Infrastructure hopes from the Budget

Infrastructure companies are demanding a range of measures to enhance flow of funds into infrastructure development:

Investment) The Interim Budget had postponed the infrastructure investment target of 9 per cent of GDP to 2014 instead of 2012 set earlier. But with the signs of revival, the target may be advanced to 2011.

Disinvestment) The Government should also expedite disinvestment in PSUs to augment funds for infrastructure.

Bond market) A secondary market for debt trading should be in place to enable private sector raise funds in infrastructure space through long term corporate bonds.

Pension funds) could also be allowed to invest 10-15 per cent of their corpus in infrastructure bonds along the lines of permission granted to LIC to invest in equity.

Introduction of the common goods and service tax) will help the construction industry rationalise its tax structure and simplify compliance.

External commercial borrowings) The Government should permit domestic companies to refinance rupee loans through external commercial borrowings; capital gains tax treatment for special purpose vehicles (SPVs) have to be rationalised, say industry representatives.

Taxation) The law should be amended to reduce capital gains tax rates for SPVs on a par with listed companies. It is mandatory that infrastructure projects are handled through SPVs, which are generally unlisted and cannot get capital gains exemption granted to the listed/parent companies.

Similarly, dividend distribution tax should also be rationalised. Infrastructure development business calls for a multi-tier corporate structure with a holding company at the top which is a listed entity.

Build on core for growth
R Balaji