The prolonged General Elections process pulled down the quantum of fresh projex (projects expenditure) announced in Q1/FY20 by 6.6 percent. In all, 2,061 new investment intentions entailing a total investment of Rs 3,23,011.6 crore were announced during the April-June 2019 period (Q1/FY20). A year ago during the same period, the country had seen announcement of 2,771 new projects worth Rs 3,45,974.5 crore.
The recent Lok Sabha elections coupled with state elections in five states — Andhra Pradesh, Arunachal Pradesh, Odisha, Sikkim and Telangana — were spread across two-and-a-half months from 10 March 2019 to 23 May 2019.
The two-and-a-half months long process slowed down the flow of fresh investment considerably by government agencies. Reflecting on this, the fresh projex announcement in the government sector declined by 41.5 percent. The fall was steep at the state level.
Private projex remains positive
A steep decline of 60.3 percent in fresh projex announcements in Q1/FY20 by the state government units resulted in a negative growth of 41.5 percent in the government sector despite a positive growth of 2.8 percent posted by the Central government agencies. The model code of conduct prevailing during the election process prevents the government agencies from announcing any new project proposals. In the government sector, 1,192 new projects entailing a total investment of Rs 1,39,201 crore were announced during Q1/FY20 as against 2,103 new projects worth Rs 2,38,087 crore announced during Q1/FY19.
On the positive side, the growth registered by the private sector in the recent past continued in Q1/FY20 too. During the three months period, private companies announced 869 new projects worth Rs 1,83,810.6 crore as against 668 new projects worth Rs 1,07,887.4 crore announced in Q1/FY19. Food processing, pharma, cement, steel, mining, shipping infrastructure, real estate are the sectors which attracted sizeable fresh investment from private companies.
Sharp fall seen in fresh projex in Manufacturing and Power
Among the major sectors, while a decent growth of 11.7 percent in fresh projex was seen in the Infrastructure sector, healthy growth in both projects and projex was witnessed in the Mining sector.
The Manufacturing and Electricity sector saw a sharp decline in fresh projex on Y-o-Y basis. Such decline was soft at 7.7 percent in the Irrigation sector. Despite announcement of more projects, the fresh projex in the Manufacturing sector declined by 28.7 percent on Y-o-Y basis. The fall in a number of mega projects (investment of Rs 1,000 crore or more) led to the decline in fresh projex in the Manufacturing sector, despite attracting 91 more projects in Q1/FY20. As against 12 mega projects worth Rs 48,575 crore announced in Q1/FY19, only eight projects worth Rs 21,855 crore were announced in Q1/FY20.
Most of the ongoing thermal projects in the private sector have reported slow progress for various reasons. Similarly, the tariff issues forced SECI to postpone its solar power project auctions during 2018-19. As a result, the Electricity sector as a whole saw a fall in both new projects as well as fresh projex. As against 99 new projects worth Rs 63,323 crore announced in Q1/FY19, only 30 projects worth Rs 8,806 crore were announced in Q1/FY20. The non-conventional power sector, which received good amount of fresh intentions from developers in recent years, saw only 20 new projects worth Rs 4,302 crore being taken up in Q1/FY20. A year ago, the sector had attracted 85 projects worth Rs 47,018 crore during the same period.
Gujarat on Top
Among the states, Gujarat cornered nearly one-fourth (26.2 percent) of the total fresh projex announced during Q1/FY20. The state attracted 364 new projects with a total investment intentions of Rs 84,457 crore. Of these, 271 projects worth Rs 71,434 crore were by private companies. The state was followed by Maharashtra with 287 projects worth Rs 47,166 crore and West Bengal with 91 projects Rs 38,995 crore.
During Q1/FY20, 86 projects were commissioned. Of these, eight projects with a total investment of Rs 13,962 crore were of mega size (investment of Rs 1,000 crore or more). Other than the Rs 1,462 crore Vijayawada-Machilipatnam highway of NHAI, the remaining seven projects were executed by private promoters.
Two large Solar power projects commissioned during the quarter were that of Arinsum Clean Energy and ReNew Power.
During Q1/FY20, 39 ongoing projects were stalled. This is the lowest number and the second lowest projex stalled in the last 18 quarters. On Y-o-Y basis, total projects investment declined from Rs 86,368.5 crore in Q1/FY19 to Rs 20,835 crore (-75.9 percent).
As the trends indicate, the share of the private sector in the stalled projex is higher than that of the government sector. Of the 39 projects worth Rs 20,835 crore stalled, 33 projects worth Rs 11,820 crore were by private promoters.
The Economic Survey 2018-19 has rightly pointed out that if India intends to grow at around eight percent in the next five years, projects investment, especially private project investment, has to increase at handsome rates. Taking a cue from the Survey suggestions, the Finance Minister announced the new government’s intentions to spend Rs 100 lakh crore on infrastructure building over the next five years. The Union Budget 2019-20 has listed a number of proposals to rekindle business spirits of project promoters. It has also lined up some concrete measures to infuse increased liquidity into the system.
On the backdrop of the Budget proposals, Projects Today expects fresh investment announcements to pick up in coming months of the year.