Developers engaged in the infrastructure sector – be it roads or ports – want the Government to ensure availability of long-term funds and induce banks to lend. This is because in the past 10 years, the Government has implemented a large number of projects on public-private partnership (PPP) basis, which, in effect, passed on the burden of raising funds for increasing road and port capacity to private firms.
Both roads and ports builders – through the National Highways Builders Federation and the Indian Private Ports and Terminals Association – have demanded the reintroduction of a section in the Income Tax Act that incentivises banks to lend more to infrastructure.
“Section S10 (23G) has to be reintroduced, permitting banks to save tax on net income on lending to infrastructure projects as approved under Section 80 (IA) and provide exemptions from capital gains on sale of such shares,” said K Venkatesh, Chief Executive Officer and Managing Director, L&T IDPL.
Access to cheaper foreign funds is another demand. “The cost of Indian debt is very high. So port companies should be allowed to refinance their entire debt through external commercial borrowings (ECBs), which will reduce the debt servicing obligation and enhance project viability,” said Rajiv Agarwal, Managing Director, Essar Ports.
Removal of the minimum alternate tax (MAT) on projects getting 10-year tax holiday is next. “Not only was MAT imposed on infrastructure projects, even its level was raised to about 21 per cent, in effect closing the gap between the marginal rate of corporate tax and MAT to about 12 per cent,” said L&T’s Venkatesh.
Virendra Mhaiskar, CMD, IRB Infrastructure, wants an alternate mechanism in place, such as business trusts, to fund infrastructure projects, which could function like real estate investment trusts. This would basically allow companies with infrastructure assets that have regular incomes to transfer their assets to a trust and list these units in bourses.
Credit backingInfrastructure developers also demanded that they should not be made to face risks that arise due to lapses on the Government’s part. Many half-implemented projects, stuck due to pending land acquisition, disputes or dues, are low-hanging fruits that can be processed faster. “The Government should focus on how much it has failed in meeting its commitments and how much penalty or compensation it needs to pay,” said KK Mohanty, MD, Gammon Infrastructure Projects Ltd. As infrastructure assets are owned by the Government, it needs to provide some level of backing for debt papers floated by infra firms to improve their credit rating. This would allow long-term funds from insurance and pension funds to be routed to projects, said Mohanty.
Anil Singh, Senior Vice-President and Managing Director (Subcontinent), DP World, sought “a clear implementation framework” so that capacity can be created in the right places instead of being concentrated in just one zone. Prakash Tulsiani, Managing Director, APM Terminals Pipavav, said the State Government should make land available for industrial parks in and around ports.