Sunday, March 18, 2012

Union Budget 2012-13: Budgetary Allocation for Infrastructure Development

Union Finance Minister Pranab Mukherjee in the Union budget 2012-13 proposed allocation of Rs. 50 lakh crore towards infrastructure investment during the Twelfth Plan period. About half of this is likely to come from the private sector. As part of the General Budget, the Finance Minister doubled the tax free bonds for financing infrastructure projects to Rs. 60000 crore. During 2012-13, the tax free bonds include Rs. 10,000 crore each for NHAI, IRFC, IIFCL and power sector, and Rs. 5000 croreeach for HUDCO, National Housing Bank, SIDBI, and ports.

The Finance Minister also announced the inclusion of more sectors in the list of sectors eligible for Viability Gap Funding (VGF) under the scheme for support to Public Private Partnership (PPP) in infrastructure. These sectors are irrigation (including dams, channels and embankments), terminal markets, common infrastructure in agriculture markets, soil testing laboratories and capital investment in fertilizer.

It was announced during the presentation of the budget that India Infrastructure Finance Company Limited (IIFCL) set up a structure for credit enhancement and take-out finance with an objective to provide ease of access of credit to infrastructure projects. It was also informed that an Infrastructure Debt Fund with an initial size of Rs. 8000 crore was launched in early March 2012 to tap the overseas markets for long term pension and insurance funds.

It was also stated that the Government has approved guidelines under which defence Public Sector Undertakings adopting the PPP mode, can establish joint venture.

Budgetary provisions for Infrastructure Development

•    The Union Budget 2012-13 stated that investment in infrastructure is to go up to Rs 50 lakh crore with half of the total investment expected from private sector.
•    More sectors proposed to be added as eligible sectors for Viability Gap Funding under the scheme- Support to PPP in infrastructure.
•    Tax free bonds of Rs 60000 crore to be allowed for financing infrastructure projects in 2012-13
•    The Union Budget announced harmonised master list of infrastructure sector approved by the Government.
•     National Manufacturing Policy announced with the objective of raising the share of manufacturing in GDP to 25 per cent and creating of 10 crore jobs.
•    Coal India Limited was advised to sign fuel supply agreements with power plants, having long-term PPAs with DISCOMs and getting commissioned on or before 31 March 2015
•    External Commercial Borrowings (ECB) to be allowed to part finance Rupee debt of existing power projects.

Transport: Roads and Civil Aviation

The Union Budget 2012-13 proposed an increase of allocation of the Road Transport and Highways Ministry by 14 per cent to Rs 25360 crore. ECB proposed to be allowed for capital expenditure on the maintenance and operations of toll systems for roads and highways, if they are part of original project. The budget permitted direct import of Aviation Turbine Fuel for Indian carriers.
The budget also stated that the ECB is to be permitted for working capital requirement of airline industry for one year subject to a total ceiling of US $ 1 billion. Proposal to allow foreign airlines to participate upto 49 per cent in the equity of an air transport undertaking under active consideration of the government was also made.

Micro, Small and Medium Enterprises

•    Rs 5000 crore India Opportunities Venture Fund proposed to be set up with SIDBI.
•    The launch of two SME exchanges in Mumbai to enable greater access to finance by Small and Medium Enterprises (SME) was announced in the budget
•    The Union budget approved policy requiring Ministries and CPSEs to make a minimum of 20 per cent of their annual purchases from MSEs
•    Of the total 20%, 4 per cent is to be earmarked for procurement from MSEs owned by SC/ST entrepreneurs.


Financial package of Rs 3884 crore for waiver of loans of handloom weavers and their cooperative societies was announced in the Union Budget 2012-13.

Budgetary allocation for textiles includes:

•    The budget also proposed setting up of two more mega handloom clusters, one to cover Prakasam and Guntur districts in Andhra Pradesh and another for Godda and neighbouring districts in Jharkhand
•    Three Weaver’s Service Centres one each in Mizoram, Nagaland and Jharkhand was proposed to be set up to provide technical support to poor handloom weavers
•    Rs 500 crore pilot scheme was announced for promotion and application of Geo-textiles in the North Eastern Region.
•    Powerloom mega cluster to be set up in Ichalkaranji in Maharashtra with a budget allocation of Rs 70 crore.

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