The government will have to increase allocation for building roads under the Engineering, Procurement and Construction (EPC) model in the 2019 Budget if it wants the road sector to thrive. That is the only window where the government can spend money under the infrastructure sector for building highways.
This situation has come about after the government burnt its fingers in the Public Private Partnership and the Hybrid Annuity models. Under these models, road builders were also toll collectors, but this is no longer a preferred route.
Now, the road builders are happier with the EPC model as their income is assured under this route.
Further, after two years, the project is handed over to another toll concessionaire.
For private road builders, developing a project and then recovering the spend over 25-30 years from toll collections is getting difficult. There is not enough bankability left for road builders so they have now developed expertise in just building the projects.
The Centre will make an assessment of the road projects to be bid out in the coming year and allocate funds, while keeping the EPC route in mind to keep the sector in the black.
For transporters, the government should maintain the taxation regime despite some opposition that is being aired.
In the last Budget, the Finance Minister had re-jigged the presumptive tax scheme. After the reworking, trucks or goods carriers up to 12,000 kg gross vehicle weight (gvw) shall deemed to be earning ₹7,500 net income per month.
A more pragmatic approach has been to fix ₹1,000 a tonne gvw for heavy commercial vehicles as against a fixed monthly income method.
This formula should be continued despite opposition from the transporters lobby, which appears removed from the ground realities.
It is also long overdue to bring in road transport trade fully under the income tax net and the Goods and Service Tax law so as to reflect the true income and remove the cascading impact of GST by way of input tax credit.
SP Singh is a Senior Fellow and Coordinator at the Indian Foundation Of Transport Research And Training. As told to Twesh Mishra of BusinessLine.