New Delhi, Jan 20 (IBNS) In its pre-budget memorandum to the Ministry of Finance, the Confederation of Indian Industry (CII) 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 US$ 970 billion 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, stated the CII in its Pre Budget Memorandum to the Government.
"There is a growing demand for augmenting our infrastructure facilities to sustain as well asaccelerate 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 Chandrajit Banerjee, Director General, CII.
Among the various key measures suggested to provide fillip to investment in the sector, CII asked for 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, said CII.
CII has also drawn attention to the 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.
With a view to attracting large investment in power generation, which is critical for growth, CII has made a case for extending the sunset clause under Section 80IA till the end of the 12th five year plan period.
In order to reduce the construction and operation cost of projects, CII is in favor of restoration of the Section 10(23G).
By exempting the interest income of the financial institutions received from the Rupee term loan financed to the companies eligible for claiming deduction under section 80IA(4), this will greatly help in countering the high interest rate environment for the infrastructure companies, CII said.
Further, given the rapidly growing demand for housing from the low middle income population, it is critical to promote low cost housing. Currently, the government offers interest subvention of one per cent for low-cost housing loans up to Rs 15 lakh, provided the housing cost does not exceed Rs 25 lakh.
CII recommends that the interest subvention scheme is extended to total housing cost of up to Rs 35 lakh. This sector has one of the largest multiplier effects and therefore, an incentive for investments in low cost housing would create demand in more than 200 industry subsectors, the release said.
CII also wants 'Integrated township development' be accorded infrastructure status. "The tax benefits under 10(23G) will not only help in fighting the slowdown but will also rein in the sharp increase in dwelling prices that we have witnessed in the last few years" suggested Banerjee.
CII has recommended restoring a separate limit to section 80CCF outside section 80C, which would allow various government undertakings to issue tax free bonds for making investment in railways, power, housing and highways. In fact, private infrastructure companies should also be allowed to issue such tax free bonds for various infrastructure activities, added the CII press statement.