Innovative
Financing ?
DNA ( 07 March 2017 ) carries following news report :
“Metro rail Companies may be allowed to
issue TAX-FREE BONDS “
The Ministry of Urban Development has
proposed allowing agencies implementing metro rail projects to issue bonds,
including TAX FREE BONDS, to raise funds for projects
The Ministry had last week held a
workshop with States and Union territories to discuss the draft policy , which
will soon be sent to the Cabinet for approval
While detailing the Budget for 2017-18 (
april – March ), Finance Minister Arun Jaitley had said a new metro rail
policy - focussing on INNOVATIVE models of
implementation and FINANCING as well as standardization and
indigenization of hardware and software will be announced
Now consider this in light of the following recent
report from Asian Development Bank :
“ According to the ADB
estimates India would require to invest as much as $4363 billion during the 2016-30
period or an annual amount of $ 291 billion,
or to 7.4% of the GDP, which is way above that of all major economies and many
fold larger than the $ 118 billion currently spent.
However, mitigating
climate change would require that India spend $ 5752 billion over the fifteen year
period which amounts to an annual outlay of $ 343 billion or 8.8% of the GDP.”
As you can see from ADB report above ,
funding requirement of Metro Projects , is only a small fraction of India’s
total funding requirement for all types of infrastructure
So , why restrict TAX FREE BONDS to only METRO projects ?
In my view , this innovation must be extended to ALL types
of Infrastructure Projects , as suggested in my following blog / email ( to NDA
Ministers ) , some 3
YEARS ago :
Monday, 7 April 2014
At
the bottom of the 42 page Election
Manifesto of BJP ,
released yesterday , I tried to search , if in very small print somewhere ,
there was a footnote which read ,
"
Please , don't ask how we plan to implement these promises ;
From where we plan to find all the money to execute these projects "
Here
are my back-of-the-envelope estimates of what some of the MAJOR projects might cost :
------------------------------------------------------------------------------------
PROJECT
.................................... Approx Cost ( Rs Lakh * Crores )
-------------------------------------------------------------------------------------
100
Mega Cities........................ 90
Interlinking
of Rivers.................. 60
Sagar
Mala of Ports.................... 30
Highways
( 25,000 Km ).............. 50
Housing
( 100 mill units )............ 100
Rivers
Cleaning.......................... 10
Other
Infra Projects.................... 100
# Freight Corridors
# Gas Grids
# OFC Network
Total ..........................................Rs 430 Lakh Crores
------------------------------------------------------------------------------------
Admittedly
, not all of these money will be required in the very first budget that NaMo
government ( - of course , only if voted to power ! ) , would present by end
June 2014
But
a problem does not go away by postponement !
There
is only ONE viable solution to the FUNDING
problem , viz:,
*
Union Government must NOT
even try to fund these projects !
There is NO WAY , it can find these kind of money
through taxation !
There
will be a revolt !
ANSWER
*
Make it possible for the PUBLIC to invest into these projects by "
owning "
these projects - and earn a reasonable " tax-free "
return on investments
( Bonds ? ) in these projects
*
Towards this end , create
various INFRASTRUCTURE SPVs
*
Immediately modify PERSONAL INCOME TAX
regime as follows :
# Up to Rs 5
lakhs..................... NIL
# 5.1 - 10 lakhs....................... 8 %
# 10.1 - 20 lakhs...................... 6 %
# 20.1 - 50 lakhs..................... 5 %
# 50.1 - 100 lakhs..................... 3 %
# Above 100 lakhs...................... 1 %
What
is likely to happen with such " INVERSE
TAXATION "
regime ?
Following
few things :
*
Total personal tax payer base will go up
dramatically from current 4
crores tax-payers
*
with this " INVERSE TAX REGIME " , there will be no
incentive to evade
taxes and to generate " BLACK MONEY
"
There will be no resistance to accept ALL payments by cheque / electronic
Clearance
The more you disclose as your income , the less you pay by way of taxes
( Of course , incrementally )
*
For a change , we will learn to reward honesty / efficiency / productivity !
No need to bribe those Income Tax officers !
*
Suddenly , lakhs of crores of BLACK MONEY will become WHITE MONEY
*
There will be a huge surge in bank
deposits ( - even with , the inevitable
lower interest rates )
*
Banks will be awash with funds to finance businesses / infrastructure
projects etc , encouraging entrepreneurs / self-employed to set up new
businesses ( at 2 %
interest rates
of loans ) and generate millions of jobs
In
any case , BJP manifesto promises :
*
Rationalization and simplification of
the tax regime - which is currently
repulsive for honest tax payers
*
The process of bringing black money to
India , what belongs to India , will
be put in motion on priority
*
Minimize scope for Corruption
Dear Narendrabhai ,
Here
is your chance to ditch the " Historical
Baggage " into the Indian Ocean
and come up with an INNOVATION that will take India
ahead of China !
If
President Kubitschek of Brazil ( 1956-61 ) - son of a poor salesman - could
construct Capital city BRASILIA and a 1500 Km highway , in 41 months , surely ,
you can do better , 57 years later !
07 March 2014
www.hemenparekh.in
/ blogs
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