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Six areas Arun Jaitley's Budget 2014 must focus on

July 7, 2014

Vidyut Gulati, Partner, Amarchand Mangaldas
Business Today spoke to Vidyut Gulati, Partner, Amarchand Mangaldas, on steps she expects Finance Minister Arun Jaitley to take in the Budget.

1. Boost infrastructure sector funding:

The government should introduce measures to ease the cost of funding, boost liquidity and investments into the infrastructure sector. It should also take steps to reduce pressure on banks facing asset-liability mismatch by channelizing long-term, low-cost funds into the sector including through regulatory reforms to mobilise funds from insurance companies and pension funds, permitting innovative financial products, deepening the corporate bond market and revitalising the market for takeout financing, refinancing and securitisation.

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2. Project clearance and implementation:

The government should boost investor confidence by simplifying procedures, setting up single-window clearance facilities for infrastructure projects to help quickly resolve environmental and regulatory uncertainties, reduce delays due to inter-ministerial co-ordination and by fast-tracking important projects in the pipeline. The project monitoring group set up under the Cabinet Secretariat should be strengthened by lowering the monetary threshold for eligible projects and encouraging creation of such monitoring mechanisms at the state level.

3. Sector-specific policy interventions:

A sector-specific approach to render the public-private partnership model more efficient and practical is required. For instance, addressing issues relating to total project cost, land acquisition challenges, viability and implementation of projects and possible re-negotiation of BOT [build, operate, transfer] contracts for stressed projects would aid the roads and highways sector. It will also introduce a clear and investor-focused regulatory regime, particularly around concession-related issues and single-till or hybrid-till models for development, and would renew investor interest in the airports sector. Addressing concerns such as fuel shortage through reforms in the coal sector and the alarming financial health of distribution companies through introduction a transparent tariff revision mechanism and implementing measures to lower transmission and distribution losses can revitalise the power sector.

4. Tax benefits:

New tax incentives can be extended to the infrastructure sector in addition to augmenting the existing benefits. For instance, extending profit-linked tax incentives to companies involved in power generation, further reduction of MAT rates for infrastructure companies and even exemptions can be provided to certain ailing infrastructure sectors. The tax incidence on investment structures commonly used in the infrastructure sector can be rationalised.

5. Infrastructure focus in fiscal expenditure:

Modifications in flagship government schemes would help introduce an infrastructure-oriented focus in government spending. For instance, the government's expenditure on MGNREGA [Mahatma Gandhi Natural Rural Employment Guarantee Act] can also contribute towards creation of durable infrastructure assets, through modification of the 60:40 wage material ratio, which would allow local government bodies to utilise a higher portion of the allotted funds for procurement of material, and hence ensuring creation of concrete infrastructure assets of higher value and utility.

6. Encourage eco-friendly initiatives:

The government should give incentives to use eco-friendly technologies and processes. Extending specific tax and policy subsidies to mitigate costs involved for eco-friendly initiatives such as green buildings, captive power generation from renewable energy resources, technologically advanced and environmentally efficient waste management and disposal systems.

- As told to Manu Kaushik

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