|Thursday, 12 January 2012 17:29|
Lots of projects in pipeline, but stalled ones up hugely
With R139 lakh crore worth of projects on hand in December last year, it is obvious India has enough of a project pipeline to sustain a high level of investment for the near-to-medium term. But what is alarming, as CMIE’s latest CapEx data shows (reported in FE on Wednesday), there has been a 41% fall in the value of new investments announced in the December quarter, which means the pipeline is getting weaker. The value of new investments per quarter rose from R66,700 crore in FY94-FY04 to R1,63,000 crore in FY05-FY06 and R5,14,300 crore in FY07-FY09. It then started falling, to R4,16,600 crore in FY10 and R4,08,600 crore in FY11—for the June quarter in FY12, it fell to R3,10,000 crore, to R2,26,800 crore in September and finally to R1,87,900 crore in December.
More than the number of new announcements, since the pipeline continues to be strong, is that project completion is also falling equally dramatically. While R35,900 crore worth of projects were completed in the December quarter, this was 53% less than in the September quarter—the saga of declining completed projects started in 2010-11. Correspondingly, the value of under-implementation-but-stalled projects continues to rise dramatically, to R5,74,500 crore in December from R4,23,400 crore in September, a 33% hike—compared to a year ago, it was almost double.
Not surprisingly, the largest proportion of stalled projects are in the electricity sector, a combination of the problems various ultra-mega power plants as well as others are facing when it comes to coal and gas supplies as well as the sharp deterioration in the finances of the sector—annual power sector losses rose from R27,000 crore in 2006-07 to R63,548 crore in 2009-10 and the outstandings of SEBs rose to R3.1 lakh crore in 2009-10. Not surprisingly, the number of power projects among new announcements is dramatically down. Construction projects are the next largest segment of stalled projects, followed by those in the metals sector. While the former largely reflect the problem of land acquisition and the weakening financial position of the real estate sector, the latter is related to environmental concerns. The lesson is clear: instead of looking for new projects, India would do much better if it just concentrated on removing hurdles for existing projects.