LARGE INFRA PROJECTS - BIG DECISIONS REQUIRED

By Ruma Dubey

Large infra projects continue to bleed. Somehow, this hemorrhage just does not seem to stop, threatening to drain out all life blood like a hemophiliac.   When the projects were announced, the market had celebrated with so much fervor but over the years, projects of big scale just do not seem to be taking off. And even if they do, it is after so much cost over-run and time delay that the project becomes unviable and irrelevant.

As per the latest estimates of the Govt, there are some 750 infra projects, spread all across India, valued from Rs.150 and above. 240 projects that are stuck are projects over Rs.1000 crore and these big projects have resulted into cost escalations of Rs.1.5 lakh crore and above. The project delay in many cases is spread not just over a couple of years but over a decade. The top five stalled projects belong to the Railways, followed by power and highways. The only gratifying news – ports and airports are doing much better.

What is shocking is that when we read such numbers, of projects getting stalled, we do not even bat an eyelid. We read it like just another news, moving on and not even recollecting the news after 15 minutes. This means, projects delays have become so routine, it is no longer even news worth remembering, forget discussing.

But when we discuss earning reports of companies, we surely talk about the performance being impacted due to poor project implementation and delays. Our capital good sector is a victim of these circumstances. So infra projects being delayed is routine news in India but it is causing serious problems on a micro level now; serious enough for the Govt to now probably take action.

The Center for Monitoring Indian Economy (CMIE) recently presented a very telling report. As per the report, the December quarter ended with 128 projects worth Rs.1.15 trillion being stalled. And amongst the reasons, it has cited – lack of promoters interest in implementing the projects as the biggest reason, stalling some 41 projects. Next comes issues with land acquisition, which stalled 11 projects. Then came delay in fuel linkages which stalled 6 projects; 8 projects were stalled due to unfavorable market conditions;  lack of funds affected 9 projects, 5 projects had to be scrapped as they did not get environmental clearances. No reasons were disclosed for stalling of project around 16 projects with investments worth Rs.44 billion.

The manufacturing sector bore the biggest brunt of stalled projects with Indian Oil’s west coast refinery worth Rs.733 billion project being the largest. Other sectors affected were steel, cement. Power sector as the second worst hit after manufacturing with 7 projects worth Rs.207 billion stalled mainly due to non-availability of feedstock.  5 transport infrastructure services projects were stalled, of which 3 were railway projects promoted by the Northern Railways. Realty sector shelved 14 projects of which 13 were residential. Of this, DLF accounted for 3 cancelled residential projects.

The news is that the Prime Minister, for whom infra is a pet peeve, while addressing the NITI Aayog meeting on Monday, might announce some reformatory measures for these stalled projects. Grapevine has it that the Govt could announce scrapping of projects where the work has not even begun and this might means some 7-10% of small projects getting scuttled. The Govt will then devote all energies to speed up work on projects where more than 50% work has been completed, to avoid further cost and time overruns.

It would be really interesting to see how issues of land acquisitions will be resolved. Govt’s own project of GAIL is today stalled due to land issues. And coal-gas linkages? Govt plans to delink forest and environmental clearances or maybe that is one place where by bending rules to blend with the needs, albeit at the cost of the environment, some middle path could be worked out. Mining licenses? Now this is another can of rotting and stinking worms.