In a massive effort to boost investment in infrastructure, Finance Minister P Chidambaram is considering waiving withholding tax, dividend distribution tax and tax deducted at source on corporate bonds for companies investing in infrastructure projects, in Budget 2007-08.
These moves are being considered to improve investor returns and access to funds to meet India's requirement of $320 billion of investment in infrastructure in five years.
Certain enabling policies are also expected. These include permitting repo deals - short-term borrowings from the Reserve Bank - against corporate bonds (at present repurchase deals are allowed only against government bonds) and enhanced investments by pension and insurance companies like LIC in infrastructure.
Banks may also be allowed to increase their exposure to infrastructure companies.
The government is also expected to set up a $10 billion fund, carved out of foreign exchange reserves, which stood at $185.08 billion recently. The dollar fund will be used to finance capital goods imports by Indian companies.
These moves are a part of recommendations made by the HDFC chairman Deepak Parekh-led expert committee on infrastructure that was set up at the behest of Chidambaram.