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Stalled Projects In 2020 Worth Rs 9.9 Lakh Crore Saw Some Revival In September, Says CMIE

Most projects completed in the September quarter were in the infrastructure sector. Government projects made up more than 60 percent of all commissioned projects for the third straight quarter. The lingering lack of demand could keep the private sector's aggressive investment in CapEx away, despite logistical hurdles reducing.

Oct 10, 2020 / 07:42 PM IST
Representative Image

Representative Image

Implementation of capacity-expanding (CapEx) projects worth Rs 9.9 lakh crore had been paused in the country during the first nine months of 2020 thanks to the COVID-19-induced lockdown, according to data compiled by the Centre for Monitoring Indian Economy (CMIE). However, many such projects, to the tune of Rs 9.2 lakh crore, were revived by September 30 as the economy started unlocking.

A majority of these projects were stalled in the quarter ending March, a report accompanying the data said. The net cumulative impact of the lockdown on these CapEx projects is around Rs 77,500 crore, of which only Rs 4,100 crore worth of projects have been abandoned so far.

The net figure is modest in the context of the previous stalling. Over the preceding nine-month periods, the cost of projects abandoned or paused has averaged between Rs 1.5 lakh and Rs 2 lakh crore. Companies therefore seem to be observing restraint both in starting or ending such projects hastily, the report observed.

"Many economic indicators that had fallen very sharply during the first quarter of the current fiscal showed a substantial albeit incomplete recovery in the second quarter," the CMIE report said.

Government ventures made up more than 60 percent of all commissioned projects for the third straight quarter. The lingering lack of demand could keep the private sector's aggressive investment in CapEx away, despite logistical hurdles reducing, the report said.

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A concerning data point is the percentage and value of projects that have been completed, which has not improved much even in the September quarter. Projects worth Rs 32,600 crore were completed from July-September, compared to Rs 24,000 crore between April and June. This is precipitously lower than the Rs 1.3 lakh crore worth of completed projects per quarter in 2019, and Rs 1.6 lakh crore in 2018.

Meanwhile, as a percentage of all projects under implementation by value, the September quarter saw completions of only 0.28 percent against the June quarter's 0.2 percent. This remains much lower than recent averages of 1 percent.

Most projects completed in the September quarter were in the infrastructure sectors. Rail and road transport together accounted for 43 percent of the total completion of projects. 35 percent of the total value of commissioned projects was in the transport infrastructure services sectors. Two automobile manufacturing projects were also completed were Rs 25,000 crore.

A majority of the CapEx projects stalled in the initial period of the lockdown, but as economic activity has progressively increased, these have now been continued. Rs 9.7 lakh crore of projects were paused in the March quarter alone, many of them in the final month.

The private sector has so far made a smaller contribution to CapEx projects, and newly announced projects declined in the September quarter - Rs 63,000 crore - versus the prior quarter - Rs 69,000 crore.
Moneycontrol News
first published: Oct 10, 2020 07:42 pm

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