Infrastructure leaders have urged continued focus on the government’s capex-led growth strategy in the upcoming Budget to further boost the economy.
At a pre-budget meeting, Chaired by Economic Affairs Secretary Ajay Seth, here on Saturday, infrastructure industry honchos have sought at least a 30 percent hike in the Centre’s capex allocation for 2024-25 to about ₹13-lakh crore. “I made a strong suggestion for 30 percent increase in infrastructure budgetary allocation from existing ₹10-lakh crore to ₹13-13.5-lakh crore”, Vinayak Chatterjee, Founder and Managing Trustee, The Infravision Foundation told businessline after the meeting.
This 30 percent hike is the minimum required to ensure that infrastructure remains the prime driver of India’s GDP growth in coming years, he added.
The pre-Budget meeting was attended by all the top secretaries of the Finance Ministry besides other senior officials.
Chatterjee also said that a suggestion was made for a need to come up with a policy statement in the Budget on rationalisation of 28 per cent GST on cement to give a fillip to infrastructure development in the country. “Although it (GST) is not a Union Budget item, suggestion was made for a policy statement on reduction of the irrational 28 percent GST rate on cement.
It needs to be brought down as it is a sin tax on a commodity where large infrastructure budgets are based and it affects the aam aadmi too. With current revenue buoyancy, there is significant case for reducing GST rate on cement”, Chatterjee said.
GROUP CONSOLIDATION FOR TAXATION
Chatterjee said there was also a suggestion for introduction of group consolidation concept for taxation. He highlighted that in infrastructure sector, every project has to be implemented through incorporation of a separate special purpose vehicle (SPV). Most big infrastructure developers have a structure where under one corporate holding (umbrella) company, there are 30-40 SPVs.
The suggestion from the infrastructure developers was to allow consolidation of financials of the SPVs into the holding company and let the consolidated holding company be subjected to income tax assessment. This would be a better option than subjecting every separate SPV to income tax assessment, he explained.
Biggies like GMR Group, Larsen & Toubro and Renew — who attended Friday’s meeting — were also in favour of such a holding company level consolidation concept for income tax assessment, sources said.
The pre-Budget meeting also saw overwhelming bunch of suggestions for addressing urban infrastructure and urban infrastructure financing, particularly things like municipal bonds. The belief was that there has been neglect of urban governance, urban financing and urban infrastructure, sources added.
Among those who attended the meeting include Pinaki Lahiri, L&T Energy — Hydrocarbon Group Head, Pratibha Bajaj, Senior Director, CDPQ Infrastructure; V Srinivas Chary, Director of the Centre for Environment, Urban Governance & Infrastructure Development— ASCI ; Subramanyam Pulipaka, CEO, National Solar Energy Federation of India and R Anantakumar, Director (operations), Afcons Infrastructure Ltd.
CAPEX-LED GROWTH STRATEGY
The capex-led growth strategy is designed to have a multiplier effect on the economy. Over the last six years, especially after Covid, the Centre’s capital expenditure (capex)-led growth strategy has represented a pivotal shift in the nation’s economic policy, focusing on substantial investments in infrastructure and development projects to stimulate long-term growth.
This approach aims to build a robust economic foundation, enhance productivity and create employment opportunities across various sectors.
While the capex-led growth strategy holds promise, it is not without challenges. Effective implementation and timely completion of projects are critical. Bureaucratic hurdles, land acquisition issues and regulatory delays can impede progress. Ensuring transparency and accountability in project execution is essential to prevent cost overruns and corruption.