Infra gets big boost with thrust on 4 poll-bound States

- Sharp increase in capex at 5.54 lakh crore in 2022, up from Rs 4.39 lakh crore in 2021

- Allocates Rs 20,000 crore for Development Finance Institution (DFI) to enable the lender to have a portfolio of Rs 5 lakh crore within three years

- Move to augment fund flows for real estate and infrastructure sectors

- Foreign Portfolio Investors (FPI) will now be enabled to debt finance REITs and InvITs after amendments to the law

Kolkata: Union Finance Minister Nirmala Sitharaman, while presenting the Union Budget 2021 in the Parliament, on Monday, said that the government has lined up plans to boost the road infrastructure across the country and has aimed to complete 11,000 km of national highway infrastructure in 2021. Her thrust on building road infrastructure was marked by her plans for four poll-bound States Tamil Nadu, West Bengal, Kerala and Assam where elections are due this year. Sitharaman said that the government has proposed a sharp increase in capital expenditure at 5.54 lakh crore in 2022, which has been increased from Rs 4.39 lakh crore in 2021.

Breaking down investment plans of the highway projects in these States, Sitharaman said that Tamil Nadu will get Rs 1.03 lakh crore for building of 3,500 km of roads, Kerala will get Rs 65,000 crore for 1,500 km of roads and West Bengal will get Rs 95,000 crore for 675 km road. Assam, meanwhile, will see 1,300 km roads being constructed at a cost of Rs 3,400 crore.

"Over 13,000 km length of roads at a cost of Rs 3.3 lakh crore has already been awarded under Rs 5.35 lakh crore Bharatmala project of which 3,800 kms have been constructed. By March 2022 we'd be awarding another 8,500 and complete an additional 11,000 kms of National Highway Corridor," she said in her Budget speech.

Quite significantly, with an aim to improve the funding for the country's infrastructure sector, Sitharaman announced the setting up of a Development Finance Institution (DFI). "Infrastructure needs long-term debt financing. A professionally managed Development Financial Institution is necessary to act as a provider, enabler, and catalyst for infrastructure financing," the Finance Minister said today in the Parliament. Additionally, the minister announced that Foreign Portfolio Investors (FPI) will now be enabled to debt finance REITs and InvITs after necessary amendments to the law.

Union Budget has allocated Rs 20,000 crore for the DFI, with an ambition for the lender is to have a portfolio of Rs 5 lakh crore within three years' time. The Finance Minister said that the move will augment fund flows for the real estate and infrastructure sector.

FM's thrust on building infrastructure has gone down very well in industry circles. "This Budget focuses on augmenting infrastructure with a special focus on expediting urban infrastructure projects which will act as a strong catalyst in driving real estate in urban areas. There is also a continued thrust on the agriculture sector which is likely to result in higher incomes and drive consumption. The proposed easing of restrictions on leverage by InvITs/REITs will attract more REITs listings and thus higher investments into real estate. The announced monetisation of surplus land of government and government bodies is a welcome move; however, the implementation will need to be monitored," said Samantak Das, Chief Economist and Head of Research, JLL India.

Jyoti Prakash Gadia, Managing Director, Resurgent India, said, "Proposal for the setting of a separate DFI exclusively for funding infra projects a massive program for monetization of completed/ running projects which will help in creating required resources through the instruments like INVITs, which functions in a manner similar to the mutual funds."

"The Budget speech expectedly has given a strong signal for infrastructure development focusing on actualizing the ambitious national infrastructure pipeline targeting an investment of Rs.111 lakh crores over 5 years. The signal comes from the announced budgetary allocations and decisions (a) central allocation of Rs5.54 lakh crores, (b) state allocations of Rs.2 lakh crores, (c) announcement to tap into budgetary resources of PSUs and wide ranging InVITs monetising assets in highways, power transmission, gas pipelines, dedicated freight corridors, airport. The above announcements are strengthened by announcement of establishing Bad Bank in nature of AMC; a development financial institution with a seed investment of Rs.20,000 crores and a target to be build a lending portfolio of Rs. 5 lakh crores in 3 years; an extensive disinvestment program with target of Rs.1.75 lakh crores; zero coupon bonds that will help arrange the infra financing. The devil lies in the details and the success in reviving the economy would depend on effective structural reforms in infrastructure sectors removing barriers to growth and how the government goes about monetising the land bank and assets held by PSUs," said Amit Kapur, Joint Managing Partner, J Sagar Associates.