Vinayak Chatterjee submits a draft of the infrastructure portion of the Budget speech for Pranab Mukherjee's consideration.
Madam Speaker, I now turn to the crucial aspect of infrastructure development. If India is to take its rightful place among the world's top nations in terms of economic prowess, the engines of growth, viz. manufacturing, services and agriculture have to operate in a globally competitive environment and the Indian people have to have access to basic utilities.
We have no choice but to provide a set of unique facilitative policy measures and interventions for infrastructure.
Section 80 IA allows a 10-year income-tax holiday to infrastructure developers. We have noted that the sunset clause kicks in on this scheme in the near horizon. We have seen the tremendous benefit that schemes of this nature have had on enabling a sector to rapidly achieve scale and impact.
The information technology industry has more than repaid the sacrifices on taxation that the nation has made over the years. Now, taking cognizance of this positive experience, I am pleased to extend Section 80 IA for another 15 years.
The scheme will be valid even after corporate restructuring, as well as include "brown-field" projects, besides the "green-field" ones ("brown-field"are older projects going for substantive upgradation, modernisation or redevelopment).
To make this tax holiday meaningful, we have also recognised that it is not logical for minimum alternate tax to be applicable in the chosen 10 years of the tax holiday. It is, therefore, proposed to abolish MAT in the period of availment.
We have understood the problems that infrastructure developers face as they operate through multi-layered special purpose vehicle structures. These relate to dividend distribution tax and capital gains in unlisted entities.
Having recognised these two difficulties, it is proposed to allow full pass-through of dividend distribution tax for infrastructure SPVs, and also allow the treatment of long-term capital gains tax on sale of equity holdings in unlisted SPVs in line with their listed counterparts.
We believe that an enabling environment needs to be created to channel more domestic and foreign capital into Indian infrastructure. The reasons are clear. Fiscal deficit has to be contained. A higher proportion of public expenditure has to be directed to social sector schemes.
The growing momentum of public private partnerships has to be supported and the huge capital outlays required for the infrastructure sector to fulfil national plans and objectives have to be provided for.
With this compelling set of circumstances, it is proposed to revive the tax incentive for commercial financiers to infrastructure, popularly known as 10 (23G), or Section 10 clause 23G, and also make it a single-point comprehensive provision for various kinds of investments in infrastructure. A detailed notification in this regard will be issued.
It is clearly recognised that to achieve uniformity across various policies, schemes and interventions, a common definition of infrastructure is needed.
Currently, there are several agencies with differing definitions of infrastructure. An Expert Committee on Definition of Infrastructure is hereby being set up under the chairmanship of the chief economic adviser to submit its recommendations by September 30. The list, which will include infrastructure services as well, is expected to be a single point of reference for the sector.
In my several meetings with the heads of commercial banks, they have confirmed to me their commitment to meet the demands of huge debt funds for infrastructure projects.
They have requested that they be allowed to float infrastructure bonds and have these exempt from capital gains under Section 54 EA and investments under Section 88 of the IT Act. After due consideration, I am acceding to the request.
We have realised that the mandate of Indian Infrastructure Finance Company Limited has been too narrowly defined. More breadth and depth are required in its operations. A task force under the chairmanship of Vijay Kelkar is being constituted and will be requested to submit its specific recommendations in the next two months.
The Union Budget is today as much about setting the stage as it is about direct fiscal interventions. Your government is seriously seized of implementation problems and logjams in delivery of critical infrastructure projects.
To address this issue squarely, it has been decided to set up the National Development Council for Infrastructure with the prime minister in the chair and the participation of all chief ministers, and Union ministers heading infrastructure ministries.
To enable the NDCI to discharge its role, a new supporting agency called the National Infrastructure Facilitation and Monitoring Agency is proposed to be set up and housed in the Prime Minister's Office.
NIFMA will, in addition to its mandate of supporting NDCI, also adopt 20 cross-sectoral projects of national importance and commit to the nation an on-time delivery.
An initial corpus of Rs 5,000 crore (Rs 50 billion) is being set aside for a rural PPP Initiative Fund to catalyse PPP projects in rural infrastructure in areas like roads, irrigation, mandis, cold chains, drinking water and electricity distribution.
The ministry of rural development is to utilise this corpus towards generating private sector interest and participation, possibly using annuity-type models, to change the landscape of rural India.
In addition, a sum of Rs 2,000 crore (Rs 20 billion) is being made available to the ministry of urban development to conceive and bid out 20 domestic economic zones to the private sector, to serve as models of modern mixed-use townships.
It is necessary for the nation to find a long-term, sustainable, equitable and transparent 21st century solution for making land available for economic development. This is necessary for job creation by both the public and private sectors.
Such a solution has to encompass scientific methods of identifying appropriate land banks, master-planning of activity zones and provisioning of essential transportation, energy, water and other links.
This is an essential role of the state and has to be undertaken in close co-operation between the Centre and states. It is, therefore, proposed to set up a National Land Bank Corporation with an initial capital of Rs 50,000 crore (Rs 500 billion), under an Act of Parliament. As part of the scheme, states are to be encouraged and facilitated to set up their own State Land Bank Corporations in symbiotic relationship with the NLBC.
Budgetary support for all the existing schemes has been appropriately provided for. With this fresh package of fiscal, policy and institutional interventions, India should see a resurgence in infrastructural activity, impacting the economic and social spheres.
Madam Speaker, I now move on to the next topic - agriculture."The author is the chairman of Feedback Ventures. He is also the chairman of CII's National Council on Infrastructure. Views expressed are personal
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