INSUBCONTINENT EXCLUSIVE:
budget for 2019-20, sources said
Introduction of tax-free bonds to boost investment is a usual way for raising funds by infra companies or PSUs, sources said
If that happens, the National Highway Authority of India (NHAI) could be an immediate beneficiary.If one sector which is likely to get
maximum Budget focus after social sectors in the upcoming Budget, it is infrastructure, said the sources
In infra, it is the highways where the government had increased allocation by 6 per cent and set aside Rs 83,000 crore for the 2019-20
interim Budget.The highways sector has been one of the best performing areas of the government with the expenditure rising from Rs 34,345.2
crore in 2014-15 to Rs 78,625 crore in 2018-19
In its Interim Budget presented in February, the government had allocated the highest-ever budgetary support of Rs 83,016 crore to the
highways sector, but it was less by Rs 2,000 crore of the 2018-19 Budget allocation.Infra majors can hope Budget to approve fresh issue of
tax free bonds to raise capital
NHAI chairman NN Sinha said the Road Transport and Highways Ministry has asked for Rs 37,000 crore for the 2019-20.Sources said government
needs capital in the infra sector to revive the economy and tackle unemployment
With tax revenues slow, the funds have to be raised from market, so, tax-free bonds are a good option.Tax-free bonds, issued by the
government enterprises, are considered attractive by investors as they offer a fixed interest rate and are a low-risk investment avenue
They most attractive feature is absolute tax exemption as per Section 10 of the Income Tax Act.The tax-free bonds generally have a long-term
maturity of typically ten years or more, and government invests the money collected from these bonds in infrastructure and housing projects
Qualified institutional investors such as trusts, co-operatives and regional banks and corporates are regular investors in tax-free bonds
Individuals, including members of Hindu Undivided Families (HUF) and NRIs as well as high net-worth individuals, often choose this to
diversify their portfolio.There are many public undertakings that offer and issue tax-free bonds
NHAI, NTPC, Indian Railways, Rural Electrification Corporation, Housing and Urban Development Corporation, Indian Renewable Energy
Development Agency, Rural Electrification Limited and Power Finance Corporation are regular issuers of tax-free bonds.NHAI has no less than
10 bond issues active in the market
Coupon rates typically vary from 7.14 per cent to 8.3 per cent
The tenures are of the order of five or ten or fifteen years
Some are due to mature in January 2022 while others as late as 2031
All have face value of Rs 1,000 and all are trading at premium ranging from 10 per cent to 20 per cent.NHAI bonds are active in the
secondary market and are readily available.
