The wheels of the Government seem to be turning to get new and stalled projects in the power, road, iron and steel, cement, and port sectors off the ground.

Following Finance Minister P. Chidambaram’s meeting with the chiefs of public sector banks (PSBs) and state-owned financial institutions on March 18, the process of region-wise stock-taking of new and stalled projects has begun.

The first meeting, organised by Canara Bank, was held in Bangalore last week. Top representatives of major banks headquartered in the South, their large clients having projects in the region and top Finance Ministry officials were present at the meeting.

Similar meetings would be held in Delhi, Mumbai and Kolkata.

GDP and infrastructure

The stock-taking initiative on new and stalled projects comes at a time when growth has decelerated significantly. India’s GDP growth at 4.5 per cent, in the October-December quarter of 2012-13, was the weakest in the last 15 quarters.

According to Reserve Bank of India Deputy Governor H.R. Khan, infrastructure development facilitates economic growth and economic growth in turn increases demand for more infrastructure. Thus, development of adequate and quality infrastructure is a necessary condition, if not sufficient, to maintain growth momentum in any economy.

Finance Ministry estimates show that there are 215 projects, each with a project size of Rs 250 crore and above, that are stalled. Out of 215 projects, 106 are in the power sector, 79 in roads, 20 in iron and steel, and 5 each in cement and port sectors.

All these projects, which collectively involve an outlay of over Rs 7 lakh crore, have been supported by PSBs. As at December-end 2012, PSBs had disbursed Rs 54,000 crore to the projects.

Delays in land acquisition, resettlement and rehabilitation issues, environmental clearances, tie-up of project financing, non-availability of fuel for power generation, lack of infrastructure support and linkages are some of the reasons for the projects being stalled.

During the current financial year up to December 2012, PSBs received 126 new projects — in power, power, road, iron and steel, cement, and port sectors — involving a collective outlay of Rs 3,55,880 crore. The projects are at various stages of appraisal and sanction.

Addressing bottlenecks

At the March 18th meeting, Government officials sought to assure bankers that the issues relating to coal linkages are getting addressed with bids being called for new projects.

Delays associated with environmental clearance are also likely to be sorted out shortly with the proposal to de-link forest clearance from environment clearance and an agreement being reached between various Ministries to expedite the clearance process.

Most of the issues relating to highway projects were being addressed and there is a likelihood of the various roadblocks being duly addressed by the Cabinet Committee on Investment. Issues relating to 37 road projects, where the selected promoters were not performing, would also be addressed shortly.

As regards electricity distribution companies, issues with related to settlement on the interest rate (on outstanding loans) to be charged are likely to be resolved.

Areas of concern

Iron ore mining was still stuck in the courts and it was not clear when this issue would be addressed.

Gas supply for power projects remains a concern.

In the case of road projects, huge funds are stuck in arbitration. Hence, bankers want the Finance Ministry to intervene and impress upon the National Highways Authority of India to settle these cases out of court at the earliest so that funds could be released into the system.

Escalation in project costs due to time and cost overruns is likely to raise problems for banks.

ramkumar.k@thehindu.co.in

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