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HERE’S WHAT IT WILL TAKE INDIA TO REACH ITS INFRA (LARR) Act 2013, it has become even more complicated since
GOALS most states have come up with their own versions of the legislation
The National Infrastructure Pipeline (NIP) projects currently stand (since its comes under the State List).
at 9300 projects over 34 sectors with an estimated investment of Some major cases such as Vodafone and Cairn Energy are INFRASTRUCTURE
about $1947.39b in 7400 projects. rooted in the retrospective tax regime whereby section 9(1)(i) of
Strong infrastructure enables a country and its corporations to be the Income Tax Act, 1961 was made effective retrospectively as
competitive while helping uplift people from poverty. Infrastructure by the Finance Act, 2012. In December last year, the international
is one of the most critical drivers for India’s growth journey as well arbitral tribunal constituted in the Cairn Energy matter held that
as a balanced socio-economic development. From roads, ports, India had failed to uphold its fair and equitable treatment
airports to power, water, health and tech, each needs to grow in obligations under the Bilateral Investment Treaty (BIT) and under
a robust manner led by government investment and risk sharing, the provisions of international law, by inter alia imposing the tax
bold policy initiatives, PPP models and tax breaks particularly for liability retrospectively. India was ordered to pay USD 1.2b to Cairn
private participation and necessary focus on skill development. Energy in damages.
Recently the government has shown strong resolve in meeting Multiple treaties to which India is a party is yet to be adopted in its
our infrastructure deficit. The Government in the Union Budget domestic legal framework, thereby affecting funding. One such
2021 has allocated US$ 32b towards transport infrastructure. The example is the implementation of the Cape Town Convention
National Infrastructure Pipeline (NIP) projects currently stand at (CTC) – an instrument adopted by India in 2008 however it still
9300 projects over 34 sectors with an estimated investment of doesn’t form a part of its legal framework which if adopted would
about $1947.39b in 7400 projects. US$ 1.4t has been allocated have provided a straight 10% OECD discount to the end users – i.e.,
by the government in infrastructure development until 2025. This the airlines. CTC also provides security to the investors to repossess
should help us improve our ranking in the Global competitiveness their assets including in a bankruptcy scenario. Funding of any
Index where India stood at nature needs to provide
68 in 2019. adequate, quick and viable
In recent years we have security to the financier –
shown tremendous progress which is addressed by CTC,
in building better roads, however India is yet to take
faster. India also entered into comprehensive benefit of
key agreements with Japan, this treaty/ convention.
USA, Israel and others for If anything these lead to
necessary infrastructure concerns about the reliance
in critical areas. The and predictability of laws in
government is also aiming India and their adoption
to invest $750b in railway and enforcement, which in
infrastructure by 2030. any dynamic is not a good
Aviation has particularly market sentiment.
seen very strong and Since funding remains the
positive developments in 2021. The successful disinvestment of biggest challenge in this sector, the government aims to partially
Air India, launch of a new airline, Akasa, leap in the cargo sector, address this by the creation of National Bank for Financing
announcement of Asia’s biggest airport in Jewar (UP), an effective Infrastructure and Development, a very promising step indeed.
Drone policy and the return of Jet 2.0 are just some pointers of The idea is to make the National Bank for Financing Infrastructure
strong market dynamics and infrastructure developments. It also and Development (NBFID) as the primary development financial
helps to have a strong player like Indigo which acts like a bulwark institution (DFI) for infrastructure financing by extending loans,
for the entire sector. attracting investment from private sector, organising and
The aircraft passenger traffic is likely to reach 520m by 2037 facilitating foreign participation, facilitating negotiation with
for which India will need a fleet size of about 1800 aircraft by government bodies etc. The government will also provide grants
2037. The growth in demand will need to be supplemented with worth US$ 50b to NBFID by the end of the first financial year and
necessary infrastructure and policy initiatives by the government will also provide guarantee at a concessional rate of up to 0.1%
with respect to airports, MROs, flying schools etc. In this context it for borrowing from multilateral institutions, sovereign wealth funds,
is equally important that the industry benefits from the financing and other foreign funds.
and leasing structures now available at GIFT – IFSC. There is India needs to get its infrastructure strategy right for it to be able to
demand of $120b investment in airport infrastructure. achieve the goal of a USD 5t economy by 2025. Underinvestment
While many infrastructure development bottlenecks have been in the sector is, as discussed above, being partially addressed by
gradually resolved, issues remain around policy stability, land the NBFID, PPP, relaxed FDI policy, tax breaks (in certain sectors)
acquisition and project funding among others. however long term private participation needs stability of policies,
Land acquisition for example has continued to be a challenge quick and reliable legal framework and strong insolvency and
given the dynamics between centre and state and since the restructuring regimes which can safeguard private finance and
promulgation of Land Acquisition, Rehabilitation and Resettlement thereby augment government initiatives.

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