Construction companies battle Andhra Pradesh project lull

Andhra Pradesh till a year back had no competition in the scale and volume of irrigation projects it awarded. Now there are scarcely any projects up for grabs in the state.

Contractors are now focusing their attention on other states, though they can’t quite make up for the inactivity in Andhra Pradesh.

Brakes were applied on new irrigation projects during the downturn and the situation worsened with the death of former chief minister Y S Rajasekhara Reddy in September.

Not only were new projects put on the backburner but the contractors also started grumbling about delays in payments.

The Andhra Pradesh government has so far accorded administrative sanction to irrigation and related works worth Rs 1.79 lakh crore. These sanctions include works to be done for various irrigation projects including the construction of new ones, upgradation and repairs to some of the existing projects.

Of these, the government has allotted works worth Rs 1.23 lakh crore through tendering. The government has paid out Rs 52,000 crore so far and another Rs 6,000 crore payment is due to the contractors. Project works worth Rs 65,000 crore are at various stages of implementation and are yet to come up for payment.

K Jalandhar Reddy, executive director of Hyderabad-based KNR Constructions, said delays are not yet a thing of the past but they are not as bad as they were. “About 60% of the dues have been cleared,” he said. KNR has stopped work on a Rs 120 crore irrigation project in the state because the government owes it Rs 5-6 crore for the same.

“Payments are being cleared on the basis of the priority of projects,” he said.

KNR has one other irrigation project worth Rs 240 crore in Jharkhand. These two projects form about 20% of its KNR’s order-book. “There are hardly any new projects here,” Reddy said.

Praveen Sood, chief financial officer, Hindustan Construction Company (HCC), concurred with Reddy that there was not much for the taking in Andhra Pradesh. “We are exploring opportunities for irrigation in other states,” he said. States like Jharkhand and Madhya Pradesh are now said to be taking the lead in irrigation projects. “But the size of projects in states like Gujarat is about Rs 100-200 crore which is small,” Sood said. Andhra used to award contracts with a ticket size of anywhere between Rs 100 crore and over Rs 2,000 crore.

About 20% of HCC’s order backlog of Rs 23,000 crore is in irrigation projects in Andhra Pradesh. Last year, it was 30%.

Rupen Patel, managing director, Patel Engineering, said the size of projects in other states is only half as much as in Andhra. “But there are projects available in Karnataka, Madhya Pradesh and Maharashtra. There is not volume in Andhra as earlier though,” he said.

Patel is executing irrigation contracts worth Rs 1,500-1,800 crore in Andhra and about Rs 2,200-2,500 crore in Maharashtra and Madhya Pradesh. “Year before last, our irrigation projects were primarily in Andhra but last year we started diversifying,” said Patel, adding that the outstanding dues from the Andhra government are now down to Rs 60-80 crore from Rs 200 crore earlier.