In line with Modi government’s ambitions to ramp up highway connectivity in India, including the construction of border roads/ strategic highways, Union Finance Minister Nirmala Sitharaman reiterated the government’s commitment to construct 9000 km of economic corridors and 2000 km of strategic highways.
Nirmala Sitharaman’s reassurance about government’s commitment towards building strategic highways contruction comes in the backdrop of Modi government’s ambitions of connecting far-flung, border areas with the rest of the country.
The Finance Minister has also made another announcement which assumes a lot of importance in the context of the government’s commitment to building 2000 km strategic highways. She has announced 100% tax exemptions for Sovereign Wealth Funds in connection with their investments in the infrastructure sector.
She said, “In order to incentivise the investment by the Sovereign Wealth Fund of foreign governments in the priority sectors, I propose to grant 100% tax exemption to their interest, dividend and capital gains income in respect of investment made in infrastructure and other notified sectors before 31st March, 2024 and with a minimum lock-in period of 3 years.”
The move is expected to lure investments in the infrastructure sector, a big step towards India’s requirements of attracting enormous investments in the said sector that could be more than $1 trillion over the next four years.
Speaking about the significance of the move, Rahul Mody, Managing Director & Head of infrastructure at Ambit Corporate Finance, said, “A number of SWFs are already significantly invested or are considering investing in the Indian infrastructure sector. The announcement of 100% tax concession to SWFs on investment in infrastructure projects along with the concessional tax rate for power generation companies is significantly positive for new investments in the sector.”
Nirmala Sitharaman’s remarks have come in light of the ambitious targets set by the Union Ministry of Road Transport & Highways for Accelerated Development of Highways. In its Year-End Review 2019, the Union Ministry has proposed building 2000 km of border roads/ strategic highways over a period of next five years, among a number of other roads/ highway projects.
Successive governments have simply neglected the significance of building strategic highways along with the border areas. But the Modi government has made it a point to get rid of this defensive, defeatist approach.
In fact, the Modi government has realised the role of strategic highways in the Bhararmala project itself. Bhararmala is Modi government’s flagship project to boost road and highways infrastructure. Among a number of other projects, the Modi government wants to build 3300 km of Border roads of strategic importance, thus changing the face of connectivity along the bordering areas. Out of the target of 3300 km of Border roads, the government wants to build 2000 km of such strategic highways in the first Phase, that is 2017-18 to 2021-22, at an estimated cost of Rs. 25,000 crores.
Especially, when it comes to the Sino-India border, ignoring road infrastructure along the 4,056 km long border with China, was almost a matter of policy. The logic reeked of a defensive, defeatist approach. It was believed that the Chinese troops would find an easy path if Beijing initiated another misadventure like the 1962 war.
The result of such an approach was not only to deprive the Indian military troops of easy access but also isolating the border areas located in far-flung areas, mostly characterised by an arduous, hilly terrain.
But Modi government’s infrastructure overdrive in far North-east and other bordering areas mark a strategic shift in India’s approach. Last year, the government approved construction of 44 ‘strategically important’ roads alongside India-China border and 21 km of axial and lateral roads in the areas bordering Pakistan.
In fact, the Union Minister of State (Defence), Shripad Naik also revealed last year that the BRO completed over 2,000 km of roads in strategic areas along the Line of Actual Control (LAC) and the international border with China. Naik had disclosed that out of the 61 roads identified as strategically important, work had been completed on 2304.65 km stretch.
In fact, the government also spent a whopping Rs 1,900 crore in developing road infrastructure in the Border areas between 2015 to 2018.
It is therefore clear that the Modi government has paid special attention towards the development of strategic highways, as against the defeatist policy of keeping the border areas isolated from the rest of India. The government has set rather ambitious targets for itself and now with the announcement of tax exemption for Sovereign Wealth Funds in infrastructure investment, we can expect that Modi government will be able to push harder when it comes to building strategic highways.