Setting Priorities: Interim Budget 2019 holds significance ahead of elections

Interim Budget 2019 holds significance ahead of elections

While announcing Interim Budget 2019-20, the central government reiterated the populist tone it had set in the previous one. Though aiming for electoral gains, the government has tried to balance the short-term goals of the economy with a long-term vision for 2030. The finance minister started his budget speech by confidently asserting that India is solidly back on track. In support, he cited the transformational reforms that facilitated a reversal of the earlier policy paralysis. During the past five years, the country emerged as a bright spot in the global economy. Inflation declined to an average of 4.6 per cent since 2014. The fiscal deficit too has been brought down to 2.19 per cent. While infrastructure sectors have been accorded the much-needed priority under the budget, empowerment of farmers and strengthening of local manufacturing capabilities have emerged as the key themes.

Indian Infrastructure gives a snapshot of key budget proposals across infrastructure sectors…

Sector-wise allocations

The finance minister laid emphasis on big numbers during his budget speech. Expenditure is expected to rise by 13 per cent between 2018-19 and 2019-20. Capital expenditure is pegged at Rs 3.36 trillion.

Roads: India has notably become the fastest highway developer in the world, constructing 27 km of highways per day. The past few years also saw a completion of projects such as the Eastern Peripheral Expressway around Delhi and the Bogibeel rail-cum-road bridge in Assam and Arunachal Pradesh, which had been stuck for several decades.

The central government has allocated funds amounting to Rs 830 billion to the Ministry of Road Transport and Highways (MoRTH) under Interim Budget 2019-20, an increase of 5.58 per cent over the Rs 786.26 billion allocated during 2018-19 (revised estimates). The allocation for central sector schemes/projects stood at Rs 828.61 billion, marking an increase of 5.56 per cent over the Rs 784.99 billion in the previous fiscal year. Of these allocations, the National Highways Authority of India has been allocated Rs 367 billion, a marginal decrease of 1.68 per cent over the previous year, while Rs 458.9 billion has been allocated for road and bridge works, an increase of 12.15 per cent over the previous year.

Under the Pradhan Mantri Gram Sadak Yojana (PMGSY), construction of rural roads has tripled. Around 1.58 million habitations of a total of 1.78 million have already been connected with pucca roads. Under this budget, a sum of Rs 190 billion has been allocated to the scheme, as against Rs 155 billion in 2018-19 (revised estimates).

Railways: Unmanned level crossings on the broad gauge network have been eliminated. Indian Railways also introduced the first indigenously developed and manufactured semi-high speed train – the Vande Bharat Express – giving a major impetus to the Make in India programme. The overall capex for the railways has been pegged at Rs 1.58 trillion, up from Rs 1.48 trillion for 2018-19. Capital support from the budget stood at Rs 645.87 billion. The operating ratio is expected to improve from 98.4 per cent in 2017-18 to 96.2 per cent in 2018-19 and further to 95 per cent in 2019-20.

Ports and shipping: Under Interim Budget 2019-20, the Ministry of Shipping (MoS) has received an allocation of Rs 19.03 billion (budget estimates). The allocation is higher than the budget estimate of Rs 18.81 billion but lower than the revised estimates of Rs 19.39 billion for 2018-19. Of the total allocation in 2019-20, Rs 5.5 billion has been allocated for the Sagarmala programme, Rs 7.57 billion for inland water transport, Rs 2.14 billion for development of ports, Rs 970 million for shipping and shipbuilding, among others. For the first time, container freight movement commenced on inland waterways – on the Kolkata-Varanasi stretch. In addition, container cargo movement to the Northeast also commenced, by improving the navigation capacity of the Brahmaputra river.

Urban water and sanitation: The central government has announced a central outlay of Rs 480.32 billion for the Ministry of Housing and Urban Affairs (MoHUA) under Interim Budget 2019-20. Of the total outlay, while Rs 195.44 billion (40.7 per cent) has been allocated towards capital expenditure, the MoHUA has received Rs 284.88 billion (59.3 per cent) to meet its revenue expenditure for the upcoming fiscal year. The outlay for 2019-20 is substantially higher than the previous year’s planned budget outlay of Rs 417.65 billion (15 per cent) and revised outlay of Rs 429.65 billion (11.79 per cent) for 2018-19.

The central government has made distinct allocations for three of its major urban infrastructure development programmes – the Swachh Bharat Mission, the Atal Mission for Rejuvenation and Urban Transformation (AMRUT) and the Smart Cities Mission. For the Swachh Bharat Mission (Urban), the government has allocated Rs 27.5 billion, which is about 10 per cent higher than the budget and revised estimates of Rs 25 billion in 2018-19. Besides, Rs 139 billion has been earmarked for the MoHUA’s Urban Rejuvenation Mission. This is significantly higher than the 2018-19 planned and revised estimates of Rs 121.69 billion and Rs 125.69 billion, respectively, for the mission. For the upcoming fiscal year, about 52.5 per cent of this allocation (or Rs 73 billion) has been set aside for AMRUT, while the remaining Rs 66 billion has been allocated to the Smart Cities Mission.

Further, the central government has allocated a sum of Rs 19.7 billion towards the Namami Gange programme and the National River Conservation Programme. This is significantly lower than the previous year’s budget estimates of Rs 30.7 billion (35.8 per cent) and revised estimates of Rs 23.7 billion (16.9 per cent). Around Rs 7.5 billion (38.1 per cent) of this allocation has been made for Namami Gange, while the remaining Rs 12.2 billion has been earmarked for the National River Conservation Programme.

Power: The budgetary allocation for the Ministry of Power stands at Rs 158.74 billion under Interim Budget 2019-20, an increase of 1.6 per cent over Rs 156.25 billion (revised estimate) allocated during the 2018-19 budget. The allocation to central sector schemes registered a decline of 12.4 per cent from Rs 138.58 billion in 2018-19 to Rs 121.31 billion in 2019-20. While no major announcements were made regarding the power sector in Interim Budget 2019-20, the finance minister spoke about the expansion of the LED distribution programme with the distribution of 1,430 million LED bulbs. In addition, emphasis was laid on promoting the use of electric vehicles and energy storage solutions to initiate a transportation revolution, cut down on costly oil imports, enhance energy security and save foreign exchange. Under the Saubhagya Yojana, free electricity connections have been provided to almost every unelectrified household. By March 2019, all willing families will get electricity connections.

The budgetary allocation for the Ministry of Coal stands at Rs 8.22 billion in Interim Budget 2019-20, an increase of 12.8 per cent over the Rs 7.82 billion (revised estimate) allocated in the previous budget. Meanwhile, the budget allocated Rs 167.25 billion to the Department of Atomic Energy, a decline of 1.4 per cent over Rs 169.65 billion allocated in 2018-19.

Renewable energy: Under Interim Budget 2019-20, the Ministry of New and Renewable Energy has been allocated Rs 52.54 billion worth of funds as against Rs 51.46 billion in 2018-19, an increase of 2 per cent . There were no major announcement for the renewable energy sector. The finance minister said that the installed capacity of solar power projects in the country has grown by 10 times in the past five years, leading to the creation of additional jobs. He also talked about the government’s concern with respect to importing costly crude oil to meet domestic energy needs and the use of biofuels to reduce imports.

Oil and gas: Under Interim Budget 2019-20, the government has proposed an expenditure of Rs 429.01 billion (budget estimate) for the Ministry of Petroleum and Natural Gas during 2019-20, which is an increase of Rs 118.01 billion from the Rs 311 billion (budget estimate) proposed for the preceding fiscal year. The revised estimate for 2018-19 stands at Rs 324.64 billion.

Of the total proposed expenditure, Rs 427.68 billion is for central sector schemes, split as follows: payment of differential royalty to state governments: Rs 19.54 billion; total strategic oil reserves: Rs 1.22 billion; total liquefied petroleum gas (LPG) subsidy: Rs 329.89 billion; total kerosene subsidy: Rs 44.89 billion; Phulpur-Dhamra-Haldia pipeline project: Rs 15.52 billion; National Seismic Programme: Rs 16.23 billion.

The balance has been allocated to the secretariat (Rs 0.35 billion) and autonomous bodies (Rs 0.56 billion). The key highlights are as follows: Under the Ujjwala Yojana, the government is aiming delivery of a total 80 million free LPG connections. More than 60 million connections have already been given and the remaining will be provided by next year. The interim budget has provided for Rs 374.78 billion as petroleum subsidy in 2019-20 as compared to Rs 249.33 billion provided in the budget estimates of 2018-19.

Telecommunications: As per Interim Budget 2019-20, the government expects revenues from the telecom sector to increase from Rs 392.45 billion as estimated for 2018-19 to Rs 415.2 billion in 2019-20, recording a growth of 5.8 per cent. The government had made a provision of Rs 486.61 billion revenue from telecom services in 2017-18, but revised it downwards subsequently.

The government’s source of revenue from the telecom sector mainly comprises licence fees and spectrum usage charges from telecom operators, which is calculated based on the adjusted gross revenue of operators.

Though spectrum sales through auctions have been the main contributor to government revenue, no auction was conducted in the 2018-19. The latest estimates for 2019-20 also do not factor in any auction proceeds. Further, in an effort to make India a modern and technology-driven society, the government has set a target to have 100,000 digital villages in the next five years. As per the budget report, monthly consumption of mobile data has increased by over 50 times in past five years.

Civil aviation: The number of airports in the country has crossed 100 with the commissioning of the Pakyong airport in Sikkim. The government has allocated funds to the tune of Rs 45 billion to the Ministry of Civil Aviation in Interim Budget 2019-20. Of the total allocation, Rs 10.84 billion will be utilised for purchasing two new aircraft for VVIP operations. An amount of Rs 4.8 billion has been earmarked for the provision of viability gap funding under the Regional Connectivity Scheme – UDAN, which has decreased steeply as compared to Rs 10.14 billion allocated for 2018-19.

Meanwhile, an amount of Rs 4.34 billion has been allocated for state carrier Air India, which is undergoing the process of divestment. On the other hand, Air India Asset Holding Limited, a special purpose vehicle, has been allocated funds worth Rs 13 billion and Rs 26 billion for 2018-19 and 2019-20, respectively, to service Air India’s debt. Besides, the budget document states that Rs 51.25 billion has been granted to the Airports Authority of India in lieu of all the expenditure incurred on existing projects. The remaining budgetary allocation has been provided to other users including the National Aviation University, the Directorate General of Civil Aviation and Pawan Hans, the national helicopter service provider.

Vision for the next decade

The finance minister has highlighted that India is poised to become a $5 trillion economy in the next five years and aspires to become a $10 trillion economy in the next eight years thereafter. The 10-dimensional vision to achieve the envisaged growth has been laid out. While the majority of the elements of the vision are aimed at strengthening the agricultural sector, development of physical and social infrastructure is one of the key objectives. The post election outcomes will however be instrumental in shaping the course of the economy and the infrastructure sectors in particular. While the central government has made concerted efforts to revive activity in every sphere of infrastructure, speeding up the pace of project and programme implementation is crucial for reaping long-term gains.