Sees Budget focus on public-pvt ties: Feedback Ventures

Excerpts from Markets Midday on CNBC-TV18 Watch the full show » RELATED NEWS Budget focus on inflation, infra, rural growth: Citigroup Budget should focus on PSE, Real Estate sector reforms Help curb watch smuggling: Titan Budget expectations from the perspective of Planning Nifty BSE | NSE 25/05/12 Are Mutual Funds betting on Nifty?

One sector that the Budget will have positive impact on is infrastructure and engineering. The sector is likely to benefit from govt's push for further funding of infrastructure projects.

Vinayak Chatterjee, Chairman of Feedback Ventures says that in the Budget he would, at a macro level expect a Public-Private Partnerships, or PPP Budget to be announced this year. He adds that the viability gap-funding issue has really no meaning unless there is a bank of PPP projects.

Excerpts from CNBC - TV18's exclusive interview with Vinayak Chatterjee:

Q: How much are you expecting by way of increasing funding for the infrastructure segment as a whole and do you expect any more clarity to come out on the ultra mega power projects as to how many would be allotted over a period of time?

A: The Honorable Finance Minister has spoken about thinking out of the box in terms of raising resources for the huge quantum of funds required for building India's infrastructure.

The Budget for the 11th plan period for the next five years is USD 350 billion, so if you divide that simply by five years you require USD 70 billion every year. Assuming 70% is from public expenditure FM certainly has to find between the centers, the state and the PSUs close to 70% of USD 70 billion so it is about USD 50 billion that has to be found every year. He has himself urged thinking outside the box. One of the things that we are looking forward to the Budget this time is a whole set of measures that we will reflect thinking outside the box and a series of new measures that will lead to more creative sources of revenue raising.

Q: Would that inevitably be some kind of tax tweaking benefits under section 81 A?

A: One of the things we think is going to happen is a new generation of bonds  being raised with some degree of tax free nature attached to them either fully or partially to make them attractive for retail investors. We also think that the new set of measures will be announced to allow greater amount of foreign funding to come in both in debt equity and mezzanine funds.

These are the two broad interventions that we are looking at but the other intervention that we have requested from CII whose infrastructure council I head is actually to tweak the method of presenting the annual Budget by having a separate section called the capital Budget as distinct from the revenue Budget, so I don't know whether that will be done or not but that is a significant expectation that we will have kind of a balance sheet which will talk about capital expenditure and sources of raising capital on the other side.

Q: In your position as head of the CIIs committee would you be abreast of the roadblocks that you face in the private-public partnership in various infrastructure projects. Do you expect any improvements there in the Budget itself?

A: In the Budget we would at a macro level expect a Public-Private Partnerships, or PPP Budget to be announced this year. 

Number two is that they will provide some carrots to the State government as to where the bulk of infrastructure is expected to happen towards, saying that if you facilitate PPP projects or you reach a certain PPP target, then we from the Centre will do something.

Q: Would you be expecting a peak custom duty to be tweaked at all from the current 16% and anything that you expect to hear on the (viability gap funding) VGF cap being  increase to non-viable projects?

A: The disbursements that I have understood from the Finance Ministry on viability gap funding has been a pathetic Rs 50 crore out of the Budgetary provision of Rs 500 crore kept aside for the year. The viability gap funding issue has really no meaning unless you have a bank of PPP projects that actively seek it.

So far as the infrastructure sector is concerned quite honestly there is no great expectations on import duty either way and if it happens many of the items required for infrastructure will be allowed to be brought in duty free which would probably affect the manufacturing sector more than the infrastructure .

But the real issue is really how the Budget this time sends a strong signal both at the Federal level as well as at the state level to create a larger bank of PPP projects. That is the problem, which the Prime Minister and the Finance Minister have both acknowledged in the public platform.