| Interim Union Budget has few incremental announcements | ||
The Finance Minister listed a report card of infrastructure created over last 10 years of UPA rule and spoke about related achievements in his interim budget speech. While the intent towards building new infrastructure, public private partnership (PPP) and creating new financing structures was on predictable lines, there was no major new announcement.
· Among notable announcements, the FM mentioned that seven nuclear power projects are under construction with the aim of achieving installed capacity of 10.08GW by FY17 vs 4.78GW currently. The target is fairly ambitious, in our assessment, and momentum in ordering should be seen in Jaitapur project in Maharashtra, and Mithivirdi in Gujarat over next 1 year if the country has to come even close to achieving the same.
· The proposal to take up four ultra mega solar power projects each with a capacity of over 500 MW in FY15 is positive for growth in this segment (current grid connected solar capacity in India is 2.2GW).
· The excise duty reduction from 12% to 10% mainly for select capital goods is applicable only up to 30th Jun-2014 and is not sufficient to encourage significant uptick in fresh infra/industrial investment. The industrial companies shall have to pass on the excise duty benefit to their customers in new orders, in our view.
Excerpts related to infrastructure, power and industrials in the FM’s speech are reproduced below:
· “We have given a big push to infrastructure and capacity addition in infrastructure industries. In 2012-13 and in the nine months of the current financial year, we have added 29,350 megawatts of power capacity, 3,928km of national highways, 39,144km of rural roads under PMGSY, 3,343km of new railway track, and 217MT of capacity per annum in our ports. Besides, 19 oil and gas blocks were given out for exploration and 7 new airports are under construction. We have also facilitated Infrastructure Debt Funds to provide take-out finance for infrastructure projects and ease the pressure on the banking system.”
· “We must rebuild our infrastructure and add a huge quantity of new infrastructure. Every proven model must be adopted and the PPP model must be more widely used. New financing structures must be created for long-term funds and pooling of investments.”
· “Ten years ago, the installed power capacity was 112,700MW; today, it is 234,600MW. Ten years ago, coal production was 361MMT per year; today, we produce 554MMT per year. Ten years ago, there were 51,511 km of rural roads under PMGSY; today, we have 389,578 km.”
· “To encourage domestic production of specified road construction machinery, I propose to withdraw the exemption from CVD on similar imported machinery.”
· “Eight National Investment and Manufacturing Zones (NIMZ) have been announced along the Delhi-Mumbai Industrial Corridor and nine projects have been approved by the DMIC Trust. Five NIMZs outside DMIC have also been given in-principle approval. Three more corridors connecting Chennai and Bengaluru, Bengaluru and Mumbai, and Amritsar and Kolkata are under different stages of preparatory work. Additional capacities are being installed in major manufacturing industries such as steel, cement, refinery, power and electronics.”
· “About 50,000 MW of thermal and hydel power capacity is under construction after receiving all clearances and approvals. 78,000 MW of power capacity has been assured coal supply.”
· “Approval was granted to establish two semi-conductor wafer fab units that will be the bedrock of the electronics hardware industry”
· “The Kudankulam Nuclear Power Plant Unit I achieved criticality and is generating 180 million units of power. The 500MW prototype fast breeder reactor at Kalpakkam is nearing completion. Seven nuclear power reactors are under construction with the aim of achieving an installed capacity of 10,080 MW by the end of the Twelfth Plan”
· “After exceeding the target and achieving 1,684 MW of grid connected solar power, the National Solar Mission entered the second phase on 1.4.2013. It is proposed to take up four ultra mega solar power projects each with a capacity of over 500 MW in 2014-15.”
· “DISCOMS, mostly sick, are being restructured with generous Central assistance.”
· “At a time when it appeared that a number of projects would fail because of the logjam, Government took the bold step to set up the Cabinet Committee on Investment and the Project Monitoring Group. Thanks to the swift decisions taken by them, by the end of January, 2014, the way was cleared for completing 296 projects with an estimated project cost of Rs660,000 crore.”
· “The Minister of Railways, presented the Railway Budget a few days ago. Budgetary support to Railways has been increased from Rs26,000 crore in BE 2013-14 to Rs29,000 crore in 2014-15. Railways need to mobilize huge resources through market borrowing and private public partnership (PPP) schemes. It is proposed to identify new instruments and new mechanisms to raise funds for railway projects.”
· “To stimulate growth in the capital goods and consumer non-durables, I propose to reduce the excise duty from 12 percent to 10 percent on all goods falling under chapter 84 and chapter 85 of the Schedule to the Central Excise Tariff Act for the period up to 30.6.2014. The rates can be reviewed at the time of the regular Budget.
India Infrastructure, Capital Goods, Power & Construction
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