Physical and Financial Capital and Infrastructure

Physical and Financial Capital and Infrastructure

• Finance Minister said that for a USD 5 trillion economy, our manufacturing sector has to grow in double digits on a sustained basis.
• To achieve the above, PLI schemes to create manufacturing global champions for an AatmaNirbhar Bharat have been announced for 13 sectors. For this, the government has committed nearly Rs.1.97 lakh crore in the next 5 years starting FY 2021-22.

Production Linked Incentive Scheme

• Production linked incentive scheme that aims to give companies incentives on incremental sales from products manufactured in domestic units.
• Apart from inviting foreign companies to set shop in India, the scheme also aims to encourage local companies to set up or expand existing manufacturing units.
• So far, the scheme has been rolled out for mobile and allied equipment as well as pharmaceutical ingredients and medical devices manufacturing.
• These sectors are labour intensive and are likely, and the hope is that they would create new jobs for the ballooning employable workforce of India.
• Need of Scheme:
• The idea of PLI is important as the government cannot continue making investments in these capital intensive sectors as they need longer times for start giving the returns.
• Instead, what it can do is to invite global companies with adequate capital to set up capacities in India.
• To make India more compliant with our WTO commitments and also make it non-discriminatory and neutral with respect to domestic sales and exports.
• Apart from cutting down on imports, the PLI scheme also looks to capture the growing demand in the domestic market.

Textiles

• Similarly, to enable the textile industry to become globally competitive, attract large investments and boost employment generation, a scheme of Mega Investment Textiles Parks (MITRA) will be launched in addition to the PLI scheme.

 Mega Investment Textiles Parks (MITRA)

• Under this scheme, 7 mega investment textile parks will be set up over the three years.
• These parks will span across 1,000 acres of land and have quality infrastructure and plug-and-play facilities.
• The objectives are to make the Indian textile industry globally competitive, boost exports and investments and generate employment.

Infrastructure

• The National Infrastructure Pipeline (NIP) now expanded to 7,400 projects. Around 217 projects worth Rs 1.10 lakh crore under some key infrastructure Ministries have been completed.

National Infrastructure Pipeline (NIP)

NIP was announced in union budget in 2019-20 for an outlay of Rs 100 lakh Crore for infrastructure projects over the next 5 years.

• NIP is a first-of-its-kind initiative to provide world-class infrastructure across the country and improve the quality of life for all citizens.
• It will improve project preparation, attract investments (both domestic & foreign) into infrastructure, and will be crucial for attaining the target of becoming a $5 trillion economy by FY 2025.
• Covers both economic and social infrastructure projects.
• Atanu Chakraborty Report :
• The task force headed by Atanu Chakraborty on National Infrastructure Pipeline (NIP), in May 2020, submitted its final report to the Finance Minister. It has recommended the following ,
• Investment needed: ₹111 lakh crore over the next five years (2020-2025) to build infrastructure projects and drive economic growth.
• Energy, roads, railways and urban projects are estimated to account for the bulk of projects (around 70%).
• The centre (39 percent) and state (40 percent) are expected to have an almost equal sharein implementing the projects, while the private sector has 21 percent share.

Infrastructure financing – Development Financial Institution (DFI)

• Accordingly, a Bill to set up a DFI will be introduced. Government has provided a sum of Rs 20,000 crore to capitalise this institution and the ambition is to have a lending portfolio of at least Rs 5 lakh crore for this DFI in three years time.

Asset Monetisation

• Monetizing operating public infrastructure assets is a very important financing option for new infrastructure construction.
• A “National Monetization Pipeline” of potential Brownfield infrastructure assets will be launched.
• An Asset Monetization dashboard will also be created for tracking the progress and to provide visibility to investors. Some important measures in the direction of monetisation are:

1. National Highways Authority of India and PGCIL each have sponsored one InvIT that will attract international and domestic institutional investors.
2. Railways will monetize Dedicated Freight Corridor assets for operations and maintenance, after commissioning.
3. The next lot of Airports will be monetised for operations and management concession.
4. Other core infrastructure assets that will be rolled out under the Asset Monetization Programme are: (i) NHAI Operational Toll Roads (ii) Transmission Assets of PGCIL (iii) Oil and Gas Pipelines of GAIL, IOCL and HPCL (iv) AAI Airports in Tier II and III cities, (v) Other Railway Infrastructure Assets (vi) Warehousing Assets of CPSEs such as Central Warehousing Corporation and NAFED among others and (vii) Sports Stadiums.

Green field investment

• It refers to investment in a manufacturing, office, or other physical company-related structure or group of structures in an area where no previous facilities exist.

Brownfield investment

• Used for purchasing or leasing existing production facilities to launch a new production activity.

Roads and Highways Infrastructure

• Finance Minister announced that more than 13,000 km length of roads, at a cost of Rs 3.3 lakh crore, has already been awarded under the Rs. 5.35 lakh crore Bharatmala Pariyojana project of which 3,800 kms have been constructed.
• By March 2022, Government would be awarding another 8,500 kms and complete an additional 11,000 kms of national highway corridors.
• To further augment road infrastructure, more economic corridors are also being planned. She also provided an enhanced outlay of Rs. 1,18,101 lakh crore for Ministry of Road Transport and Highways, of which Rs.1,08,230 crore is for capital, the highest ever.

Railway Infrastructure

• Indian Railways have prepared a National Rail Plan for India – 2030. The Plan is to create a ‘future ready’ Railway system by 2030.
• Bringing down the logistic costs for our industry is at the core of our strategy to enable ‘Make in India’. It is expected that Western Dedicated Freight Corridor (DFC) and Eastern DFC will be commissioned by June 2022.
• For Passenger convenience and safety the following measures are proposed:

1. Introduction of aesthetically designed Vista Dome LHB coach on tourist routes to give a better travel experience to passengers.
2. Indian railways will be provided with an indigenously developed automatic train protection system that eliminates train collision due to human error.
3. Budget also provided a record sum of Rs. 1,10,055 crore, for Railways of which Rs. 1,07,100 crore is for capital expenditure.

Urban Infrastructure

• A new scheme will be launched at a cost of Rs. 18,000 crore to support augmentation of public bus transport services.
• Two new technologies e., ‘MetroLite’ and ‘MetroNeo’ will be deployed to provide metro rail systems at much lesser cost with same experience, convenience and safety in Tier-2 cities and peripheral areas of Tier-1 cities.

“Metro Neo” 

• It is a rail-guided urban transport system with rubber-tyred electric coaches powered by an overhead traction system running on elevated or at-grade sections. The light transit system, which costs about 20-25% of a Metro and also has lower maintenance costs.

Power Infrastructure

• Finance Minister proposed to launch a revamped reforms-based result-linked power distribution sector scheme with an outlay of Rs. 3,05,984 crore over 5 years.
• The scheme will provide assistance to DISCOMS for Infrastructure creation including pre-paid smart metering and feeder separation, upgradation of systems, etc., tied to financial improvements.

Ports, Shipping, Waterways

• The budget proposes to offer more than Rs. 2,000 crore by Major Ports on Public Private Partnership mode in FY21-22.
• A scheme to promote flagging of merchant ships in India will be launched by providing subsidy support to Indian shipping companies in global tenders floated by Ministries and CPSEs. An amount of Rs. 1624 crore will be provided over 5 years.

Petroleum & Natural Gas

• Ujjwala Scheme which has benefited 8 crore households will be extended to cover 1 crore more beneficiaries.
• Government will add 100 more districts in next 3 years to the City Gas Distribution network.
• A gas pipeline project will be taken up in Union Territory of Jammu & Kashmir.
• An independent Gas Transport System Operator will be set up for facilitation and coordination of booking of common carrier capacity in all-natural gas pipelines on a non-discriminatory open access basis.

Pradhan Mantri Ujjwala Yojana:

• Aim: To provide LPG (liquefied petroleum gas) connections to poor households.
• Goal: A deposit-free LPG connection is given to eligible with financial assistance of Rs 1,600 per connection by the Centre.

Eligibility criteria:

• Applicant must a woman above the age of 18 and a citizen of India.
• Applicant should belong to a BPL (Below Poverty Line) household.
• No one in the applicant’s household should own an LPG connection.
• The household income of the family, per month, must not exceed a certain limit as defined by the government of the Union Territories and State Government.
• The name of the applicant must be in the list of SECC-2011 data and should match with the information available in the BPL database that Oil Marketing Companies have.
• Applicant must not be a recipient of other similar schemes provided by the government.

Financial Capital

• The Finance Minister proposed to consolidate the provisions of SEBI Act, 1992, Depositories Act, 1996, Securities Contracts (Regulation) Act, 1956 and Government Securities Act, 2007 into a rationalized Single Securities Markets Code.
• The Government would support the development of a world class Fin-Tech hub at the GIFT-IFSC.
• Finance Minister Nirmala Sitharaman has increased the responsibility of the Securities and Exchange Board of India (SEBI) by appointing it as regulator for the Gold Spot Exchange. The recommendation to nominate SEBI in this role also came from the National Institute for Transforming India.
• For warehousing purposes, the government has appointed Warehousing Development and Regulatory Authority (WDRA) as the regulator.
• The government says WDRA will be strengthened to set up a commodity market ecosystem arrangement, including vaulting, assaying and logistics,  in addition to warehousing for agriculture commodity contracts.

Spot Exchange in India

• In India, Spot Exchanges refer to electronic trading platforms which facilitate purchase and sale of specified commodities, including agricultural commodities, metals and bullion by providing spot delivery contracts in these commodities.
• This market segment functions like the equity segment in the main stock exchanges. Alternatively, this can be considered as a guaranteed direct marketing by sellers of the commodities.
• Spot Exchanges leverage on the latest technology available in the stock exchange framework for the trading of goods.
• This is an innovative Indian experiment in the trading of goods and is distinct from what is commonly known as “commodity exchanges” which trade in futures contracts in commodities.
• The facilities provided by the spot exchange, like a normal stock exchange, include clearing and settlement of trades on multilateral netting
• Trades are settled on guaranteed basis (i.e., in case of default by any person exchange arranges for the payment of money / good) and the exchange collects various margin payments, to ensure this. The exchange also offers various other services such as quality certification, warehousing, warehouse receiptfinancing, etc.

Increasing FDI in Insurance Sector

• Budget proposed to amend the Insurance Act, 1938 to increase the permissible FDI limit from 49% to 74% and allow foreign ownership and control with safeguards.
• Under the new structure, the majority of Directors on the Board and key management persons would be resident Indians, with at least 50% of Directors being Independent Directors, and specified percentage of profits being retained as general reserve.

Disinvestment and Strategic Sale

• In spite of COVID-19, Government has kept working towards strategic disinvestment. The Finance Minister said a number of transactions namely BPCL, Air India, Shipping Corporation of India, Container Corporation of India, IDBI Bank, BEML, Pawan Hans, NeelachalIspat Nigam limited among others would be completed in 2021-22.
• Other than IDBI Bank, Government propose to take up the privatization of two Public Sector Banks and one General Insurance company in the year 2021-22.
• In 2021-22, Government would also bring the IPO of LIC for which the requisite amendments will be made in this Session itself.

Strategic Disinvestment Policy

• Strategic disinvestment is the transfer of the ownership and control of a public sector entity to some other entity (mostly to a private sector entity). Unlike the simple disinvestment, strategic sale implies a kind of privatization.
• The policy provides a clear roadmap for disinvestment in all non-strategic and strategic sectors. Government has kept four areas that are strategic where bare minimum CPSEs will be maintained and rest privatized.
• In the non-strategic sectors, CPSEs will be privatised, otherwise shall be closed. She said that to fast forward the disinvestment policy, NITI Aayog will work out on the next list of Central Public Sector companies that would be taken up for strategic disinvestment.
• Government has estimated Rs. 1,75,000 crore as receipts from disinvestment in BE 2020-21 .

 Strategic Sector PSUs are:

• Arms & Ammunition of defence equipment
• Defence aircraft & warships
• Atomic energy
• Applications of radiation to agriculture, medicine and non-strategic industry
• Railways

Roads and Highways Infrastructure

• Finance Minister announced that more than 13,000 km length of roads, at a cost of Rs 3.3 lakh crore, has already been awarded under Bharatmala Pariyojana project of which 3,800 kms have been constructed.
• By March 2022, Government would be awarding another 8,500 kms and complete an additional 11,000 kms of national highway corridors.
• Enhanced outlay of Rs. 1,18,101 lakh crore for Ministry of Road Transport and Highways, of which Rs.1,08,230 crore is for capital Expenditure.

Bharatmala Pariyojana 

• It is a centrally-sponsored and funded Road and Highways project of the Government of India.
• The total investment for 83,677 km (51,994 mi) committed new highways is estimated at ₹5.35 lakh crore (US$75 billion), making it the single largest outlay for a government road construction scheme.