Infra pipeline: Only a fifth of large projects ready for tenders: report

By: |
Updated: Sep 15, 2020 12:54 PM

According to a research report by Emkay Global that reviewed the top 1,000 projects accounting for over 80% of the pipeline value, only a fifth are “close to tender-ready stage”.

In the transport segment, against a total NIP estimate of Rs 54.7 lakh crore, projects worth only Rs 31 lakh crore (57%) are likely to materialise over the stipulated FY20-25 period, the report has forecast.

As many as 6,633 projects involving potential investments of Rs 128 lakh crore over a six-year period through FY25 are showcased under the government’s National Infrastructure Pipeline (NIP), but only a fraction of the large projects is ready for tenders.

According to a research report by Emkay Global that reviewed the top 1,000 projects accounting for over 80% of the pipeline value, only a fifth are “close to tender-ready stage”. Nevertheless, there are “niche opportunities” for regional road EPC (engineering, procurement and construction) companies and metro rail contractors in the near term, while water, railways and affordable housing segments offer longer-term opportunities, the report says, after collating data from the dashboard for the NIP.

“Out of Rs 104 lakh crore of projects data that we have collated (remaining cost outlay of ~Rs 95 lakh crore), only about Rs 37 lakh crore is in the development stage and less than 20% of overall pipeline is close to tender-ready stage, with the remaining in either idea/nascent stage or already ordered out,” it added.

In the transport segment, against a total NIP estimate of Rs 54.7 lakh crore, projects worth only Rs 31 lakh crore (57%) are likely to materialise over the stipulated FY20-25 period, the report has forecast.

“Metro space offers a strong DPR (detailed project report) approved development pipeline though at risk of deferment due to potential change in mobility pattern post rising work from home,” it says.

Railways lacks an immediate development pipeline as most of the large projects envisaged, such as new DFC corridors, are in the conceptual stage. Roads capex is likely to dip from current levels initially due to weak orders in recent past, but can pick up in later years due to long pipeline in place; funding will be key though, according to the report.

Energy has the largest share in development-stage projects but largely consists of thermal and renewable power generation projects that may face viability hurdles.

Funding remains a key challenge even before execution of various projects and land acquisition, it says. The research agency recently estimated that the combined infrastructure spending by the Centre and states is likely to decline to a compounded annual growth rate of just 5.5% over the FY19-25 period from 21% over FY13-19.

With the economy battered by the pandemic, a government task force on the NIP had in April firmed up a road map for capital investments of `111 lakh crore in infrastructure up to FY25, pledging 71% of the expenditure for energy, roads, urban development and railways.

The government had then said out of the total expected capital expenditure, projects worth Rz 44 lakh crore (40%) were under implementation, projects worth Rs 33 lakh crore (30%) were at a conceptual stage, projects worth Rs 22 lakh crore (20%) are under development (project identified and DPR prepared, but yet to draw-down funds) and the balance projects worth Rs 11 lakh crore (10%) were unclassified.

Of course, as some analysts have already pointed out, Covid has hit the progress of many infrastructure projects, delaying the tendering process of many of them. However, despite resource crunch, the Centre has told various infrastructure departments to keep pace with the budgetted spending level. In late July, economic affairs secretary Tarun Bajaj had said: “I have personally spoken to large infrastructure departments and assured them that even if I have to borrow a little more I’ll do that, but you should achieve your spending targets in the current year.”

Get live Stock Prices from BSE, NSE, US Market and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Financial Express is now on Telegram. Click here to join our channel and stay updated with the latest Biz news and updates.

Next Stories
1COVID-19 impact on Delhi Metro: DMRC suffers loss of over Rs 1600 crore due to closure of metro services
286 year old dream comes true! PM Modi inaugurates Indian Railways’ Kosi Rail Mahasetu in Bihar; top 5 facts
3Indian Railways trains fares to soon include ‘user charge’ for stations similar to flight fares; details