Budget 2021: FM gives a boost to infrastructure development

As finance minister Nirmala Sitharaman presented her first ‘paperless’ Union Budget on February 1, 2021, a range of measures, focusing on key sectors, were announced to revive the COVID-19-hit economy. Of these measures, infrastructure received a sizable chunk of the total funds, which seemed more vigorous as compared to the last year. Here’s a detailed look at the FM’s Union Budget announcements related to the infrastructure sector.

The National Infrastructure Pipeline (NIP) announced in December 2019, was launched with 6,835 projects. As per Sitharaman, the project pipeline has expanded to 7,400 projects and 217 projects, worth Rs 1.10 lakh crores, have already been completed.

For financing infrastructure projects, the FM announced the creation of a professionally-managed Development Financial Institution and provided a sum of Rs 20,000 crores, to capitalise this institution. The aim is to create a lending portfolio of Rs 5 lakh crores in next three years. In addition to this, the FM also announced amendments for Debt Financing of InvITs and REITs, by foreign portfolio investors. This will also revive cash flow in the infrastructure sector.

The FM also announced a National Monetisation Pipeline, which will have potential brownfield infrastructure assets. Under this, all infrastructure projects will be monetized, to raise cash.

Budget 2021: Announcements for road and highway infrastructure

The FM said that more than 13,000 km length of roads, at a cost of Rs 3.3 lakh crores, had already been awarded under the Rs 5.35-lakh-crore Bharatmala Pariyojana project, of which 3,800 kms had been constructed. By March 2022, the government will be awarding contracts for 8,500 kms of highways and complete an additional 11,000 kms of national highway corridors, she said.

Sitharaman further announced new road economic corridors which includes:

See also: Budget 2021: Industry welcomes expansionary budget, hails pragmatic approach

New flagship projects announced by the FM:

• Delhi-Mumbai Expressway: Remaining 260 kms to be awarded before March 31, 2021.
• Bengaluru-Chennai Expressway: 278 kms to be initiated in the current financial year. Construction will begin in 2021-22.
• Delhi-Dehradun economic corridor: 210 kms will be initiated in the current financial year. Construction will begin in 2021-22.
• Kanpur-Lucknow Expressway: 63 kms of expressway, providing an alternate route to NH 27, will be initiated in 2021-22.
• Chennai-Salem corridor: 277 kms of expressway will be awarded and construction will start in 2021-22.
• Raipur-Vishakhapatnam: 464 kms passing through Chhattisgarh, Odisha and north Andhra Pradesh will be awarded in the current year. Construction will start in 2021-22.
• Amritsar-Jamnagar: Construction will commence in 2021-22.
• Delhi-Katra: Construction will commence in 2021-22.

The FM provided Rs 1.18 lakh crores to the Ministry of Road Transport and Highways, out of which Rs 1.08 lakh crores is for capital expenditure.

Budget 2021: Announcements for railway infrastructure

• The FM said that Indian Railways had prepared a National Rail Plan for India – 2030. The plan would create a ‘future ready’ railway system by 2030.
• With an intention of bringing down the logistics costs, the Western Dedicated Freight Corridor (DFC) and Eastern DFC will be commissioned by June 2022. In the first phase, East Coast corridor from Kharagpur to Vijayawada, East-West Corridor from Bhusaval to Kharagpur to Dankuni and the North-South corridor from Itarsi to Vijayawada will be undertaken.
• For passenger safety, high density and highly utilised network routes of the Indian railways will be provided with indigenously developed automatic train protection systems that will eliminate collisions due to human error.
• The FM provided Rs 1.1 lakh crores to the Railways, out of which Rs 1.07 lakh crores would be for capital expenditure.

Budget 2021: Announcements for urban infrastructure

Two new technologies, MetroLite’ and ‘MetroNeo’ will be deployed, to provide metro rail systems at much lesser costs with the same experience, convenience and safety, in tier-2 cities and peripheral areas of tier-1 cities.

At present, a total of 702 kms of conventional metro is operational and another 1,016 kms of metro and RRTS is under construction in 27 cities.

See also: Budget 2021: Government extends affordable housing tax holiday, deductions under Section 80EEA for another year

Central government will be providing its counterpart funding to the following cities:

Budget 2021: Announcements for port, water and shipping infrastructure

• Major ports will be moving from managing their operational services on their own to a model where a private partner will manage it for them. For this purpose, seven projects worth more than Rs 2,000 crores will be offered by the major ports on public-private partnership mode in FY21-22.
• India has enacted the Recycling of Ships Act, 2019 and acceded to the Hong Kong International Convention. Around 90 ship recycling yards at Alang in Gujarat have already achieved HKC-compliant certificates. Efforts will be made to bring more ships to India from Europe and Japan.
• A scheme to promote flagging of merchant ships in India will be launched, by providing subsidy support to Indian shipping companies in global tenders floated by Ministries and CPSEs. An amount of Rs 1624 crores will be provided over five years.

Housing.com News’ viewpoint

While a number of these infrastructure projects were already announced earlier and are already running behind schedule, due to the COVID-19 pandemic, a fresh funding boost is always welcome. Also, most of the roads and highway announcements have come in poll-bound states, which means a lot of development will depend on the final verdict of the common man. One thing which went missing from Nirmala Sitharaman’s Union Budget 2021 speech was the ‘Smart City Mission’. The project, which was launched in June 2015, was supposed to develop 100 smart cities across India that would have flaunted excellent, high-end infrastructure and amenities. However, with funds lying unutilised, the ambitious plans to develop smart cities is yet to see a way forward.

Infra experts say budget’s sectoral focus to boost economy

While acknowledging that the finance minister’s Budget 2018 was a populist one, prior to the elections in 2019, infrastructure experts, nevertheless, feel that it will provide a boost to the economy, which is pegged to grow at over seven per cent

February 2, 2018: Terming the Budget as populist, the infrastructure industry has welcomed the government’s focus on the sector, saying it will provide the necessary impetus, as the economy is pegged to grow at 7-7.5 per cent for 2018-19. “It is fair to say that this year’s budget is a populist one, focusing on providing social security at the grass root level. The various announcements and funding provided, are towards promoting the further growth of small scale industries, as well as improving infrastructure, particularly across rural India,” CBRE chairman, India and south-east Asia, Anshuman Magazine said.

According Surendra Hiranandani, Founder and MD of House of Hiranandani, the massive push for improvement in infrastructure, including significant capital expenditure for roads, railways and development of smaller airports, will indirectly benefit the real estate sector in the long run.

Savills India country manager – tenant representation, Bhavin Thakker said the extension of Rs 2,000 crores to the agricultural market and infrastructure fund will strengthen market connectivity, making real estate a preferred choice of investment, not only in metros but also in tier-2 and tier-3 cities.

“The government has taken the onus of constructing 35,000 kms of roads under the Bharatmala Pariyojana project, for which the Budget allocated is Rs 5.35 lakh crores, which aims to provide seamless connectivity in backward and border areas,” Action Construction Equipment ED, Sorab Agarwal said.

He further said the allocation of Rs 11,000 crores for Mumbai’s rail network, will definitely create a positive impact for the infrastructure sector. “The announcement of constructing 9,000 kms of national highways, will create job opportunities,” Agarwal added.

In his budget, finance minister Arun Jaitley has pegged capex at Rs 1.48 lakh crores for Railways, while allocating Rs 6,602.86 crores for the aviation sector. Hind Rectifiers’ CEO Suramya Nevatia, said the Railway’s focus on modernisation of signalling and safety systems, along with optimum electrification, will not only enhance efficiency but also move a large amount of trade traffic from road to railways.

“Most ancillary companies affiliated with rail infrastructure, should benefit on account of this huge proposed capex allocated for rail infrastructure,” he added.

Deloitte India partner Peeyush Naidu, said the budget had set the right course for the aviation sector. “It reaffirmed commitment to sustaining the growth in the sector, by focusing on substantial increase in airport capacity. The UDAN scheme is expanding the aviation network, through a transparent market-based model, as a result of which hitherto unserved airports and helipads will be connected by existing and new operators,” he said.

“The emphasis on building infrastructure with huge investments in railways, airways and highways, is seen as a step forward in building seamless network for smooth functioning for all inter-city operations,” SYSKA Group director, Rajesh Uttamchandani added. The government has estimated an investment of Rs 50 lakh crores in the infrastructure sector. “Infrastructure has been recognised as a growth driver of the economy. The investments in infrastructure are estimated to be in excess of Rs 50 lakh crores. This will support the growth of GDP and connect and integrate the nation with a network of roads, airports, railways, ports and inland waterways,” Blue Dart CFO Aneel Gambhir said.

With the announcement of Rs 1.48 lakh crores allocated to Railways, the industry is hopeful of seeing a thrust on improving freight logistics, apart from better passenger connectivity. “This will help the logistics industry drive efficiency through rail networks, in terms of costs and CO2 reductions, as the current logistics movement is skewed towards road transport,” Apollo LogiSolutions managing director, Raaja Kanwar said. He further said the plan to expand the current 124 airports by five times, seems skewed in favour of passenger movement. However, the development of airports across the board is good, to build a robust logistics network. “We expect that freight movement is given due cognisance, as well,” Kanwar added.

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