Infrastructure to get push in Budget

Tax structure rationalisation expected to provide a push to core sector.

Budget 2004-05 may contain major sops for infrastructure sectors like power, telecom, construction, railways and roads. The government is considering rationalising the tax structure in these areas to provide a big push to infrastructure development.

"Infrastructure is top of the agenda for the next Budget, " a government official said. Discussions are on whether the government should adopt a public sector-led investment model for infrastructure development or opt for public-private partnership.

One section feels that public sector investment in infrastructure is a safer and surer way, as the private sector cannot be relied upon for investing in core infrastructure projects. However, the opposite view is equally strong.

The official said the Budget needed to focus on a few 'winners' "" sectors that had to given a big push. "This year ,we are planning to provide the right climate for infrastructure development in the country. That's the winner for next year's Budget," he said.

The official said last year's "winner" sector was textiles. The taxation structure in the sector was totally revamped by introducing zero excise duty for the cotton sector. The move had paid handsome dividends, the official said.

In focusing on such sectors, the government is in fact taking a leaf out of the East Asian experience, where countries such as Korea, Taiwan and Singapore rationalised tax structures in select infrastructure areas to attract projects.

Korea had, for instance, identified ship building as a potential sector and it eventually managed to acquire a significant share of the world market.

Of the total $23 billion of foreign direct investment that flowed into the country in the last 13 years, only $7.66 billion came for infrastructure sectors like power, telecommunications and transportation.

The prime minister had a couple of months back estimated India's infrastructure investment requirement at $150 billion over 5-10 years. The civil aviation sector would need $45 billion and the railways would require another $10 billion over the next 10 years.

And the investment need in the power and telecom sectors in the next five years would be $75 billion and $25 billion, respectively, he had said.