Budget for Infrastructure
27th Apr, 2021
- The focus pillars Union on infrastructure, Physical Budget and 2021-22 being financial part has of Capital, one welcome of and the Infrastructure.
- The infrastructure allocations have gone up substantially. The capital allocation has gone up by over a third of the previous year’s allocation to Rs. 5.5 lakh crore in keeping up with the plans of the National Infrastructure Pipeline (NIP).
National Infrastructure Pipeline
- The NIP envisages a capital spend of over Rs. 100 lakh crore over six-year period, 2019-20 to 2024-25, with 39 percent to come from the Centre, that is about Rs. 40 lakh crore.
- With the spending being less than average over the past two years, partly also affected by the pandemic depression, the big challenge would be the ability to catch up over the next three years.
- In terms of scope, the NIP includes over 20 sectors and has recently been enhanced to 7400 projects. While allocations may not be an issue, the ability to spend wisely and effectively is what needs attention.
- Urban transport has been given a strong focus, not only with allocations for extension of metro lines in major cities, but also for Metrolite and Metroneo projects and for bus transportation.
- While a metro line costs Rs. 300 crore per kilometer, the Metrolite is about Rs. 180 crore per kilometer and the Metroneo is Rs. 70 crore per kilometer.
- With these technologies, India will have a full range of mass transit technologies, starting from the conventional bus to the Bus Rapid Transit System (BRTS), Metrolite, Metroneo, the Metro and the Regional Rail Transit System.
- Such a range is required, for a diverse urban economy like India, not only to support suburban areas of tier one cities, but also to bring in mass transit options in tier two and tier three cities.
- Other sectors of infrastructure that found special mention were upgradation of some fishing harbours, the water supply schemes in urban local bodies, and bringing in PPPs in more existing airports.
- Though there was no explicit mention of the ports and shipping sector, there is an ongoing programme in this sector called Sagarmala.
- There is also a recent visioning exercise called the Maritime India Vision for 2030 that provides a roadmap for significant growth in this sector.
Developmental Financial Institution
- A new infrastructural Developmental Financial Institution (DFI) is being setup with an allocation of Rs. 20,000 crore.
- While this is a welcome move, we need to learn from the lessons of the earlier institutions that were setup or catalysed by the government.
- These include IL&FS (which today is under serious charges of misgovernance), IDFC (which after having evolved into a bank has diluted its intended development focus) and IIFCL.
- The government has also set up a ‘bad’ bank, including an Asset Reconstruction Company (ARC) and an Asset Management Company (AMC) for taking care of non-performing assets.
Minimum Support Price
- Minimum of notified Support crops Price as declared (MSP) by is the guaranteed Government price of India for public procurement purpose.
- It acts as a safety net to farmers by protecting their business interest from the uncertainties of market due to various natural and market forces.
- Government of India notifies MSP for 23 ‘Khiarif’ and ‘Rabi’ crops at the start of each cropping season that include selected commercial crops as well.
- The group comprises seven cereals (paddy, wheal, maize, sorghum, pearl millet, barley and ragi), seven oilseeds (groundnut, rapeseed, mustard, soybean, sesame, sunflower, safflower and nigar seed), and four commercial crops (copra, sugarcanes, cotton and raw’ jute).
- Under Indian conditions, crop production often fluctuates affecting market prices vis-a-vis prospect of the particular crop in next sowing season.
- For example, in case of crash of prices due to over production (glut), fanners become reluctant for sowing the crop in the next year.
- It may affect the supply with many consequences. To counter such situations, MSP is fixed by the Government which infuses confidence in farmers despite turnarounds in prices.
Commission for Agricultural Costs and Prices
- MSP is fixed by the Government of India on the recommendations of the Commission for Agricultural Costs and Prices (CACP) which is a statutory body.
- CACP submits its recommendations to the Government in the form of price policy reports twice a year separately for Kharif and Rabi seasons.
- The Union Government considers the report, takes view of the states Governments and also deliberates on the overall demand and supply situation in the country to take the final call on fixing MSPs.
- Post-harvesting, the Government procure crops from farmers at the MSP across APMC mandis and procurement centres.
The budget 2021-2022 takes a practical approach to growth with a focus on hard gains of fiscal rectitude. The motive of the Union Budget is to subsequently bring about the fast and very balanced economic growth of our country with emphasis on social justice and equality. Also, the major decisions are related to Education& Health, Agriculture, Corporate Tax, NRI Tax, and Income Tax and the union budget has further fuelled new aspirations for a better India.