Steel ventures lead as stalled projects rise again in Q2

By: | Updated: October 6, 2015 1:17 AM

Half the projects have been held up because of policy-related problems relating to land, environment or other clearances or to fuel linkage

In some disappointing data put out by CMIE, the value and volume of stalled projects is once again increasing — in the July to September quarter they were at 7.6% of GDP, up from 6.9% in the April-June quarter. The numbers, crunched by brokerage HSBC, show the uptick comes after several quarters and much of it — as much as
50% — was accounted for by steel ventures.

In contrast, after coming off for several quarters new project announcements trended up in Q2FY16. While the value of such projects increased, volumes dropped suggesting the presence of some big-ticket ventures. Interestingly, a fourth of the increase came from the electronics sector, including the $-billion Foxconn venture in Maharashtra; while 60% of the projects originated in the private sector, 40% were driven by government. HSBC believes the government should be applauded for successfully channelling savings from a lower subsidy payout to a higher capital expenditure.

However, half the stalled projects have been held up because of policy-related problems — either  promoters haven’t been able to acquire land, get environment or other clearances or tie up the fuel linkage.


Only 10% aren’t taking off because the promoter has lost interest and 9% because there is a shortage of funds.
Executive action on fast-tracking clearances and sorting out raw material availability and legislative or other innovative action to solve land acquisition problems continue to be wanting.

HSBC believes new projects cannot continue to prosper if stuck projects remain frozen given weak aggregate demand and low capacity utilisation are likely to be a drag on any rapid rise in new investment intentions.

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