In this article we will discuss about the sectors considered forming a part of infrastructure projects in India.
India in order to sustain high economic growth requires large investments in areas like roads, ports, power, and telecom, etc. Apart from government spending, the infrastructure sector also requires private participation to make significant progress on development of infrastructure.
New initiatives such as Public Private Participation (PPP) increase in Foreign Direct Investment (FDI) limits and adequate funding support from the government has provided tremendous boost to the sector, ensuing robust performance in the last couple of years despite the global and domestic slowdown.
Creation of adequate and proper infrastructure recognized as the key priority and a necessary condition for sustaining the growth momentum of any economy. Infrastructure is a major prerequisite for economic growth and development both because it provides the basis for the production of goods and services and because it provides essential services directly to consumers.
Infrastructure development has a direct bearing on sustainability of economic growth and future development. Infrastructure inadequacies contribute to low levels of human development. There are many evidences that creation of infrastructure has large multiplier effects and has a significant impact on poverty reduction.
In India there is need of large and continuing amounts of investment in almost all areas of infrastructure. This includes transportation like roads, ports, railways and airports; communication like cable, television, fibre, mobile and satellite; and agriculture like irrigation, processing and warehousing. The term infrastructure in general refers to the basic physical systems of a country’s or community’s population, including roads, utilities, water, sewage etc.
The American Heritage Dictionary, defines the term ‘infrastructure’ as the “the basic facilities, services and installations needed for the functioning of a community or society, such as transportation and communication systems, water and power lines, and public institutions including schools, post offices and prisons”.
Early definitions relate to the core, areas of transportation, water supply, energy, waste, sanitation and so on. Later, other non-core areas like industrial parks, agriculture, communication etc. tend to get added. The private sector demand that various projects in tourism, healthcare, education and real estate be declared officially as infrastructure in order to have more tax breaks.
Any credit facility in whatever form extended by lenders (i.e. banks, FIs, or NBFCs) to an infrastructure facility as specified below falls within the definition of ‘Infrastructure Lending’.
In other words, a credit facility provided to a borrower company engaged in developing, operating and maintaining any infrastructure facility that is a project in any of the following sectors, or any infrastructure facility of a similar nature:
1. A road, including toll road, a bridge or a rail system
2. A highway project including other activities being an integral part of the highway project
3. A port, airport, inland waterway or inland port
4. A water supply project, irrigation project, water treatment system, sanitation and sewerage system, or solid waste management system
5. Telecommunication services whether basic or cellular, including radio paging, domestic satellite service (i.e. a satellite owned and operated by an Indian company for providing telecommunication service), network of trunking, broadband network and internet services.
6. An industrial park or special economic zone
7. Generation or generation and distribution of power
8. Transmission or distribution of power by laying a network of new transmission or distribution lines
9. Construction relating to projects involving agro-processing and supply of inputs to agriculture
10. Construction for preservation and storage of processed agro-products, perishable goods such as fruits, vegetables and flowers, including testing facilities for quality.
11. Construction of educational institutions and hospitals
12. Any other infrastructure facility of similar nature
The Companies Act, 2013, under Schedule VI has listed the following infrastructure projects or infrastructural facilities as infrastructural activities:
Transportation (including inter modal transportation), includes the following:
1. Roads, national highways, state highways, major district roads, other district roads and village roads, including toll roads, bridges, highways, road transport providers and other road related services
2. Rail system, rail transport providers, metro rail roads and other railway related services
3. Ports (including minor ports and harbours), inland waterways, coastal shipping including shipping lines and other port related services
4. Aviation, including airports, heliports, airlines and other airport related services
5. Logistics services
Agriculture, including the following, namely:
1. Infrastructure related to storage facilities
2. Construction relating to projects involving agro-processing and supply of inputs to agriculture
3. Construction for preservation and storage of processed agro-products, perishable goods such as fruits, vegetables and flowers including testing facilities for quality.
Water Management, including the following, namely:
1. Water supply or distribution
3. Water treatment
Telecommunication, including the following, namely:
1. Basic or cellular, including radio paging
2. Domestic satellite service (i.e. satellite owned and operated by an Indian company for providing telecommunication service)
3. Network of trucking, broadband network and internet services.
Industrial, Commercial and Social Development and Maintenance, including the following, namely:
1. Real estate development, including an industrial park or special economic zone
2. tourism, including hotels, convention centres and entertainment centres
3. Public markets and buildings, trade fair, convention, exhibition, cultural centres, sports and recreation infrastructure, public gardens and parks
4. Construction of educational institutions and hospitals
5. Other urban development, including solid waste management systems, sanitation and sewerage systems.
Power, including the following:
1. Generation of power through thermal, hydro, nuclear, fossil fuel, wind and other renewable sources
2. Transmission, distribution or trading of power by laying a network of new transmission or distribution lines
Petroleum and Natural Gas, including the following:
1. Exploration and production
2. Import terminals
3. Liquification and re-gasification
4. Storage terminals
5. Transmission networks and distribution networks including city gas infrastructure.
Housing, including the following:
1. Urban, and rural housing including public/mass housing, slum rehabilitation, etc.
2. Other allied activities such as drainage, lighting, laying of roads, sanitation and facilities
Other Miscellaneous Facilities/Services, including the following:
1. Mining and related activities
2. Technology related infrastructure
3. Manufacturing of components and materials or any other utilities or facilities required by the infrastructure sector like energy saving devices and metering devices
4. Environment related infrastructure » disaster management services
5. Preservation of monuments and icons
6. Emergency services (including medical, police, fire and rescue).
Such other facility service as may be prescribed.
The Provisions of Income-tax Act, 1961, says that deduction under Section 80-IA is available to an undertaking providing infrastructure facility:
The meaning of infrastructure facility, under the act, means:
1. A road including toll road, a bridge or a rail system
2. A highway project including housing or other activities being an integral part of the highway project
3. A water supply project, water treatment system, irrigation project, sanitation and sewerage system or solid waste management system, and
4. A port, airport, inland waterway or inland port or navigational channel in the sea.
The Insurance Regulatory and Development Authority (IRD A) defines infrastructure as it seeks to deploy 15 percent of the long-term funds available with insurance companies as its contribution towards alleviating the asset-liability mismatch inherent in this sector.