No expectations from Budget; will take it as it comes: GMR

This is the government's great Indian infrastructure dream. But the ground reality is a rude awakening. With a slowing economy, high interest rates and more importantly delayed decision making, infra projects and infra companies face an uncertain future.

As Pranab Mukherjee gets ready to present Budget 2012 the message is clear - jump start the investment cycle, focus on accelerating infrastructure spending and break the policy logjam.

But does the government have the political capital to deliver on the infra promise?

A Subba Rao, CFO of GMR Group talks about his budget expectations to CNBC-TV18.

Below is an edited transcript. Watch the accompanying video for more.

Q: An issue that perhaps cannot be addressed in the Budget is this business of policy logjam which is what is impacting the sector the most as it is the biggest worry. How concerned are you? Do you believe that the recent efforts that we have seen with the principle secretary Pullok Chaterjee now being told to fast track infrastructure projects etc is actually going to give you the desired results?

Subba Rao: The Budget is not necessarily the platform where all these measures would be announced, but we are happy with the kind of momentum that has begun in the recent past. So, there is a 30 day, 60 day and a 90 day plan, at the end of the 90th day the power sector is the most impacted as of today among all the infrastructure sub-sectors and there is an action plan that has been initiated and we hope that this action plan would be initiated by the end of 90th day. We would see some kind of hope, but coming to the budget what is going to happen, what government should do? We don't have any expectations.

Q: You have absolutely no expectations, so you can't go away disappointed if nothing is delivered?

Subba Rao: Yes, learn to accept what comes your way. That is the happiest way of living life. There has been a trust deficit. You say something today and you go back and change it tomorrow. The government should come and make a categorical statement saying that here we are going to stick to the policy, these are some of the principle statements the government should make.

Then we make the investments based on governments pronouncements statement legislation and then we do not know the stability of this and it's going to be rolled over. When we started the infra journey there was no MAT - Minimum Alternative Tax, there was no Dividend Distribution Tax, etc. All these things over a period of time in the revenue interest have been rolled back, impairing our returns on investments.

Q: Given the government's precarious fiscal deficit position as well as its revenue constraints, are you worried that perhaps we are likely to see even more rollbacks?

Subba Rao: That is a bigger discussion, fiscal deficit and why is it happening? You have unsustainable subsidies, you have huge interest payments and you have huge social programs like NREGA which is the cause of inflation. So, all these things are creating money which is not earned and that has no value for the people who are getting it and that is what is causing inflation. That should be arrested. Addressing fiscal deficit, rolling back promises that have been made is not the solution, you have solutions elsewhere.

Q: Is 2012 going to be far worse for infrastructure companies than last year because we haven't been able to address the slow order book situation, the policy logjam clearly continues, interest rates continue to be high?

Subba Rao: We have been trained, not to think negatively but to think positively. If you have read the sacred book, stick to that book.

Q: Given the fact that we have now got this special task force that has been setup to look into the issues as far as the power sector is concerned where we are perhaps going to see some of these issues being addressed. For instance, just look at the demand for Coal India to sign up FSAs at this point in time which clearly seems to be the message from the government?

Subba Rao: Yes, people have come back from the first meeting with a lot of cheer and confidence and we are hopeful that these things will be addressed. We trust yesterday's Supreme Court decision will not derail this process by refocusing on some other issue.

Q: Why do you worry about the impact of the Supreme Court's order as far as the 2G case is concerned? Is it the first come first serve issue that you are worried about?

Subba Rao: Yes. It might shift the focus from resolving these issues to some other issues which demand urgent attention. That could be one danger. The capex costs have been rising. If the import duties are slashed we all would be happy. We have been demanding a slash.

Q: What are the three priorities that you think the government needs to address?

Subba Rao: The first thing is fiscal consolidation. They have to make efforts to reduce the fiscal deficit that would do three good things for us - it makes more and more capital available for the infra industry, it reduces the cost of capital and it reduces inflation. The Budget can be made a platform to make announcements and all airports can be privatised and the power industry the government has to make a promise that power industry issues should be resolved if they are not resolved by that time.

Urban infra is a huge space for making investments and the government should come out with a policy where concessions agreement would be rolled over for various parts of urban infrastructure so that would re-initiate and put life back into infrastructure by bringing huge capital. Third, we must do all that is necessary to be done to invite FDI. There is huge money available in the world. The Budget has to give that kind of feeling to all the investors in the world that they can trust this country and put capital in this country.