InfraLive, January 2021

InfraLive, January 2021

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SKU: Vol. VII - Issue IX Category:

Budget 2021-22 is all about Big Stimulus. At the same time, the government has made it clear that it will carry out administrative strikes against those elements of domestic industry which abuse protective measures. A case in point is the temporary revocation of the CVD on certain steel products which were mostly imported from China. This duty was levied in 2018 to protect the domestic industry. However, instead of behaving responsibly, steel manufacturers formed cartels and colluded on pricing. The consequences were painful for the construction industry and highway projects. The construction industry which has been one of the worst sufferers of the pandemic is still reeling from the effects. Evidently its fears have not been allayed by the revocation operable till September 2021. Barely ten days after the budget announcements, the Builders Association of India, put out full page advertisements in leading newspapers headlining cartelization protest and complained about unreasonable price hikes of steel. It also alleged similar cartelization in the cement industry.

On previous occasions, union minister Nitin Gadkari had on several public platforms mentioned about the prevailing cartelization in the sector which has made the cost of road and bridge construction unreasonably high.

The government must pay attention to such red flags particularly since a historical outlay has been made for the highway sector at Rs 118,100 crore of outlay – the highest ever.

Overall, against a revenue of Rs 19.76 lakh crore, the government has proposed to spend Rs 34.83 lakh crore, which means a fiscal deficit of about Rs 15.07 lakh crore at 6.8 per cent of the GDP. This it plans to cover-up through borrowings. During FY 2021-22, it aims to raise Rs 1.75 lakh crore through disinvestments.

Privatisation has dogmatically been considered a bad word in political economy. The finance minister did away with this hindrance and boldly used the word while announcing the government’s decision to privatise two public sector banks, one general insurance company and the decision to have bare minimum government presence in key strategic sectors of Atomic Energy, Space and Defence, Transport and Telecommunications, Power, Petroleum, Coal & other minerals and BFSI.

In the petroleum sector a new levy of excise duty has been imposed as Agriculture Infrastructure and Development Cess for development expenditure in the agri sector. To balance the burden of this tax, basic excise duty and Special Additional Excise Duty on Petrol and High-speed diesel have been reduced. Another consumer facing measure in the sector has been the expansion of the Ujjwala scheme, whereby 1 crore more LPG connections will be added to the existing 8 crore beneficiaries of the scheme.