In our special series on budget expectations of different sectors of Indian industries from Union Finance Minister, Pranab Mukherjee, we bring to you the infrastructure sector in India. Below are the excerpts of Rashi Suri's budget expectations.
Expectations from the budget 2010: Infrastructure development
Great expectation are there in the Infrastructure sector from the budget proposed to be tabled in the parliament on 26th February especially, when the Indian Government has identified the need for US$ 500 billion in infrastructure spending between 2007 and 2012. For India to revert to a GDP growth rate of 9 percent and to sustain it in the future, due attention should be given to the infrastructure sector.
Streamlining the policy framework for Public Private Partnerships (PPP) projects, green energy, ultra mega power projects, viability gap funding have been seen as stimulus to the growth of Indian infrastructure sector. The fiscal as well as non-fiscal measures for the infrastructure sector would be critical for the proposed budget.
The Government should reintroduce the tax exemption granted to companies, which invested in infrastructure projects on interest income and capital gains earned by such investments which will lower the overall cost of the infrastructure projects, thereby attracting more private investments into infrastructure projects.
Clarity is required in the proposed budget for availability of tax holiday under the Income Tax Act for companies, which have been awarded contracts for modernisation of roads, expansion of existing highways. Tax authorities have taken the view that exemption is only available to companies that are engaged in development of new infrastructure facility and modernization and upgradation of the existing facility do not amount to development of new infrastructure facility resulting in prolonged litigation. The Government should unequivocally endorse the availability of tax holiday to such modernisation/ expansion projects, which could help in attracting investments as well as reduce the overall cost of the project.
In relation with the tax holiday available to an undertaking engaged in power generation/ distribution if it begins to generate/ distribute power to enterprises, which commence such activities on or before March 31, 2011, as most of the power projects are still at development phase and are unlikely to be operational before March 2011, the tax holiday should be extended to undertaking generating/ distributing power even after March 31, 2011.
Together with the tax incentives measures like single window clearance for the roads and power sector should be introduced to give the required impetus for the infrastructure sector.
(Inputs from Ms. Rashi Suri, Head - Infrastructure Practice, S. N. Gupta & Co)
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