Big infra back on track, needs a bigger push

The recent incident of a power outage that happened while the power minister Piyush Goyal was briefing the media on the achievements of his ministry fuels skepticism, signalling that much of the harping may be anecdotal.
It has highlighted the current state of affairs, particularly of the infrastructure sector where sound bites have largely overshadowed the action on the ground.

As the news of the power cut at the New Media Centre of Press Information Bureau went viral on social media causing much embarrassment to the power ministry, the state government of Delhi tried to clear its name claiming that it wasn't due to lack of power capacity but poor maintenance of power infrastructure by the private power operators.

While this claim of the Kejriwal government only drew more guffaws, the attempt highlights how we have been missing the infrastructure story till now.

Amid the publicity blitzkrieg and grandiose pronouncements that the infrastructure space would see investments worth Rs 25 lakh crore by 2019, there are growing concerns about the pace of groundwork in the sector.

"There is concern among the corporates about the implementation. The pace of development is not giving the comfort level to people like us. The pace of infrastructure development has to be faster than what we had seen in the past," Arun Singh, chief economist of Dun & Bradstreet Info Services India told dna.

To be fair to minister Goyal, the power ministry has some solid achievements to boast of and we are not just talking about UDAY scheme here.

UDAY, or Ujwal DISCOM Assurance Yojana, touted as the financial turnaround and revival package for electricity distribution companies (discoms) might have been criticised by many as a mere financial jugglery where debt in the books of discoms are transferred to the states.

But beyond this, some notable achievements in the power sector have been adding 46,543 megawatt of conventional power in the last two years, which is one-fifth of the total current capacity; laying 69 kilometre of transmission line a day against an average 46 km earlier and a significant growth in rural electrification.

The transparent e-auction of 31 coal blocks and allotment of 43 coal blocks from the 204 cancelled by the Supreme Court in 2014 could also be seen as a major achievement.

While the move was necessitated by the court ruling, the short time by which the mammoth task was executed in a near-flawless manner by the coal ministry deserves praise.

The auction process has also generated Rs 3.4 lakh crore of real and potential revenues to the coal-bearing states, most of which was economically challenged, a development which might see speed in the implementation of infrastructure projects by states also.

Roads is another sector that has been witnessing a lot of activity particularly after the government resolved the execution crisis after the Build Operate Transfer or BOT toll model failed to get responses due to poor market conditions.

With the solving of the crisis through the development of the hybrid annuity model, investors are coming back and projects getting revived.

"Lot of the projects which were stuck, work has started on the ground, particularly in the road and mining sectors," Srei Infrastructure Finance joint managing director Sunil Kanoria recently told analysts.

During the current year, the government expects to award projects worth at least Rs 5 lakh crore, with Rs 2.5 lakh crore being awarded in the last two years.

The target is to achieve the building of 41 km of highways a day, minister Nitin Gadkari said recently.

Activity in mining has revived largely because of the auctioning that happened. The private sector, after taking possession of the mines, has now been putting in the investment required to resume operations.

The importance of the Railways in fuelling the economy and investment cycle can't be ignored.

While there has been a lack of visibility of projects on the ground, minister Suresh Prabhu claims Rs 40,000 crore projects involving private sector are under implementation with the ministry reviving work on 77 languishing projects.

"We believe the historical lack of delivery in the Railways creates skepticism but this time, it could be different. This opinion is driven by the minister's reformist credentials, our opinion that he has identified the largest problem, overcapacity and speed, and his innovative approach to funding. We estimate that India will spend $95 billion on the Indian Railways over the next 5 years, which along with the railways multiplier will result in 12% of the growth in GDP between 2015-19," Morgan Stanley had said in a report, adding that land acquisition would remain a key problem area with 28% of capex stuck for clearances.

Stalled projects continue to haunt the infrastructure space. "Problems faced by infrastructure projects are complicated. A number of issues confronting the sector are structural in nature such as regulation-driven environmental clearance, land acquisition, absence of dispute resolution mechanism, weak credit profile of sponsors, aggressive bidding, flux in fuel and raw material linkage, flaws in risk sharing of Public Private Partnership (PPP) infrastructure model," India Ratings said in a recent report on the economy.

But things are turning positive.

"Data for the December quarter showed that the extent of stalled projects for infrastructure companies was at a 13-quarter low. This gives us the confidence that things are looking up," the D&B chief economist said.

Issues related to 353 of these projects, cumulatively worth Rs 11.7 lakh crore, were resolved by Feb-2016. However, another 390 projects with a cumulative investment of over Rs 19 lakh crore are still facing hurdles.

"Implementation of the proposed plug-and-play model, which aims at awarding major projects after acquiring land and the requisite approvals, is expected to significantly reduce execution delays and attract higher private participation in the sector," a report issued by rating agency Icra said.

To sum up, the government has its policy framework as well as plans for some game-changing projects in place, it now needs just the right amount of push.

"If all the calls and decisions taken by the present government are implemented judiciously in a time bound manner, our future would be secured in terms of sustainable growth rates. If specific projects like the freight corridors, country specific investment zones, smart cities or policies like Make in India, Digital India and Ease of Doing business are implemented judiciously at a fast pace, we would see much more investment going forward," Singh said.