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February 2018

Budget 2018-19 Update

BUDGET UPDATE2018-19

BUDGET 2017-18 SECTOR COVERAGE

SECTOR BUDGET RATING

HEALTHCARE

RETAIL

REAL ESTATE

RENEWABLE POWER

LOGISTICS

AGRICULTURE

EDUCATION

ROADS

RAILWAYS

PORTS & SHIPPING

POWER

MINING

CIVIL AVIATION

URBAN DEVELOPEMENT


Key policy changes • Price and margin control for medical devices implemented; stents and knee implants already regulated; more devices to follow

• National Health Policy approved by Cabinet with focus on preventive healthcare, medical education and universal access

• Draft National Medical Device policy introduced to promote growth and domestic manufacturing in the medical devices industry

Promoting domestic manufacturing of medical devices

• Medical devices manufacturing parks set up in various states such as AP, Telangana and Tamil Nadu

• Testing labs set up in a PPP model to ensure quality standards for domestic manufacturing

Raised budget allocation to INR 47,352 crore, 23% increase over 16-17

• Currently only 1.4% of GDP, should ideally be minimum 2.5% of GDP (National Health Policy target by 2025)

• Negligible increase in capex planned; budget still largely revenue expenditure heavy

Positive steps towards strengthening medical education

• Addition of 1,700 MBBS seats; rate of addition needs to be higher to bridge gap of c. 200,000 seats

• Upgradation of district hospitals to medical colleges; 55 proposals received of which 8-10 have been upgraded

• 5,800 PG seats added as well – reasonable progress towards closing the specialist skill gap in the nation

PPP model for access enhancement and infrastructure development

• Various PPP projects awarded across dialysis, primary care, diagnostics and medical education in 2017

• Mostly rolled out by state Governments with some support from the Centre

Slow progress in rolling out new AIIMS centres • With the announcement of 2 more AIIMS in Budget 2017, the total number of new AIIMS centres has gone up to 12

• However, slow on-ground execution; 4-5 centres have constructed boundary walls, other projects are still at the site selection or inspection stage

Increased focus on combating Non Communicable Diseases (CVD, Diabetes and Cancer)

• Increased spending on CVD and diabetes - c. INR 955 crore earmarked for NCDs in 2017-18 compared to INR 555 crore in 2016-17

• Continued progress on setting up State Cancer Institutes and Tertiary Care Cancer Centres; while 57 proposals have been sent till date funds have been released for 30 so far; necessary to pick up pace on execution

HEALTHCARE - 2017 Round up


Strengthening of NRHM and drive to eliminate communicable diseases

• Intention of strengthening the NRHM infra by transforming 1.5 lakh sub centres into Health and Wellness Centres; reasonable progress with c. 20% centres upgraded so far

• INR 634 crore released for increasing awareness and testing for Tuberculosis; strong push to drive prevention and vaccination for Measles as well

Plan to increase coverage for RSBY - still awaiting approval

• Govt. has proposed to launch a new health protection scheme which will provide health cover up to INR 1 lakh per family (from existing INR 30,000) belonging to poor and economically weaker families - the contours of the scheme are yet to be finalized

Continued promotion of Generic Drugs; likely reduction on private player margins going forward

• Increase in number of Jan Aushadhi stores from c. 750 to c. 3,000 in 2017; in line with policy push to make drugs available for all at lower costs

HEALTHCARE - 2017 Round up


Expectation Announcement Rating

• 20% increase in allocation• NHP target of c. 2.5% of GDP by 2025

• 11% increase in allocation (to INR 52,500 crore)• Total public spend of c. INR 1.6 lakh crore expected• Moderate increase in expenditure; total expenditure

on health, education and social protection increased from INR 1.22 lakh crore in 2017-18 to c. INR 1.38 lakh crore in 2018-19

Additional expenditure of INR 25,000-50,000 crore on the new Health Protection scheme expected over the year based on pace and timing of implementation• Some decrease in planned capital expenditure; budget

still largely revenue expenditure heavy

• Increased access through health insurance; Govt. to take on the role of a payor (National Health Protection or Universal Health Coverage)

• Increase in cover from INR 30,000 to INR 100,000

• National Health Protection Scheme: Strong step towards Universal Health Coverage by providing coverage of c. INR 5 lakh p.a. to 10 crore ‘low-income’ families

• Currently, c. 4 crore families covered by RSBY; significant increase in reach and coverage plannedwith new scheme

• Govt. has stated a requirement of c. INR 10,000 – 12,000 crore for the implementation

Translates to a premium of c. INR 1,100 per household per yearImplies that the treatment rates offered would be equivalent to CGHS / RSBY rates While additional c. INR 2,000 crore has been budgeted at the centre, the increase in health cess and subsuming existing health schemes could be usedtofinancethis

• However, to provide cover at reasonable rates we estimate requirement of more than c. INR 50,000 crore – implementation success will be contingent on the plan details

• Continued allocation towards medical education

• Need to add MBBS seats at a faster rate; More than 5,000 seats should be added annually (compared to c. 1,000 last year)

• Setting up of 24 new Government Medical Colleges and Hospitals by upgrading existing district hospitals – translates to addition of c. 2,400 MBBS seats; however, higher rate of addition of PG and UG seats required to fillwiththeskillgapinthecountry

• c. INR 452 crore allocated to upgradation of PG seats compared to c. INR 165 crore last year, a 174% increase

HEALTHCARE - Budget 2018 Expectations and Announcements

POSITIVE NEUTRAL NEGATIVE



• Continued Budgetary support for improving treatment for high impact/cost diseases - Heart, Lung, Cancer, Stroke

• Makingcanceranotifiabledisease to ensure accurate capture of incidence and treatment patterns

• Faster release of funds for SCIs and TCCs (compared to last 2-3 years)

• Increasing allocation under NPCDCS; set up Cancer/ Cardiac facilities in 25 - 30 districts

• Increasing incentives for doctors to associate with Government tertiary care centres

• Partially addressed through plans to upgrade district hospitals

• Further encourage PPP projects to develop infrastructure

• Not addressed

• Continued budgetary support for National Dialysis Services Program

• Not addressed

• Explicit policy and budgetary push towards digitization of healthcare records

• Allocation of funds for digitizing records at large tertiary Government centres, centres of excellence like AIIMS, TMH, etc

• Not addressed

• Tax benefits for providers and device manufacturers

• Lower GST from current 7.3% to 5% • For a taxpayer involved in building

a hospital, weighted deduction of 150% could be restored to reduce cost burden on patients

• Not addressed





• Boost indigenous manufacturing of medical devices and consumables

• Preferential treatment in Government procurement contracts

• Tax exemptions for new plants in SIAs and SEZs

• Increased allocation to encourage development of medical devices parks with linkages to industrial corridors similar to the ones in AP, Telangana and Tamil Nadu

• Not addressed

• Incentivize insurance coverage to drive penetration

• Encourage preventive medical care by increasing the limit of tax exemption for preventive health check-ups from the current limit of INR 5,000 to a maximum of INR 20,000 under Section 80D

• Increased deduction for insurance premium under Section 80D for income tax assessment from the limit of INR 25,000 for self, spouse, dependent children and INR 30,000 for senior citizen parents to a common limit of INR 50,000

• Also, provide an additional benefitby increasing the exemption limit of medical reimbursement from INR 15,000 to INR 50,000 per annum

• Not addressed

• Ayushman Bharat Scheme to subsume Strengthening of Health and Wellness Centres

• Strengthening of 1.5 lakh primary care facilities across the country by upgrading them to health and wellness centres

• Allocation of INR 1,200 crore for the same (c. INR 80,000percentreperyear);whilethisisnotsufficientfor all centres, c. c. 50% of centres can be covered this year

• Positive development in line with plan for improving access





• Increased budgetary support for Tuberculosis patients • Additional nutritional support of INR 500 per month

to be provided to all TB patients, through allocation of INR 600 crore

• In line with National Health Policy 2017, initiative for complete eradication of TB by 2025

• Announcement of Health & Education Cess • Health and education cess of 4% on direct taxes

declared in lieu of extant Education Cess• Estimated receipt of c. INR 6,000 – 10,000 crore • Likely to be one of the funding sources for the new

Health Protection scheme

• Increased allocation to National Organ Transplant Program

• Allocation of c. INR 91 crore to the program compared to only c. INR 5 – 10 crore over the last 2-3 years

• Increased push towards awareness activities, government funding of transplants and development ofregionaltransplantoffices/registriesexpected

• Potential opportunity for private players

• Improving Research and Development capabilities under ‘‘Revitalising Infrastructure and Systems in Education (RISE)”

• Focus on developing research oriented aspects, for educational and health institutions across the country for which c. INR 1,800 crore has been allotted for Health Research

• Enhancing R&D prowess, thus improving medical equipment manufacturing and treatment capability




Impact of GST • Under GST, total tax rate for FMCG sector came down to 18-20% from 22-24%

• Largely a welcome change, as it allowed for price reduction, boosting consumer sales, particularly in the rural segment-

• Logistics costs reduced from 2-7% to 1.5% leading to smoother supply chain management and lower costs for both retailers and manufacturers

• However, given the scale and ambit of the exercise, it’s still too early to determine the exact formula and precise rates for the new tax system

Revival of consumer demand • Consumer-oriented sectors like FMCG, consumer durables and retail performed well, backed by re-stocking by trade channels and improved consumer demand; rural demand was higher than urban

• With an increase in digital transactions and a revival of consumer demand, retail sector is set to grow faster than its current 20%

Revised FDI Norms • 100% FDI for single Brand Retail Trading (SBRT) via the automatic route, up from 49% earlier, provided the entity sources 30% of its purchases for business from India

• Brands such as Apple, Uniqlo, IKEA, Tesla may soon have a direct retail presence in India

• 100% FDI in multi brand retail for food products • While this is a welcome move to encourage foreign

entities to set up shop in India, it poses a threat to small/local businesses, mom-and-pop shops

Model Shops and Establishment Act • Bill aimed at benefitting the retail industry byHelping shopkeepers circumvent bureaucracy & licensing issuesImprovingemployeebenefits&workingconditionsAllowing shops to operate 24X 7, 365 days a year

• So far, 4 states have adopted the act and implemented state -specific policies - Maharashtra, Karnataka, Tamil Nadu & Andhra Pradesh, while other states like UP & Telangana are expected to follow soon

Ease of Doing Business • India has been ranked #1 in A.T.Kearney’s Global Retail Development Index 2017 for developing countries, surpassing China

• Favourable FDI norms, shift towards organized retail and a growing middle class with a large appetite for retail & luxury consumption, have contributed to the same

RETAIL - 2017 Round up


E-commerce • Despite constituting only 7% of the retail sector, India’s E-commerce has seen rapid growth in the past year - partly a result of demonetization in 2016 and therefore, a shift from unorganized buying to organized; Industry expected to reach USD 48 billion by 2020; largely dominated by pure-play online retailers

• While the sector is witnessing new player participation and an increased investment funding, investments have seen a cautious approach, unlike early 2015

Alibaba - Paytm • Alibaba recently invested USD 200 million in Paytm Mall - a move widely seen as a direct challenge to Amazon India

RETAIL - 2017 Round up



• Industry status for Retail will enable players to seek financial supportand encourage more investments in the sector

• Financial support would help small retailers upgrade and compete with larger brands

• Not Addressed

• SimplificationofGSTNorms• Multiple filings and manual

signatures are required for availing GST refunds - simplification ofthis process expected in view of strong feedback from industry stakeholders

• Relaxation of norms to enhance GST compliance

• Removal of certain items from luxury goods list at a tax rate of 28%

• Not Addressed

• Incentives for Digital Payment• Budget 2018 expected to dis-

incentivize cash payments and favor digital modes of payment to increase transaction transparency

• Curtailing usage of ATMs to reduce cash in circulation

• No immediate impact announcements to encourage digital payments

• Exploration of block chain technologies will speed up transactions, make transparent and seamless

• Potentially encouraging for local, as well as foreign companies, to invest in India, as it enhances the ‘ease of doing business’

• However, this is still in the initial stages of development

• Liberalisation of retail regulations• Following Maharashtra

Government’s new retail policy which allows additional FSI and ground coverage, longer working hours, part time employees etc., it is hoped other states will follow suit

• Move expected to attract top retail chains,whofinditdifficulttocomplywith local licensing and operating norms, as well as provide space at affordable rents

• Not Addressed

RETAIL - Budget 2018 Expectations and Announcements




• Increase in customs duty on mobile phones, perfumes & toiletries, automobiles, furniture and textiles

• Significant increase for food items such as edible oils from 12.5% to 30%

• Boost to domestic manufacturers, but the resulting price increases will have a negative short-term impact on retail sales

• Corporate tax reduced to 25% for companies with turnover of up to INR 250 crore

• Limited impact on the retail sector- most small retail in India operates as proprietorships / partnerships, which will continue to pay tax at 30%

RETAIL - Budget 2018 Expectations and Announcements



“Housing for all by 2022” initiative • Union Budget 2017-18 revised guidelines for affordable housing projects – units with dimensions 30 sq.m. and 60 sq.m. carpet area instead of BUA qualify as affordable housing units

• Infrastructure status to Affordable Housing sector• However, private sector participation in affordable

housing projects remains low – only 55,000 units priced under INR 40 lakh were built under the private sector in top 7 cities in 2017, which is lower than 78,000 units constructed in 2016

Revised Pradhan Mantri Awas Yojna • Allocation to PMAY increased from INR 15,000 crore to INR 23,000 crore to build 10 million homes by 2019.

• GST reduced from 12% to 8 % to first time buyers under CLSS scheme. However, only 1 million homes were built under PMAY until November 2017

Real Estate Regulatory Act implementationby states

• Except West Bengal, almost all states have notified real estate rules. Maharashtra, Madhya Pradesh and Punjab have established a permanent Real Estate Regulatory Authority, while 15 other states like Karnataka have interim Regulatory Authority. Telangana has notified RERA rules and is in the process of setting up the Authority. NCR lags in RERA implementation as all three state governments (Delhi, Haryana, and UP) have a low adoption rate

Real Estate Investment Trusts (REITs) • SEBI had notified REIT regulations in 2014, subsequent revisions in the regulations by SEBI in December, 2016. However, no single trust has been set up so far.

• Even so, outlook for REIT in India remains positive owing to considerable easing of regulations.

• Embassy Corporate Park, among few others, filed an application with SEBI seeking in-principal approval to register its REIT last year.

REAL ESTATE - 2017 Round up


Key trends in the real estate sector • Unsold inventory, which peaked in 2014 at 7.2 lakh units saw a downward trend with current levels of 5.3 lakh units in 2017, a 19% decline from 2016 levels; driven by developers’ priority to offload inventory level by offering incentives such as price cuts, free of charge floor rise, stamp duty waiver, etc.

• Consequently, housing prices have dropped by 5% in Mumbai, 7% in Pune, 5% in Bengaluru, and 2% in NCR region.

• Despite significant price cuts, lack of consumer demand has resulted in decline in sales; Only 2.3 lakh units sold in 2017, down 7% in 2016. Government initiatives like RERA and PMAY are yet to make any impact on consumer sentiment in the real estate sector.

• Lack of consumer demand, existing high levels of unsold inventory and dilemma regarding RERA implementation has resulted in a 41% decline in units launched in 2017. Only 10.3 lakh units launched in 2017 as compared to 17.5 lakh units in 2016.

Co-working spaces gather momentum • Concept of co-working spaces has been gathering momentum with potential market size of 12 to 16 million seats. Some major players are WeWork, Office Pass, Awfis, amongst others. Sequoia invested INR 130 crore in Awfis, while WeWork signed with Embassy Group to develop a facility in Bangalore with USD 100 million investment.

REAL ESTATE - 2017 Round up




• Reduction in GST• Currently, under construction

properties come under the 18% tax slab with 1/3rd tax abatement on account of land value. However, land value in most of the cities is more than c. 50% of the project cost.

• For end consumers tax burden has increased to 12% under GST from 5-7% under the service tax and VAT regime

• Rationalisation of taxation critical for affordable housing projects as margins are thin

• Abolishing stamp duty or adjusting it in GST might improve consumer sentiment

• Not Addressed

• Single Window Clearance for Residential projects

• This would reduce the present impediment of delayed approvals for projects due the lengthy bureaucratic process of obtaining all the necessary clearances

• Not Addressed

• Amendments in the taxation structure and norms for REITs

• Reducing holding period from 3 years to 1 year at par with equity investments will make REITs more attractive for investors

• Exemption from paying distribution of dividend taxes by SPVs to holding company and from HCs to REIT

• One time waiver on stamp duty at the national/ state level will help boost REIT investment in the commercial rental segment

• Not Addressed

REAL ESTATE - Budget 2018 Expectations and Announcements



• Cheaper cost of land acquisition for affordable housing projects

• High cost of land is key a source of stress for a real estate developer as margins in affordable housing are thin

• Dedicated ‘Affordable Housing Fund’ at the National Housing Bank to encourage greater investment in the affordable housing sector

• Industry status to real estate sector• Developers can borrow at lower

rates resulting in lower final priceand higher consumer demand

• Not Addressed

• Abolition of circle rates• Circleratesdonotreflecttruesale

value and transactions are under-valued to save on capital gains tax. Govt. also losing out on revenue from stamp duty and registration fee

• Partially addressed: Tax relief for buyers and sellers to the extent of 5% difference between the circle and market rates

• Push towards rental housing• A flat tax rate of 10% on Rental

Income• Deduction from rental income

under section 24 should be increased from 30% to 50%, and 100% for women and senior citizens to improve rate of returns from renting

• Not Addressed

• Revive stressed assets in the real estate sector

• National fund to sanction start up loans equal to 10 to 15% of the project costs to kick start delayed/ stalled projects

• Not Addressed

• Introduction of title insurance for newly built houses

• Will encourage investment in real estate

• Reducing risk to banks thereby lowering interest rates

• Not Addressed

REAL ESTATE - Budget 2018 Expectations and Announcements



RENEWABLE POWER - 2017 Round up

Sector continues to grow despite challenges • Addition of 12GW renewable power capacity between Jan-Nov 2017, bringing total renewable energy capacity in India to 62GW

• Growth in solar also sluggish with capacity addition in FY18 stagnant compared to the previous year; key drivers were flat power demand and rising solar panel costs

• Wind saw sluggish growth due to tariff challenges; New sector guidelines helped revive some interest

• Drop in Hydro power generation driven by low rainfall in southern and western states, hot weather in parts of the country

GST Impact • Renewable energy developers facing GST of 5-28% on input equipment, but with no GST on power sales cannot avail offset; development slowing down due to lack of clarity

• c. 8-10% increase in total project costs, following GST

1MW cap on net-metering, hampering RESCO model growth

• State Nodal Agencies to implement a 1MW cap on net-metering, causing a reduction in growth from RESCO (Renewable Energy Service Company) for IPPs and EPCs, curtailing growth potential driven by high demand for RESCO in the market

Chinese solar modules show sharp increase in price, cause tumult in Indian markets for existing projects

• After a sustained period of price drop leading to growth and new tenders, Chinese solar panels and modules have shown a sharp uptick in price; Existing projects and tenders have shown sudden price overruns due to increase in system costs contrary to expectations

Diversion of NCEEF to account for GST losses • NCEEF(National Clean Energy and Environment Fund) diverted to compensate for losses due to GST, leading to reduction in investment in the renewables sector

MNRE concept note to promote manufacturing (December 2017)

• DirectfinancialsupportofmorethanINR11,000crore for manufacturers to expand and upgrade domestic solar manufacturingfacilitiestoachieveafive-foldincreaseofinstalled solar power to 100 GW by 2022

• Three-pronged approach to support local manufacturers that includes:

Providingalevelplayingfieldwiththeimpositionofanti-dumping duty on cells and modulesCreating demand through a DCR programSupporting manufacturers financially by providingmultiple subsidies


Development Fund for International Solar Alliance

• Government to set up a USD 350 million development fund for development and financing solar projects

• MoU in place, co-financing by various companies and bankers such as Yes Bank, NTPC, CLP

Rent a Roof policy • Developers can take rooftops on rent, offer lease to households, and feed the solar power to the grid in order to give a push to solar rooftop projects, which has shown least growth in last 5 years

Other developments of significance • Chief Electricity Inspectorate to Government (CEIG) approvals process continues to be slow

• Cutthroat market scenario discouraging smaller players• Rooftop systems yet to grow up to potential; newer

technologies in play, older systems will need upgrading to avoid bad PR at a sensitive time for market adoption

• Open access policy in some states (particularly Karnataka) seen as positive step for industry.

RENEWABLE POWER - 2017 Round up




• Increase in subsidy/public investment to spur greater growth

• Increased input costs likely to slow down growth of renewable energy capacity installation if not addressed; expectation of continued subsidies, especially for government and educational institutions to adopt renewable energy systems

• No capacity addition target defined, no significanteffort to correct the shortfall in achievement from last fiscal

• Comingfiscalyearexpectedtobeatoughonegiventheglobal price-rise in solar modules and the increase in cost of project development, as a consequence of GST

• No critical subsidies or incentives to boost the market were announced

• Achievement of the 2022 target of 175 GW capacity to be a challenge

• Fiscal Incentives: Given long gestation periods for renewable projects, reinstatement of 80% AD and strong incentives for manufacturing to increase self sufficiency Reinstatement of tax holiday or credit on input GST to reverse cost increase Clarity on proportion of investment from the NCEEF into the sector

• Not Addressed

• Interest subvention scheme similar to Technology Upgradation Fund (TUF) in textiles would be instrumental for expanding the scope of domestic manufacturing

• Subsidy to enable upgradation of existing systems to match current state-of-the-art, to help scale up production, which will in turn help create a robust ecosystem and driveinnovationintofieldslikebio-ethanol

• Not Addressed

• Create common rooftop solar market and deploy in housing projects

• Offering solar options in affordable housing projects under development or already occupied would help drive rooftop solar in high potential urban markets, where adoption has been low

• Not Addressed

RENEWABLE POWER - Budget 2018 Expectations and Announcements





• Reconsider import duty on solar panels

• Domestic manufacturing capacity will need to be developed before placing barriers on solar cell imports; incentives should be provided to domestic manufacturers instead to keep project and per unit cost of solar power low.

• Customs duty on solar tempered glass, a key component in manufacture of solar panels- reduced from 5% to 0%

• However, Customs duty on import of solar tempered glass was only imposed in June 2017; through an exemption in 1999; this customs duty was not effective, imports continued to be cleared duty-free. Withdrawal of customs duty, therefore, would have no significantimpact

• Fund allocation of INR 5,024 crore for 2018-19, as against INR 5,472 crore in the previous year

• While solar power still prioritized at 58% of the RE budget, significant decrease from the previous year (from INR 3,361 crore to a INR 2,894 crore outlay this year)

• Wind Energy outlay of INR 750 crore against past liabilities of the now discontinued GBI scheme

• Mechanism to buy surplus solar power from farmers using solar pumps sector.

• Mandate for distribution companies to buy surplus solar power remains a challenge, Budget failed to provide any direction on how this may be achieved

• Increase in customs duty for Lithium ion batteries: Custom duty on Lithium-ion batteries used in Electric Vehicles increased from 10% to 20%

• Adverse impact on costs in EV as well as small solar rooftop industry, but is expected to promote domestic research and manufacturing

• R&D outlay cut INR 144 crore in FY18 to INR 99 crore in FY19; Limited focus on R&D to support technological advancements in the Renewable Energy sector

• Increased budget allocation to DUGJY, Saubhagya Scheme, IPDS

• Budget allocation to schemes like Deendayal Upadhayaya Gram Jyoti Yojna (DUGJY), Sahaj Bijli Har Ghar Yojana (Saubhagya), Integrated Power Development Scheme (IPDS) to help enable last mile connectivity for rural households

• Better distribution network a positive for both DISCOMS and power manufacturers, including those in the renewables sector




• Faster Adoption and Manufacturing of Electric Vehicles in India

• Outlay of INR 175 crore for establishing charging stations, technology development, 200 electric buses in public transport, and conversion of 1,000 govt vehicles to EVs

• Boost to the nascent Electric Vehicle Industry in the country however, impact likely to be offset by increase in customs duty on Li-ion batteries



LOGISTICS - 2017 Round up

Impact of GST • GST has been a positive development for the organised logistics industry enabling players to implement Hub & spoke model of infrastructure development and provide end to end services

Introduction of e-way bill • E-way bill replaces the current waybills & transport bills submitted by the logistics sector to the state transport authorities at checkposts

• Set to be rolled out on Feb 1, 2018, mandatory e-way bill for goods of value above INR 50,000 and moving beyond 10kms interstate

• E-way bills expected to lower transit times by limiting state level checking and to minimize tax evasion in the long run

• May cause temporary disruption as the industry adapts to the new system; especially in the case of smaller transporters owing to poor access to technology and technical know-how

Industry status to Logistics Sector • Industry status to the logistics sector (cold chain, warehousing, multimodal parks comprising ICDs) awarded in Nov ’17

• Opens access to cheaper finance, enhanced credit limits, longer tenure funds from insurance companies and pension funds, to industry players interested in developing large scale infra facilities

• Industry given access to funds from IIFCL (India Infrastructure Financing Co. Ltd.)

Major infrastructure projects (Bharatmala and Sagarmala)

• Witnessed limited budget allocation similar to previous budgets; Progress sluggish

Private Freight Terminals, Domestic Container Terminals and Goods Shed Privatization

• The Indian Railways’ intent to increase its market share in surface logistics continued to gain momentum with 13 new PFTs and 17 new DCTs being opened



LOGISTICS - Budget 2018 Expectations and Announcements


• Improve budget allocation to infrastructure development projects (Road, Rail & Waterways – Bharatmala, DFC & Sagarmala) to accelerate project development

• Improvement in infrastructure (Road, Rail and shipping) spending to INR 2.72 lakh crore for FY19 against 2.33 lakh crore for FY18

• Allocation to ministry of shipping for implementation of Sagarmala project doubled (125 crore to 250 crore); Impactnotlikelytobesignificant,though

• Development of National Waterways to be fast-tracked using allocation of 2.5% of CRF (Central Road fund – INR 80,000 crore in FY17) per bill passed in Dec ’17 would provide access to additional funds of c. 2000 crore

• Bharatmala to be fast-tracked by organising individual roadproject intoanSPV;TobefinancedbyTOT (Toll,Operate & Transfer) or InvITs

• Integrated Transportation Policy to provide a road map for the upcoming dedicated feeder and inter-corridor routes along with details on the multi-modal logistics parks to provide visibility on the direction of logistics industry

• No further details presented in the Budget

• Dilapidated government and railway warehouses that cause wastage of produce and poor efficiencies in warehouse operations; could be upgraded using modern technology and private investment to unlock potential in existing infrastructure

• Not addressed

• Incentives for specialized logistics providers inthefieldofcold chain, Container Freight Stations (CFS) to setup operations under the SEZs/ logistic hubs

• Partially addressed • Operation Greens: To accelerate development of cold

chain network through a INR 500 crore allocation to FPOs (Farmer Producers Organizations)

• Announcement of creation of National Logistics Portal to link all stakeholders

• Limited potential; existing third party service providers already cater to the need

• Policy on toll system on “pay as you use” basis to be launched

• Mandatory inclusion of FAST tags on all 4-wheelers (since Dec’17) aids in toll collection & reduction of waiting times at toll gates


AGRICULTURE - 2017 Round up

Good monsoon, record harvest in 2017; subsequent price crash and farmer protests

• Farmers produced record harvest in 2017 (276 million tonnes) - record highs reported for rice, wheat, pulses, tur, urad, and coarse cereals (4% higher than previous record in 2013-14) Price crash of various crops led to protests in many states throughout the year - UP, Telangana, Maha, etc.

• As a consequence, production / sowing has come down in both Kharif (production lower by 3.9 million tonne) and Rabi seasons (-0.5% change over 2016-17)

Doubling of Farmer Incomes • Various policy changes under formulation to meet the target of doubling farmer incomes by 2022:

SAMPADA scheme: INR 6,000 crore corpus setup for the period 2016-20, to be used to develop agro-processing infrastructure in the country (budgeted allocation of INR 634 crore - 3 mega food parks, 50 integrated cold chain and value addition infrastructure have been developed and 17 food testing laboratories have been set up in Maharashtra during 2017-18)Model contract farming law criticized by farmer groups and agriculture experts for being pro – agro companies (provision of lower than contractual prices in case of low quality of produce (is still under discussion)Policy-level plans of revamping APMC and doing away with its monopoly in the agricultural produce market, creating an open market for the farmer –Agriculture Produce and Livestock Marketing Act and circulated amongst state governments for adoption

• To open up the agricultural produce market, govt. is targeting to connect 585 mandis through online platform “eNAM” where buyers can purchase from any mandi in India (470 mandis in 14 states have been integrated)

Agricultural credit • Target for agricultural credit in 2017-18 fixed at a record level of INR 10 lakh crore and INR 6.25 lakh crore disbursed as of September 2017

Expansion of Fasal Bima Yojana • Budget of INR 10,701 crore was higher than INR 5500 crore in 2016-17; For the past fiscal insurance claims raised to the tune of INR 13,600 crore, out of which, INR 12,313 crore (90.5%) have been settled


National Mission for Sustainable Agriculture • Focused on 3 main components - ‘Rainfed Area Development’, ‘Soil Health Management’ and ‘Climate Change and Sustainable Agriculture’; Allocation of c. INR 12,00 crore under Budget 2017-18

Soil Health Cards Scheme underway; states have surpassed the targets set for samples collected; 5.53 crore of a target of 14 crore Soil Health Cards distributed

AGRICULTURE - 2017 Round up


AGRICULTURE - Budget 2018 Expectations and Announcements


• Revamping of Agricultural Markets (APMCs)

• To de-monopolize/de-regulate agricultural produce market to meet target of doubling farmer income by 2022

• INR 2,000 crore fund for Gramin Agricultural Markets (GrAMs)

• GrAMs, combined with exemption from APMC regulationstobenefitfarmersinsellingproducemoreopenly; to impact small & marginal farmers (86% of total)

• Agriculture credit target to be revised to INR 11 lakh crore

• Extension of Kisan Credit Cards to fisheries andanimal husbandry

• Given election year and pressure to deliver a populist budget, Increase in Pradhan Mantri Fasal Bima Yojana allocation

• Not addressed

• Income security for farmers, to cover not just bad crop yield (PMFBY) but also farmers’ household incomes

• MSP of all unannounced Kharif to be 1.5 times production cost

• Protection of farmer income in times of bumper crop / price crash – large impact on agricultural households

• Establishment of agro-processing infrastructure to benefitfarmersbyprovidingeasieraccesstoprocessingunits (customers)

• Liberalization of farmer exports: higher farmer realizations; move towards tapping India’s unrealized export potential

• GST slab change• Demands from farmer groups and

recommendation of NITI Aayog to remove agricultural commodities from the Essential Commodities Act and bringing all agriculture inputs and equipment under 0% GST

• Not addressed

• Decrease in fertilizer subsidy• Reduced pilferage due to Aadhaar

(DBT) and GST

• Not addressed

• Reduced allocation for Pradhan Mantri Krishi Sinchai Yojana

• Scheme has lost momentum since launch in 2015

• Not addressed




• ‘Operation Greens’: Improvement in supply chain / agri-logistics for basic vegetables – tomato, onion, potato

• Positive for food processing, FMCG companies

• Infra development plan for Mega Food Parks (12 projects), Cold Chain and Value addition Infra (101 projects)

• National Bamboo Mission: Positive impact for constructionindustries;NorthEasttobenefit

• INR 10,000 crore for Fisheries and Aquaculture InfrastructureDevelopmentFund(FAIDF)forfisheriessector

• Animal Husbandry Infrastructure Development Fund (AHIDF)

• INR 200 crore corpus for medicinal and aromatic plants

• Manufacturing of perfumes, essential oils, and associatedproductstobebenefited

AGRICULTURE - Budget 2018 Expectations and Announcements



Expenditure Profile Budget 2017 • c. INR 80,000 crore allocated to education • Top expenditure heads: Sarva Shiksha Abhiyan (c. 29%),

Mid Day Meals (c. 13%) and Higher Education (c. 42%)

Setting up of Institutes of Eminence (IoEs) • List of 20 top colleges and universities to be guided and supported by the government to improve their global rankings

District level National Achievement Survey • NASdatacollectedonadistrictlevel,forthefirsttime• Welcome step in monitoring learning outcomes,

improving accountability and preparing the government to align with its plans to shift focus to improving the quality of education across the country

Thrust on encouraging innovation and creative thinking

• A government fund to encourage local innovation in school education,

• Setting up of the Atal Tinkering Cells and the Atal Incubation Centres; not in operation yet

National Testing Agency • Single body to conduct standardized admission and eligibility tests at the higher education level, expected to ease operational burden of regulators.

• Going forward, mandate may be widened to bring standardization and reliability to testing across all levels of education.

• NIA yet to come into operation.

Annual Status of Education (ASER) findings and the conversation around “No-Detention”

• Compiled by the research assessment wing of Pratham, a household based survey to measure basic capabilities and literacy.

• High share of our school students below grade level, going unchecked under the CCE No Detention Policy

EDUCATION - 2017 Round up

SCHOOL

COLLEGE


EDUCATION - Budget 2018 Expectations and Announcements


• Merged budget for Sarva Shiksha Abhiyan (SSA), Rashtriya Madhyamik Shiksha Abhiyan (RMSA) and Scheme of Restructuring and Reorganisation of Teacher Education (STE)

• Move expected to help rationalize costs, optimize allocations and prevent duplication of efforts.

• 4% increase in overall allocation• INR 85,000 crore allocated• Spending on education still remains at 3.48% of GDP• However, the highly anticipated merger of the budgets

for SSA, RMSA and STE not enacted this year• The idea of taking a “holistic approach to education”

as announced by FM in the speech not reflected inbudgetary allocation and expenditure plans

• Announcements aligned with the NEP: Last revised in 1992, the National Education Policy draft announcement has been postponed from December 2017 to March 2018. Expected to lay focus on

Increasing private sector participation in public education improving access to higher education vocational training and skill development teacher training and re-training.

• No announcements on private sector participation or vocational training/skill development

• National Achievement Survey (NAS) budget hike: Only at INR 1 crore last year, allocation to NAS expected to see an increase, given the focus on improving learning outcomes as well as tracking school specificachievementmetrics.

• District wise strategy to be developed to improved NAS scores, after NAS data was collected at the district levelforthefirsttimelastyear

• However, given lack of funds- implementation will remain a concern

• Tax Relief on Education Loans: Lowered interest rates and concessional financing terms for girls and disadvantaged students expected.

• Alternatively, 8 year tax break window on education loans be widened, given the rise in school fees.

• Not addressed

(a)

(b)

(c)

(d)

SCHOOL

COLLEGE




• Tax Relief for providers: As the government starts to shift focus to higher and secondary education, tax relief on the use of certain services by higher education institutions expected.

• This will encourage market entry and improve quality as a large number of private institutes facing huge financial setbacks giventheir large capital requirements, the absence of non-concessional finance,andtheinabilitytopasstheburden to students given external regulation and risk of agitation.

• Not addressed

• Mass Scale Training Program for Teachers: ASER findings haveunderscored the problem of poor learning outcomes amongst students; Likely a strong push for retraining teachers

• 13 lakh teachers to be trained in the year• However, no budgetary allocation earmarked and no

plan detailed • Use of the digital platform “DIKSHA” to help upgrade

teacher skills and encourage adoption of digital learning tools and apps

• Integrated BA-B.Ed/B.Sc-B.Ed integrated degree to be offered to ensure teachers hold proficiency in thesubjects, and to ensure that graduating teachers can not only work in educational institutions but also in industry jobs

• Expected to address the problem of low quality instruction

• Revision in child education allowance for tax exemption (currently at INR 100/month/child) expected, as an attempt to discourage high dropouts at secondary level

• Not addressed

• More KVs and JNVs• Delivering strong results and help to

improve access for differently abled and disadvantaged children

• Every block with 50% ST population and at least 20,000 tribal persons to have an Eklavya model Residential School, on the lines of the Navodaya school

• Improve in access for tribal students, would help contain dropouts at the secondary level


SCHOOL

COLLEGE




• Reduction in 18% GST on ed-tech products and services to increase uptake

• Reduction in angel tax to encourage financingandmarketentry

• Adoption of ed-tech can help address the problems that emerge from the skewed teacher-student ratio in schools across the country

• Intent to shift from blackboards to digital boards expressed but budget for digital India e-learning reduced from INR 518 crore to INR 456 crore

• Lack of basic infrastructure continues to be a problem across many schools in the country (only 62% of all schools have an electricity connection, only 24% have functional computers and only 9% have an electricity connection and a functional computer (DISE, 2015-16))

• Plan for technology to improve education quality and efficiencylacking in greater detail

• ‘Revitalizing Infrastructure and Systems in Education (RISE) by 2022’ and higher education

• To step up investments in research and infrastructure at premier institutions of higher education

• Total investment of INR 1 lakh crore, over the next four years

• Higher Education Financing Agency (HEFA) to be suitably restructured to enable the same

• ‘‘Prime Minister’s Research Fellows (PMRF)’’ Scheme to identify 1,000 best B.Tech students each year from premier institutions only, provide Ph.D fellowships at IITs and IISc

• Likely to have limited immediate impact, and limited contribution to improving employability of our graduates

• Focus limited to increasing Ph.D seats only, no effort in increasing post-grad seats

• Education cess increased to 3% (education cess) + 1% (health cess)

• INR 11,000 crore receipt expected- likely to be spent on covering the health and education needs of BPL families


SCHOOL

COLLEGE



Increase in budget allocation for roads and highways

• Only 11% of the targeted 25,000 km of road length to be awarded, achieved till Nov 2017

• Only 32% of the targeted 15,000 km of road length to be completed, achieved till Nov 2017

• NHAI signed MoU with TIDCO (Tamil Nadu Industrial Development Cooperation) in May 2017 for the development of Multi-modal logistics park in Ponneri Industrial area near Kamarajar Port in Tamil Nadu

PPP and Public Utility contract as amendments to the Arbitration and Conciliation Act of 1996

• Govt. agreed to release 75% of the amount against margin free guarantee in situations where awards have been given but are contested

• Arbitration cases to be solved within 1 year

Road construction target scaled up to 40 km/day • Road construction target for the year not achieved; Ministry shifts 40 km/day target to FY20; Likely to achieve 30 km/day in FY19; current rate 26.6 km/day compared to 19.26 km/day last year

Recapitalization of Public sector banks • Plan on course; govt. announced a massive capital infusion plan of INR 2.11 lakh crore over the next two years for Public Sector Banks, likely to boost the availability of capital for infrastructure sector

Impact of 5% tax reduction on interest income of foreign currency borrowings and masala bonds

• NHAI Masala Bond issue launched at London Stock Exchange in May 2017;

• Following an overwhelming response, initial benchmarked issue of INR 1,500 crore up-sided to INR 3,000 crore.

• The transaction marked the largest ever 5 year issuance and largest inaugural transaction in the Masala Bond market

Implementation of Pradhan Mantri Gram Sadak Yojana

• c. 26,000 km of rural roads constructed till date this year, against a target of 51,000 km

Other developments of significance • Bharatmala Project approved, to create 83,677 km of roads,highways,green-fieldexpresswaysandbridgesinphases at an estimated cost of INR 7 lakh crore.

• First phase to be completed by by 2022, 34,800 km of highways will be built.

• Land acquisition for 28 ring roads and 45 expressways initiated

ROADS - 2017 Round up



• 10-12% increase in budget allocation over FY18

• Revision in highways award target (10,000 km from 6,500 km in FY18) and predominance of EPC contracts in awarded contracts

• Increased capital outlay required to meet the target of 40km/day of road construction

• Revival of the investment cycle, which would lead to greater participation from private players and creation of more jobs

• Allocation increased to c. INR 71,000 crore (10%) compared to the INR 64,900 crore in FY18; Only marginal increase in allocation; Given predominantly EPC nature of contracts- 40 km/day target to come under pressure

• Increased allocation for specificunion government programs

Programs like Pradhan Mantri Gram Sadak Yojana (20-25% increase) and Bharatmala require significant capitaloutlay, would help expedite the projects; Increase in PMGSY likely to boost rural consumption and infrastructure

• Widening the scope of PMGSY-initial objective of connecting all eligible habitations nearing completion – target pulled forward to March 2019, from March 2022; Next phase to include major link routes which connect habitations to agricultural and rural markets (GrAMs), higher secondary schools and hospitals; Move to stimulate economic growth in rural areas and improve access to basic facilities

• Union budget allocation at INR 19,000 crore, same as last year

Allocationmaybeinsufficient to achieve targeted construction of 57,000 km of roads and generation of 28.35 crore Man-days of work in 2018-19

• Increased retail investor participation, funding from capital markets and FDI

• Shortfall in funding post budgetary support, CRF receipts and toll plough back to be covered through increased bond issuance

• IDF and InvITS to be made more robust; long term infrastructure bonds to be introduced

• Not addressed

• Adoption of new rating scale for infra projects

• Shift to expected loss (EL) scale from underlying credit as against default based rating; would highlight strength of projects and lead to greaterinflowofcapital

• Not addressed

ROADS - Budget 2018 Expectations and Announcements




• Setting up of PPP project review committee and infrastructure PPP Adjudication tribunal: Would help streamline re-negotiating concessions for distressed projects and effective resolution of disputes, positive step to enhance private sector participation

• Not addressed

• Asset recycling: monetize state-owned operating assets and utilities to boost revenue and reduce dependence on budgetary allocations and containment of fiscaldeficittargets

• NHAI to consider organizing its road assets into Special Purpose Vehicles and use innovative monetizing structures like Toll, Operate and Transfer (TOT) and Infrastructure Investment Funds (InvITs)

• Move to help raise equity from the market for its mature road assets

• Supplementary source of funding; would help to meet the gap between expenditure and budgetary allocation. However, considering lead time for policy formulation, unlikely that any of the assets would be monetized in FY19

• Not addressed

• Connectivity infrastructure in border areas• Construction of Rohtang tunnel completed (Ladakh),

contract for construction of Zozila pass (J&K) (14 km) progressing well

• Proposed construction of tunnel under Sela pass (Arunachal Pradesh)

• Improving efficiency of toll collection: Cash being replaced by ‘fastags’ and other electronic payment systems

• From Dec, 2017 all class “M” and “N” cars being sold only with ‘fastags’

• Government to come out with policy to introduce toll system on ‘pay as you use’ basis

• Will help reduce travel time; positive for logistics sector

• Construction of 2.6 lakh km of rural roads under Mahatma Gandhi National Rural Employment Guarantee programme (MGNREGA)

ROADS - Budget 2018 Expectations and Announcements



RAILWAYS - 2017 Round up

Safety concerns • 35 rail accidents occurred primarily associated with track failures.

Ministry Modifications • Charge of the ministry transferred from Suresh Prabhu to Piyush Goyal, following a spate of train accidents

• Station redevelopment plan (INR 1 lakh crore) and IT infrastructure plans (INR 5,000 crore over 5 years) scrapped

Capital and Developmental Expenditure • Capital expenditure in 2017 directed towards building tracks, rolling stock and the Rashtriya Rail Sanraksha Kosh

40-50% of the expenditure raised through extra-budgetary sources

Fare Revision • GST impact: service charge hiked from 4.5% to 5% for firstclassandACfares

• IRCTC food rates hiked• Fares of 48 super-fast trains hiked; expected to generate

incremental annual revenue of INR 70 crore

Public listing of IRCTC, IRFC, IRCON • Registrars called in to handle the listing of IRCTC, IRCON and RITES; investment banks shortlisted to manage the IPO of Indian Railway Finance Corp Ltd.

PPP in railway development • Station Redevelopment Plan of INR 1 lakh crore scrapped owing to lukewarm interest in the bidding process at 23 stations

Habibganj railway station to be redeveloped in PPP; Bansal Group to invest INR 100 crore towards an overhaul of the station, and c. INR 350 crore to develop four commercial land parcels adding up to 17,245 sq. m.

• New metro policy approved, enabling private sector participation in development and operations of metro rail;

• In line with global standards the Policy stipulates a shift from the present ‘Financial Internal Rate of Return of 8%’ to ‘Economic Internal Rate of Return of 14%’ for approving metro projects

• MoU between Government of India and Japan, towards implementation of the Mumbai-Ahmedabad high speed rail corridor,withfinancial assistance covering81% of total project cost


RAILWAYS - 2017 Round up

Modernization and upgradation of identified Dedicated Freight Corridors (DFCs)

• A 200 km stretch between Rewari and Phulera in Western DFC likely to get commissioned by March 2018

• Next stretch in line (343-km Kanpur -Khurja section in Eastern DFC) to be commissioned by December 2018

• Overall target set at operationalising around 1,200 km of DFC in eastern and western arms combined, by June 2019,likely to extend to 2021

Freight Service Delivery • Freight basket increased from 10 to 43 commodities includingfinishedindustrialproducts

• Coal loading to receive high priority Synergies expected from Mr Goyal heading coal and railway ministries

• Long haul trains under the names ‘Python’, ‘Anaconda’ and ‘Maruti’ have been planned to increase count to 50 from 15 by March, 2018

Improving energy efficiency • First solar powered train with a battery bank introduced• Use of CNG to run a train between the Rewati - Rohtak

section (81 km) • Installation of LED lights at railway stations continued

(c. 47% stations equipped by November, 2017); with targeted completion by March 2018

Cashless Paperless Ticketing • In efforts to promote Aadhaar integration with IRCTC accounts, the limit for bookings per account in a month has been doubled (6 to 12) for Aadhaar linked accounts

• Service charges remain to be withdrawn until March 2018,to encourage online ticketing

• SAARTHI - an integrated app for all railway related transactions and enquiries launched in July 2017

Tourism • New Rail Tourism Policy draft developed in November to push focus on luxury, heritage and pilgrimage tourism



• Budgetary allocation to railways expected to reduce; making it imperative for railways to bridge the financinggapthroughothersources(viz. internal revenue sources, borrowings, selling assets, private sector participation

• Capital expenditure allocation of Rs 1.48 lakh crore for the FY19 (~14% higher than FY 18); to be directed towards safety measures and capacity creation - doubling of tracks, gauge conversion, network growth and upgradation

• Dedicated allocation for improving safety

• Installation of CCTV systems across all trains and stations and total investment of INR 3,000 crore

• Automation of signalling systems requiring an investment of INR 78,000 crore likely to be approved in the budget

• Elimination of 4,943 un-manned level-crossings on broad level gauge

• Acquisition of 13,000 LHB wagons, 5,000 passenger coaches and 600 locomotive; Link locomotives via Indian Space Research Organisation (ISRO) satellites by December 2018, to reduce accidents

• LHB coach production capacity likely to be doubled to 8,000 per year, demand touted to increase by 30% over 2017

• INR 12,000 crore proposal to equip 6,000 electric locos with European Train Control System Level II has received clearance; likely to be made provision for in the budget

• Renewal of 36,000km of rail track in 2018-19 and elimination of 4,267 unmanned railway crossings on broad gauge routes in the next two years to reduce the number of rail accidents

• 12,000 wagons, 5,160 coaches and 700 locomotives, mostly of safer LHB technology to be procured to further reduce accidents

• All stations and trains to be equipped with WiFi and CCTVs towards increasing safety and security across the network

• Ensuring use of technology and fog safety devices as ‘Fog Safe’’ and ‘‘Train Protection and Warning System’’ will reduce weather related train delays and eliminate accidents

• Focus on Speed• Allocation of a major chunk of

infrastructure budget for ambitious Bullet train project; According to estimates, the bullet train project will need at least INR 1.1 lakh crore of investment during the 2017-22 period.

• High Speed Rail Institute in Vadaodra proposed to be set-up to provide manpower training to operate high-speed railway projects; expected to train 4,000 people once operationalized in 2020

RAILWAYS - Budget 2018 Expectations and Announcements




• Sanction of “Golden Quadrilateral” connecting the four metros (Delhi, Mumbai, Chennai and Kolkata) requiring an investment of INR 40,000 crore; Delhi-Mumbai and Delhi-Howrah sanctioned at a cost of INR 11,189 crore and INR 6,875 crore respectively last year, where the blue print is in progress

• Not addressed

• Augmenting non-fare revenue: Proof of concept for Rail Display Network has been tested at 13 stations - likely to get a push for implementation across 408 A1 and A stations in 2018. Ambitious target to establish the network across 2000 stations by 2020

• Not addressed

• Electrification expected to be given a major push, estimated to save the department INR 11,500 crore annually (through complete electrification) -deadlineadvancedby 2 years to 2020

• Electrificationof4,000kmrailwaylinetargetedtocutdownoperational expenses; complete electrificationis expected to result in INR 11,500 crores savings per annum

• Network Modernization and Station Redevelopment • Indian Railway Station Development Ltd to undertake

modernization of 600 railway stations, and stations with daily footfalls over 25,000 to be equipped with escalators

• Modern train-sets with state-of-the-art amenities and features are being designed at Integrated Coach Factory, Perambur; First such train-set Train 18 to be commissioned during 2018-19





• Capacity expansion and network upgradation• INR 11,000 crore allocated to expand Mumbai

transport system for adding 90km of double line tracks toincreaseaccessibilityandreduceroadtraffic

• Funds kept aside to develop suburban network in Mumbai (INR 40,000 crore for 160km) and Bangalore (INR 17,000 crore for 150 km) to augment metropolitan growth

• INR 4,253 crore allocated for Pune-Lonavala 3rd and 4th railway line to enable faster movement of express trains, and increase frequency of suburban trains

• 18,000 km of line doubling and transformation of entire network to broad gauge as key meaures towards eliminating capacity constraints




PORTS AND SHIPPING 2017 Round up

Industrial statistics • 27.5% increase in cargo capacity at major ports from 1065MMT in FY 17 to 1358 MMT in FY18*

• Cargo traffic at major ports at 499.41 MMT in FY18*as against 647.43MMT in FY17

• Container traffic continues to rise; 7.14% Y-o-Y growth to 67.7 lac TEUs in FY18*

Improving operational efficiencies • Efforts towards infrastructure upgradation & operational efficiencies through initiatives such as Sagaramala showing results, with average turnaround time dipping by 27% from 87.36hrs in FY 16 to 63.33 hrs in FY 18; Average output per ship berthday improved by 13% from 13156 MT in FY 16 to 14912 MT in FY18

• Sagarmala project witnessed allotment of 12 projects in FY18* as against initial plan of 59 projects

Berthing & Stevedoring policy, 2016 • Approved in Jul 2016, policy showing complete effect since 31st July 2017

• Policy mandates improving operational efficiencies of the ports by standardizing metrics to capture operational efficiency & impose penalties/ incentives to agents handling berthing & stevedoring activities

Major Ports Authorities, 2016 • Aimed at providing greater autonomy to major ports by creating individual authorities to each port responsible for development of the port as deemed fit by the authority

• Roles include entering into private partnerships, raising funds through banks/ international markets, tariff fixation etc.

• The bill still struggling its way through the parliament; report from Parliament standing committee was submitted in Dec ‘17

Model concession Agreement (MCA) • Changes to the MCA, 2016 were approved in Jan ’18 to bring greater transparency into the PPP projects undertaken by the Major ports.

• Addresses certain key concerns flagged by the private sector such as :

Equity exit within 2 years from COD,Reduction of land rent (200% to 120%), Methodology of royalty payment from percentage of gross revenue to fixed price MT of cargo/ TEU handled indexed to WPIFlexibility to deploy higher capacity equipment/facilities/ technology to improve productivityExtension of SAROD (Society for Affordable Redressal of Disputes) - Ports for dispute resolution between port boards & private partners to the existing concessionaires as well


Jal Marg Vikas Project • NW-1, the largest project under JMVP on River Ganga cleared by CCEA; Investment of c. INR 5,500 crore. in development of pathways, vessels and multimodal parks along the river have commenced. Expected to be complete by 2023

• Work for setting up of dredging and setting up of floating terminals on NW-4 has also commenced

• Roll-on/ Roll-off vessels have commenced operations on the rivers of Brahmaputra connecting Meghalaya & Assam, marking a major advancement in In-land water transport in India

PORTS AND SHIPPING 2017 Round up



• Major Ports Authority Bill, 2016 covers most of the amendments proposed by the parliament standing committee, currently under scrutiny with the Union Cabinet. Government

• Clearing the Bill will retain and enhance private sector interest in the sector

• Not addressed

• Greater budget allocation: Improve spending to complete projects in the 12 major ports to the tune of c. INR 20,000 crore.

• Recently announced high power committee chaired by Finance minister could assist in ensuring greater allocation to the sector

• Allocation to ministry of shipping for implementation of Sagarmala project doubled (INR 125 crore to 250 crore) c. 27% increase (from INR 3165 crore to INR 4042 crore) in fund for development of other port infrastructure development projects

PORTS AND SHIPPING - Budget 2018 Expectations and Announcements



POWER 2017 Round up

New Capacity Addition • Government focused towards renewable sources of energy in alignment with PM’s vision; c. 80% of the new capacity addition in FY18 has been through renewable, hydro and nuclear

Progress of UDAY • UDAY implemented in 31 states/UTs• DISCOM’s financial losses reduced from INR 51,589

crore in FY16 to INR 34,826 crore in FY17• Participating states have achieved a reduction of 1% in

Aggregate Technical and Commercial (AT&C) losses

Launch of SHAKTI (Scheme for Harnessing and Allocating Koyala Transparency in India) scheme

• Aims to provide coal linkages on auction basis to independent power producers so as to positively contribute towards the stressed asset scenario;

• A total of 27.18 million tonnes per annum auctioned with tariff discount going as high as 4p/unit

• Savings in tariff of INR 125 crore/year expected for up to 25 years

Nuclear Capacity Increase • Cabinet nod to set up 10 indigenous Pressurized Heavy Water Reactors (PHWRs) for nuclear power generation; Centre plans to double nuclear power generation capacity to about 14,000 MW

Other significant trends • Plans to put 5-6 coal blocks on auction for commercial mining by private players

• Cabinet Committee on Economic Affairs (CCEA) in the planning stage to finalize the methodology for allocation of coal mines

• Interest in commercial mining shown by Polish companies at the recently concluded Bengal Global Business Summit



• Excise Cut on Petrol and Diesel• With the election due in 2019, huge

pressure to reduce retail prices for petrol and diesel; need to reduce excise duty on petrol and diesel to negate the impact of rising global prices

• Basic excise duty cut by INR 2 on petrol and diesel and additional excise duty cut by INR 6

• However, petrol and diesel to cost the same with the introduction of a new road cess of INR 8 per litre

• GST on coal needs to be reduced from 5% to 2% to bring it in line with Countervailing Duty on same goods; important to ensure that input costs for power generation remains low

• Not addressed

• Increased focus on reducing coal imports and moving towards energy self-sufficiency might move theGovt. to expedite the opening up of commercial mining

• Not addressed

• Central government’s funding support through the Integrated Power Development Scheme, Deendayal Upadhyaya Gram Jyoti Yojana (DDUGJY) and Pradhan Mantri Sahaj Bijli Har Ghar Yojana (SAUBHAGYA) scheme would aid investment growth in the distribution segment

• The INR 1.6 trillion SAUBHAGYA scheme, launched in fiscal 2018,envisages 100% target achievement by December

• Allocation of INR 3,800 crore to DDUGJY – reduced from INR 4,814 crore allocated last year

• Allocation of INR 4,900 crore to Integrated Power Development Scheme (IPDS) – reduced from INR 5,800 crore allocated last year

• Allocation of INR 16,000 crore to Saubhagya scheme to enable last mile connectivity for rural households and likely to provide a boost in energy demand

• Access to bond markets likely to help meet 25% of debt and help players

• To help DISCOMs curtail their losses – in line with UDAY scheme

• Increased capital expenditure of railways• Expenditure on electrification and augmentation of

railway network likely to create additional power demand

POWER - Budget 2018 Expectations and Announcements



MINING 2017 Round up

Increased spend on Infra and Highways • Very high growth in steel and cement (16% and 17.3% respectively)

• Rise driven by favourable base effect stemming from the disruption in the wake of demonetisation in November 2016.

• Early indicators for industrial production in the organised sectors in November 2017 provide favourable signals, such as the uptick in growth of the core sector and sharp improvement in the expansion of automobile production and non-oil merchandise exports.

Customs duty on MgO coated coldrolled steel coils for use in manufacture of CRGO steel

• India imports 400,000 tonnes a year of CRGO, expected to decline, as Germany’s Thyssenkrupp starts production from a 50,000-tonne-a-year plant being trialled in western India

National Steel Policy 2017 • The New Steel Policy, 2017 aspires to achieve 300MT of steel-making capacity by 2030. This would translate into additional investment of INR 10 lakh crore by 2030-31.

• The enactment of the National Steel Policy should help create the necessary conditions to help domestic steel production match the anticipated pace of growth in consumption

Rise in exports, decline in imports • 52. 9% rise in steel exports (7.6 MT during the April-December period), aided by a slew of government measures and global steel price trends; imports grew at 10.9%

• Import growth sluggish due to increase in duties

GST Impact • Impact of GST on Iron and Steel Industry – Likely benefit of lower tax rate of 5% expected on major inputs used like coal and iron ore under GST. Transportation & logistics services are kept under 5% bracket which will raise help in reducing logistic costs. Marginal savings in cost of production, at 18% rate, as against average of 20% from existing tax rate.


MINING - Budget 2018 Expectations and Announcements


• Reduction in customs duty to NIL for Chromium and Nickel ores, Stainless steel scrap

• In the absence of domestic sources for these ores, Reduction in import duties would help stainless steel producers to be competitive vs. imports

• Not addressed

• Copper concentrate exemption from import duty

• High duty of 10.25% on copper concentrate - 96% of the country’s total requirement is imported

• Not addressed

• Hike basic customs duty on aluminium scrap to protect domestic industry

• Not addressed

• Considering the excess capacity in Indian refined copper industry as well as the rising imports, basic customs duty on copper products likely to be increased from 5% to 10% in this budget

• Not addressed

• Make in India necessitates the pacing up of accelerating minerals exploration;Extensivegeoscientificsurveys to produce high quality geological, geophysical and geochemical data required. Industry hopes for commensurate budgetary allocations.

• Not addressed

• Improve “Ease of doing business”• Structural Reforms like empowering

The Indian Bureau of Mines or State directorate of mines to enforce mining plans and mine closures

• Not addressed




• Decrease in basic customs duty on coking coal from 2.5% to NIL

• India is heavily dependent on imported coking coal, as domestic quality is unsuitable for the steel industry (due to its higher ash content). During April-September of FY18, 22.6 mn tonnes of coking coal were imported; Move would reduce costs for the steel industry and help to increase production.

• Not addressed

• Decrease in export duty on iron ore above certain grade levels

• Reduction or scrapping of 30% export tax on medium grade iron ore (applicable to ore with more than 58 percent iron, or Fe content); India has high surplus of this commodity, stockpile rose over the last five years to reach149milliontonnes at the end of the financialyear in March 2017. So far the steel ministry has opposed this fearing a domestic shortage of iron ore

• Not addressed

• Change in Custom duty on Finished goods• Decreased from 10% to 7.5% for:

bricks, blocks, tiles and other ceramic goods of siliceous fossil meals or of similar siliceous earths, other articles of stone containing magnesite, dolomite or chromite.

• Increased from 5% to 7.5% for:refractory bricks, blocks, tiles and similar refractory ceramic constructional goods, other than those of siliceous fossil meals or similar siliceous earths, other refractory ceramic goods

• LimitedimpactontheMiningindustry;beneficialonlyto a few segments

• INR 8.25 crore for mining research and development under the Science and Technology Programme aims to enhance capabilities.

• Deliverables not specified yet, but project proposalsto be invited from government institutions, PSUs, universities etc.

MINING - Budget 2018 Expectations and Announcements



CIVIL AVIATION 2017 Round up

Regional Connectivity Scheme UDAN • 325 new routes awarded under RCS-2 with 56 new airports and helipads being connected

• Disallowance of input tax credit on inputs (excluding services) for the economy class would result in an additional cost to the airlines. Due to increasing capacity and competitive intensity the ability of airlines to pass on the increased cost to customers is limited

New Airports • INR 4 Lakh crore to be invested in establishing 100 airports in the next 15 years, of which 70 airports will be in new locations

• 18 new airports in the country: They include Jewar(Greater Noida) in Uttar Pradesh; Mopa in Goa; Navi Mumbai, Shirdi and Sindhudurg in Maharashtra; Bijapur, Gulbarga, Hasan and Shimoga in Karnataka; Kannur in Kerala, Pakyong in Sikkim; Karaikal in Puducherry; Dholera in Gujarat and Bhogapuram in Andhra Pradesh

• Construction commenced in Mumbai and Noida• Kannur International Airport to be functional by

November 2018• GVK Power and Infrastructure limited signed

concession agreement with CIDCO to create a special purpose vehicle for developing the Navi Mumbai International Airport

Air India privatisation • Foreign airlines allowed to invest up to 49% under the approval route in Air India; Tata and Indigo have expressed interest in AI’s international operations


CIVIL AVIATION - Budget 2018 Expectations and Announcements


• Aviation Turbine Fuel to be brought under purview of GST regime

• Zero Rating to be prescribed for Maintenance, Repair and Overhaul under GST regime to boost domestic MRO industry

• Not addressed

• Increased InvestmentUpdate on upgradation of existing airport infrastructure Expected share of greenfieldinvestments to rise to 75% by fiscal2022Significantly higher fundallocation expected to MRO sector to facilitate the fast growing civil aviation sector

• INR 1,014 crore budget allocation for UDAN; 5 times increase in comparison to 2018-19

• Proposal for revival of 50 airports and viability gap funding for North-East connectivity will boost domestic airtraffic

• Action Plan for privatisation of Air India to be expected in 2018-19

• Government to shed 51% stake in Air India

• Funding for NABH (NextGen Airports for Bharat) Nirman to be raised by leveraging the balance sheet of AAI; initiative to increase the capacity of existing airports by 5x



URBAN DEVELOPMENT 2017 Round up

Smart Cities Mission • 9 new smart cities approved, totalling to 99 with a proposed investment of INR 12,824 crore - Moradabad, Bareilly and Saharanpur (Uttar Pradesh), Bihar Sharif (Bihar), Silvassa (Dadra and Nagar Haveli), Erode (Tamil Nadu), Daman & Diu, Itanagar (Arunachal Pradesh) and Kavaratti (Lakshadweep)

• 10 additional smart cities seek involvement of private sector totalling up to 21 PPP projects so far

• ~3%, (23), projects of 642 identified by the Smart Cities Mission were completed by February 2017, valued at INR 305 crore (of INR 38,021 crore available).

• Work on another 10% (65) of projects valued at INR 2,737 crore commenced. Of the remaining, 86% (554) projects “at various stages of implementation”

Heritage City Development and Augmentation Yojana (HRIDAY)

• Up to July 2017, 95.4% of central funds sanctioned for upgrading 12 heritage cities were unused

• INR 5.8 crore used in Varanasi and Amritsar (24% of the total amount used)

Urban Housing PMAY HFxA (Urban • Boost to housing sector due to modifications in the credit link subsidy scheme

• Raised income levels for eligibility, increased subsidized loans, relaxed norms with regards to build up area and inclusion of middle income group

• Work on 93% of sanctioned houses–meant to meet 16% of India’s urban housing shortage–incomplete as of January 2018. (Target of housing for all: 2022)

Swachch Bharat Mission Urban • Per capita budget allocation for 2017-18 for urban was INR 52 in comparison to INR 156 for rural

• INR 1,402.6 crore have been sanctioned to date of which 45% sanctioned for solid waste management and the remaining for IHHL&CTBs, IEC and CB&A&OE

• 51,734 wards with 100% door to door collection.• However, expenditure on waste processing and

conversion of waste to energy remains limited.


URBAN DEVELOPMENT - Budget 2018 Expectations and Announcements


• Urban Housing PMAY HFA (Urban)• INR 17,000 crore expected to be

allocated driven by the upcoming general elections and deadline of 2022 (Housing for All)

• INR 6,505 crore allocated for PMAY HFA (Urban); 7.6% hike in comparison to 2017-18

• Timely completion of 1.2 crore houses by 2022 highly unlikely with current resources and pace of project completion

• Swachch Bharat Mission Urban• Per capita budget allocation for

SBM-U lower than SBM-G and expected to increase in 2018-19

• Allocation towards Solid Waste Management likely to increase in comparison to previous year, with a shift in focus from 100% door to door collection to solid waste processing and conversion of waste to energy

• Possibility of establishing a central authority to set up waste to energy plants across the country through PPP

• INR 2,500 crores allocated for SBM-U; 8.69% hike in comparison to 2017-18

• Per capita budget allocation for SBM-U continues to besignificantlylessthanSBM-G.

• Emphasis on solid waste management and processing of waste to energy continues to be limited in comparison to construction of toilets

• Smart Cities Mission: INR 6,169 crore central assistance for Smart Cities Mission; 54.22% hike in comparison to 2017-18

• Central assistance to cover approx. 48% of total proposed investment for 9 new smart cities to be spent towards

Water connection to all households in 500 citiesSmart command and control centre, smart roads, solar rooftops, intelligent transport systems and smart parks


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