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Saturday, 02 Nov 2013
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Project investment lull continues in Apr-Sep 2013

 

The first half of 2013-14, April-September, has seen further erosion in fresh project investment. While the number of new projects announced increased on a Y-o-Y basis, investment planned therein declined.

 

Projects_Investment_ProjectsToday

 

A slowing economy, non-supportive global scenario and a non-functional government has had an inevitable fallout on project investment in the country, which has not only retarded in terms of projex, but has even witnessed a drop in the rate of execution of existing projects. There is a spike in project deferments/cancellations due to various hurdles faced by project promoters. No doubt, lately, there has been a flurry of government actions in improving execution of some giant projects but in some select sectors these efforts have yet to fructify.

 

The number of projects launched went up to 4,470 during H1 of 2013-14, from 4,150 in H2 and 3,944 in H1 of 2012-13. The envisaged investment in the projects was slightly lower at Rs 2.42 trillion in H1, as against Rs 2.59 trillion in H2 and Rs 2.56 trillion in H1 of 2012-13.

 

  Fresh Investment 2013-14 (Apr-Sep)
Sectors
Projects
Rs Crore
Share (%)
Manufacturing
433
29,656
12.2
Mining
26
14,144
5.8
Electricity
180
44,135
18.2
Services & Utilities
3,709
136,353
56.3
Irrigation
122
18,129
705
All Sectors
4,470
242,416
100

The improvement seen in the number of new projects is basically due to a number of infrastructure projects announced by public sector units. And as for the private sector, the number of projects dropped to 1,054 from 1,514 in H1 of 2012-13 and the entailed investment went down 66 per cent to Rs 527 billion. A large part of the public sector investment was found in sectors like roadways, railways and community services comprising rural and urban infrastructures. The public sector has played a major role in steadying investment launches in the past two-three years, even as the private sector lacked investment confidence in view of various uncertainties on economy and investment fronts, aggravated by eroding finances in existing businesses.

As in earlier two halves, Maharashtra has remained at the top, in the ranking by states in projex start-ups both, in number and entailed capex. With 602 new projects launched, the state has attracted Rs 31,743 crore of fresh capex commitments during H1. Gujarat came in second with 244 projects worth Rs 31,267 crore investment.

 

Project Implementation Thwarted

 

Reflecting the desperation mood of project developers from irresolution of several hindrances, project casualty reached a new high in terms of stalled projex. Three hundred ninety three projects, worth a record Rs 2.15 trillion were put on hold during the first half of the ongoing fiscal, against 575 projects worth Rs 1.36 trillion in the Q2 and 717 projects worth Rs 1.86 trillion axed during H1 of 2012-13.

 

Hurdles in clearing the last milestone in a project life probably worsened during H1. Only 518 projects involving capex of Rs 381 billion were completed during H1 of 2013-14, as compared to 1,631 projects worth Rs 1,936 billion entering the completion stage in H2 and Rs 1,391 projects worth Rs 1503 billion getting commissioned in H1 of 2012-13. Overall, the project implementation ratio in the private sector has remained below that in the public sector. This could be because of increasing thrust by the private sector in power generation where the implementation pace is low because of long gestation and a variety of hurdles in various clearances, and lack of fuel supply assurances.

 

This broad investment canvas put together from the 52nd Quarterly Survey by ProjectsToday, no doubt looks depressing with little hope of an early bounce back.

 

The economy is expected to improve in the second half of the year following a good southwest monsoon that should augur well for the farm sector as also pervasively impact other real sectors.

 

However, elections in eight states during Q3 and general elections by the end of the fiscal or early in the next fiscal will slowdown decision making in the government sector. Following eroding profitability and the resultant liquidity strap, India Inc may not be too eager for capex binge and would like to see the outcome of the general election before finalizing corporate plans.

 

Overall, the current fiscal, the second year of the ongoing 12th plan, is also likely to end with sub-optimal feat on the project investment front.

 

Manufacturing Sector Developments

 

 
  • Birla Corpn will invest around Rs 950 crore to set up new units in four states
  • CCEA has given its approval for an Integrated Processing Development Scheme for a textile unit
  • Zuari Cement laid the foundation stone for a cement grinding unit at Solapur, Maharashtra
  • Numaligarh Refinery signed two MoUs for its expansion plan
  • Akzo Nobel has commissioned its decorative paint plant in Gwalior, Madhya Pradesh

 

Infrastructure Sector Developments

 

 

 

Power Sector Developments

 

 
  • BHEL has invited bids for Suratgarh supercritical thermal power project in Rajasthan
  • BHEL has bagged a contract worth Rs 2,569 crore from Neyveli Lignite Corporation
  • Neyveli Lignite Corporation has invited EoIs for work related to the supercritical thermal power project in Uttar Pradesh
  • Tata Power to develop wind projects with a total generation capacity of over 160 MW
  • Nova Iron & Steel is setting up a waste heat recovery-based power project in Chhattisgarh

 

FDI Developments

 

 

 

Quote of the week:

 

M S Kapadia_Economics Research India Pvt. Ltd._ProjectsToday

"In this scenario, we feel that in what matters more for investment sentiment over short to medium term, the project execution has to improve, as this would make up for some slack expected in project start-ups and also create market for lots of capital goods and construction materials, which itself should spur investment in related fields."

-Dr. M S Kapadia, Director,
Economic Research India Pvt. Ltd.

 
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