Budget 2020: Govt's Infra push critically dependent on project preparation and private sector participation
Peeyush Naidu February 4, 2020
The Government had already announced the National Infrastructure Pipeline (NIP) for 2019-2025 in December 2019. Specifically for the Transportation & Logistics sector, in today's budget, the FM additionally announced certain initiatives and proposals.
For instance, the National Logistics Policy is to clarify the role of the Centre, States and key regulators as well as to outline the setting up of a single-window e-logistics market.
Initiatives for building up components of the agri-logistics and national cold chain were also announced - covering VGF for setting up efficient warehousing under Public-Private Partnership (PPP), Krishi UDAN to be launched by the Ministry of Civil Aviation for international and national routes to improve value realisation, and Kisan Rail to be set by Indian Railways through PPP for transporting perishable goods.
For their effective implementation, the Centre and states would need to closely work together to ensure integration with value chains through promotion, coordination and involvement of producers and stakeholders on ground.
Across segments of Roads, Railways, Ports, and Airports, the budget maintained focus on a number of initiatives announced in the past while additionally outlining a few specific projects/ initiatives. These included setting up a large solar power capacity alongside Indian Railway tracks on land owned by them, fund allocation for the Bengaluru suburban project, the intent to corporatise one major port followed by its listing on the stock exchange, etc.
It is the actual grounding of these investments that is more important to consider in the context of the boost, the projected capital expenditure is supposed to provide to the economy - through reduction in transportation & logistics costs for the industry, creation of employment opportunities, etc.
The NIP had pegged the projected capital expenditure for Transportation & Logistics Sector covering Roads, Railways, Ports and Airports at about Rs 35.7 lakh crore - of which about Rs 4.9 lakh crores and Rs 6.7 lakh crores were projected for FY20 and FY21. The budget indicated an allocation of Rs 1.7 lakh crore for FY20-21 - marginally higher than the Rs 1.6 lakh crore under the previous year's budget.
Achievement of the overall NIP target would be critically dependent on the effective involvement of the private Sector and leveraging of additional resources. While the budget did indicate certain initiatives like granting of 100% exemption for sovereign wealth funds in infrastructure, power generation companies and other notified sectors (with a minimum lock-in period of three years) with respect to additional resource generation, it would be more important to ensure the sustained involvement of the private sector for execution of infrastructure projects.
The budget announcement on the creation of a Project Preparation Facility is indeed important in this context. Projects would need to be planned, prepared and structured - in due consultation with the private sector, so as to ensure that there is a credible framework under which the private sector can evaluate potential returns and take up these projects.
Administrative ministries and departments have a major role to play in giving a boost to the investment cycle through a painstaking focus on the time-bound implementation of the projects envisaged under the NIP and the budget.
(The author is Partner, Deloitte)