Lustrum FY15-19 Saw Sharp Increase in Fresh Investment: Projects Today Survey

The 74th Survey of projects investment in India conducted by Projects Today indicates that during the five-year period FY15-19, 47,911 new projects were announced with a total investment of Rs 60,51,281 crore as against 43,876 new projects worth Rs 29,28,125 crore announced in the preceding five-year period FY10-14, a rise of 106.7 percent.

The buoyancy in announcement of fresh investment was observed across all major sectors except the Electricity sector, which recorded absolute decline both in number of new projects and investment committed therein. While fresh investment increased by more than 100 percent in the Manufacturing, Mining, Infrastructure and Irrigation sectors, the Manufacturing and Irrigation sectors saw less number of new projects announced during the latest five-year period ending 31 March 2019.

Though the Manufacturing sector attracted 1,325 less projects during the FY15-19 period, thanks to increase in the number of mega projects (with cost of Rs 1,000 crore or more), total fresh investment expanded by 130.5 percent from Rs 7,00,725 crore to Rs 16,15,456 crore. As a result, the share of Manufacturing in total fresh investment increased from 23.9 percent in FY10-14 to 26.7 percent in FY15-19. Among the sub-sectors, Fertilisers, Steel, Cement, Refinery and Electronics segments received increased fresh investment commitments during the FY15-19 period.

The FY15-19 period saw announcement of 253 mega projects. Of these, 218 were owned by private promoters. The preceding five-year period had seen announcement of 131 mega projects.

Reflecting the emphasis of the current government on infrastructure building, fresh investment intensions multiplied three times from Rs 11,46,208 crore in FY10-14 to Rs 34,09,300 crore in FY15-19. The sector comprising transport and social infrastructure saw announcement of 39,509 new projects in FY15-19 as against 33,145 projects announced during the FY10-14 period.

The extra emphasis laid by the Central government on expanding highways led to trebling of fresh investment in the Roadways from Rs 3,64,809 crore in FY10-14 to Rs 11,24,996 crore in FY15-19.

The Construction sector comprising Commercial Complexes, Industrial Parks and Real Estate saw a fall in number of new projects during the five-year period FY15-19. Though fresh investment commitments increased from Rs 2,18,439 crore in FY10-14 to Rs 6,42,657 crore in FY15-19, the twin-balance sheet phenomenon affected this sector the most. Further, demonetisation, GST and the RERA Act disrupted the basic functioning of the industry.

The Power sector, during the FY15-19 period, witnessed more stalling of the existing projects than announcement of new projects. Most of the large-size thermal power projects announced during the FY10-14 period could not make much progress due to non-availability of land, lack of finance and delays in signing of PPA agreements.

As against 639 thermal projects worth Rs 7,90,227 crore announced during FY10-14 only 98 new thermal projects worth Rs 2,19,568 crore were announced during FY15-19. On the other hand, new investment in renewable power projects (mainly Solar and Wind) expanded by 294.5 percent from Rs 92,760 crore during FY10-14 to Rs 3,65,953 crore during FY15-19.

Cumulative fresh investment in the Irrigation sector increased sharply from Rs 57,934 crore in FY10-14 to Rs 1,98,869 crore during FY15-19. Madhya Pradesh, Rajasthan and Telangana were the large investors in this sector.

The Supreme Court's decision to cancel 214 coal blocks allocated to developers, not only stalled fresh investments flowing into this sector, but also affected the functioning of power plants with an aggregate capacity of 28,000 MW. Though the Central government re-allocated or auctioned 86 coal mines, actual production has begun in only 23 mines as of December 2018.

The FY15-19 period saw announcement of 763 new projects worth Rs 1,88,272 crore as against 627 projects worth Rs 89,711 crore announced during FY10-14. The Private sector is involved in around 60 oil exploration projects and 25 coal mining projects.

Private Sector Investment: Showing signs of revival

Private investment after picking up in FY15 and FY16 slumped in FY17 and FY18 only to recover in FY19. However, all along the five years (FY15-19) private fresh investment remained higher than the lower figures seen in FY12, FY13 and FY14.

Policy paralysis and financial mismanagement saw large scale stalling of projects in the last three years of the FY10-14 period. Further, heavy borrowings and mismanagement of funds forced owners of such projects to default on their debts mostly borrowed from Indian banks. The resultant “twin-balance sheet” issue weighed heavily on financing the ongoing projects, which in turn forced even the genuine promoters to go slow on new projects announcement.

During FY15-19, total fresh investment by the Private sector increased by 55 percent (thanks to mega projects), however, the number of new projects fell sharply when compared to FY10-14 statistics. This indicates the uneasiness of small- and medium-size private companies that are still awaiting revival in domestic demand to chalk out their expansion plans.

Stalling of Projects continued in FY15-19

The Survey indicates that during the FY15-19 period 3,642 projects worth Rs 16,59,353 crore were put on the back-burner as against 3,791 projects Rs 10,94,945 crore in the FY10-14 period indicating an increase of 51.6 percent in toxic projects during the latest five-year period, FY15-19. Around 82 percent of the total projects investment vanished during FY15-19 was in the Manufacturing and Electricity sectors.

On the positive note, the total quantum of stalled projects after hitting the recent high of Rs 1,95,795 crore in the first quarter of FY18 dropped sharply to Rs 12,477 crore in the last quarter of FY19. This is the lowest quarter figure recorded in the last eighteen quarters.