Jaitley’s Power Push for India’s Energy and Infrastructure Sectors

Jaitley’s Power Push for India’s Energy and Infrastructure Sectors

Infrastructure:

· Together with the Capital Expenditure of the Railways, the Total Outlay on Roads and Railways Proposed at Rs 2,18,000 Crore in 2016-17

· Total Outlay for Infrastructure in Budgetary Estimates 2016-17 Stands at Rs. 2,21,246 Crore

Oil and Gas:

· Government to provide calibrated marketing freedom to incentivise Oil & Gas production

· Rs 2000 cr provided for LPG connections to women under BPL

Power:

· Comprehensive plan to augment investment in Nuclear Power generation

Finance Minister Arun Jaitley announced a host of comprehensive measure in his Budget Speech 2016-17 for the energy and infrastructure sector.

Oil and Gas:

India is blessed with rich natural resources including oil and gas. However, their discovery and exploitation has been below our potential. Imports of hydrocarbons occupy a large share of India’s total imports. There is a situation of rising demand, near stagnation in production and consequent rapid increase in imports.

As part of India’s drive towards self-sufficiency, Jaitley announced that his Government is considering to incentivise gas production from deep-water, ultra deep-water and high pressure-high temperature areas, which are presently not exploited on account of higher cost and higher risks.

A proposal is under consideration for new discoveries and areas which are yet to commence production, first, to provide calibrated marketing freedom; and second, to do so at a pre-determined ceiling price to be discovered on the principle of landed price of alternative fuels.

Power, RE and Coal:

India has achieved the highest coal production growth in over two decades, highest ever capacity addition in generation, highest ever increase in transmission lines and in distribution of LED bulbs. 82. In the power sector, we need to diversify the sources of power generation for long term stability.

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Jaitley announced that the Government is drawing up a comprehensive plan, spanning next 15 to 20 years, to augment the investment in nuclear power generation.

Budgetary allocation up to Rs 3,000 crore per annum, together with public sector investments, will be leveraged to facilitate the required investment for this purpose.. To augment infrastructure spending further, Government will permit mobilisation of additional finances to the extent of Rs 31,300 crore by NHAI, PFC, REC, IREDA, NABARD and Inland Water Authority through raising of Bonds during 2016-17.

The private sector plays an important role in the development of infrastructure, many of which are implemented in the Public Private Partnership (PPP) mode.

Towards this, the minister announced three new initiatives to reinvigorate this sector.

(i). A Public Utility (Resolution of Disputes) Bill will be introduced during 2016-17 to streamline institutional arrangements for resolution of disputes in infrastructure related construction contracts, PPP and public utility contracts;

(ii). Guidelines for renegotiation of PPP Concession Agreements will be issued, keeping in view the long term nature of such contracts and potential uncertainties of the real economy, without compromising transparency;

(iii). A new credit rating system for infrastructure projects which gives emphasis to various in-built credit enhancement structures will be developed, instead of relying upon a standard perception of risk which often result in mispriced loans.

Infrastructure allocation in Budget up 22.5%
Infrastructure allocation in Budget up 22.5%

Roads, Ports and Railways:

Jaitley noted that in the road sector, there were more than 70 projects that were languishing at the beginning of the year, due to legacy factors. Aggregate length of these projects was about 8,300 kms involving more than Rs 1 lakh crore investment.

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With proactive interventions, nearly 85% of these projects have been put back on track. 73. India’s highest ever kilometres of new highways were awarded in 2015.

At the same time, India’s highest ever production of motor vehicles was achieved in 2015. This is a sign of growth in the economy; but it presents a challenge also.

Therefore, the government has speeded up the process of road construction. The finance minister accordingly proposed an allocation of Rs 55,000 crore in the Budget for Roads and Highways.

This, he said, will be further topped up by additional Rs 15,000 crore to be raised by NHAI through bonds.

Thus the total investment in the road sector, including PMGSY allocation, would be Rs 97,000 crore during 2016-17. 74.

Together with the capital expenditure of the Railways, the total outlay on roads and railways will be Rs 2,18,000 crore in 2016-17. 75.

Jaitley said his government further expects to approve nearly 10,000 kms of National Highways in 2016-17.

“This will be much higher than in the two previous years. The pace of completion of road projects will also rise to nearly 10,000 kms in 2016-17. In addition, nearly 50,000 kms of State highways will also be taken up for up-gradation as National Highways. 76. The total outlay for infrastructure in BE 2016-17 stands at Rs 2,21,246 crore,” Jaitley added.

In 2015, India’s major ports have handled the highest ever quality of cargo. “We have also added the highest ever capacity in major ports. We have started a series of measures for modernizing the ports and increasing their efficiency. The Sagarmala project has already been rolled out. We are planning to develop new greenfield ports both in the eastern and western coasts of the country,” the FM said.

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The work on the National Waterways is also being expedited. Rs 800 crore has been provided for these initiatives.

Civil Aviation:

In the civil aviation sector, the Government is drawing up an action plan for revival of unserved and underserved airports. There are about 160 airports and air strips with State Governments which can be revived at an indicative cost of Rs 50 crore to Rs 100 crore each. “We will partner with the State Governments to develop some of these airports for regional connectivity. Similarly, 10 of the 25 non-functional air strips with the Airport Authority of India will also be developed,” Jaitley said.