Environmental And Forest Clearance Holds Up Infra Projects

We have always maintained that infrastructure projects are core to the growth of our country. With the UPA government focusing on infrastructure, there was a kind of momentum in these projects. However, recent data suggests that projects worth over Rs 7 lakh crore have been stuck on account of non-availability of the environmental and forest clearance. 

The major worry here is that this amount is equivalent to almost half the government spending in the current financial year. This has put a strain on infrastructure in the country ultimately acting as an obstacle for an economy striving to get into a high growth trajectory. 

Media reports suggest that according to data compiled by state run banks for a meeting with Finance Minister P Chidambaram, the amount is locked up in 215 projects spread across power, roads, ports, cement and steel, each with an estimated cost of Rs 250 crore or more. It is a known fact that any delay in the projects increases the cost of projects reducing the margins for the players. In relation to the same, banks have also warned that any delay will push up the overall cost of setting up the projects. Apart from an increased cost, it will increase the risk for public sector banks, which have already disbursed loans amounting to Rs 54,000 crore. 

It is true that the government is betting on the cabinet committee on investment (CCI) to remove these hurdles. However, experts say that it may not be sufficient and we second the thought. 

If the figures are anything to go by, the biggest hold-up has been in the power sector (Rs 5.39 lakh crore), followed by roads (Rs 1.22 crore) and steel (over Rs 32,500 crore). In our many previous articles we had been mentioning about delayed power projects. 

The slower pace of infrastructure projects has already shown its negative impact on the financial performance of the companies in the December 2012 quarter. In Q3FY13, the margins of many infrastructure companies got impacted on account of delay. With the government tackling on non-core fronts like managing its allies, we feel it may lose focus on the core aspects of the economy. Hence, if the government is focusing on infra projects, the impact will be larger going ahead.