labels: industry - general, economy - general, union budget 2006
Infrastructure proposals a mixed bag news
Raju Bist
28 February 2006

As expected, the latest Budget has a touch of politics to it. This is evident in a variety of sectors, including the proposals made towards infrastructure development.

Thus a special road development programme has been launched for the north-eastern part of the country. (Is it a coincidence that prime minister Manmohan Singh has been nominated to the Rajya Sabha from Assam?)

Also, a special assistance of Rs848 crore has been announced for Jammu and Kashmir for its reconstruction fund, including Rs230 crore for the Baglihar project. This will be in addition to the 2006-07 state plan of Rs2,300 crore. It is after many years that the Congress party has come to power in the troubled state (albeit on a power sharing basis) and any sops should only help the party strengthen its roots there in the coming years.

Otherwise, it is a mixed bag as far as the budget allocation for infrastructure is concerned. The finance minister announced in his Budget speech that the GDP should grow by 10 per cent. This is expected to benefit cement and construction companies. Another important announcement was about the setting up of the India Infrastructure Investment Company.

The FM has declared that the government will encourage foreign direct investments (FDI) in infrastructure areas. An investment of Rs220 billion is expected in refinery projects over the next two years. Part of this will be met by way of FDI. Apart from refineries, cement, power and steel sectors will also benefit from FDI inflow. In all, the government hopes to mop up $150 billion by way of FDI.

Section 80IA of the Income Tax Act applies to infrastructure facilities. The terminal date for developing an industrial park has been extended from 31 March 2006 to 31 March 2009. This is expected to give a boost to the development of new infrastructure projects.

The FM has set aside Rs944 crore under the 'accelerated irrigated benefit programme' for bringing up to six lakh hectares under irrigation. This is part of the Bharat Nirman project announced in last year's Budget. Under this project, stress is being laid on the development of six areas: irrigation, roads, water supply, rural electrification, housing and rural connectivity.

Against a target of 56,270 habitations, 47,546 habitations were covered until January 2006 under the Accelerated Rural Water Supply Project and 5,337 habitations were connected under the rural roads programme by September 2005. Till January 2006, Rs. 2,260 crore was released and 870,000 rural houses constructed.

A bill on cellular telephony in rural areas will be brought in Parliament by the Communications Ministry. More than 50 million rural connections will be rolled out in three years. In all, Rs1,500 crore will be allocated under the 'universal services obligation fund' for the sector to help reach the target of 250 million connections by December 2007.

The defence expenditure is being increased to Rs.89,000 crore including Rs37,458 crore for capital expenditure. This is expected to benefit telecom equipment manufacturers.

But the increase in service tax from 10 to 12 per cent is expected to impact telecom companies.

The National Highway Authority of India (NHAI) is being reconstituted to make it more effective. A total of Rs. 4000 crore is being set aside for the construction of rural roads. A special road development programme is being flagged off in the North East with an outlay of Rs 550 crore. In other parts of the country, 1,000 kms of expressways have been proposed through the Build-Operate-Transfer (BOT) route.

The much-hyped 'golden quadrilateral' project, the previous BJP government's pet road development programme, is still on the radar. The FM announced that 96 per cent of work will be completed by June this year and all the corridors will be completed by 2008.

His optimism stems from the fact that the highway construction has been speeded up, now progressing at 4.48 kms per day as against 1.86 kms in 2004. The Highways Development Programme will receive Rs 99.45 billion in 2006-07. The government has identified three new road projects to be funded by a new special purpose vehicle.

Maritime development
The 'national maritime development programme' (NMDP) has been approved and work is in progress on 101 projects covering inland waterways, shipping and ports including deepening of channels in Kandla, JNPT and Paradip. The plan allocation for the department of shipping has been increased by 37 per cent to Rs735 crore. The National Maritime Academy (formerly known as the National Institute of Port Management) in Chennai is being converted into a central university with branches in Mumbai, Viskhapatnam and Kolkata.

Other highlights:

  • The government will develop 15 tourist spots. This is expected to provide a fillip to the construction of hotels and resorts.
  • An estimated Rs. 6,250 crore is being set aside under the Jawaharlal Nehru National Urban Renewal Mission. The government will promote establishment of new towns, preferably focused on a specific industry, for example Information Technology, or a specific theme, for example education or health.
  • The outlay for the Rajiv Gandhi Drinking Water Programme has been increased to Rs 4680 crore as against Rs 3645 crore this year.

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Infrastructure proposals a mixed bag