Boost infrastructure spending: ASSOCHAM

In its pre-Budget presentation to the Finance Minister, Pranab Mukherjee, the ASSOCHAM has called upon the Union Government to take tangible steps and remove all the procedural bottlenecks for speeding up project clearance.  In addition, regulatory bodies must be set up for all major infrastructure sectors for its orderly and sustainable growth as it is crucial in the current economic environs to invest in large infrastructure projects in a big way which will in turn generate significant employment and demand for commodities like steel and cement.

In the memorandum, the ASSOCHAM said that the infrastructure projects would require huge investment by public and private sectors as currently power, ports and other infra projects suffer from high incidence of non-vat taxes like service tax, VAT and excise duty which add to the capital cost of such projects by 15 to 20 per cent and lengthens their payback period. Similarly high tax incidence during the investment phase makes many infrastructure projects less attractive for investment.  In order to make large infrastructure projects in power, roads, ports irrigation and oil exploration bankable and attractive for investment, such projects should be exempted from service tax, excise duty VAT and CST during the investment phase till they are commissioned.

In the current scenario when the recessionary trend has gripped the global economy, it is quite difficult to raise resources from primary capital market as many domestic sectors are facing demand recession and stiff competition from low cost imports. As such the government has to take urgent policy decisions which stimulate growth, create conducive environment for new capital investment which generates employment and demand for industrial goods and protect indigenous market from dumping foreign goods below cost and also undertake tax reforms which make Indian industry competitive to face global challenges.  Meeting huge financial requirement of the infrastructure projects where the gestation period of a project is much longer, the ASSOCHAM recommends partial disinvestment of shares in the existing public sector companies without losing their managerial control.