Business Today

Union Budget 2013 offers little to the roads sector

The finance minister said that while the roads sector has reached a level of maturity, it is plagued by problems such as financial stress, enhanced construction risk and contractual management issues.

G. Seetharaman        Last Updated: February 28, 2013  | 13:51 IST

Finance Minister P. Chidambaram may have pleased many with his generosity towards social sector schemes, but was found wanting on infrastructure, particularly roads.

The finance minister said that while the roads sector has reached a level of maturity, it is plagued by problems such as financial stress, enhanced construction risk and contractual management issues.

What followed that statement, however, was too little.

He announced the setting-up of a regulator for the sector, which is certainly welcome because disputes between highway developers and contractors and the National Highways Authority of India are delaying the commissioning of projects.

But the role and powers of the regulator will have to be clearly defined. After all, most disputes are to do with land acquisition and environmental issues and the role played by the Ministry of Environment & Forests is critical too.

Appointing a regulator addresses only one of the three problems-contractual management issues - that Chidambaram spoke about. There was little in the Budget to ease the financial stress developers are under. Road builders and financiers were hoping for a scheme which provides a way out for delayed projects by restructuring loans.

Moreover, banks have clearly tightened their purse strings. The gross bank credit to roads in December 2012 was 16 per cent higher than a year earlier. This was, however, much lower than the 28 per cent growth registered in 2011.

While NHAI awarded nearly 6,500 km of projects in 2011-12, so far this fiscal year - which has only a month left to end - it has awarded just under 850 km.

India plans to spend $1 trillion, or Rs 55 lakh crore, on infrastructure in the 2012 to 2017 period. About 47 per cent of this is expected to come from the private sector. Roads are the second biggest infrastructure segment after power. The minister would have done better to address the sector's financing concerns by doing more than just talking of "innovative" instruments and raising the limit on infrastructure bond issues to Rs 50,000 crore in 2013-14.

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