Budget 2016: PPP key for transportation & infra sector, says L&T

In the Budget 2016-17, infrastructure and transportation—railway and road—sectors received expected attention, says R Shankar Raman, Whole-Time Director and CFO, L&T. However, the government has failed to recognize role of Public Private Partnership (PPP) in both the sectors, Raman tells CNBC-TV18.The increase of Rs 1 lakh crore in direct and indirect taxation and Rs 70,000 crore in non-tax revenue, the borrowings have been kept modest, he says. However, he did expect to see a roadmap of effective tax rate coming through.Meanwhile, Gautam Trivedi, MD & CEO, Religare Capital Markets, says allotment of Rs 2.2 lakh crore for rail and the road projects combined may boost cement sector indirectly.In an interview to CNBC-TV18's Latha Venkatesh & Anuj Singhal, Gautam Trivedi, MD & CEO, Religare Capital Markets and R Shankar Raman, Whole-Time Director and CFO, L&T gave their take on Arun Jaitely's Union Budget and his outlook on the road ahead.Latha: As an infrastructure guy there are couple of things for you, a big infrastructure Budget as well as some renegotiation of public private partnership (PPP) kind of announcements, intention announcements. What is your take?Raman: I think some sectors received the expected attention. Transportation in infrastructure was always a candidate for that. If you really take the railway spend plus the road capex together, during FY16, we looked at an outlay of revised estimate outlay of Rs 1,80,000 crore and that has moved to Rs 2,20,000 crore. So, it is a good 20 percent increase over the previous year. So, that is a very strong signal that is being given out. As you rightly said, however, grudgingly, the government does recognise the need for PPP to hold their hand in this path of boosting growth through the transportation infrastructure. The government obviously does not have all the resources to spend on building out this plan so they need the private sector who are interested in this space to participate with them and to some extent there was a statement made saying 85 percent of the stuck projects have got fixed, I am not very sure whether the percentage is precise but it at least states their mindset of wanting to fix the existing problems which they need to move ahead. Latha: The debt markets have got quite a bonanza. They were expecting that the government will borrow about Rs 4.8 lakh crore, the government is actually borrowing only Rs 4.24 lakh crore and of course the fiscal deficit target has been adhered to which is why that borrowing is so much lower, almost Rs 50,000 crore lower than what the street was expecting. Do you think money gets cheap for corporates? Raman: I wish it will get cheap. However, the catch in my mind seems to be the Rs 1 lakh crore increase in the tax collections that the initial number seems to suggest. I obviously need to go into details to substantiate that but a quick look at the Rs 1, 70,000 crore increase in the overall outlay is being funded by Rs 1 lakh crore increase in taxation, direct and indirect out together and about Rs 70,000 crore in terms of non-tax revenues. So, consequently the borrowing is kept modest, in fact down by Rs 50,000 crore but the success of the non-tax revenue to go up by Rs 70,000 crore could actually be the wildcard in the borrowing plan overall. Latha: What sectors will you look at all positively after this Budget?Trivedi: The one figure that came out of this Budget was the figure of Rs 2.2 lakh crore which is what the rail and the road projects combined. Again we don't have a sense of what the number last year was because it is optically a staggeringly interesting number. Hopefully this impacts cement at some point because if you are actually going to go and spend that kind of money in the next 12-13 months that should come out in cement. We have seen a pretty tepid, five percent growth rate for both profits as well as topline for cement sector in the last quarter. So, that is a sure sign that a lot of these money is actually being spent and finally projects are taking off the ground. So, that is what I would say.Watch video for more