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Budget boosts infrastructure

The government has shown its intent in reviving the economy by taking several positive steps in the budget to boost infrastructure. The industry too has received most budgetary initiatives with a smile.

Amitabh Das Mundhra, director, Simplex Infrastructures Ltd, has called it a growth-oriented move while Anil Sethi, chairman, Subhash Projects & Marketing Ltd (SPML) has expressed confidence that the budget would provide necessary fillip to accelerate the overall growth and development of the country.

VK Kaushik, MD, Punj Lloyd feels the budget has given a much needed thrust to the infra sector. Dun & Bradstreet analysis has given a Positive+ to the infra sector. In fact, Pranav Ansal, vice chairman & MD, Ansal API has expressed hope that the hike in infra spending will be a huge boost for the real estate sector.

While welcoming the 87% hike in JNNURM, Hemant Kanoria, CMD, Srei Infrastructure Finance Ltd said that it is high time more cities be brought under its coverage. Sethi of SPML appreciated that the government would be removing bottlenecks for speedy implementation of infrastructure projects.

The increased allocations for power, road, railways, housing, irrigation, etc have indeed been very encouraging. “The significant capital flow in the road and urban infrastructure has matched our expectation as the allocation has been increased by 23% and 87% respectively from the last financial year, thereby increasing the immense scope and business opportunities in these sectors,” said Kaushik of Punj Lloyd.
Ankineedu Maganti, CEO, Soma Enterprise Ltd however felt that the allocation could have been higher, especially for highways. But he wholeheartedly welcomed the step to enable IIFCL to refinance banks in infrastructure projects.

“In addition to the incremental funding available, banks will take comfort from this move, and be more aggressive in funding infra projects,” he said. Maganti also described the clarification provided in exemption of excise duty on goods manufactured at site for use in construction as a welcome relief.

Mundhra too appreciated the steps taken on the IIFCL front saying that it would strengthen IIFCL’s role in developing India’s infrastructure. “The initiative of take-out financing would allow easier and greater funds for infra projects,” he said.

Rajiv Sethi, MD, Gemini Equipment & Rentals Pvt Ltd called takeout financing as an innovative approach and thanked the FM for scrapping FBT and the reaffirmation that GST will be implemented next year.

The FM’s initiatives towards encouraging growth in rural infrastructure development also augur well. “It is heartening that the government has continued its focus on developing rural infrastructure through increased allocations on Bharat Nirman and NREGS,” said Kanoria of Srei.

Of course, there has been some dissatisfaction on certain issues and in certain sections. PKC Krishnan, CFO, ElectroMech who called the budget lacklustre on the whole said that increase in outlay for the infra sector can stimulate growth only in certain related sectors.

While Kanoria felt the budget had almost practically nothing for the NBFC sector except for the reduction of tax rate on lease rentals for plant and machinery, Maganti remarked that the steep hike in MAT could be detrimental to PPP projects.

However, barring these few issues, overall the budget has been received quite well. Crisil Research has in fact predicted that the industry will continue to record a healthy growth due to large order inflows in the pipeline.

The research also said that operating margins for large players are expected to improve – something which Kaushik also hinted at. “Private companies can now look to take on more projects and tap the innate potential,” he said.

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