Infrastructure projects worth Rs 7 lakh crore stuck in red tape

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NEW DELHI: Projects worth over Rs 7 lakh crore — which is equivalent to almost half the government spending in the current financial year — are held up in the absence of environmental and forest clearances, land and fuel, putting strain on the creaky infrastructure in the country and becoming an obstacle for an economy striving to get into a high growth trajectory.

According to data compiled by state-run banks for a meeting with finance minister P Chidambaram, the amount is locked up in 215 projects spread across power, roads, ports, cement and steel, each with an estimated cost of Rs 250 crore or more. Any delay will push up the overall cost of setting up the projects, bankers said. It also increases the risk for the public sector banks, which have already disbursed loans amounting to Rs 54,000 crore.

"The delays tend to have an impact on other projects as well and it results in a vicious cycle and impacts overall sentiment," said Arvind Mahajan, head of infrastructure and government practice at consulting firm KPMG.

Although the government is betting on the Cabinet committee on investment to remove the hurdles, experts say it is not sufficient. "What we are doing is patchwork, which will not work," said Vinayak Chatterjee, chairman of Feedback Infrastructure, a consulting firm where L&T, IDFC and HDFC are also shareholders.

The biggest hold-up is in the power sector (Rs 5.39 lakh crore), followed by roads (Rs 1.23 crore) and steel (over Rs 32,500 crore). Even flagship projects like the ultra-mega power projects such as Sasan and Coastal Andhra are held up, although they were bid out ostensibly with all approvals in place.

Power sector hit hard

An analysis of data for the power projects, including a few linked to transmission, shows that they have been hit hard by the delay in environmental and forest clearances with as many as 37 projects stuck for lack of approvals. In a few cases, like in Tamil Nadu and Jharkhand, state agencies have held up the green clearances. In terms of value, the cost of these projects adds up to a staggering Rs 1.92 lakh crore.

Chatterjee suggested that the government could prepare a map of the country with zones demarcated for activities. Besides, he said the Centre and state agencies need to stop passing the buck on green clearances.

The other critical factor hobbling the power sector seems to be the availability of fuel — coal as well as gas. As many as 31 projects are held up with the proposed investment pegged at around Rs 1.4 lakh crore. There is, however, an element of double counting as banks have cited multiple factors for the delay of projects. For instance, the Athena power project in Chhattisgarh has been delayed due to the absence of fuel, and also due to the fact that around 90 acres of land is yet to be acquired, Allahabad Bank has told the finance ministry.

There may be another reason for counting the same project in multiple places: different banks have given different reasons for delay in the same project. For instance, Andhra Bank has said that Sasan Power, the 4,000 mega watt ultra-mega power plant, is held up as clearance from the ministry of environment and forests for coal blocks is pending. Bank of Baroda has said there was a delay in handing over land.

Adani Power Maharashtra's project seems to suffer from even more complications that range from land acquisition to green clearances, delay in award of coal blocks as well as equipment related issues.

For the sector as a whole, land is the third biggest problem as lenders have cited it as the reason behind the delay in 26 projects, with investment adding up to nearly Rs 1.47 lakh crore.

But when it comes to highways, land is the single biggest roadblock, delaying 48 projects across the country. The next biggest culprit is environmental clearances although approvals are expected to be faster after the recent rapprochement between the National Highways Authority of India and the environment and forests ministry.

Although NHAI and the highways ministry have cited lack of bank funding to developers as a major reason for the lack of interest in new projects, lenders have told the finance ministry that it is the inability of agencies such as railways to give right of way that has put over a dozen projects in the slow lane.

Banks would make you believe that funding is not an issue. At least that's what they have told the finance ministry.

Infrastructure projects worth Rs 7 lakh crore stuck in red tape - The Times of India

 

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When UPA 2 came to power, ambitious targets were set for pushing forward spending of Infra-structure in a bid to boost economy and remove several bottlenecks. However in due course of time, several factors became a roadblock notable of which are Land acquisition policy and timely clearance from Environmental and forest ministry. In a seminar last year with PM, several noted industrialists literally complained against Ministry of environment for sitting on the files for too long thereby delaying the projects.

One of the big reasons for economy slowing down to levels it is now is the fact the any project execution is still amongst the slowest in India compared to other growing economies. With interest rates already very high, availability of capital for new projects is quite costly. However if a company finds a resource to fund a new project, it finds it excruciatingly slow to start and complete the project. The interest starts to pile the moment a loan is approved and disbursed, and if project delays, the cost of interest starts to make an endeavor loss making unless revenue starts flowing quickly. This situation is driving more and more projects either to abandoned altogether or to be shifted to a better country. In the end its the economy that is loosing.