Stalled Projects: Dormant business opportunities worth Rs.16.33 trillion

In a couple of months, the general elections would be over and hopefully with a stronger mandate, a new effective government would be in place at the Centre. With the realisation of this eventuality, which is generally perceived as likely, corporates would be back to their drawing boards chalking up capex plans. By the way, the last two fiscals proved to be a nightmare for the Indian economy where principally, because of hopelessly lacking effective governance, the growth rates dropped to historically low levels and project investment almost stagnated.

In this scenario, what could be very fruitful for India Inc. is to look for capex proposals that can be executed quickly and expeditiously to reap resultant revenue streams. Stalled, deferred or abandoned projects on which project promoters have deferred implementation; or left them altogether due to various reasons impinging on project viability, like those specific to promoters and industry, upstream and/or downstream, as also specific to the then state/centre policy environment including clearances, financial closures etc. should now be sound capex propositions factoring in rejuvenated project investment and the economy in coming months.

ProjectsToday has identified 579 stalled projects in the country on which execution has stopped due to various reasons. The capital outlay on these projects estimated on the eve of their being putting on the backburner was around Rs.2.57 trillion. In addition, ProjectsToday has also profiled 2,362 projects involving a then envisaged outlay of Rs.9 trillion which have been deferred waiting for right socio-economic-political environment; and 2,291 projects costing Rs.4.76 trillion abandoned totally because of various reasons beyond the control of project promoters.

All these categories of problem projects with diverse possibilities of their rehabilitation add up to 5,232 projects with a total capex of Rs.16.33 trillion, which is around three-fifths of project investment under implementation. This is the business opportunity that is waiting to be looked at, probed and executed by capex-starved India Inc. In recent years, project casualty had peaked during 2012 which saw around 1,158 projects facing blocks; the following year saw 947 projects getting overwhelmed by problems. Over three-fourths of problem projects were put on the block during the post-2008 period. These projects are both in public sector and private sector.

The biggest “abandoned” project is the Rs.40,000-crore Keonjhar Steel Project of Mittal Steel Company N.V.; the biggest ‘deferred’ project is the Rs.60,000-crore Coal-to-Liquid Fuel (Angul) Project of Jindal Synfuels Ltd; and the biggest “stalled” project is the Rs.25,000-crore Greater Noida-Gazipur Expressway Project (Ganga Expressway) of Jaypee Ganga Infrastructure Corporation Ltd.

These projects, many of which could be taken over at less than economic valuation, have already seen various amounts of work including vital spade work and if their blocks are taken care of, then they can be relatively quickly implemented, given right management input, business-friendly policy environment and more receptive financial markets.

However, for the present, we have endeavoured to sketch the 580 stalled projects where work has halted for reasons such as agitations by locals, environmentalists etc., differences between project partners, court orders, problems in financial closure etc. Resolving impediments in these projects should help corporates glide through execution process to project completion, to get quicker and better revenue streams from a given capital spending.

Stalling by year
A table elsewhere on this page shows the classification of stalled projects by year when deferment of projects was made public.

On the average project life of the stalled projects, restricting the discussion to latest five years 2009-2013, we find that the average period of existence for projects before they were shelved/deferred was around three years. The maximum period between project launch and shelving was 13 years each in respect of Gulbarga airport, Dandeli hydel power project and Paguthan power project. But there were around 41 projects which were axed within a year of their launch, which included Gotner wind-based power project, Umbergaon captive power project, Burdhman steel project and Gundtewadi cotton seed oil expansion project.

Stalled projects by state
With 134 projects stalled involving an envisaged outlay of Rs.26,408 crore, Maharashtra leads other states in terms of project investment which has halted, whereas Uttar Pradesh with 31 projects involving Rs.52,280 crore of investment led in terms of capital outlay put on hold. The Rs.25,000-crore Greater Noida-Gazipur Expressway Project (Ganga Expressway) and Rs.18,000-crore Bargadh thermal-based power projects were among the projects shelved in Uttar Pradesh. The stalled projects in Odisha included the Rs.20,000-crore Keonjhar integrated steel project and Rs.7,905-crore Niyamgiri bauxite mining project. The nine major states included in the table accounted for 72 per cent in terms of number of projects and 78 per cent in terms of capital outlay put on the block in the country.

Stalled projects by industry
Stalled project investment was witnessed across a wide spectrum of industries, services and utilities, and other infrastructures. There are 51 real estate projects, 28 shopping, business and commercial complexes, 23 hotel projects and 32 roadway projects which have been shelved. In manufacturing, 49 iron and steel projects and 22 cotton textile projects were prominent in project morbidity, In electricity, 10 each wind and waste-based power projects, 20 hydropower projects, 11 gas-based power and 26 coal- and lignite-based power and nine bagasse-based power projects were axed; There were nine major coal mining projects on which capex has been halted.