STALLED PROJECTS - WILL CHIDAMBARAM REALLY CLEAR THE WAY?
By Ruma Dubey
The big news of yesterday, after the big speech of Narendra Modi at FICCI was Chidambaram’s rhetoric. He said that the agenda of his meeting with industry honchos and top bankers in Mumbai was to identify projects which were stalled and get these 300-odd projects going.
Well, sounds good but will this happen or will it remain merely rhetoric? At the meeting, Chidambaram and the team identified 215 projects that have been stalled for one reason or other. Another 126 new projects were identified to which banks have sanctioned loans but which have not taken off. The FM stated that of the 215 stalled infra projects, 106 are from the power sector, 79 from road, 20 from iron and steel, 5 in cement and 5 in port sector.
The Centre for Monitoring the Indian Economy (CMIE) has a better story. In its report it has stated that in Q4FY13, stalling of projects rose 4% (YoY). The report states that 92 projects worth Rs.1.18 trillion were stalled in Q4FY13 compared to 157 projects worth Rs.1.14 trillion in Q4FY12. Also, investments worth Rs.1 trillion in 17 projects were dropped, 47 projects worth Rs.148 billion were abandoned and 28 projects worth Rs.16 billion were shelved.
The report said that the biggest project hit was in the power sector which saw projects worth Rs.625 billion being stalled but of this, Rs.600 billion was Nuclear Power Corporation’s power project in Andhra Pradesh after the Supreme Court out a stay on land acquisition. The next big hit was the realty sector, seeing projects worth Rs.505 billion getting stalled of which Rs.400 billion was HCC’s project at Maharashtra and Gujarat. The project at Gujarat was cancelled after HCC failed to make the down payment twice, even though the deadline was extended to accommodate payment. The other project in Mumbai, was redevelopment of a Govt colony but the govt decided to repair the colony instead of rebuilding a new one.
For FY13, CMIE stated, “444 projects worth Rs.3.98 trillion were stalled. The numbers were 17% lower than 549 projects worth Rs.4.81 trillion recorded during 2011-12. Out of these 444 projects, 145 projects worth Rs.2.1 trillion were just scrapped. 126 projects with investments worth Rs.1.02 trillion were shelved and 156 projects worth Rs.710 billion were abandoned. Reasons which dominated stalling of projects during 2012-13 were land acquisition problems, environment clearance, raw material shortage and issues related to mining licenses.”
On the other hand, Chidambaram, after his meeting yesterday, stated that projects were stalled mainly on account of 4-5 reasons – land acquisition, gas or coal linkages, environmental/forest clearances and in some cases the inability or unwillingness of the banks to restructure loans.
What is gratifying to note is that on 18th March, Chidambaram had a similar meeting with PSU bank chiefs and state-owned financial institutions and even then, he had come up with same statistics of projects stalled. Since then, what has started happening is that the process of region-wise of new and stalled projects has begun. Well, at least something is better than nothing…..
Though 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.
By the way, in the speech yesterday, Modi had mentioned about women empowerment and women entrepreneurship. He cited various examples but the one which remained with all was about Jasuben’s Pizza, which Modi said was more popular than Pizza Hut which was close by and was run single handedly by Jasuben, who passed away five years ago. The media did follow up on Jasuben Pizza, which is known as Jasuben’s Old Pizza and is now run by her son. It has two outlets, employs five people and serves around 100 people per day. And yes, the pizza’s are hugely popular but not as much with the youth as with the older generation. Maybe thanks to Modi’s speech now, the small pizza outlet might well turn out to become a huge outlet. Afterall, who could have asked for a better marketing guru than Mr.Modi himself! Now if only Chidambaram’s words have the same effect!