Pending infrastructure projects

Within six months of the NDA government’s coming to power in May 2014, the Project Monitoring Group (PMG) was moved from the Cabinet Secretariat to be under the Prime Minister’s Office (PMO). The intention was to push 225 big-ticket projects worth Rs. 13 lakh crore pending since the UPA government era. Of them, 194 belonged to the category involving individual project investment of Rs. 1,000 crore and above. However, the total number of pending projects till the end of the previous Congress-led UPA government was much larger - as per official records, 494. The estimated cost of all these projects was Rs.24.68 lakh crore at 2013 prices. What had reportedly held up these projects was a multi-layered red tape obstruction involving as many as1,622 issues requiring as many solutions or clearances.

The PMG summary report as on December 23, 2014, made an interesting reading. It said the government had made decisions towards resolution of the issues in the case of 199 projects involving an investment of over Rs. 7,00,000 crore. A year has passed since. No one in the public really knows if all these projects are on. And, if yes, the progress they have made, the jobs they might have created and the value they added to the GDP growth. If most of these projects failed to make much progress, one would like to know the reasons. To grow fast, India needs sustained investment of at least Rs. 2,00,000 crore a year in new projects. The world’s second most populous country after China is far behind China and other states in terms of infrastructure, industrial, and defence production and support to agriculture with better water conservation and irrigation facility and increasing domestic output of fertilisers and pesticides. New projects are vital to the country’s growth and economic stability. Nearly 30 crore able-bodied people in India are either underemployed or unemployed.

Both the Finance Minister and the Chief Economic Advisor to the government stated last month that lack of private investments is partly responsible for the lower GDP growth estimate for the current financial year at 7.2 per cent against earlier expectation of between 7.5 to 8 percent. The prospect of a higher GDP growth in 2016-17 too looks rather bleak for a variety of reasons, including low rate of private investments. Too many new investment projects are held up and few private investors are coming out with new projects. There have been an encouraging response from foreign private investors in electronic and information technology sectors though few have expressed plans to manufacture hardware in the country. They will operate mostly as assembly units. In fact for India’s size, its state of economic development and existing opportunities, a total project investment of Rs. 24 lakh crore for execution over a period of time would appear to be peanuts. If a 600 km Japanese-funded Mumbai-Ahmedabad bullet train project signed between the two countries during Prime Minister Shinzo Abe’s visit of India, last month, alone is estimated to cost Rs. 98,000 crore, the number of pending projects before PMG carrying investment of Rs. 1,000 crore and above would appear to be rather small and not certainly adequate to move the country’s economy forward to the desired annual growth level of above eight per cent.

Some of the important questions the PMG need to answer are: how many of the pending projects are going to see the light of the day and how soon, and if private investments are not forthcoming what alternative funding and collaborative arrangements the government is doing to ensure their implementation? It is said that 225 large projects envisaging investment of over Rs. 13 lakh crore are not moving because of some 570 issues pertaining to non-availability of clearances from the Central and state government departments, including Environment, Corporate Affairs, state civic agencies, land acquisition and rehabilitation, and compensation for those to-be-displaced families from their land or home. The issues are vital and can’t be steamrolled by a democratic government.

The PMG’s position under either the Cabinet Secretariat or PMO does appear to have little impact on the implementation of the pending projects and their future. Both the establishments are headed by the Prime Minister, anyway. Bringing PMG under PMO seems to have achieved little to ensure that the projects get the necessary government clearances fast and take off without further delays. Years have passed since these projects were conceived on paper. Do their private promoters and proposed bankers still find the projects bankable? How is PMG looking at this vital issue to provide a remedy? Can’t the government step in to replace an unwilling or hesitant private investor in projects that are of national importance and contribute substantially to the country’s economy and growth?

If private promoters are not immediately forthcoming to implement projects, the government should venture into the field. Few can deny the fact that it was the early government decision made in the mid-1950s and ‘60s to actively participate in capital formation by tapping the national budget to create a long-term base for heavy and strategic industries in the public sector which are now paying dividends contributing to the generation of the country’s current level of industrial production and economic growth. The government would do well to restart public investment in projects vital to the country’s economy. The necessary funds should come from the national budget. Involving foreign partners in such projects may be most welcome. Let the government use discretion to contain the administrative and other less productive expenditure to keep the budget deficit as a result of such expenditure at a desirable level.