INDIA BUDGET: TOP 10 DEVELOPMENTS FOR TRANSPORTATION SECTOR

Finance Minister, Government of India has unveiled Financial Budget for the year 2016-17 on 29 February 2016. It is one of the key events for India as it defines the intention of the government for next one year.

Indian Road Sector

India has the second largest road network in the world, with about 5.23 million km of road network comprising National Highways, State Highways and other roads. The National Highways (NH) in the country covers a total length of 100,475 km (2% of total road network) and carry about 40% of the road traffic. This clearly shows that there is heavy load on Highways network. 

Key Focus Areas

The government is focusing on fuelling the investment in road sector. Key focus areas include the construction and award of 10,000 km roads each over the next fiscal, upgradation of 50,000 km of state highways into national highways and rolling out of 85% of the stuck projects involving investment of INR 1,000 billion (US$ 15 billion). 

After the sucess of Golden Quadrilateral (GQ), Government of India has proposed umbrella scheme -  Bharatmala for:

(i) Development of State Roads along Coastal areas / Border areas, including connectivity of non-major ports, about 7000 km

(ii) Backward Areas, Religious, Tourist Places Connectivity programme, about 7000 km

(iii) Setubhratam Pariyojana which is for the construction of about 1500 major bridges and 200 ROBs / RUBs

(iv) District Head Quarter Connectivity Scheme for development of about 9000 km for newly declared National Highways

Bharatmala (Necklace of India) is proposed to complete projects including Setu Bharatam, Char Dham Connectivity and National Highways Development Programme. The ministry aims to complete the project by 2022.

Top 10 Developments

1. The Government of India has allocated INR 550 billion (US$ 8.5 billion) for the construction of roads and highways in 2016-17. The fund will be used for the construction of highways and road network across the country.

2. The ministry has also allocated an investment of INR 270 billion (US$ 4.0 billion) under the Pradhan Mantri Gram Sadak Yojana (PMGSY). The roads provide good all-weather road connectivity to unconnected villages.

3. An additional fund of INR150 billion (US$ 2.3 billion) to be raised by the National Highways Authority of India through bonds in 2016-17. The fund will be used for the contract which will be executed under EPC (Engineering, Procurement and Construction).

4. The abolition of the Permit Raj for public bus sector will be the government’s “medium-term goal”. The government has proposed to open public bus sector for the private companies. Entrepreneurs will be able to operate buses on various routes, subject to certain efficiency and safety norms. The major benefits of this game changing initiative will be provision of more efficient public transport facilities, greater public convenience, new investment in this moribund sector, creation of new jobs for our youth, growth of start-up entrepreneurs and other multiplier effects. Currently, the public bus sector is operating 170,000 buses and carries around 70 million people travel. According to Road Transport Ministry, the opening of the sector will increase the passenger ridership to 120-150 million per day. The new demand will create new investment and job opportunities for the sector. 

5. The government will introduce amendments to the Motor Vehicles Act, 1988 in order to open up the road transport sector in the passenger segment. An enabling ecosystem will be provided for states, which will have the choice of adopting the new legal framework. 

6. The financial condition of state transportation is poor and that the reform was needed to infuse more capital and new technology in the form of battery-operated and bio-fuel buses. The move will lead to a cost-effective and pollution-free substitute for people.

7. The government will issue guidelines for renegotiation of PPP contracts on the basis of Kelkar Committee's recommendations on PPP. This will allow renegotiation of old contract and will protect the private sector against the loss of bargaining power over long time spans. 

8. The ministry will develop a new credit rating system for infrastructure project, which will give emphasis to various in-built credit enhancement structures.

9. Introduction of A Public Utility (Resolution of Disputes) Bill to streamline institutional arrangements for resolution of disputes in infrastructure-related construction contracts, PPP and public utility contracts.

10. The government has earmarked INR 100 billion (US$ 1.5  billion) for the metro projects.

Indian Budget 2016-17 has clearly given lots of importance to road sector. The construction of roads is important to provide accessibility. However, there is need to make more investment in public transport sector.