



Budget 2019: 'Tax-Free bonds, innovative PPP models needed to boost infra sector'


With the NDA government being re-elected, expectations have been high for big economic reforms by the government in the upcoming Budget 2019. All eyes are on the government to take measures to stimulate the economy and focus on job creation.

Infrastructure is one of the sectors where several measures are expected from the budget to push investments and develop the infrastructure in the country.

Infrastructure today is one of the key drivers for the Indian economy and includes several sub-sectors like roads, railways, power and urban infrastructure to name a few.

As per reports, India needs investment to the tune of Rs 50 lakh crore in the infrastructure sector by 2022 to have sustainable development in the country.

To achieve this, large investments are expected towards key segments like roads, railways, waterways, etc. The investments are expected to come through budgetary support and through raising external resources.

One of the biggest deterrents of spending has been the lack of funding options. With stress in the banking system, funding towards the sector has been affected.

To reduce the dependence on budgetary allocation, raising funds through other means have become crucial. Asset monetization is one such funding avenue which the government is likely to significantly focus on.

The launch of the first Toll-Operate-Transfer model for roads has been very successful and similar model may be replicated in other sectors within the sector as well.

The government may also consider the reintroduction of tax-free bonds to raise funds that would be directly utilised to boost infrastructure investment.

Additionally, the introduction of an innovative PPP model like hybrid annuity or raising foreign capital through investment trusts are steps that can be taken to revive investments.

Investments in key infra segments:

As far as the road sector is concerned, the government in FY18 launched the Bharatmala program that would entail Rs 7 lakh crore of cumulative investment from FY18-22.

In the Interim Budget in February 2019, the government provided for ~Rs 1.5 lakh crore including internal and external budgetary resources (IEBR) for road sector in FY20.

We expect the allocation to be at similar levels in the budget, in line with the annual investments envisaged under the Bharatmala program.

In the interim budget, total allocation towards railways rose to Rs 1.58 lakh crore, the highest ever. We expect the budget to maintain the elevated allocation as railways revenues have been lower than targets.

Fresh investments are therefore required to improve the revenues and support the expected pickup in the economy.

Similarly, we expect a strong focus on other infrastructure segments like irrigation, aviation, rural roads, and metros. The funding for these segments is likely to remain robust.
