The Budget 2021- 2022: Reforms to Boost Infrastructure
Infrastructure got a big boost in the Union Budget 2021-2022 presented by the Finance Minister (FM). The government has chosen to spend big on infrastructure covering sectors such as the road sector, power sector ports,airports sector, urban infrastructure and so on.
In its Budget 2021-2022, the Finance Minister emphasized the need to increase funding from the Government and the financial sector for ‘National Infrastructure Pipeline’ (NIP), which has been expanded to cover 7,400 projects by 2025. The Government intends to achieve the funding by:
a) Creating National Bank for Financing Infrastructure and Development (NBFID) which will have a capital base of Rs.20,000 crores and a lending target of at least Rs.5 lakh crores over a period of three years. Debt financing through the infrastructure investment trust (InvIT) and real estate investment trust (REIT) routes will be enabled by making suitable amendments in the relevant laws. National Bank for Financing Infrastructure and Development Bill, 2021 has already been listed on the ongoing Parliament session;
b) Monetizing Assets by launching the ‘National Monetization Pipeline’ of potential brownfield infrastructure assets, with a dashboard to track the progress and to provide visibility to investors. Finance Minister announced that
- Five operational roads with an estimated enterprise value of Rs.5,000 crores are being transferred to the NHAI InvIT;
- Transmission assets of a value of Rs.7,000 crores will be transferred to the PGCIL InvIT;
- Railways will monetise Dedicated Freight Corridor assets for operations and maintenance, after commissioning;
- The next lot of Airports will be monetised for operations and management concession; and
- Other core infrastructure assets that will be rolled out under the Asset Monetization Programme are: (i) NHAI Operational Toll Roads (ii) Transmission Assets of PGCIL (iii) Oil and Gas Pipelines of GAIL, IOCL and HPCL (iv) AAI Airports in Tier II and III cities, (v) Other Railway Infrastructure Assets (vi) Warehousing Assets of CPSEs such as Central Warehousing Corporation and NAFED among others and (vii) Sports Stadiums.
c) Enhancing the share of capital expenditure in central and state budgets: The Finance Minister has kept Rs.5.54 Lakh crores for capital expenditure which is 34.5% more than the Budget estimate of 2020-21. Additionally, Rs.2 lakh crores will be provided to States and Autonomous Bodies for their Capital Expenditure.
Roads and Highways Infrastructure
The Finance Minister further informed that by March 2022, the Government will be awarding another 8,500 kms under the Bharatmala Pariyojana Projectand complete an additional 11,000 kms of national highway corridors. To further boost road infrastructure, the Budget enhanced outlay of Rs. 1,18,101 Lakh Crores for Ministry of Road Transport and Highways, out of which Rs. 1,08,230 Crores is for capital expenditure. Finance Minister further announced the following augmentations:
- 3,500 km of National Highway works in the state of Tamil Nadu at an investment of Rs.1.03 lakh crores which also includes the Madurai-Kollam corridor, Chittoor-Thatchur corridor. The construction will start next year.
- 1,100 km of National Highway works in the State of Kerala at an investment of Rs.65,000 crores including 600 km section of Mumbai-Kanyakumari corridor in Kerala.
- 675 km of highway works in the state of West Bengal at a cost of Rs.25,000 crores including up-gradation of existing road-Kolkata – Siliguri.
- Works of more than Rs.34,000 crores covering more than 1300 kms of National Highways will be undertaken in the State in the coming three years.
For the Railway Infrastructure, Finance Minister announced a record sum of Rs.1,10,055 crores. Finance Minister N Sitharaman said that Indian Railways have prepared a National Rail Plan for India 2030. The plan is to create a future-ready railway system by 2030 bringing down the logistic cost for the industry which is at the core of the strategy to enable Make In India.
She also announced the following additional initiatives for developing railways infrastructure:
- The Sonnagar – Gomoh Section (263.7 km) of Eastern DFC will be taken up in PPP mode in 2021-22. Gomoh-Dankuni section of 274.3 km will also be taken up in short succession.
- Dedicated freight corridor projects to be undertaken, namely the East Coast corridor from Kharagpur to Vijayawada, East-West Corridor from Bhusaval to Kharagpur to Dankuni and North-South corridor from Itarsi to Vijayawada. Detailed Project Reports will be undertaken in the first phase.
- Broad Gauge Route Kilometers (RKM) electrified is expected to reach 46,000 RKM i.e. 72% by end of 2021 from 41,548 RKM on 1st Oct 2020. 100% electrification of Broad-Gauge routes will be completed by December, 2023.
She further announced the following measures for Passenger convenience and safety:
- Introduction of aesthetically designed Vista Dome LHB coach on tourist routes to give a better travel experience to passengers.
- High-density network and highly utilized network routes of Indian railways will be provided, with an indigenously developed automatic train protection system that eliminates train collision due to human error.
The Budget 2021-22 has its strength in the Infrastructure Sector which has got an unprecedented increase of 34.5%. The Government has also reiterated its commitment to the PPP model in Ports, bus transportation, airports, etc. Seven projects worth more than Rs.2,000 crores will be offered by the Major Ports on Public Private Partnership mode in FY21-22 for managing the operational services. Though the speech has not given any clear indication as to what will be the mode of execution of various projects, in light of the previous trends it can be safely assumed that the Government will execute all its infrastructure-related Projects through PPP model only. For boosting the revenue, the Government has purposed to take the route of Asset Monetization. Further realizing the need of the hour in the backdrop of the COVID-19 pandemic, the creation of NBFID will bring in the required relief to the sector.