Around 25 categories will qualify as infrastructure, according to a new definition being planned by the government to clear the mess over what constitutes this sector.
A harmonised list of infrastructure will shortly be sent to the Committee of Secretaries. Those items that qualify for criteria like non-tradeable and yield external benefits will come under the sector, which is being incentivised in various ways to remove bottlenecks in this key area.
The list will then be sent to the Cabinet Committee on Infrastructure for approval. The whole process of having a uniform criteria for infrastructure will take around three months.
As such, while oil and gas may not qualify as infrastructure since they are tradeable, pipes carrying them will certainly come under the sector, a key government official told Business Standard.
Categories like road will naturally come under infrastructure since they provide external benefits to people living around it, he added.
Currently, there are various definitions of infrastructure, which create problems, particularly in the wake of infrastructure debt scheme, being prepared by the government and various other incentives.
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Reserve Bank of India (RBI) itself has various definitions for infrastructure. For the purpose of external commercial borrowings(ECB), it defines infrastructure to include power, telecommunication, railways, road, sea port and airport, industrial parks, urban infrastructure (water supply, sanitation and sewage projects), mining, exploration and refining and cold storage.
While the nodal agency for what constitutes infrastructure or not will be the department of economic affairs in the finance ministry, for purposes like ECB, RBI will be allowed to have its definition on infrastructure.
Earlier, the Rangarajan Commission had indicated six characteristics of infrastructure sectors like natural monopoly, high-sunk costs, non-tradeability of output, non-rivalness (up to congestion limits) in consumption, possibility of price exclusion, and bestowing externalities on society.
Based on these criteria, it suggested infrastructure to include railway tracks, signalling system, stations, roads, transmission and distribution of electricity, telephone lines, pipelines for water, crude oil, etc.
Income Tax Department, for the purpose of tax concessions, defines infrastructure as electricity, water supply, sewerage, telecom, roads and bridges, ports, airports, railways, irrigation, storage, special economic zones, etc.
The exact definition of infrastructure will be needed since the sector is being encouraged so India removes bottlenecks in the path of sustained high economic growth.
In the Budget, Finance Minister Pranab Mukherjee had proposed creating special vehicles in the form of notified infrastructure debt funds and subjecting interest payment on borrowing of these funds to a reduced withholding tax rate of 5 per cent against the current 20 per cent. Besides, income tax exemption was given to these funds.
Infrastructure also qualifies for public-private-partnership model of the government as well as viability gap funding (VGF).
In fact, for the purpose of VGF, the finance minister expanded the list of infrastructure to include capital stock in health and education.