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The UPA government seems to be competing with sprinter,Usain Bolt when it comes to issuing clearance to infra projects. The government cleared 28 projects worth Rs 1.1 lakh crores over the week-end after sitting on it for years.
The government's return to speedy decision making seems to be coming from the realization that there has been little or no investment in the country in recent times. Foreign investors have refused to act despite aggressive sales pitches by the finance minister through global road shows.
In order to get the economy moving, government cleared 18 power projects with a generating capacity of 15,500 MW totalling Rs 83,772 crore. However, the clearance has come at a time when there is little need for it. Before clearing the proposals in a haphazard manner, the government should have at least looked at the ground realities.
For the first time since the power crisis in 1990s, coal based power plants are operating near the 68.5% base level, the minimum level over which they are entitled for incentives. Gas plants are operating at only 29%. Apart from this over 30,000 MW power plants are mothballed for want of fuel.
Apart from fuel,power plants are also facing poor demand. Industrial sector which is the major consumer of power is in doldrums with demand coming down sharply and is unlikely to rise anytime soon. Costly and poor quality of power is one of the reasons for the industrial sectors woes.
Demand for power has gone down to such a level that state governments are going back on their commitments. Chattisgarh government has recently retracted its commitment of buying 30% of power from units set up in the state. This has put nearly Rs 42,000 crore of projects in jeopardy.
Banks faced with rising non-performing assets are shying away from financing power projects, on account of various issues involved with it. Just because the government is in a hurry to clear projects does not mean that the banks will finance it.
There is a huge difference between announcing a project and implementing it. This is clearly apparent in the railway sector.
Among the various projects cleared are three railway projects worth Rs 7,103 crore. Incidentally DNA has reported that railways has wasted Rs 2 crore on inauguration money over the few years on 68 projects which were announced by much fanfare but have not moved beyond the ceremony.
Among the various projects cleared are three railway projects worth Rs 7,103 crore. Incidentally DNA has reported that railways has wasted Rs 2 crore on inauguration money over the few years on 68 projects which were announced by much fanfare but have not moved beyond the ceremony.
Government should have by now realised that lip service will not help the economy. Capital goods stocks normally react positively to such news, but they are all trading lower. Market clearly does not believe the government; it needs to see action rather than words.
Government might have broken Usain Bolt’s record by announcing projects at breakneck speed; unfortunately it has done so on a treadmill. The economy will continue to remain where it is, though it might seem that the government is sprinting very fast.
