USD 47 billion worth Projex Shelved

According to the data released by ProjectsToday.com in India during the first six months of the current fiscal (April-September 2012) around 727 projects entailing a total project investment of Rs 254,280 crore (USD 47 billion) were shelved by their respective promoters. Last fiscal during the same period, 333 projects worth Rs 97,714 crore (USD 18 billion) were shelved.

Private companies, which are quick to shelve their unviable projects, dropped around 456 projects, while the government agencies accounted for the remaining non fructified projects.

Not Ro-Ro, Rail on Lorry

The day will not be far off, if the Indian Railways fail to modernize their stocks (coaches, railway lines, signals, etc.), its coaches will have to be moved around by Indian Lorries, as shown in the below picture!

It is high time the Railway Board take up modernization program on priority basis and go slow on new projects. Railway Board many a times is forced to take up new lines/projects due to political pressure. These projects though economically unviable are taken up under the garb of socially desirable. As a result, most of the projects remain in papers for long.

According to ProjectsToday.com, as of 31 October 2012, there were 760 railway projects costing USD 85 billion. Indian Railways with a network of 63,974 km carry around 7 billion passengers and 833 million tonne of freight traffic every year.



Rail on Lorry, Indian Style!

 

UPA II Coming Alive

After a long wait, the country saw some bold policy interventions from the UPA government today (14 Sept 2012). These measures came on top of yesterday's decision to hike the diesel price by Rs 5 and limit the subsidised LPG (liquefied petroleum gas) cylinders to six per year, per family.

To begin with, the government decided to revive the policy to allow 51 per cent FDI in multi-brand retail. The decision earlier passed in November 2011 was put on the back burner following stiff opposition from the allies. This time it has played safe by giving state governments right to implement the policy or not in their territories. The ruling Trinamool government in West Bengal was the first to say no to the policy. MNCs like WalMart of the USA, Carrefour of France and Metro of Germany are the major immediate beneficiaries.

Heeding to the long standing demand of a section of Indian private aviation sector, the Cabinet decided to allow foreign airlines to hold up to 49 per cent of the equity in Indian airline companies. Kingfisher and Spicejet are the immediate beneficiaries. Both are currently debt stressed.

The UPA government also raised the FDI limit from 49 per cent to 74 per cent in Broadcasting, Cable and Dish TV services.

Better late than never. To meet the PSU disinvestment target of Rs 30,000 crore set for the fiscal 2012-13, the Cabinet gave green signal to disinvest 10 per cent stake in Oil India, 9.59 per cent in Hindustan Copper, 12.15 per cent in NALCO and 9.33 per cent in MMTC. In all, the government hopes to garner around Rs 15,000 crore from the sale of equities. Last fiscal, it managed to raise only Rs 14,000 crore against the target figure of Rs 40,000 crore.

The Bombay Stock Exchange (BSE) reacted with a bang 444 point rise (highest in the last 14 months) to the above measures. Expressing their satisfaction over the delayed reform measures, Indian industry captains wants the government to implement the same without any roll backs.

Indian Cement Industry - Victim of Policy Paralysis

Recently, the Union Minister of State for Commerce and Industry stated in the Parliament that the country would see a capacity addition of 13.5 million tonne during the fiscal 2012-13. As of March 2012, the combined cement manufacturing capacity stood at 336.10 million tonne. Despite of the low capacity addition, the total capacity is expected to outstrip the demand. The slowdown witnessed in infrastructure building process coupled with the industry specific problems are expected to curtail the projex activities in this sector in the next couple of years.

According to the latest information available with ProjectsToday.com (a database monitoring over 50,000 projects envisaged across India) of the 209 cement projects lined across the country as at the beginning of March 2012, nearly three-fourth of them are delayed considerably. Most of these projects where announced three to four years ago and were expected to be commissioned by March 2015.

While the delays in getting government clearances, mining leases and the required land are the prominent reasons for the time overruns seen in the delayed cement projects, the current economic slowdown, reduced spending in the real estate sector and the slow pick up in the infrastructure projects has also forced cement manufacturers to go slow on their capacity addition/expansion programmes.

As of March 2012, of the 209 cement projects nearly 153 projects entailing a total investment of around Rs 1,04,000 crore and an aggregate capacity of 293 million tpa (tonne per annum) were facing time overruns of over two years. As a result of the overall slowdown in project implementation, the country will see capacity addition of 80 million tpa during 2012-2015 as against 117 million tpa of capacity addition happened during 2008-2011.

During FY13, as per the information available with ProjectsToday around 26 cement projects with an aggregate capacity of 37.38 million tpa will fructify. Of this, cement projects of ABG, ACC, Birla Corp, Indian Cements, Jaiprakash Associates, Reliance Cementation projects are of large size.

Cement projects by States

The top five states – Madhya Pradesh, Karnataka, Chhattisgarh, Gujarat and Rajasthan together accounted for 70 per cent of the total envisaged capacity addition and around 71 per cent of the total projex.

Madhya Pradesh, which has the largest cement grade lime deposits in India, tops the state wise list with 39 projects having aggregate capacity of 81 million tpa. The limestone reserve in the state is estimated at 5,921 million tonne. Bhushan Steel, Emami Cements, Reliance Cementation, Sanghi Energy, Surya Global Cement and Visa Cement have lined up mega cement projects with capacities of 3 million tpa or more in the state.

The state also leads in terms of delayed cement projects. As of March 2012, 33 projects planned in the state are facing time overruns of over two years. Most of the projects for which MoU signed during the State’s Investor’s meet in 2010 have not reported much progress in implementation.

Tales of Delayed Projects

The third week of August (12-18, 2012), saw a number of reports on project delays. The reasons cited for missing the deadlines were faulty planning, opposition from locals, non availability of equipment in time, liquidity crunch, etc.

It is now certain that India will not be able to meet the targeted addition of 1000 MW in the Solar power segment by May 2013. Though the government has managed to find private players to set up the targeted projects, the power developers are finding it difficult in executing those projects because of two main reasons – lack of enough ground stations to measure solar radiation and shortage of Heat Transfer Fluid (HTF) as there are only two suppliers of HTF globally.

It is also certain that the ambitious plans of the Union Ministry of Roadways and Transport to build 1,000 km of expressway at a cost of Rs 16,680 crore under Phase IV of the NHDP will not see making much head-way in the 12^th Plan either. The Ministry intended to set up the expressways in the 11^th Plan. The poor response NHAI is getting for its highway projects has made the ministry to go slow on its expressway projects. Despite all out efforts, NHAI has not managed to reach its goal of building 20 km of highways a day.

Paradeep Refinery has stated that its 15 million tonne refinery will miss the deadline of September 2012 at least by one year. Failure of BHEL to set up its captive power plant in time, non receipt of environment clearances for its jetty and delay in construction of pipelines and coastal roads because of land issues and opposition from locals has forced the company to revise the completion date of its Rs 30,000 crore project to September 2013.

Change in Tax rules and liquidity crunch has forced GVK Power to put two of its mega projects on the back-burner. The company has decided not to set up the proposed SEZ project in Tamil Nadu as the projex proposal has become unviable as SEZs now have to pay Minimum Alternate Tax (MAT). The company has also deferred its proposed Rs 7,000 crore greenfield seaport project at Okhamade in Gujarat. The company has failed to reduce its debt burden estimated at Rs 13,000 crore.

India - Population: 1.22 billion, 83 athletes & 6 Medals

The 2012 Summer Olympics, London, came to an end on 12 August 2012. Indian Olympic Association sent 83 athletes to participate in 13 different sports segments. Given the success we had tasted in the Beijing Olympics and in the recently held Commonwealth games, the expectations from Indian participants were very high. However, we ended with only six medal haul.

While the Indian Hockey team, the Tennis team, Vijender Singh (Boxing) and Abhinav Bindra (Shooting) disappointed us, the following SIX made India proud. We Salute them for their achievements!

Vijay Kumar, Shooting - Silver
Sushil Kumar, Wrestling - Silver
Mary Kom, Boxing - Bronze

Saina Nehwal, Badminton - Bronze
Gagan Narang, Shooting - Bronze
Yogeshwar Dutt, Wrestling - Bronze

Sensible Political Decisions

The last week of July saw some sensible political decisions in the infrastructure arena.

There is no doubt that availability of land, that also in time, is one of the most cited reasons by the project promoters for the delayed off take of projects in India. The recent step taken by the Indian government to do away with the Cabinet Committee permission for transfer of government owned land for public-private-partnership (PPP) projects is expected to expedite the project implementation by a minimum of six months. As per the new guidelines land transfer from Central ministries to statutory bodies or public sector undertakings will now be outside the purview of Cabinet clearance.

Though Uttar Pradesh government has been identified as one of the erring states which plunged 19 Indian states into darkness by drawing more than allotted power, last week the government took some fruitful decisions also. First, the UP chief minister laid the foundation stone for the Rs 2,770 crore road project being set up by SEW Infrastructure.  The BOT project seeks to take up four laning work of the 206-km stretch between the Delhi–Saharanpur section. 

To top it the chief minister has agreed to inaugurate the six laned access-controlled Yamuna Expressway on 9 August 2012. The 165 km expressway was awarded and built during the BSP government regime. The expressway built at a cost of Rs 14,000 crore is expected to reduce the travel time between Agra and Greater Noida from four hours to around one-and-half hours.

Quote of the week

“The situation looks challenging, no doubt, but we simply have to get accustomed to dealing with these headwinds. What gives us hope is that the Indian consumer is aspiring for a better life,” Nitin Paranjpe, CEO & MD, Hindustan Uniliver Ltd.