The upcoming union budget should be focused on boosting private as well as the government's investment in infrastructure, the Confederation of Indian Industry (CII) said.
In its pre-budget memorandum to the finance ministry, CII said it has identified the development of adequate infrastructure as the most critical prerequisite for reviving the growth momentum of the economy.
Given that the 12th Plan envisages an investment of $970 billion (nearly RS.50,000 Crore) in infrastructure over the next five years and nearly half of which is to come from the private sector, urgent measures are required to make the sector viable and capable of attracting capital, CII said.
“There is a growing demand for augmenting our infrastructure facilities to sustain as well as accelerate the growth momentum. To provide a requisite push to investment in the infrastructure sector, fiscal policy would have to play an important role, especially at a time like this when business sentiments are low and the economy is in the grip of a slowdown,” said CII director general Chandrajit Banerjee.
CII suggested several measures to boost investment in infrastructure sector, including exempting infrastructure companies from the payment of Minimum Alternative Tax (MAT). Currently, infrastructure projects are entitled for a tax holiday under section 80IA for 10 consecutive years during the first 15-20 years of their operation.
“The levy of MAT during this period has greatly negated the tax benefit offered under 80IA,” CII said.
The industry body has also emphasised need for continuation of tax benefit for power sector under section 80IA sunset clause, which entitles a company for tax benefits only if it starts generating power by the end of current fiscal year.