More than 50 per cent of the infrastructure projects are stuck at various stages of implementation due to regulatory hurdles and sector-specific bottlenecks, leading to significant time and cost overruns, said K.C. Chakrabarty, Deputy Governor, Reserve Bank of India, on Tuesday.
There has been no dearth of policy pronouncements and re-engineering of processes aimed at improving the investment climate for infrastructural projects, he claimed. However, there seems to be little headway in achievement on the ground, he said.
The Deputy Governor said of the 576 Special Economic Zones that have received formal approval, only 172 are operational.
Against a target of 50,621 km of road projects during 2008-13, only 10,690 km have been awarded.
“Many of the projects awarded have yet to see commencement of work due to problems in achieving financial closure, delay in land acquisition and obtaining environmental clearances,” said Chakrabarty at an infrastructure finance conclave at Agra.
Of the 16 ultra mega power projects (UMPPs) planned, contracts for only four have been awarded.
Impaired assets
Banks have been substantially financing infrastructure projects in the country despite the inadequate commercialisation of projects.
Outstanding bank credit to the infrastructure sector, which stood at Rs 7,243 crore in 1999-00, has increased steadily to Rs 7,86,045 crore in 2012-13.
Chakrabarty said financing of infrastructure projects has not been without its fair share of pain for banks. The non-performing assets (NPAs) and restructured assets in this segment have increased quite substantially lately.
The gross NPAs and restructured standard advances for the infrastructure sector, together as a percentage of total advances to the sector, has increased considerably from Rs 12,190 crore (4.66 per cent) as at end-March 2009 to Rs 1,36,970 crore (17.43 per cent) as at end-March 2013.
Appraisal standards
There is enough evidence to suggest that a substantial portion of the rise in impaired assets in the infrastructure sector is attributable to non-adherence to the basic appraisal standards by banks.
Chakrabarty said, “The evidence suggests that the higher NPA in the sector is not an industry-wide issue, it is rather bank-specific. For the umpteenth time, I reiterate that the reason for NPA is non-performing administration.
“In the case of infrastructure, this could also be on account of non-performance beyond that of the bank management — that of policymakers, bureaucracy, etc.”
But he wondered how this malady affects public sector banks the most.
Providing the answer to this poser, he said, “In our assessment, the project appraisal and the decision making in public sector banks has been more impressionistic rather than being information based. How else does one defend the eagerness of some banks to fund power distribution companies with negative net worth!”