Live Budget 2013-14: Setting up road regulator is a welcome move: KPMG

Infrastructure companies reeling under huge debts have a reason to cheer post the Finance Minister assuring them availability of low cost funds in the Union Budget 2013-14.

The aggregate debt of  top ten infra companies accounts for about 13 per cent of total bank loans and a whopping 98 per cent of the entire banking system net worth, Credit Suisse had stated in August last year.

There may not be any major changes in their position even today, say experts.

Companies like GMR , GVK and Lanco InfraTech have been crying hoarse about high interest outgo on huge debts. In an interview with moneycontrol.com, a few months ago, A Subba Rao, chief financial officer at GMR had said that all infra companies are in huge debts because projects which they undertake are long drawn and companies break-even only after a year or two of operations.

Meanwhile, Hemal Zobalia, Partner- Tax, KPMG in India in a post Budget statement said, " Setting up a road regulator is a welcome move combined with announcement of awarding contract for 3000 kms in first 6 months and more roads in north east states.  Financing for infra projects would be eased through enhanced liquidity from IDF (infra debt funds), IIFCL and housing loan deduction.  Increased planned expenditure in education and healthcare will translate into higher development projects in these sectors. Investment allowance of 15 percent for projects of 100 crore will certainly promote infra growth."

Meanwhile, Finance Minister P Chidambaram has announced 3000 kms of road projects in 2013-14 in various states including Gujarat, Maharashtra, Rajasthan and Andhra Pradesh.

He also said committees will be set up to fast- track  new projects and even those that were stalled due to technical reasons. He also said finance will be available at lower cost which will lease interest burden for the infra sector. For the purpose, infra debt funds will be encouraged.

He further said a regulatory body will be set up to clear pending disputes related to land acquisitions and environmental hurdles. The regulator will also address various issues faced by developer and also review NHAI (National Highways Authority of India) performance and policies.

"While every sector can absorb new investment, it is the infrastructure
sector that needs large volumes of investment. The 12th Plan projects an investmentof USD 1 trillion or Rs 55,00,000 crore in infrastructure, said the minister while reading out the Budget document.

The Plan envisages that the private sector will share 47 percent of the investment. Besides, we need new and innovative instruments to mobilise funds for this order of investment, he said.

Companies like IRB Infra, Ashoka Buildcon, GMR and GVK will benefit as they will now have access to low cost funds.

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