The Govt might focus on infra agendas such as 'Power for All' and 'Housing for All'.
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The Govt might focus on infra agendas such as 'Power for All' and 'Housing for All'.

Budgetary allocation for roads and highways is expected to increase to Rs 85,000 crore in Union Budget 2016-17.

  • February 19, 2016  
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Ravi Gopalakrishnan, Head of Equities, Canara Robeco Asset Management Co.

The government is in the process of kick-starting the infrastructure sector by increasing public spending, creating new avenues for raising capital for infrastructure projects and ensuring more transparent processes.

It seems committed to addressing the key challenges that have long been faced by international and domestic investors. The Budget could include some important measures to improve the environment for private infrastructure investment.

The government might focus on the 'One Team' model for infrastructure that recognises the importance of both the Central government and state governments for infrastructure investments.

This year's Budget could also spell out the roadmap to achieve some of the government's bigger agendas such as GST, 'Power for All' and 'Housing for All'. The Budget could also focus on creation of the National Investment Infrastructure Fund with an initial annual allocation of Rs 40,000 crore.

It is expected to fund public sector infrastructure finance companies, which, in turn, might be able to leverage their higher credit rating to access domestic and international debt markets. This should help the sector attract money from foreign pension funds, insurance funds and other institutional investors seeking more secure investments.The fund is expected to get higher annual allocations in future years.

Sector-wise Expectations

ROADS:

  • Budgetary allocation for roads and highways is expected to increase to Rs 85,000 crore in Union Budget 2016-17 from Rs 42,900 crore in Budget 2015-16. The ministry has already utilised 80 per cent of the funds allocated for this financial year.
  • Dividend distribution tax for companies engaged in infrastructure development could be abolished/ rationalised.

POWER:

  • The government is expected to extend the 10-year tax holiday to companies that start power generation by March 31, 2020.
  • In order to encourage the development of renewable power, the ministry has proposed a compulsory renewable purchase obligation that requires distribution utilities to purchase between 2 and 10 per cent power from renewable sources.

Strengthening Policy and Governance:

  • The Union government is looking to set up a regulator for fixing railway fares and ensuring a level-playing field for private investments in railway infrastructure.
  • Formation of the National Facilitation Committee to address disputes, inter-ministerial issues involving Central/ state governments, etc, is also proposed.

 Written by Ravi Gopalakrishnan, Head of Equities, Canara Robeco Asset Management Co.