The Union Budget 2025 is focused on tackling infrastructure challenges through increased private sector involvement, improved safety measures, sustainable practices, and enhanced integrated planning. Anticipate a significant emphasis on infrastructure spending in the upcoming Union Budget.
Union Budget 2025: Infrastructure development is crucial for achieving the Viksit Bharat vision. Despite a lower-than-expected GDP growth rate this fiscal year, investing in infrastructure will drive economic growth. In the Union Budget 2025, the government allocated Rs 11.11 trillion to the sector, marking an 11.1% year-on-year increase. However, there are still challenges that need to be addressed.
The Economic Survey 2023-24 pointed out delays in infrastructure development due to issues with land acquisition, limited private sector involvement, and a lack of focus on sustainability. Data from the Ministry of Statistics and Programme Implementation (MoSPI) shows that 63% of the 1,740 central sector projects currently underway have exceeded their timelines, with 25% experiencing cost overruns. It is essential for the upcoming budget to tackle these obstacles head-on.
One of the key areas that need attention is encouraging private sector participation. Private investments and Public-Private Partnerships (PPPs) were subdued in 2024, partly due to the Lok Sabha elections. However, even after the elections, there was no significant increase in tender rollouts. To boost private sector involvement, measures such as accelerating Highway Project Awards and expediting Airport Monetisation are necessary.
Streamlining the bidding process for highway projects will help prevent delays and ensure a consistent project pipeline. Despite 12,376 km of highways being awarded in fiscal 2023, only 3,100 km were awarded by December 2024. The Ministry of Road Transport and Highways (MoRTH) announced a list of 53 toll projects, but only a few tenders were issued, and some were withdrawn due to viability concerns. The pace of toll-operate-transfer awards has also been slow, with limited interest from bidders.
Fast-tracking the privatisation, PPPs, and monetisation of airports and underutilised assets should be a priority to improve connectivity to underserved regions. Enhancing the viability of the UDAN scheme and increasing funds for smaller airports will improve connectivity to underserved regions.
– The government is expected to establish a Rs 300 billion Maritime Development Fund to support port development and shipbuilding. This fund could incentivize shipowners to replace outdated vessels with ships built in local shipyards through a credit note scheme. Additionally, amendments to the Securitisation and Reconstruction of Financial Assets Act could allow ships to be mortgaged against loans.
– The asset monetisation programme should be strengthened by implementing new methods, such as securitisation, and by establishing clear policies for the asset monetisation cell. Modifying the model concession agreement to address private sector concerns could also enhance this initiative.
– Improving dispute resolution processes is crucial for maintaining investor confidence. For instance, the Delhi Metro arbitration case underscored the importance of certainty in arbitration outcomes. The guidelines on limiting arbitration in high-value contracts, set to be implemented in June 2024, may need to be revised.
– Recent incidents, including bridge collapses, tunnel cave-ins, and train derailments, have highlighted safety concerns in India’s infrastructure development. To ensure sustainability, the budget should prioritize:
– Enforcing Safety Standards: Strict adherence to safety and quality standards is essential throughout the construction, planning, and execution phases, particularly for roads, railways, and urban infrastructure.
– Increasing Funding for Road Safety: More resources should be allocated to road safety schemes, training, and research to address India’s high rate of road accidents.
– Enhancing Railway Safety: Investing in technologies like collision avoidance systems, advanced signalling, and AI-based track inspection can help reduce railway accidents and improve overall safety.
Promoting Integrated Planning and Monitoring:
The PM Gati Shakti National Master Plan, launched in 2021, was designed to enhance integrated planning practices. However, its implementation has been limited, leading to inefficiencies in infrastructure development. In order to address this issue, the budget should incorporate the following measures:
Improving Infrastructure Development in India
To enhance infrastructure development in India, several key initiatives must be prioritized and implemented effectively. Strengthening the National Master Plan for Roads is crucial, as it will improve coordination between state and national corridors, leading to streamlined infrastructure development and avoiding duplication.
Increasing Rail Coefficients is another essential step to enhance capacity. Interventions to improve the use of existing freight corridors and approval of projects in the pipeline can significantly boost efficiency.
Port Connectivity is also a critical aspect that needs attention. Allocating funds to connect ports to industrial hubs through multi-modal logistics parks will ensure efficient trade and transport.
Expanding PM Gati Shakti Adoption is necessary to align infrastructure development and minimize overlaps. The portal should be expanded at all levels to link infrastructure budgetary support from the Centre to states based on their adoption.
Sustainable Infrastructure Development
As India aims for net-zero emissions by 2070, promoting sustainable infrastructure development is crucial. The budget can play a significant role in achieving this goal across various sectors.
In the road sector, incentivizing the use of sustainable construction materials like reclaimed asphalt pavement, cement substitutes, and waste plastic can lead to more environmentally friendly road construction practices.
For railways, accelerating the modernization process by increasing the production of Vande Bharat coaches and modern wagons designed for higher speeds and greater payloads is essential. Additionally, ramping up renewable energy projects such as solarization of railway stations and energy-efficient locomotives will help meet net-zero emission targets.
In the aviation sector, introducing subsidies or schemes for Sustainable Aviation Fuel (SAF) promotion and expediting the solarization of existing airports can significantly reduce carbon emissions.
For ports and inland waterways, financing green sustainability initiatives focusing on energy-efficient and environmentally friendly practices is crucial for achieving sustainable development goals.
Clean Energy: Increasing the scale of renewable energy installations is essential for India to fulfill its commitments under the Nationally Determined Contributions (NDCs). It is imperative for the government to allocate additional funds for battery-based energy storage through the viability gap funding route. Incentives for the solar manufacturing ecosystem should be expanded, including measures such as extending the concessional corporate tax rate of 15%, providing production-linked incentives (PLI) for solar modules, and offering tax benefits for research and development investments. Support for the green hydrogen/ammonia segments should also be prioritized, with reduced GST rates and incentives for storage and transportation infrastructure.
Furthermore, exploring non-conventional financing options, such as blended finance utilizing concessional public capital, can help meet the significant capital requirements of the sector.
The upcoming 2024-25 Union Budget presents a unique opportunity to address longstanding challenges in India’s infrastructure sector and prepare it for future growth. By increasing funding, encouraging private sector involvement, integrating sustainability practices, and ensuring stringent safety and quality standards, the government can achieve inclusive and sustainable growth. Implementation of these measures will enable the country to unleash its full infrastructure potential, fostering economic growth and realizing the vision of a developed India.
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