+ Indian Infrastructure Sector: Key to Atmanirbhar Bharat - CII Blog

Paul Krugman in the aftermath of the 2008 great recession wrote, “The usual argument against public works as economic stimulus is that they take too long: by the time you get around to repairing that bridge and upgrading that rail line, the slump is over and the stimulus isn’t needed. Well, that argument has no force now….So let’s get those projects rolling.”

The Union Budget 2021 was historic in the aftermath of the unforeseen pandemic and economic slump. It recognized the need to boost the infrastructure sector, which in turn would have a multiplier effect on the entire economy.

To increase the CAPEX, the National Infrastructure Plan was launched in December 2019 with 6835 projects, and this is now expanded to 7,584 projects with an estimated project cost of USD 1818.05 billion. 217 projects worth INR 1.10 lakh crore are already completed. A Development Finance Institution (DFI) with a lending portfolio of INR 20,000 crores has also been announced.

A slew of other measures like the National Monetization Pipeline, privatization of airports in tier 2 & 3 cities, and debt financing of Infrastructure Investment Trust (InvITs), among others, will increase the efficiency and generate revenues. 

CII has recommended some measures to further boost the infrastructure sector. Some of these recommendations include:

Infrastructure 

  • Re-invigorating the Public-Private Participation (PPP). 
  • Issues related to land acquisition, environmental clearances, rehabilitation and resettlement, removal of encroachment, shifting of utilities, and availability of linkages to be given special focus while preparing projects. 
  • Accelerate dispute resolution. 
  • Revive the demand cycle.
  • Fast-track awarding and implementation of projects.
  • Attract long-term financing for infrastructure. 

Aviation 

  • Bring Aviation Turbine Fuel (ATF) under the ambit of GST. 
  • Fully flexible use of airspace for Airlines.
  • Increase window of operations for civil aviation at all defence airfields. 
  • Full liberalisation of code sharing.
  • GST Input Tax Credit allowability/availability of Works Contract, Goods and Services on Construction of Immovable Property.
  • Exemption of royalty charges on MRO services and infrastructure at airports.

Shipping 

  • Port-wise maritime master plan to provide a directional view on infrastructure requirements based on cargo forecast and shipping dynamics. 
  • Encourage port-led industrialization.
  • Prioritize cost reduction – process optimisation/simplification and process automation; Vessel Related Charges, among others.
  • Enhance attractiveness for transshipment cargo.
  • Rejuvenate the PPP approach.
  • Increase digitization.

Railways 

  • PPP in all composite and civil projects should be allowed. 
  • Attractive incentives should be provided to the private sector to invest in public utilities with a balance of risk-sharing between Railways and developers.
  • Redesign procurement contracts to address issues through one-time calibration of its commercial contracts and terms by Indian Railways. 
  • Time should be fixed for the release of payment after delivery/receipt of material.
  • Online billing process needs to be improved.
  • To make Railways the preferred choice for transportation, Railways should assure transit time. 
  • Innovative way to operate more load of goods at lesser cost and time. 
  • Common user terminal policy.

Real Estate 

  • The input tax credit about works contract service incurred during construction period where the said immovable property is rented/leased/licensed, to be allowed. 
  • GST “Time of Supply’ to be realigned to receipt of consideration. Section 12 and Section 13 of the CGST Act be amended to determine the ‘Time of Supply’ based on ‘receipt of payment/consideration’. 
  • Holding period for units of Business Trust to qualify as a long-term capital asset should be reduced to 12 months from 36 months [Section 2(42A). 
  • Set off – of House Property Losses against income under the other head to be restricted to INR 2 lakhs.

The youngest demography in the world needs heightened infrastructure spend and swift implementation. The realization of ‘Atmanirbhar Bharat’ is through the holistic development of the infrastructure sector. The journey has begun. 

To read the CII recommendations on Infrastructure in detail, read the February 2021 issue of CII Policy Watch.