Budget 2017 - Infrastructure sector - Centrum Infrastructure Advisory Limited

Sandeep Upadhyay, Managing Director & CEO - Centrum Infrastructure Advisory Limited

The attempt to catalyse the economic growth through core sectors like Infrastructure and Defence was evident in the FM's speech. Within the Infrastructure sector the focus continues to be on pushing Capital expenditure in the transportation sector with major impetus of railways.

Addition of low cost housing within the gamut of Infrastructure sector was much anticipated and is a welcome move. However one was expecting much needed reduction in MAT rate which seems to have been side-lined with minor iteration on which details are further awaited.

Given the steep target the NDA government has set for itself in the roads sector and considering subdued interest evinced from private players to take up financing risk for green field projects I was expecting a significant increase in the budgetary allocation which was missing to some extent suggesting that perhaps Government still continues to believe that a large corpus of development funding could be accessed through alternate funding channels like Infrastructure Investment Trusts (InvIT), foreign sovereign & pension funds and new project roll out frameworks including Toll Operate Transfer (TOT) etc.

To complement the moderate increase in the budgetary allocation, it also seems there is increasing dependence on some of the development bodies like NHAI and institutional financing agencies like PFC, IREDA etc to raise funds through the bonds and public market route which have been relatively slow to respond so far.

While the progress on PMGSY and target set for rural electrification is commendable, Unlike the previous two budgets during the current NDA regime there were no announcements of block buster projects. However the pace of rolling out the infrastructure projects including the need of single window clearance and implementing reforms in the PPP framework and dispute resolution with the Contractors is where the respective authorities really need to focus to accelerate growth in the infrastructure sector.

Overall the budget speech concerned to infrastructure sector is progressive and in line with the industry expectation though it was clear that the priority was to prove a point on the political reforms and uplifting the rural and agricultural sector.

Source : Equity Bulls

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