The biggest benefit that the latest Budget has conferred on the entire infrastructure sector is the removal of double tax on dividends, says Mr Kuljit Singh, Partner, Ernst & Young.

As infrastructure projects are typically developed through SPVs (special purpose vehicles), removal of double taxation can lead to a saving of at least one level of dividend taxation (in the existing level of 16.995 per cent, including surcharge), he explains in an e-mail interaction with Business Line.

Additionally, at present, a large number of developers are looking to set up holding companies for power, highways, ports and so on. The valuation of all of these holding companies would be positively impacted due to this measure, foresees Mr Kuljit.

Another positive from the Budget for infrastructure projects that he mentions is the reduction of duty on project imports from 7.5 per cent to 5 per cent. A key negative, however, is the duty structure on cement, which is expected to push up costs, rues Mr Kuljit.

While the Union Budget for 2008-09 addressed the needs of various infrastructure requirements, including that of social and rural infrastructure, there was not much to offer as tax sops, or for promoting private sector investments, bemoans Mr Vishwas Udgirkar, Executive Director Government Regulation and Infrastructure Development Practice, PricewaterhouseCoopers.

As evident from various reports and documents, the Government is relying on huge investments from the private sector to create infrastructure that can support the overall economic growth, he reasons. It was expected, therefore, that the Budget would address various issues relating to financing of infrastructure.

On that ground, the Budget has little to offer except the proposed change in the treatment of dividend distribution tax (DDT). Mr Vishwas concedes, though, that this could be a significant measure to encourage infrastructure financing, welcome by the industry.

Another financial measure that he highlights is the exemption of TDS (tax deduction at source) on listed corporate debt instrument, which is expected to help, over the long term, in the development of the debt market.

The Budget, however, has not addressed a number of issues like exempting foreign borrowings by infrastructure companies from withholding tax requirements, providing similar capital gain tax treatments for listed and unlisted equity, treating infrastructure holding companies as a separate class of NBFCs (non-banking financial companies), exempting Section 80IA companies from minimum alternative tax (MAT) and re-introducing Section 10(23G), lists Mr Vishwas.

Talking of the power sector, among the infrastructure components, Mr Kuljit also finds it upsetting that the Budget has not mentioned the extension of section 80IA tax benefit for power projects.

Non-extension of this tax benefit will have a negative impact on power projects which are being proposed today, as most of these may not be completed before March 31, 2010, which is the last required date for commissioning under the existing 80IA tax provision of the Income Tax Act, 1961.

The national fund proposed for power transmission and distribution (T&D), if properly structured, can be used to strengthen the T&D network at the state level, suggests Mr Kuljit. Also, the allocation of Rs 5,500 crore for Rajiv Gandhi Grameen Vidyut Yojana will positively impact the state-level networks.

As regards roads and highways, he sees nothing significant in the current Budget, but for an increase of around Rs 2,000 crore being proposed in the NHDP (National Highways Development Project), and an allocation of additional Rs 4,000 crore for rural roads.

In the medium to long term, the cut in excise duty from 16 per cent to 12 per cent for small cars may lead to increase in traffic on roads, thus positively impacting toll roads, he anticipates.