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Return to Main Page of Budget 2005-2006

Indian Budget 2005-06
Full Text of P. Chidambaram, Minister of Finance, Budget Speech(Feb 28, 2005)



72. Telecommunication is the best way to provide connectivity in urban and rural India. By the end of January 2005, we had achieved a tele-density of 8.75 per cent. However, we are concerned with the low tele-density in rural areas. So far, Government has released Rs.1,700 crore to the Universal Service Obligation (USO) Fund, which has been fully utilized. A provision of Rs.1,200 crore has been made for 2005-06. 1,687 subdivisions will get support under the USO Fund for rural household telephones. 5.20 lakh village public telephones (VPTs) have been installed so far, and BSNL has undertaken to provide VPTs in the next three years to the remaining 66,822 revenue villages

National Highway Development Project

73. The National Highway Development Programme (NHDP) has made steady progress, and 5,172 kms of National Highways have been four-laned till January 2005 under NHDP I and NHDP II. To be launched in the next fiscal, NHDP III will target selected high density highways not forming part of the Golden Quadrilateral or the North-South and East-West corridors. I have provided Rs.1,400 crore for this purpose in 2005-06 to four-lane 4000 kms. A special package for the North Eastern region has also been approved, and I have allocated Rs.450 crore in this behalf. In overall terms, the outlay for National Highway development will be increased from Rs.6,514 crore in BE 2004-05 to Rs.9,320 crore in 2005-06.

Rural Electrification

74. A massive programme for rural electrification will begin in 2005-06 with the objective of covering 1.25 lakh villages in five years. The focus will be on deficient States. The programme envisages creation of a rural electricity distribution backbone, with a 33/11 KV substation in each block and at least one distribution transformer in each village. I have provided Rs.1,100 crore for this programme in the next year.

Indira Awas Yojana

75. Indira Awas Yojana is the flagship rural housing scheme for weaker sections. The allocation is being increased from Rs.2,500 crore in the current year to Rs.2,750 crore in BE 2005-06. About 15 lakh houses will be constructed during the next year.

Special Purpose Vehicle

76. The importance of infrastructure for rapid economic development cannot be overstated. The most glaring deficit in India is the infrastructure deficit. Investment in infrastructure will continue to be funded through the Budget. However, there are many infrastructure projects that are financially viable but, in the current situation, face difficulties in raising resources. I propose that such projects may be funded through a financial Special Purpose Vehicle (SPV). When large infrastructure projects are implemented, the foreign exchange resources could be drawn for financing necessary imports. Accordingly, I propose to establish an SPV to finance infrastructure projects in specified sectors. Roads, ports, airports and tourism would be sectors that can benefit most from the SPV. The projects will be appraised by an Inter-Institutional Group of banks and financial institutions. The SPV will lend funds, especially debt of longer term maturity, directly to the eligible projects to supplement other loans from banks and financial institutions Government will communicate the borrowing limit to the SPV at the beginning of each fiscal year. For 2005-06, I propose to fix the borrowing limit at Rs.10,000 crore.

77. I have also made a provision of Rs.1500 crore for “viability gap” funding for infrastructure projects. That mechanism will be used also in conjunction with the funding mechanism through the SPV.

PURA Clusters

78. The unorganized or informal sector accounts for 92 per cent of the employment and absorbs the bulk of the annual accretion to the labour force. PURA or Provision of Urban Amenities in Rural Areas is an idea that contains within itself possible solutions to a number of problems that afflict rural India such as unemployment, isolation from markets, lack of connectivity and migration to cities. The National Commission on Enterprises in the Unorganized/ Informal Sector has proposed pilot projects for ‘growth poles’ applying the PURA principles. The objectives are to expand production and employment in the unorganized enterprises around existing clusters of industrial activities and services as well as encourage the formation of new clusters. Once the proposals are firmed up, Government will take up the creation of a few growth poles, as pilot projects, in 2005-06.

National Urban Renewal Mission

79. The demographic trends in the country indicate a rapid increase in urbanization. India needs urban facilities of satisfactory standards to cope with the challenge. If our cities are not renewed, they will die. The National Urban Renewal Mission is designed to meet this challenge. It will cover the seven mega cities, all cities with a population of over a million, and some other towns. I propose to make an outlay of Rs.5,500 crore in 2005-06, including a grant component of Rs.1,650 crore for the Mission.

80. The Mumbai Metro Rail Project, the Mumbai Trans Harbour Link, the Mumbai Western Expressway Sealink and the Bangalore Metro Rail Project are examples of projects which could be supported through the Mission.

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