[Gist of Yojana March 2021] Budget for Infrastructure

Mains Paper 3: Economy
Prelims level: National Infrastructure Pipeline
Mains level: Indian Economy, growth and development, infrastructure

Introduction:

• The focus pillars— Union on infrastructure, Physical Budget and 2021-22 being Financial part has of Capital, one welcome of and the Infrastructure. The infrastructure allocations have gone up substantially. The capital allocation has gone up by over a third of the previous year’s allocation to Rs. 5.5 lakh crore in keeping up with the plans of the National Infrastructure Pipeline (NIP).

National Infrastructure Pipeline:

• The NIP envisages a capital spend of over Rs. 100 lakh crore over six-year period, 2019-20 to 2024-25, with 39 percent to come from the Centre, that is about Rs. 40 lakh crore. With the spends being less than average over the past two years, partly also affected by the pandemic depression, the big challenge would be the ability to catch up over the next three years. In terms of scope, the NIP includes over 20 sectors and has recently been enhanced to 7400 projects. While allocations may not be an issue, the ability to spend wisely and effectively is what needs attention.

Urban transport:

• Urban transport has been given a strong focus, not only with allocations for extension of metro lines in major cities, but also for Metrolite and Metroneo projects and for bus transportation. While a metro line costs Rs. 300 crore per kilometer, the Metrolite is about Rs. 180 crore per kilometer and the Metroneo is Rs. 70 crore per kilometer.
• With these technologies, India will have a full range of mass transit technologies, starting from the conventional bus to the Bus Rapid Transit System (BRTS), Metrolite, Metroneo, the Metro and the Regional Rail Transit System. Such a range is required, for a diverse urban economy like India, not only to support suburban areas of tier one cities, but also to bring in mass transit options in tier two and tier three cities.
• Other sectors of infrastructure that found special mention were upgradation of some fishing harbours, the water supply schemes in urban local bodies, and bringing in PPPs in more existing airports. Though there was no explicit mention of the ports and shipping sector, there is an ongoing programme in this sector called Sagarmala. There is also a recent visioning exercise called the Maritime India Vision for 2030 that provides a roadmap for significant growth in this sector.

Developmental Financial Institution:

• A new infrastructural Developmental Financial Institution (DFI) is being setup with an allocation of Rs. 20,000 crore. While this is a welcome move, we need to learn from the lessons of the earlier institutions that were setup or catalysed by the government. These include IL&FS (which today is under serious charges of misgovernance), IDFC (which after having evolved into a bank, has diluted its intended development focus) and IIFCL.
• The government has also set up a ‘bad’ bank, including an Asset Reconstruction Company (ARC) and an Asset Management Company (AMC) for taking care of non-performing assets.

Infrastructure development to public sector companies:

• Public sector companies targeted in the infrastructure sector include Air India, Shipping Corporation of India, CONCOR, Pawan Hans and BPCL. Disinvestment may not be as easy as just stating the intent, given the experience with Air India. Apart from a significant prior preparation, expectations may have to be sobered. Asset monetisation in the infrastructure sector is focused on leveraging airports of the Airports Authority of India, roads of the National Highways Authority of India, transmission lines of the Power Grid Corporation of India, warehouses of the Central Warehousing Corporation, segments of the Dedicated Freight Corridor Corporation of India, pipelines and other assets of some of the companies in the petroleum sector. These are steps in the right direction, since they will unlock value of significant assets (including land) that have been created by the government.

Way forward:

• The budget highlighted a long-term policy of the government that has significant implications for the infrastructure sector. Stated as the Public Sector Enterprises Policy, it classified various sectors as Strategic and Non-Strategic. Strategic sectors would have ‘bare minimum’ presence of public sector enterprises, while all central public sector enterprises in the non-strategic sectors will be privatised. The infrastructure domains in the ‘strategic’ classification include Transport, Telecommunications, and Energy (Power, Petroleum and Coal). The import of this policy may have been lost amidst the din of the many budget announcements.

Conclusion:

• Overall, the budget has moved in the direction of not only recognising the importance of infrastructure for the much-needed economic growth at a national level, but also being more realistic of the requirements of wise and effective spending on infrastructure. However, real outcomes can further be realised only by attention to detail and capacity for implementation.

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