Tag Archives: Bharatmala Pariyojana

Getting Back on Track

GST rate reduction from 28 per cent to 18 per cent has provided a breather to the construction equipment industry. Although 15 per cent of items would still be at 28 per cent, the major grouse has been addressed. That said, as many as 42,710 units were sold between January and September this year, against 37,346 units in the same period in the last financial year. Just this year, the number of units sold has equalled the prior record of 70,000 units sold during 2011. The industry has grown by 19 per cent in Q1 and 22 per cent in Q2 except for the 35 per cent dip in July owing to GST implementation, according to ICEMA reports. With an eye on growth of over 25 per cent, the construction equipment industry is gearing up for EXCON 2017, to be held from December 12 to 16 in Bengaluru, spread over 260,000 sq m. Although real estate has been tottering, projects like Bharatmala Pariyojana and metro-rail projects across the country are fuelling the revival alongwith irrigation and urban rejuvenation projects.
There is a move to bring real estate under the GST ambit. However, the present constitutional amendment did not cover real estate and stamp duty continues to be within the domain of state tax. Several states may not be ready to part with stamp duty and therefore legalities are being explored. Even currently, as land is an immovable asset, the industry has been given 33 per cent abatement on the 18 per cent GST. Therefore, the effective charge on the sector, for property under construction, is now 12 per cent as against the listed 18 per cent. A further effect of input credit would bring the incidence down to 9 per cent or so. There is no GST on completed projects as they are considered immovable assets.
The unsung success of the Pradhan Mantri Gram Sadak Yojana (PMGSY) needs to be highlighted too. The highest-ever construction of 130 km rural roads per day has been achieved under the PMGSY, leading to an addition of 47,400 km of PMGSY roads in 2016-17.
PM Narendra Modi is planning to spend an additional $14 billion under this scheme by March 2020; about Rs 1.4 lakh crore has already been spent under the programme. The cost will be shared in a 60-40 ratio by the federal and state governments.
Logistics has now been provided infrastructure status, allowing the growth and expansion of this sector at easier financial cost, which can help in distribution and access of goods across the country. This will compliment the rollout of the GST.
Even though the second quarter of 2017-18 has had insipid financial results with the net profit of 1,300 BSE companies declining by 3.54 per cent from the same quarter the previous year and net sales rising 7.39 per cent during the same period, the periods ahead will improve as the base effects of demonetisation and relaxation of the GST effect will trickle in.

Stage Set for Revival?

As the GDP figures of 5.7 per cent appeared in the press, the murmurs began. GST was already making lives difficult for the traders and businessmen, and the ghosts of demonetisation had not completely vanished yet. The evidence of the economy sputtering emboldened the critics and turned the loyalists into skeptics. The government too moved at an amazing speed having realised that the wolves were beginning to bay for their blood. Establishment of the PM Economic Council was announced, and then, within a fortnight, a massive infusion of reforms was launched.

The Rs 6.92 trillion road network of 83,677 km, on the back of the GST reform, can be a potent economic multiplier in times to come. The road construction push includes the Bharatmala Pariyojana with an investment of Rs 5.35 trillion to construct 34,800 km. In addition, Rs 1.57 trillion will be spent on the construction of 48,877 km by NHAI and MoRTH. That said, NHAI has been made the nodal body to ensure timely execution. Financing is innovatively being raised by monetising road assets worth Rs 34,000 crore from 82 operating highways under the TOT model.

Further, the bank recapitalisation plan of Rs 2.11 trillion over the next two years, in a bid to clean banks’ books and revive investment, is a timely move. With this, the projects that will be put to bid can be funded by banks giving a boost to credit disbursal, which has fallen abysmally low.

Besides roads, the next biggest business opportunity has become the Metro-Rail project execution. Over Rs 2 trillion of business is up for grabs over the next few years with Mumbai Metropolitan Region (MMR) itself contributing Rs 1.5 trillion. Metro projects with a total length of 370 km are operational in eight cities. Further, metro projects with a total length of 537 km are in progress in 13 cities. New cities acquiring metro services include Hyderabad (71 km), Nagpur (38 km), Ahmedabad (36 km), Pune (31.25 km) and Lucknow (23 km). Last month, the government introduced a New Metro Policy that focuses on giving clarity on the development of projects, collaborations, participation, standardising norms, financing, and creating a procurement mechanism to implement projects effectively.

Although the timing of the announcements may be scheduled to ensure that the economic agenda reaches a crescendo just before the elections, the forthcoming calendar year 2018 can be extremely rewarding with most contracts getting to fruition during this period.

After a long hiatus, the stage seems set for a revival and if the land acquisition hurdle can be overcome, we are headed for a frenetic pace ahead.