The Government, in the last 30 days, has cleared many projects to gain the confidence of private players and the industry at large. But the question that arises is what will be the fate of these projects? And most importantly, when will these projects see the light of day?
Working at a breakneck speed to kickstart the economy, the Narendra Modi-led BJP Government is looking to give a big boost to the infrastructure sector. And in one of the first few steps to achieve that, the new Government has cleared seven projects worth Rs 21,000 crore, recently. These projects were stuck for decades owing to environmental issues and financing woes; they will now be off the drawing board, opening up a slew of opportunities for the players involved in these projects and the infrastructure sector at large.
These include a 235-km long railway line significant to tap Chhattisgarh´s second largest iron ore reserves and ensure the survival of the Bhilai Steel Plant to a major hydro-electricity project in Sikkim, and the 1,440 MW coal-based power project of RKM Powergen. In addition to this, the Project Monitoring Group (PMG) headed by the Prime Minister is continuously resolving issues related to projects which are now worth Rs 5.20 lakh crore. But the pertinent question remains, what next? Are these project clearances mere ´clearances´ or will these projects see the light of day in coming years and have a positive impact on the infrastructure sector?
IT contacted RKM Powergen, Tamil Nadu Electricity Board, Hindalco and Vizhinjam International Seaport, a few players who have recently received project clearances from the Government to understand the future prospects of these cleared projects.
J Mohan, GM (Planning), RKM Powergen says that a financing problem holding up a Rs 9,000 crore power project in Chhattisgarh developed by RKM Powergen to generate 1,440 MW of power has been resolved after talking to its lenders´ consortium which includes Power Finance Corporation, Bank of Baroda and Corporation Bank. ´We are in the final stages of the project and had approached CCI to resolve our issue. The project that was supposed to be commissioned six months earlier will now be commissioned in the next three months,´ says Mohan.
An official from Tamil Nadu Electricity Board (TNEB) said that the entity has floated bids for the 1,320 MW Ugandi thermal power project. ´The Tamil Nadu Generation and Distribution Corporation (Tangedco), will carry out the project on engineering, procurement and construction basis, and will finance the debt component of the project, which would come to approximately 75 per cent of the total project cost,´ he says. However, TNEB officials are still evaluating the technical bids and are expected to award the project in the month of September.
Another important project which saw some activity was Vizhinjam International Seaport Ltd´s international deepwater multipurpose seaport. The project received five requests for qualification (RFQs) from Gammon, Adani, Essar Projects, Hyundai-Concast consortium and SREI-OHL consortium. ´We will be inviting financial bids by August 10th and will conduct the second pre-bid meeting next week,´ says Lazar Maliakal, Project Manager, VISL.
Meanwhile, PMG is expected to push for the new airport terminal at Mumbai airport and Delhi´s Aerocity project, both worth Rs 12,000 crore, Sterlite Energy´s 2,400 MW power project (Rs 12,000 crore) and Adani´s Mundra thermal power plant (Rs 9,977 crore). PMG has also resolved issues related to the Rs 7,000 crore project of Utkal Alumina refinery of Hindalco in Odisha and Rs 4,255 crore Lumding-Silchar (482 km) gauge con¡version project of Indian Railways, which is aimed at providing seamless connectivity to lower Assam and Tripura, and Mizoram and Manipur with rest of India.
The clearance of the Utkal project may bring some relief to Hindalco as it was betting big on this project, which can produce 1.5 mt alumina per annum. The company had recently obtained financial closure for this project.
The Utkal alumina project in Odisha is a 1.5 mt refinery with captive bauxite resources of 200 mt. ´The output from UAIL would be sufficient to feed alumina to the Mahan and the Aditya smelters,´ said Debashish Bhattacharya, Managing Director, Hindalco Industries in an earlier interview with IT.
In addition, the ailing road sector has also received a breather, as PMG has resolved the issues in four road projects, which fall under the National Highway Development Programme (NHDP) Phase III and IV. The four projects are undertaken by BSCPL Infrastructure Ltd, Essel Infra, Ashoka Buildcon and Supreme Infrastructure Development Projects Ltd.
Among these four developers, BSCPL has already commenced work on four-laning of the road project under NHDP Phase-IV. The company has obtained financial closure in the last year and is going ahead with the project despite premium issue which is yet to get resolved. Meanwhile, the Government of Odisha has sent a letter to the State Board of Wildlife, recommended KVK Nilachal´s 1050 MW power station at Athagarh, for consideration and approval. The project recently received the green nod from the Ministry of Environment and Forests.
Bankability in question
According to financial experts, projects which have recently received approvals will at least take two-three years for financial closure. Most experts also feel that, since these projects have taken longer time to get their issues resolved, the question that arises is, are these bankable projects?
´Even though the projects have received all clearances, when it comes to the financial part, these projects will go to the finance ministry for final review,´ says a source close to the development. A PMG official agrees, not willing to go on the record. Meanwhile, VG Kannan, Managing Director and CEO, SBI Capital Markets Ltd is of the opinion that although the government has cleared projects worth Rs 4.5 lakh crore, it will take minimum three years by the time these projects come in the financial market.
While speaking with IT over the phone, Prakash Javdekar, Union Minister, Ministry of Environment and Forest blames the earlier regime. ´Investment scenario may not change instantly. Hence, we are trying to clear many stuck projects.´
Anil Swarup, Additional Secretary and Head, PMG felt that mere clearances are not sufficient. ´So far, we were assuming that if project promoters are not coming back with complaints, then the projects have taken off but now we are keeping track of actual activity,´ he says.
The ruling party´s swift action mode has managed to boost investor sentiment both locally and globally as countries like France and China have decided to pump in investments in India. The country is keen to attract foreign development agencies and companies to help finance new roads, railways and cities. In a recent announcement, France has proposed to give India a $1.4 billion credit line to fund sustainable infrastructure and urban development projects. Even China has shown keen interest in facilitating the upgrade of railways in India as well as build expressways.
Land acquisition concern
While rapid clearance of projects should help the economy, land acquisition could still prove to be a major hindrance. The revised Land Acquisition Bill has drawn a lot of criticism in its present form and also slowed down the process of land acquisition to a great extent.
´What people are really complaining about is the rules and procedures as to how they are now written. People say that many of them are sequential. And if you add them up line to line, they may take anything between three to five years to buy people´s land. That seems to be the biggest criticism. There is significant scope for rewriting many rules and procedures to compress the price,´ says Vinayak Chatterjee, Chairman & Managing Director, Feedback Infrastructure.
But industry analysts believe that with Narendra Modi´s business-friendly record, he can revive India´s economic power by ensuring a stable business environment which is free from regulatory and political uncertainty, capricious policy making and cumbersome bureaucracy. He can also ease supply side bottlenecks (as is evident from the actions undertaken to clear policy logjams and easing out procedures in the initial few weeks of the government) which have thrown India´s energy, industry and infrastructure sectors into a negative spiral.
Work in progress
infra graffiti - No green barrier
In the past three months the new government was instrumental in clearing many projects, thanks to the Ministry of Environment and Forests. After being inducted into the Modi-led government, Prakash Javdekar, Minister of Environment and Forests is leaving no stone unturned in clearing pending files, a legacy from the previous UPA government.
The largest number of projects awaiting for TOR
Industrial infrastructure - 161
Mining - 45
Hydro power - 12
Thermal - 12
Infrastructure - 11
Construction - 09