Budget 2014: UPA policies rendered roads sector directionless. Will Jaitley change it?

Like power and water, various modes of transport infrastructure have an important role in providing essential services at optimal cost to common people and at the same time form the back bone of the economy.

Successive governments in last two decades realised the importance of building transport infrastructure and maintaining it. Many flagship programmes such as the National Highways Development Project and Dedicated Freight Corridor for the railways were launched. Metro airports were converted into world class Airports. Some success was achieved in improving urban transport in cities like Delhi and Bangalore. Many projects launched by the NDA regime were taken forward by the UPA-1 and also initially by UPA-2.

Many highways were upgraded, people were happy to pay toll for better roads. The railways under the UPA-1 proved its detractors wrong and during 2004-09 revived financially. Its revival was considered as a great success story by the whole world.

India showcased its prowess by building 4 world class airports in Mumbai, Delhi, Hyderabad and Bangalore. Delhi Metro Network expanded significantly and other Metros followed by launching Metro Projects. Things were looking great until 2010-11 and then the slide started.

Financial revival of the railways was short lived. While the government successfully achieved short-term goals, long-term investment in improving infrastructure was ignored. Fare rationalisation was neglected. There was lack of strong political leadership for this ministry after 2009. Due to the overall neglect, the Indian Railways today has once again become a slagging organization.

The Highway up-gradation program, lauded as one of the world’s largest and successful programmes, came to a stand-still. Many projects are abandoned due to delays in land acquisition, getting environmental clearances and shortage of funding, both debt and equity. NHAI which awarded close to 7,000 kms in 2011 could hardly award any new projects in 2013.

The Government could not take the airport modernization programme to the next level. Modernisation of remaining metro airports and Airports at second tier cities could not progress. Regional connectivity still remains a distant dream.

While the global economic slowdown did contribute to this, one can say that it was the inability of the government to push major initiatives and projects that led to this state of affairs.

With this background there are huge expectations from the forthcoming budget. This is the first budget of the new government, which has received solid mandate from the people and also higher expectation. I am not expecting any substantive fiscal concession(s) in the budget as sufficient tax and other fiscal incentives have already been made available. However, I expect quite a few important policy statements that would boost the transport sector.

It is expected that the government would use the budget speech to provide an overall direction to the sector and highlight its vision. I anticipate that the government will endeavour to give the right message to stakeholders.

The Union Budget could give a fillip to the highway upgradation programme by announcing measures to improve the availability of long-term finance. Issuance of infrastructure bonds by banks, streamlining infrastructure debt funds and takeout financing measures and deepening of corporate bond markets would facilitate in addressing bottlenecks.

Increased government expenditure would also provide a stimulus to the sector in the short term. The budget should reaffirm the government’s focus on policy reforms for the sector, finer details of which can be subsequently announced. Further refining the policy of exit for developers from projects, contract re-negotiations, MCA revisions, setting up of the regulator for the sector etc. would be important in this regard.

In the airports sector, the budget could promote enhanced private participation for six airports (Chennai, Kolkata, Jaipur, Ahmedabad, Lucknow and Guwahati) and a likely way ahead for Navi Mumbai airport. Low-cost no-frills airports to promote regional connectivity may also be encouraged.

In addition to overcoming existing issues, it will also be important for the budget to highlight the government is bringing in fresh thinking on regulations, institutional capacity etc. from a longer term perspective. In the end, it will be important for the budget to indicate that the government has the larger picture in mind.

Vishwas Udgirkar is a Senior Director with Deloitte Touche Tohmatsu India Private Limited. Views expressed are personal.