In a major fillip to investment, especially in the infrastructure sector where a $1-trillion expenditure has been envisaged in the 12th Plan, Finance Minister P. Chidambaram on Thursday announced a number of steps to boost growth, including setting up two new ports and creation of two new industrial corridors and seven new smart cities.
Spelling out his budget priorities, Mr. Chidambaram said debt funds for infrastructure would be encouraged and tax-free bonds up to Rs. 50,000 crore allowed in 2013-14. The government would also seek funds from multilateral agencies like the World Bank and the Asian Development Bank to build roads in the north-east, linking it to neighbouring Myanmar.
Mr. Chidambaram referred to creation of a regulator to give a boost to road projects and address bottlenecks faced by investors. The most important of the initiatives was creation of two new industrial corridors — Bangalore-Chennai and Bangalore-Mumbai — on the lines of the Delhi-Mumbai Industrial Corridor project. Plans were already drawn up to establish seven new smart cities along the industrial corridors. Work on two smart cities at Dholera in Gujarat, and Shendra-Bidkin in Maharashtra would start during 2013-14. On the power front, the Minister said he had given the nod for constructing a transmission link from Srinagar to Leh in Jammu and Kashmir at an investment of Rs. 1,840 crore. The Dabhol LNG terminal, with a capacity of five million tonnes a year, would be fully operational in 2013-14.
As for rural infrastructure, he said the National Bank for Agriculture and Rural Development, which was operating the Rural Infrastructure Development Fund (RIDF), had successfully utilised 18 tranches so far. “I propose to raise the corpus of RIDF-XIX in 2013-14 to Rs. 20,000 crore and Rs. 5,000 crore will be made available to it to finance construction of warehouses, godowns, silos and cold storage units designed to store agricultural produce, in both the public and private sectors.”
Another proposal is an allowance for new, high-value investments. “A company investing Rs. 100 crore or more in plant and machinery between April 1, 2013 and March 31, 2015 will be entitled to deduct an investment allowance of 15 per cent of the investment in addition to the current rates of depreciation. There will be enormous spillover benefits to small and medium enterprises,” the Minister said.
‘A positive step’
In his reaction, Pratik Kadakia, principal, Roland Berger Strategy Consultants, said that considering the inevitability of coal imports for the power sector, the proposed PPP model with CIL was a positive step. Infrastructure and port development, to sustain the supply chain that would involve 180 million tonnes, was also required. Introduction of financial instruments, especially for longer-term debt and market creation, was designed to facilitate this over the long term; but supply chain issues in the shorter-term might persist, he said.
India Ratings said the constitution of a regulatory authority for the roads sector would address a long-felt need. The budget reiterated the government’s commitment to press ahead with previously announced measures such as credit enhancement from India Infrastructure Finance Company Limited and encouragement for setting up infrastructure debt funds. Both of these had the potential to galvanise the bond markets to fund the massive infrastructure investments India urgently needed, the agency said.