79th Survey of Projects Investment in India
In Q1/FY21, the country underwent one of the longest and stringent lockdowns, which started from 25 March 2020. Though Unlock 1.0 was announced on 8 June 2020, economic activities across the country have commenced at a very low pace. The intensity of the pandemic has not yet diluted. Millions of labourers who migrated to their homes have not shown any urgency to return to their worktowns.
Under such unfriendly business environment, one cannot expect fresh investment proposals to emanate on large scale either from government sector or private sector. As a result, the fresh investment announced during Q1/FY21 was the lowest in the last five years.
During the COVID-19 affected three months (April–June 2020), the country saw announcement of 1,241 new projects entailing a total investment of Rs 97,859 crore. During the similar period a year ago, the country had seen announcement of 2,500 new projects worth Rs 3,86,673 crore.
The projex developments in Q1/FY21 could be analysed in two ways. One is the usual comparison with the Q1 developments to the earlier data and do a statistical analysis or carryout a standalone study and appreciate the fact that despite full lockdown and limited availability of resources (labour and liquidity), the country could see some capacity building initiatives by both government and private sector. We preferred the second choice. However, for the benefit of our users, we have listed the comparable data in tables.
During Q1/FY21, besides 1,241 new projects, 5,493 project tenders worth Rs 1,74,852.82 crore were announced. The period also witnessed finalisation of 738 project contracts worth Rs 31,418.15 crore. Interestingly, the quarter saw a record value of tenders issued for leasing of mines.
While states like Tamil Nadu and Maharashtra held investors meet and signed MoUs, Uttar Pradesh, Madhya Pradesh and Karnataka re-worked the labour laws, started building land banks and sent feelers to foreign companies for investing in their states.
The Central government on its part announced financial-cum-fiscal reforms worth Rs 20.1 lakh crore, introduced bold reforms in the agriculture sector and offered sops for MSMEs to transform themselves from pigmies to giants.
How far the above measures will induce foreign and Indian private promoters in committing new investment on large scale only the developments in the coming quarters will reveal.
Fresh Projex in Q1/FY21
The month-on-month figures of fresh investment announcements in the first three months under the lockdown show an interesting trend. While the month of April, the first month of complete lockdown, saw announcement of 260 new projects worth Rs 20,181.6 crore, the next month, May 2020, registered sizeable increase in the number of new projects and ensuing investment. In all, 436 new projects worth Rs 37,922 crore were announced.
With the announcement of Unlocking 1.0 of the economy on 8 June 2020, the month saw a further surge in the number of new projects. In all, the month saw announcement of 545 new projects with a total investment of Rs 39,755.43 crore.
Though it is too early to proclaim the reversal in the trends in projex, the monthly statistics do indicate consistent performances from state government-owned agencies and some encouraging comeback efforts by the private sector. Though fresh projex from the Central government agencies dipped in June 2020, we expect this to rise in coming months.
Fresh Projex by Sectors
In the Manufacturing sector, 117 new projects entailing a total investment of Rs 22,864.6 crore were announced. Of this, 107 projects worth Rs 20,172.6 crore were by private firms. The Chemicals, Machinery and Automobiles sectors made up for most of the investment in this sector.
In the Chemicals sector, 63 new projects were announced. Of this, 17 were in the pharmaceutical sector and most of them were for manufacturing APIs critical for the manufacture of generic bulk drugs.
The largest project of the quarter was announced by UPL, which signed a MoU with the Maharashtra government for setting up Rs 5,000 crore pesticides plant in Sahapur, Ratnagiri district. The company had earlier in December 2019 announced Rs 353 crore pesticide plant expansion project at Ankleshwar in Bharuch district of Gujarat.
The Machinery sector saw announcement of 16 new projects worth Rs 3,678 crore.
This included Rs 2,000 crore wind mill equipment manufacturing unit of Vivid Solaire Energy and Rs 900 crore semiconductor chips project of Polymatech Electronics in Tamil Nadu. Both projects were part of the 14 MoUs signed by the Tamil Nadu government on 27 May 2020.
Of the four Automobiles projects, notable was that of Daimler India Commercial Vehicles. The company plans to set up Rs 2,277 crore commercial vehicle projects at Oragadam in Tamil Nadu.
The Mining sector saw 22 new projects worth Rs 6,125.49 crore. The Coal India subsidiaries Central Coalfields, Western Coalfields, Northern Coalfields account for most of the fresh projex announced in this quarter. The quarter also saw a record 63 project tenders worth Rs 14,618 crore being floated. Among these, the most notable tender worth Rs 1,997.7 crore was issued by the Central Coalfields for development and operationalisation of Kotre Basantpur Pachmo OCP for 25 years in MDO mode in West Bokaro Coalfieds.
The Power sector attracted 49 projects with commensurate investment of Rs 8,774 crore. The proposed investment was spread across, almost equally, among the Thermal, Hydel and Solar power sectors. A 750 MW gas-based power project of Chennai Power Generation project at Ponneri, Tiruvallur in Tamil Nadu at a cost of Rs 3,000 crore was the largest power project announced in Q1/FY21.
The Hydel power sector saw 27 small hydel power projects announced by the Manipur State Power Company for creation of 304.54 MW of new power capacity at a total investment of Rs 2,436.32 crore.
The Solar power sector saw three major projects, two by Tata Power Renewable Energy and one by Vikram Solar. The total investment committed on these three projects added up to Rs 2,850 crore.
Responding to the Post COVID-19 Survey conducted by Projects Today in May 2020, around 39 percent of the participants had opined that fresh capacity additions will happen in the Pharma and Healthcare sectors with immediate effect.
The Q1/FY21 saw announcement of 123 new hospitals and medical colleges with an aggregate investment of Rs 7,087 crore. The Andhra Pradesh Medical Services & Infrastructure Development Corporation, the Bihar Medical Services & Infrastructure Corporation, the Public Works Departments of Assam and Uttar Pradesh were the prominent investors in these sectors. The quarter saw floatation of 312 hospital-related project tenders worth Rs 4,095 crore.
The quarter also saw proposals for setting up 102 schools at a cost of Rs 3,237.9 crore and 120 water treatment and supply and sewage treatment plants at a cost of Rs 4,062.05 crore.
In the Roadways sector, both the National Highways Authority of India (NHAI) and the National Highways & Infrastructure Development Corporation (NHIDCL) were active. NHIDCL announced 35 roadways projects with an aggregate projex of Rs 8,983.73 crore and NHAI took up nine new highways at a cost of Rs 2,011.61 crore. The Public Works Departments of different states also announced a number of state level highways and roadways during the period. In all, the sector saw announcement of 151 new projects worth Rs 18,005 crore.
Another interesting development in the infrastructure segment was the announcement of setting up of five Data centres at a total investment of Rs 7,400 crore. Of the five, three would come up in Tamil Nadu and two in Maharashtra.
Of the total fresh investment announced in Q1/FY21, 60.9 percent was owned by the government sector and 39.1 percent was by private investors.
The private sector’s share in the total investment which was inching closer to the 50 percent mark in the preceding three quarters came down sharply to 39.1 percent in Q1/FY21. Sectors which attracted over Rs 1,000 crore of investment include pesticides, steel, machinery and electronics, automobiles, power, real estate and data centres. In all, private promoters announced 266 new projects worth Rs 38,242.9 crore. A similar fall in private investment was seen in the first quarter of FY14.
Bulk of the investment in the government sector was by state government-owned agencies. Most of the new investment proposals were aimed at setting up new hospitals, schools, medical colleges, water supply schemes and roadways. On the other hand, most of the Central government investment was seen in the mining, roadways and power distribution sectors.
Fresh Projex by States
Thanks to the 17 MoUs signed by the Tamil Nadu state government on 27 May 2020, the state cornered around 18.63 percent of the total fresh investment emanated in Q1/FY21 and topped the statewise investment table.
The second-ranked Maharashtra too gained by the 12 MoUs it signed with companies from Singapore, South Korea, the USA under the Magnetic Maharashtra 2.0 investors’ mela. The 90 new projects announced in the state in Q1/FY21 are expected to bring in fresh investment of Rs 11,228.8 crore.
In terms of number of new projects, Uttar Pradesh topped with 167 new projects worth Rs 8,867.8 crore. A bulk of the projex planned by the state agencies were for setting up schools, healthcare centres, medical colleges and water supply schemes.
While the month-on-month small progress seen in announcement of new projects augurs well for the revival of projects investment activities in India, it will take a couple of quarters before normalcy returns in the projex arena.
As per the latest analysis of Projects Today, around Rs 21,11,985 crore worth projects were still stuck in the 108 Red Zone districts as of May 2020. This accounts for 37.4 percent of the total projects under execution across the country. A country, which has already seen one year of economic downturn, cannot afford to keep the ongoing projects under lockdown for a long time.
As a follow up to the Rs 20.97 lakh crore package announced in May 2020, the Union government has taken several steps to implement the reform measures it proposed with the economic package. Further, on their part, the Union government has already stepped up its grand plan of spending Rs 111 lakh crore over the next five years.
In the short-run healthcare, pharma, medical equipment and education are the areas where the government should give its maximum attention to grab private and foreign investment. Industry analysts feel some sort of tax break would help in attracting both foreign and domestic investments.
Projects Today believes that India has all the potential to be the contract manufacturer of the world in areas like automobile ancillaries, smartphones, electronic items, capital goods, food processing, pharmaceuticals, chemicals, etc. It also has the required labour force in abundance. However, the country’s slow-moving official machinery, archaic land and labour laws are some of the things preventing foreign companies from bringing in their technology and capital to India. It is high time we address these issues at the earliest at the Central and state governments level.