Budget 2021: Infrastructure revival needs priority

The 2021 budget is crucial in enabling the resurgence of the Indian economy and adequate support to the infrastructure sector assumes significance in this regard. However, being a year affected by a global pandemic, budget for 2021 may need to focus on consolidation of existing gains and resetting the growth projections for the economy. Therefore, it is expected that the 2021 budget may revolve around support from the central government to the impacted sectors, thrust on digitisation and innovation, and monetisation of existing assets.

With India headed towards the mass vaccination drive for fighting Covid-19, the economy is looking at a revival. Many of the traditional sectors would have to reconfigure their existing approach towards the ‘new-normal’ and the central support would be necessary for them to take the required steps. Some interventions which may be considered for 2021 budget are highlighted below:

1. The National Infrastructure Pipeline (NIP) is a first-of-its-kind exercise by the government to provide world-class infrastructure to its citizens. Of the total investment, almost 40% is envisaged to be contributed by the states. However, as the states are currently constrained due to their high fiscal deficit and lack of liquidity, the central government may consider providing support to states by extending a line of credit.

2. To support the aviation sector, the government could look at rationalising the taxation on aviation fuel and defer the payment of taxes to improve the liquidity in the sector. Additionally, to strengthen the government’s resolve for Atmanirbhar Bharat and Make in India, central government could also look at incentivising retention of Maintenance Repair Overhaul services in the country.

3. Covid-19 has torpedoed the fragile finances of the public transport sector. Due to lockdown restrictions, the public transport operators have suffered significant financial losses. In such a scenario, operational subsidies could be rolled out to these operators so that they can sustain their operations and continue to provide their services.

4. The thrust towards promoting electric mobility has become even stronger with most of the automobile majors promoting electric variants of their cars. The recent announcement of renowned auto major Tesla entering India, is evidence of the immense potential of Indian market for electric vehicles. Therefore, we expect policy initiatives for establishment of charging infrastructure in the country and also increased subsidies for the users under the FAME policy.

Another key area of support could be the digitisation and innovative initiatives in various infrastructure sub-sectors, as under:

1. During 2019, the government introduced National Common Mobility Card (NCMC) to enable seamless travel across different modes of transport besides retail shopping. The NCMC service has already been launched for Delhi Metro’s Airport Express Line in December 2020 and is expected to cover the entire Delhi metro network by 2022. Fund allocation could be made towards accelerating the adoption of this card and for extending its wings to other modes of transport.

2. The services provided by the government agencies across infrastructure sector generate tremendous user data that, if analysed proficiently, can generate greater insights for provision of future services. Therefore, fund allocation for implementation of data gathering initiatives may provide impetus to this initiative. Over due course of time, the government may also introduce conducive policy framework to facilitate monetisation of such large data sets. In addition to generating additional revenue streams for the government, it will also provide the much-required impetus towards digitisation.

To make up for lack of passenger revenue, a key focus area of this budget could be towards identifying additional revenue streams by utilising the existing resources. Sectors could look towards monetising their existing assets to reduce their fiscal burden. Such moves have produced the desired results in highways and power sector and could soon find favour amongst other sub-sectors as well. Towards this end, the following initiatives could be proposed:

1. The central government could further emphasise operating the trains and railway stations on PPP mode to reduce the fiscal burden on Railways.

2. The central government may also explore new alternate sources of revenue to meet the NIP objectives. This could be through monetisation of its existing assets through tools such as TOT/InvIT. Additionally, focus could also be towards commercialising the surplus land held by organisations such as Indian Railways and AAI.

Overall, the government has a tough task of maintaining growth while dealing with the economic losses as a result of the lockdown during the pandemic, and we expect 2021 budget to strike a balance between growth requirements and country’s finite resources.

Views are personal. The author is partner, Deloitte India.