FM assures India Inc on rebooting Rs. 7-L-cr projects

Written by feBureau | Mumbai | Updated: Apr 9 2013, 05:54am hrs
Finance minister P Chidambaram on Monday attempted to reassure industry and bankers, saying the government would work towards removing bottlenecks to kickstart over 215 infrastructure projects worth R7 lakh crore. Chidambaram discussed problems relating to the stalled projects, each worth R250 crore or more, with top industrialists, including AV Birla Group chairman Kumar Mangalam Birla, Prashant Ruia, CEO, Essar Group, Ajit Gulabchand, chairman and CEO, HCC, and Anil Ambani, chairman, ADAG. State Bank of India (SBI) chairman Pratip Chaudhuri and other bankers were present at the meeting.

Another 126 projects, for which banks had sanctioned loans but were yet to take off, were also discussed. The finance minister attributed the delays to land acquisition, gas or coal linkages, environmental and forest clearances and, in some cases, the inability or the unwillingness of the bank to restructure the loans. We are sitting with banks and industry to find out why a particular project has been stalled. I am noting that down, to go back and try to remove that block, Chidambaram told reporters after the meeting in the countrys financial capital. The finance minister, however, did not give a time frame for resolving these issues.

Industrialists and bankers said Chidambaram discussed each project in detail to understand the issues.

The finance minister went into great detail on each of the projects and was keen that these be worked on," said Birla, adding that promoters were encouraged to talk about the problems.

Bankers, for their part, expressed concern over delays in clearances, which was blocking funds. There are difficulties in providing more finance, said SBIs Chaudhuri, adding that Chidambaram had taken note of the problems and had given an assurance that the government would step up its efforts to try and solve them. The finance minister is expected to meet more industry players in Chennai on Monday.

According to the governments estimates, the power sector is the worst hit, with projects worth more than Rs 5 lakh crore stalled, followed by the road sector where projects to the tune of Rs 1.2 lakh crore have been delayed. About Rs 30,000 crore worth of steel projects are also stuck due to problems of raw material linkages. In the year to March 31, the government awarded only around 1,000 km of road construction projects, one-tenth of the target of 9,500 km. Similarly, the shipping sector was awarded 27 projects worth Rs 6,302.3 crore, against the target of awarding 42 projects entailing Rs 14,500 crore in investment.

Delays in projects have caused the twin problems of rising bad loans and fall in incremental credit offtake for banks. Credit growth has slowed to around 14% in 2012-13 from around 17% in the previous year.

Moreover, a large part of banks assets is getting restructured; in 2012-13, banks restructured close to Rs 77,000 crore worth of loans, sharply higher than the Rs 44,000 crore recast in the previous year. Non-performing assets as a part of total advances are estimated to have risen to as high as 3.5-4.0% for the banking industry from 2.5-3.0% earlier.