CCI, PMG boost to projects to show results in longer term

Written by Aftab Ahmed | Raj Kumar Ray | New Delhi | Updated: Jan 13 2014, 09:19am hrs
Analysts like those at Crisil believe that the impact of the investments unclogged by the Cabinet Committee on Investments (CCI) and the project monitoring group (PMG) will not be felt until 2014-15 as most of these are in long-gestation projects, report Aftab Ahmed & Raj Kumar Ray in New Delhi. But the sheer scale of these investments is difficult to miss and would undoubtedly play a key role in the economic turnaround on the horizon by spurring demand.

The CCI says it helped unlock R3.16 lakh crore of investments since January 2013 by facilitating clearances of over 80 infrastructure projects, a claim largely borne out by a clutch of corporates that FE spoke to.

In most of the cleared projects, fresh investment has started flowing in and in some cases production has started, Anil Swarup, head of the PMG and additional secretary at the cabinet secretariat, told FE. In the case of 80 projects that the PMG handled and cleared, Swarup said the total project cost was about R3.54 lakh crore and the cumulative investment committed was about R3.16 lakh crore.

In many power projects, companies had committed most of the investment over the past several years and some even commissioned their plants by 2012-13 but faced last-mile hurdles in getting a fuel linkage, which prevented some of the firms from staring production and made others unviable.

After the CCI/PMG facilitated fuel supply agreements with Coal India last year, many of the power projects are have either commenced operations or are ready to begin operations.

In the case of Reliance Power's 1,200 MW coal-based power project at Rosa in Uttar Pradesh, for instance, the company has committed Rs 5,100 crore and commissioned all the four units by 2011-12. But the company listed the project with the PMG last year as it did not have a fule supply agreement (FSA). The company's spokesperson confirmed the development and said the FSA has been signed in March 2013.

Similarly, two of Avantha Power's projects have been cleared one in Chhattisgarh and the other in Madhya Pradesh after the FSAs were secured. Company sources said generation will start soon in one unit while the other is nearing completion.

RKM Powergen's Rs 8,981-crore power plant in Chhattisgarh got cleared some months ago. "Phase 1 of the project will be commissioned by next May and after that every two months will see completion of one unit. By the end of FY15 all projects would be commissioned, said a senior official of RKM Power.

These might be projects where investments were already made and the bank loans about to turn into NPAs (non-performing assets) had commercial production not started. What we have done is that we have facilitated clearance of all issues and these projects are now operational and will soon be able to service their debts, Swarup said.

Delays in infrastructure projects have been one of the main reason for rising NPAs of banks. Latest Reserve Bank of India data show the share of the infrastructure sector in banks' total stressed assets had risen from 8.4% in 2010-11 to 21.2% in 2011-12 and further to 30.3% by September 2013. Gross NPAs of banks increased to 4.2% at the end of September 2013 from 3.4% in March 2013 and less than 3% a few years ago.

The CCI and PMG have so far received over 400 cases of stalled projects and 130-odd projects, mostly under the New Exploration and Licensing Policy and power sectors, were cleared. About 270-odd projects involving a total investment worth Rs 10 lakh crore are pending.

PMG data show that in the case of Ambuja Cements' existing plants in Himachal Pradesh, delay in renewal of forest clearance stalled the Rs 3,500-crore project. The PMG facilitated the renewal of the green clearances.