to be amended to facilitate the monetisation of land held by AAI.  It will be good for the government to learn from the Delhi and Mumbai airport PPP projects and keep affordability as the key objective. AAI lands are idle resources that can help fund the RCS proposed under the new Civil Aviation Policy.

  4. In order to facilitate the resolution of disputes for large and complex projects in the infrastructure space, a new legislative framework is proposed to be implemented within the ambit of the Arbitration and Conciliation Act, 1996. This is welcome. Hope the amendments explore various internationally tested alternative dispute resolution mechanisms for construction projects.     

  5. The proposal to grant infrastructure status to affordable housing projects is a great idea. Here again, it could have been combined with an increase in tax exemptions on interest payments, which did not happen. The reduction of the long term capital gains period to 2 years will drive more real estate transactions and help improve sentiment.

  6. It was heartening to hear that Railways will tie up with private logistics players to provide end-to-end multi-modal solutions for the transport of goods, especially perishables such as agricultural goods. This will give transporters a single window mechanism to transport their goods to different parts of the country.


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