The Centre might bestow infrastructure as well as industry status to new sectors to boost several pandemic hit industries in the upcoming Union Budget. Industry insiders said that several sectors and sub-industries such as hospitality, automobile retail, specific diganotics facilities and companies engaged in installation of EV charging stations amongst others might get the status.
The infra tag will enable these sectors to avail tax breaks, incentives and credit on lower interest rates. “Sectors which are in greenfield or which would need capex augmentation to help them overcome the pandemic can be looked from the lens of an infrastructure sector,” said Jagannarayan Padmanabhan, Director and Practice Leader, Transport & Logistics, Crisil Infrastructure Advisory. “Also many of the already identified sectors need a sustained policy push which will help them get visibility both in terms of quantum and the time period of applicability.”
Till now, activities associated with laying of power and telecom transmission and distribution lines, roads, highways, railways and construction of facilities such as hospitals, affordable housing, power generation units, water treatment plants, SEZs and certain type of hotels amongst others were given such status.
Besides, these sectors are a part of harmonised master list for infrastructure sub-sectors. However, in April 2021, exhibition-cum-convention centre was included in the list. “Given the focus around electric vehicle, and need for significant investment in charging stations, if the government adds the sector in infrastructure list, the benefits arising out of it will be significant,” said Vishal Kotecha, Director, India Ratings and Research. “Infra tag on sectors increases ability to raise funds, access to dedicated funds and lenders, foreign capital, lower interest rates among others.”
In recent years, lenders have taken a severe hit on their books consequent to cater to the unique financing requirements of the infra sector. This necessitated regulatory changes and government support from time to time.
“The pandemic has hit the retail, hospitality and automobile sectors hard and the need for credit and liquidity support is real and urgent,” said Vipula Sharma, Senior Director – Ratings and Head – Infrastructure Ratings, Brickwork Ratings.
“Any likely move to reclassify lending to these sectors as infrastructure lending will enable the banks to lend at concessional rates and extended timeline which in turn would give the sectors time to recover from the three years of repeated extended closures and rebuild their businesses. It would also enable access to funds from a larger set of institutions and funds. ”Furthermore, as the economy continues to recover from the prolonged pandemic, the sustainability of the recovery is clearly the key fiscal and monetary policy objective.
Consequently, Centre would need to focus on not only enhancing public capital expenditure further in infrastructure but also encouraging the private sector including foreign players to invest in the sector.
Lately, the Centre has already taken an initiative to kickstart private sector capital expenditure through the Production Linked Incentive (PLI) programme that has already covered 13 sectors with an aggregate outlay of Rs 1.97 trillion spread over the next few years. AGENCIES