Aligning 7 ENGINES of INFRA DEVELOPMENT

Infrastructure development with a holistic, inclusive and collaborative approach has been a long-felt need in order to enhance efficiency and optimise resource utilisation. The PM GatiShakti approach announced in October 2021 and emphasized in the recent Union Budget reiterates this perfectly and augers well for developing transportation and logistics infrastructure. Under the newly announced framework, 16 Central Ministries and Departments including Railways and Roadways will collaborate and work in unison for integrated planning and coordinated implementation of infrastructure connectivity projects. This will afford multiple benefits - reduce inter - ministries silos, bureaucratic entanglements & consequently lead to speedier implementation. In addition, it will reduce logistics cost in the country, thereby paving the path of higher private investments and economic growth.

7 engines of GatiShakti

The Finance Minister, in her Budget speech, had highlighted the seven engines of development under the PM GatiShakti plan viz. Roads, Railways, Airports, Ports, Mass Transport, Waterways, and Logistics Infrastructure -all of which will work in a unified manner to drive economic growth and sustainable development. Further, these engines will be supported by the complementary roles of Energy Transmission, IT Communication, Bulk Water & Sewerage, and Social Infrastructure. The plan which aims for seamless multimodal connectivity and logistics efficiency will also include infrastructure developed by the state governments as per the GatiShakti Master Plan. Further, as majority of infrastructure projects are already identified under the National Infrastructure Pipeline (NIP), the implementation of these will be aligned with PM GatiShakti framework.

The proposal for the seven engines under PM GatiShakti and measures highlighted in Union Budget 2022-23 are summarised below:

The Union Budget 2022-23 was the first budget to incorporate the PM GatiShakti National Master Plan for Multimodal Connectivity in the annual budgetary allocations as well as targets for various ministries, post its launch in October 2021. The budget has thus set the stage for increased allocations for key ministries and identifying targets in line with the GatiShakti plan.

Capex

The recent budget has provisioned for a significant increase in the overall capital expenditure in FY2023 to Rs. 7.5 lakh crore, which is 24.4% higher than Rs. 6.0 lakh crore in FY2022 RE. Over 60% of the capex is towards three key sectors - defence, railways, and roads. The overall capex including grants and aids for creation of capital assets is budgeted to increase by 27% - from Rs 8.4 lakh crore in FY2022 RE to Rs 10.7 lakh crore in FY2023 BE, which is estimated at 4.1% of GDP. Capital expenditure in key infrastructure segments like Railways has been budgeted to increase to Rs 2.45 lakh crore in 2022-23 BE (increased by 14% over 2021-22 BE), Roads and Highways to Rs. 2.08 lakh crore (marginally higher by 4.8% over 2021-22 BE), while that of metro and MRTS projects has been kept more or less stagnant at Rs 19,100 crore.

In the Railways segment, about 2,000 km of rail network will be brought under Kavach, the indigenous world-class technology for safety and capacity augmentation in FY2023. The budget has further provided a capital outlay of Rs 24,100 crore towards the Mumbai Ahmedabad High Speed Rail project, developed under an SPV - National High Speed Rail Corporation Limited. In the road sector, while capital outlay by government has been increased in 2022-23, no incremental debt by NHAI is factored which will help NHAI in efficiently managing its debt. The government is planning to raise over Rs 20,000 crore by way of innovative ways of financing including monetisation of national highways through a mix of TOT and InvIT route as well as raising funds through the SPVs (primarily the Delhi-Mumbai Expressway). In the metro segment, about 105 km of new metro line and 17 km of new regional rapid transit system (Delhi-Ghaziabad-Meerut) line is planned to be completed in FY2023. The increased expenditure towards key infrastructure sectors is partly met from the higher inflows assumed in the Central Road and Infrastructure Fund (CRIF) at Rs 2.95 lakh crore in FY2023 BE vs Rs 2.48 lakh crore in FY2022 RE.

Further, the Union Budget 2022-23 has allocated Rs. 1.0 lakh crore in FY2023BE (up from Rs. 15,000 crore in FY2022 RE) to be provided as assistance in the form of loan to states for capital expenditure. This is expected to provide more head room to state governments for increasing the capex. With increased capital outlay and support towards states, the budget has set the momentum for the seven engines which will also help it in achieving the target under the NIP. Further, with PM GatiShakti framework, the projects are expected to be implemented with a common vision which will help in speedier execution, and more efficient infrastructure and logistics network creation.

Words of caution

While the increased investments by the government are welcome, there certainly are a few words of caution. Mainly, the capacity of agencies and contractors executing the projects will be critical in ensuring timely implementation of projects. In this regard, the PM GatiShakti framework has plans of ramping up capacity in planning, design, financing, and implementation management by taking technical support from the Capacity Building Commission, central ministries, state governments, and their infra agencies. Moreover, the Union Budget has also proposed measures which will support the capacity of contractors. These include allowing use of surety bonds from Insurance companies as a substitute for bank guarantees in government procurements which will reduce the dependence on banks for such guarantees.

- Abhishek Gupta

Assistant Vice President, ICRA

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