The budget today has envisioned a constructive growth story for India’s future. The increased hike in direct capital investment outlay by a good measure of 33 percent to Rs 10 lakh crore for FY24, or around 3.3 percent of national gross domestic product (GDP), shows the government’s intent to enhance growth potential and provide a cushion against global headwinds. Infrastructure spending whether in roadways, railways, power or traditional infrastructure sectors is likely to have a multiplier effect on India’s growth story.
We welcome the continuous and dedicated effort on futuristic India @100, especially the emphasis on promoting green power and its evacuation, development of a detailed framework for pumped storage projects or looking to deliver 24x7 power with an ambitious viability gap funding for 4,000 MWh worth of battery-based energy storage projects.
We would have liked to see a dedicated roadmap for the development of power transmission infrastructure, given any alternative to fossil fuel-based generation is also contingent on a robust transmission and distribution network. Battery storage systems need support but given most of the bids are at around four hours of dispatch, the capacity envisaged is at a maximum of about 1 GW, which would need to be boosted significantly to sustain round-the-clock power via green sources. We were also hopeful of a reduction in duties on utility-scale battery-based systems to promote widespread adoption of battery-based storage solutions, and we hope that this will be addressed subsequently.
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The Big Misses
A big dampener in the budget, however, has been for infrastructure investment trusts (InvITs) and real estate investment trusts (REITs). We had hoped that this budget would streamline long-term capital gains taxation of business trusts in line with listed equities since securities transaction tax (STT) is already applicable to business trusts. This would have only helped promulgate business trusts further as an investment choice, especially for retail and institutional investors. While that has been left out, the budget seems to have brought in new tax implications on capital repayment by business trusts. On a plain reading, it appears that capital repayment as a form of distribution will now be taxable as income from other sources. This will certainly reduce attractiveness for investors who would have expected it to be treated as an adjustment against the cost of acquisition upon divestment and thereby getting taxed under capital gains.
Similarly, while a proposal to withdraw exemptions from tax deducted at source (TDS) on non-convertible debentures (NCDs) issued by companies will bring uniformity with NCDs issued by business trusts, waiving of TDS for both types of entities would have ensured both uniformity and increased investment demands by investors.
Finally, the budget also left a lot to be desired on the private investment front. We hoped to see clarity on the implementation of the National Monetisation Pipeline (NMP) and the National Investment Pipeline (NIP) as envisaged in earlier budgets. While guidelines for monetisation have been notified at a broader level, the monetisation process is yet to pick steam. Timely sourcing of private investment is equally important if the country is to meet its aggressive targets for infrastructure development. More importantly, the promulgation of business trusts (InvITs) is still necessitated, as this has been a structural change in getting last-mile investments into the infrastructure sector without compromising on corporate governance. This asset class is yet to unlock its true potential, which in turn can create capital investments of about Rs 8 lakh crore alone over the next 4-6 years.
We hope that while the spirit of the budget has been concentrated in the right direction, the execution follows too seamlessly. It is imperative that while solving the twin objectives of inclusion and growth, we integrate the twin sources of funding, i.e., public as well as private investment, in this direction too. In that regard, the budget for 2023 has a lot left to be desired.
Harsh Shah is CEO, IndiGrid. Views are personal and do not represent the stand of this publication.
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