In the ’90s, the government took the decision not to play around with the overall tax rates in every budget, especially in direct taxes. Every finance minister has abided by this decision. The result has become too well established — the total tax receipts of the government have moved up spectacularly.

Something similar needs to happen for the infrastructure sector in this forthcoming Union budget.

Finance Minister Pranab Mukherjee would do the sector a massive benefit if he can insist that infrastructure policies will not be tampered with in the next four years. The results are then sure to start flowing in. To realise the significance of taking such a step, Mukherjee just needs to see the shattering changes made in road sector policies in the last one year of the first UPA government and what disaster they have brought. The pace of road construction slipped to less than 2 km a day, while the government moved to first cap the number of bidders in any project to five, then moved away to single bidders — and then leaked information that, instead of asking the developers to bid on BOT basis, or both building and earning revenues from the project by charging tolls, it would subsidise unviable stretches by going in for annuity models, or shadow tolling.

The finance ministry has now changed the rules for roads and other public-private partnership projects (revised RFQs) by mandating that the bidders must have a turnover that is at least twice the cost of the project. However, nowhere in the new set of rules does it say that these will hold good for the next, say, five years. Since an average road project of about 100 km costs upward of Rs 500 crore, often near Rs 700 crore, it would be a crazy bidder indeed who would take a chance on that sort of investment if he is not sure of some stability in policy.

... contd.