A country is as good as its\ninfrastructure. The Government is acutely aware of this and is continuously\nworking towards upgrading India’s infrastructure. Budget 2020 also provided a\nthrust to infrastructure development to boost spending across roads, highways,\nrailways, airports, and ports. Allocating over 103 lakh crores for infra\nprojects, the Government identified over 6500 projects under the National\nInfrastructure Pipeline (NIP) to build a $5 trillion economy by 2025. <\/p>\n\n\n\n
While many of these announcements\nwere before the COVID-19 crisis hit the Indian shores, they are even more\nrelevant in a crisis with a deepening financial crunch and staggering\neconomies. Government Infrastructure spending could be the magic potion that\ncould create jobs, increase purchasing power, and generate consumer demand to\nrevive the economy to its past glory. Infrastructure spending directly uplifts\nrelated sectors like cement, steel, diesel, and more, which helps gradually\npick up the pace of commercial activity in the economy. <\/p>\n\n\n\n
Additional Read: <\/strong>Corporate Loan restructuring. Will it be a Boon or a Bane for the Economy?<\/a> <\/p>\n\n\n\n Here are a few Government\ninfrastructure development initiatives and avenues for financing construction\nprojects: <\/p>\n\n\n\n 1.<\/strong> Roads and Highways:<\/strong>\nThe Indian Government, in 2017, approved a total investment of INR 6,920\nbillion for the construction of over 83,677 km of roads in the upcoming five\nyears. The current FY2021 budget also provides for capital for accelerated\ndevelopment of roads and highways. <\/p>\n\n\n\n ICRA predicts road projects’\nexecution at approximately 9000Kms, 10% lower than last year due to the\nCOVID-19 impact. However, the second half of July 2020 shows early signs of\nrecovery with toll collections across national highways rising to 87% of\npre-COVID levels. Enhanced spending on construction of roads and highways\nincreases the demand for construction and mining equipment, laborers, and more,\nwhich helps put cash directly in citizens’ hands. <\/p>\n\n\n\n 2. FDI:<\/strong> In a move to attract more foreign investments in the\ninfrastructure sector, the Government has relaxed several FDI regulations to\nallow 100% FDI investment in select construction development projects.\nMoreover, these new provisions have also eliminated the lock-in period of three\nyears in specific real estate development projects such as Hotels & Tourist\nResorts, Hospitals, etc. <\/p>\n\n\n\n Lack of financing has been one of the fundamental limiting factors in improving infrastructure in developing countries. While these relaxations are sure to attract more foreign investments, an equally viable alternative is to access construction finance<\/a> instead of waiting to accumulate the required upfront capital to invest in these projects. A construction finance loan could speed up infrastructure development plans without burdening cashflows. <\/p>\n\n\n\n 3. Smart Cities:<\/strong> The Government allocated INR 6,450 crore in Budget\n2020 to develop five smart cities in the fiscal year FY2021. To accelerate\nurban infrastructure, the Indian Government set a vision of 100 smart cities\nstarting in 2015. While COVID-19 might have delayed this initiative’s progress,\nthe urbanization endeavor would create jobs and boost economic growth across\nidentified states. <\/p>\n\n\n\n These projects require huge\nupfront investment that could be catered too by accessing builder finance. Tata\nCapital allows for flexibility in these loans to be tailored to match the\nGovernment\u2019s milestone payouts to ensure loan repayments align with income. <\/p>\n\n\n\n 4. Transport:<\/strong> In the Union Budget 2020-21, the Government has given\na massive push by allocating INR 1.70 trillion for transport infrastructure. Of\nthe 103 lakh crore invested in NIP projects, over 37 lakh crore is estimated to\nupgrade transportation, be it metro, rails, airports, or ports. The Government\nalso plans to build 100 airports by 2024 and launch more Tejas trains to\npromote tourism and domestic travel. <\/p>\n\n\n\n 5. Power:<\/strong> The power sector is one of the keys to propel economic\ngrowth in the country, and the Union Budget 2020-21 allocated Rs 22000 crores\nfor discom reforms, power, and renewable energy sector. To further push India\u2019s\nrenewable energy capacity Government also plans to establish a renewable energy\ncapacity of 500 GW by 2030, including large solar power plants along railway\ntracks. <\/p>\n\n\n\n 6. Oil & Gas:<\/strong> Under the Open Acreage Licensing Policy (OALP),\n1.37 lakh square km have been allocated to the private sector and central\npublic sector enterprises for exploration. There is also a plan for a 51%\nexpansion of the national gas distribution grid to 27000 Kms. <\/p>\n\n\n\n In light of the pandemic, few other measures taken by the Government to\ncontinue its impetus on infrastructure development are: <\/strong><\/p>\n\n\n\n – Reduction of milestone limit\nand faster release of monthly invoice payouts by NHAI <\/p>\n\n\n\n – Compensation for loss of toll\ncollection by increasing the concession periods <\/p>\n\n\n\n – All registered real estate\nprojects and central departments including railways, public works department,\nministry of road, transport, and highways have offered an extension of time of\nat least 90 days and up to 180 days to all undergoing projects without any\npenalty <\/p>\n\n\n\n – Government agencies to release\nretention proportionately to the extent contracts are completed to ease working\ncapital for road contractors <\/p>\n\n\n\n – Speedy settlement of arbitration of disputes between Government and contractors<\/p>\n\n\n\n Additional Read: <\/strong>Budget 2020: Key Highlights and Takeaways<\/a> <\/p>\n\n\n\n Tata Capital believes in doing its part by offering to finance entrepreneurs committed to developing India’s infrastructure through these initiatives. If you’ve received large tenders to execute under any of these policies or are planning to participate and require construction and mining equipment financing<\/a>, project financing, or any other working capital requirements to execute them, connect with us.<\/p>\n","protected":false},"excerpt":{"rendered":" A country is as good as its infrastructure. The Government is acutely aware of this and is continuously working towards upgrading India’s infrastructure. <\/p>\n