Infrastructure Sector

Budget: The Financials

• The spending in infrastructure estimated at Rs
2,14,000cr an hike of over 23% from Rs
1,73,000cr during 2010-11
• Nearly 48.5% of the plan allocation.
• Government to come up with a comprehensive
policy for further developing PPP projects.
• Capital investment in fertilizer production
proposed to be included as an Infrastructure
sub-sector
•
 Budget: The Reforms
• Under take out financing scheme, seven projects
sanctioned with debt of Rs. 1,500 crore.
Another Rs. 5,000 crore will be sanctioned
during 2011-12.
• To boost infrastructure development, tax free
bonds of Rs.30,000 crore proposed to be issued
by Government undertakings during 2011-12.
•
• Raising the venturing limit of FII in infrastructure
sector from $20bn to $40bn
• The total disbursement target for India
Infrastructure Finance Company Limited (IIFCL)
has been hiked to Rs 25000cr from Rs 20000cr
•
The Story so far...
 Deafening silence ….
• Major issues that are holding back the
creation of bankable infrastructure
projects from the private sector.
• Burning issues such as land acquisition
and associated relief and
rehabilitation issues, environmental
issues and strengthening of the
regulatory framework go unnoticed.
• Also, the issue of a coal regulatory
authority, mentioned in an earlier
budget, is happily skipped.
 Budget & Infrastructure
• Energy sector : Domestically supplied UMPP
equipment has been exempted from excise duty,
but only to provide a level-playing field against
imports.
• Coal sector : Issues like coal regulatory authority,
investments in the sector, forest land and mining go
unnoticed.
• Housing sector: Affordable housing has been given a
fillip with a hike in the priority sector loan limit to
`25 lakh and an interest rate subvention of 1% for
loans up to `15 lakh. This sector should also get
additional relief from the incremental `1,000 crore
for the rural housing fund and the credit
enhancement for LIG through the Mortgage Risk
Guarantee Fund.
• Cold chains and cold storages will be treated as
‘infrastructure’ and the capital investment will be
eligible for VGF assistance

 Financial Impact
 Increase in the limit for FII investment
in infrastructure sector corporate
bonds to $25 billion, the exemptions
for notified infrastructure debt funds,
the access afforded to mutual fund
investments to FIIs / Sebi sub-account
holders and to almost anybody in
mutual fund equity schemes, the
extension by one year for investments
in the long-term infrastructure bonds
will all contribute to easing the supply
of funds for the sector.
Budget Proposal Sector impact Companies
impacted

48.5% of total Positive as Positive for

plan allocation companies will companies like
have more HCC,NCC,Simplex
opportunities L&T,etc

SEZ developers Companies will Negative for

and units pay Mundra port
operating are 18.5%effective
brought under MAT tax rate.
Creation of infra Positive as Positive for
debt fund access to low companies like
cost funds L&T, Gammon
India
Budget Proposal Sector impact Companies
impacted
Deduction of an Will result in Positive for
additional amount more investment L&T, GMR Infra,
of Rs.20000 on tax in infra sector IRB Infra
savings
Increased Positive for Positive for BEL,
allocation to companies BEML, L&T
Defense Capex manufacturing
Increased
from 60833Cr. To Positive
defense for Positive for
allocation
69199Cr.(13%to infra companies IL&FS Transport,
components
Bharat
increaseNirman
) IRB Infra, L&T.
from 48000 Cr. To
58000 Cr.
Budget Proposal Sector impact Companies
impacted
Tax free bonds Financing for Positive for
worth 30,000Cr. infra will be IRB,IL&FS, GVK
Are proposed to easier power
be issuedin rural Positive for
Increase Positive for IRB
infra development infra companies Infra, L&T.
fund by 2000Cr.