Top public sector bankers, industrialists, and mandarins of the Finance Ministry and Reserve Bank of India met on Tuesday in a bid to remove hurdles in implementing 85 big infrastructure projects in the power, port/shipyard, roads and steel sectors.
Some of the reasons for the projects making slow progress or getting stalled altogether include unfavourable market conditions, poor promoter interest, lack of statutory clearances, including environmental; land acquisition problems, and lack of funds.
“The total amount outstanding of banks and financial institutions in these 85 projects is about ₹3.51-lakh crore…We had taken up some of the big projects in four sectors — power, port/shipyard, roads and steel,” Hasmukh Adhia, Financial Services Secretary, Ministry of Finance, said after the meeting.
About 4 per cent of the ₹3.51-lakh crore of loans is classified as non-performing assets, he added
As at December-end 2014, the value of stalled projects stood at ₹8.8-lakh crore or 7 per cent of GDP.
Power projects Besides understanding the reasons for the stress in some of the infrastructure projects, participants in the meeting “also decided to put in place a co-ordinated mechanism for dealing with the stressed projects”.
The heads of 13 public sector banks, Power Finance Corporation and Rural Electrification Corporation attended the meeting.
The government was represented by Adhia and RN Choubey, Special Secretary, Ministry of Power. RBI Deputy Governor SS Mundra was also present.
With respect to the power sector, Choubey said 18,000-19,000 MW of coal-based power projects still need feedstock, for which the Ministry of Coal will continue to conduct coal block auctions.
He pointed out that for network upgradation, there will be a total outlay of ₹1.20-lakh crore (that needs to be sanctioned and approved) for all power discoms (distribution companies) with a 60 per cent subsidy over the next two years.
The rest 40 per cent will have to be either funded by State Governments or banks.
The Finance Ministry has been trying to resolve the issues relating to stalled projects over the last couple of years.
The previous Manmohan Singh Government had also convened similar meetings.
Asset quality concerns Concerned over rising bad loans in the infrastructure sector, the Finance Ministry has been regularly meeting public sector bank chiefs.
Arundhati Bhattacharya, Chairperson and Managing Director, State Bank of India, said, “One good thing is that things that we are saying in bits and pieces to many of the agencies had already been taken note of and lot of action has been initiated…
“We also discussed some of the sectors where some inter-ministerial issues have to be sorted out.
“The amendment to the Electricity Act is really going to bring in competition in the power sector and this dis-intermediation will actually make everybody efficient…
“In respect of coal we now have a feeling that sufficient coal mines will be put up for auction. The sense of scarcity that was there will be a thing of the past… Basically, such meetings give us more confidence that going forward we will be in a position to look at these projects becoming totally viable and healthy again,” she added.
TM Bhasin, Chairman of the Indian Banks’ Association and MD and CEO of Indian Bank, said that it was a good forum for bankers to raise issues with regard to Joint Lenders’ Forum)where the consortium leader was following one set of practices and others were not falling in line.
A cause for NPAs One of the major reasons for rising NPAs for PSBs is non-implementation of infra projects, due to reasons such as absence of fuel linkages, environment clearances and land acquisition.
There has been a rise in the level of NPAs and the number of stressed projects of PSBs in the last four quarters. Of the total gross bank advances in the industry, about 5 per cent are NPAs and 6 per cent are restructured.