The Finance Minister has presented a budget aimed at sprucing up the country’s infrastructure and readying it for higher growth. Besides enhancing sectoral allocations, the doubling of the amount of tax free bonds to be raised for infrastructure in FY13 will go a long way in capacity augmentation in roads, power, railways, housing, ports, etc.
Expanding the scope of Viability Gap Funding and including various segments of agricultural infrastructure, telecom and also including oil & gas related infrastructure is also welcomed. The Minister has rightly identified the criticality of external commercial borrowings (ECB) in infrastructure financing and to that end has rightly allowed ECB financing to play a larger role in sectors like roads, power, railways, housing, mining, etc.
However, the Minister has not mentioned anything on raising the annual cap of USD 30 billion that now applies for ECB in India. We hope that cap will be raised in due course. In addition, customs duty reduction on a number of items and equipment pertaining to sectors like road, power, mining, shipping, aviation, cold chain, agriculture, etc. will go a long way in benefiting India’s infrastructure.
Reducing the withholding tax rate on ECB from 20% to 5% for 3 years for select sectors is another big positive for infrastructure sector. The sunset clause for power sector stands extended for another year and the sector has also been allowed enhanced depreciation on select items.