Cash crunch, high costs stall 666 projects in 2010

Suresh P. Iyengar Mumbai | Updated on January 25, 2011

Power, roadways, refineries, steel projects top in cancellations

India Inc has put off 275 projects worth Rs 67,000 crore in manufacturing and another 307 services and utility projects worth Rs 25,000 crore in 2010 due to various reasons including cost overruns, paucity of funds, high finance costs and delays in obtaining Government approvals.

A total of 666 projects with an investment of Rs 1,74,000 crore were stalled in 2010 against 519 entailing an investment of Rs 1,36,627 crore in the preceding year, according to the 41st survey conducted by ProjectToday, one of the largest online databases on investments in India.

Project cancellation

While in the Government sector, project cancellation was limited to electricity and roadways, the private sector saw large-scale cancellations in refineries, steel, aluminium and electricity. In the electricity sector, private players stalled 58 projects against 16 by government entities.

On the positive side, corporates commissioned 1,520 projects across sectors at an investment of Rs 1,67,581 crore in 2010. Of these, the private sector's contribution was 1,311 projects worth Rs 1,14,522 crore.

However, the number of projects fell by 35 per cent from 2,328 at an investment of Rs 1,83,261 crore in 2009. Mr Shashikant Hegde, CEO, ProjectsToday, said the gap between projects completed in the last two years may narrow down as the information on projects commissioned comes with a lag of three to four months. At best, there is a possibility of 2010 numbers increasing to 2,000, he added.

Automobiles, cement, steel and refineries were the four major sectors which saw record project completions. In the infrastructure sector, airports, roadways, SEZs and ports saw substantial investments.

Gujarat, with 17.7 per cent of total projects completed, and Maharashtra (14.5 per cent) alone accounted for a third of projects commissioned in 2010. Tamil Nadu and Andhra Pradesh also saw sizable investments progressing from projects to operational capacities.

New projects

The number of new projects announced in 2010 totalled 9,919 at an investment of Rs 7,95,144 crore. This was dip from 9,344 projects (Rs 6,26,119 crore) in the preceding year. The country also saw 3,987 private start-ups worth Rs 4,52,300 crore in 2010 with a bulk of fresh private investment coming in electricity, petrochemicals, cement, metallurgy, machinery and construction sectors. Government units announced 5,932 start-ups worth Rs 3,42,844 crore during the year.

The manufacturing sector saw 1,686 start-ups (Rs 2,12,867 crore) largely in textiles, fertilisers, petrochemicals, refinery, cement and steel sectors. In textiles, major investments to increase spindle capacities were done by SEL Manufacturing, Alok Industries, Birla Cotsyn, Hanung Toys and Vardhaman Textiles.

IFFCO's Rs 10,000-crore urea project in Andhra Pradesh's Nellore district was the largest in the fertiliser arena with Tata Chemicals' Rs 4,000 crore a distant second. In petrochemicals, Reliance Industries' Rs 16,000-crore petroleum cracker project and Rs 6,850-crore investment in paraxylene at Jamnagar were among the largest.

Cement projects lag

Most mega cement projects announced in 2009 did not report much progress in implementation. Surya Global, Essar, ACC, Emami, Ambuja Cement and Jaiprakash Industries were among the 85 new cement projects announced in 2010 against 96 last year.

Maharashtra, with the highest number of live projects and largest outstanding investment, managed to attract 1,962 new projects worth Rs 95,720 crore. Unlike Orissa, fresh investment in the State is evenly spread across the manufacturing, electricity and infrastructure sectors. However, bulk of the investment (64.6 per cent) in Maharashtra has come from government agencies with the private sector's contribution at 35.4 per cent.

Published on January 25, 2011

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