Testing Budget Shakti
01 Feb 2022
Long Read
Infrastructure development has
clearly been given a huge thrust in
the Union Budget 2022-23 by the
finance minister. The capital outlay
has been raised by 35 per cent to
Rs.7.5 trillion and the fiscal deficit has
been contained at 6.9 per cent of
GDP. Among the variety of initiatives
announced, some that were
noteworthy included:
The allocation of Rs.1 trillion to
assist states in catalysing
investments including those for
PM Gatishakti in the form of a
50-year interest-free loan is over
and above the normal borrowing
allowed to states. The utilisation
could include PM Gram Sadak
Yojana, digitisation, optic fibre
network, town planning schemes
etc. Data for the last five years
(2016-17 to 2020- 21) revealed
that more than half (52.3 per cent)
of the projects were taken up in
five states — Gujarat, Maharashtra,
Karnataka, Andhra Pradesh, and
Tamil Nadu. This will allow other
states to also follow suit and
therefore there will be a race
towards development.
After a gap of six years,
urban
planning a.k.a. smart cities
mission has been rejuvenated
with the FM’s emphasis on
nurturing megacities and
re-imagining tier 2 and 3 cities.
I had emphasised the need for
‘capacity building’ time and again
at various platforms in order to
stop the haemorrhaging of the
building blocks. Having
recognised this gap, a committee
has been formed to resuscitate
this vertical. An outcome report of
the Smart Cities Mission could be
a good starting point. Strategically,
villages in border areas have
been covered under the Vibrant
Villages Programme which will
include roads, housing, village
infrastructure, renewable energy,
etc. The contracts for laying
optic fibre in all villages,
including remote areas, will be
awarded under the Bharatnet
project through PPP in 2022-23
and is targeted to be completed
in 2025.
The PM Awas Yojana has been
delivering effectively and another
8 million houses are to be
completed in both urban and
rural areas with an allotment of
`480 billion. Piped water for each
household has been delivered to
55 million households and
another 38 million will be covered
with an allotment of `600 billion.
The $5.9 billion Ken-Betwa Link
Project which transfers water
from river Ken to Betwa,
is aimed at providing irrigation
benefits to 9.08 lakh hectare of
farmers’ lands, drinking water
supply to 6.2 mn people,
103 MW of Hydro, and 27 MW
of solar power. Five more
draft DPRs of river links have
been finalised.
In the transportation and logistics
sector, highways for 25,000 km,
100 new cargo terminals to be
built in the next 3 years, contracts
for implementation of Multimodal
Logistics Parks at four locations
through PPP mode and
manufacturing new generation
400 Vande Bharat trains with
improved energy-efficiency have
been planned. The road sector
has provided a lifeline through its
performance of having executed
13,435 km in 2020-21 which is
an average of 37 km per day.
However, the roads story has
slowed down since then. The
government has set a target of
12,000 km (for) the current
financial year against which
5,118 km was constructed as
on November 30, 2021 (barely
21 km per day). The government
has lowered the target for the
year to 33 km/day from the
40 km/day target set earlier.
The original target was to build
14,600 km highways in 2021-22.
The PM GatiShakti Master Plan
for Expressways is being
formulated in 2022-23 to
facilitate faster movement of
people and goods. The National
Highways network will be
expanded by 25,000 km in
2022-23 (but this does not mean
that this will be the construction
target, as moving up from the
current pace of 21 km per day to
69 km per day will be an
impossible uphill climb) and
`20,000 crore will be mobilized
through innovative ways of
financing to complement the
public resources. Provision of
surety bonds to fill in for bank
guarantees is a welcome step in
adding to the capacity of existing
EPC contractors in taking up more
and for encouraging new EPC
contractors into the fold.
Within transportation, the
Parvatmala scheme aimed at
connecting the hilly regions is
likely to see 60 km of eight
ropeway projects take-off. These
would be environment-friendly,
encourage the SME sector, and
boost tourism.
Several new age businesses have
been recognised and provided
for as an indication of the
government’s focus on the future,
and the youth. Encouragement to
start-ups and sectors such as
clean tech, drones, wearable
devices, blended fuel, land
record management, battery
swapping, AVGC, 5G etc, are
laudable intentions.
Initiatives on skilling and
education by using portals,
television channels, digital
university, backed by the
completion of the laying of the
optic fibre network by 2025 are
steps in the right direction.
However, the government needs to
also report on schemes that were
announced earlier and report on their
progress. One such initiative, the
Delhi-Mumbai Industrial Corridor
was started 13 years ago. I had
interviewed Amitabh Kant – then CEO
of that initiative - and he had shown
us the master plans for seven
greenfield cities which were already
complete. Yet, in the last several years
of budget speeches, we have yet to
hear of any update on this monolithic
investment. It is one of the world's
largest infrastructure projects with an
estimated investment of US$90 billion
and is planned as a high-tech
industrial zone spread across six
Indian states. The Smart Cities Mission
reported on its deliveries but not on
the outcome, and these projects are
very low on the sustainability index
which means the projects will die
when the money runs out.
For the year 2022-23, the 15th
Finance Commission has earmarked
Rs.229.08 billion for municipalities. Of
this Rs.72.27 billion are earmarked for
million-plus cities and Rs156.81 crore
is for non-million plus cities. The grant
will be divided state-wise and will be
devolved to the cities from the states
based on their population.
Accountability-based funding has got
cities worried. Earlier 80 per cent was
given as a basic grant and only
20 per cent was linked to reforms.
Now with 100 per cent of grants
linked to performance, states have to
work on a war footing. Today grants
have been linked to safe water and
energy resilience. This is crucial if
India has to meet the aggressive SDG
(Sustainable Development Goal)
targets it has taken.
The projects planned under various
corridors are substantial and can fill
the vacuum – which is dragging our
growth momentum down - in our
project pipelines. The industrial
corridor programme is set to create
greenfield, smart, industrial cities with
sustainable 'plug n play' ICT-enabled
utilities, that will facilitate the
manufacturing investments into the
country by providing quality,
reliable, sustainable and resilient
infrastructure to industries. The
government has approved 11 such
corridors consisting of 32 projects to
be developed in four phases. Each will
have multiple townships and industrial
cities and we are yet to see any
visibility. The 701 km Samriddhi
Expressway from Mumbai to Nagpur
is creating 19 new townships and one
of these is already underway.
The year 2022-23 will be principally
driven by the roads and metro rail
execution but will also see irrigation,
power, railways and mining with
above-normal commercial
expressions. Beginning now and until
2024 we are going to witness 16
assembly elections and one general
election, and should the states decide
to win elections on the development
plank, we will certainly have a lot to
look forward to.
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