Projects worth Rs 9.9 lakh crore stalled till September this year: CMIE

Amidst prolonged lockdown and continued uncertainties regarding a return to some form of normalcy, implementation of projects worth Rs 9.9 lakh crore was stalled during the first nine months of 2020 till September 30, according to a latest report by industry think tank Centre for Monitoring Indian Economy (CMIE). The report, however, said that projects worth Rs 9.2 lakh crore were revived during the same period.

CMIE's CapEx service, that tracks the initiation, implementation and completion of capacity-expanding projects, had reported in early July this year that 674 projects worth Rs 9.7 lakh crore were stalled because of the lockdown during the January-March quarter. These were predominantly in the month of March. 

The study by the CMIE showed that another eight projects worth Rs 6,200 crore were stalled in the April-June quarter of the current fiscal. 

"These numbers now stand revised at 721 projects worth Rs 9.8 lakh crore in the March 2020 quarter and 22 projects worth Rs 8,500 in the June 2020 quarter. Another Rs 3,200 worth of projects were stalled in the quarter ended September 2020," said Mahesh Vyas, Managing Director and CEO of CMIE.

The industry think tank said that many of these projects, whose implementation was stalled, resumed activities as the severity of the lockdown was scaled down progressively.

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The study showed that around Rs 4,100 crore worth of projects whose implementation was stalled were abandoned during the first nine months of 2020. Just before the lockdown, this averaged at over Rs 10,000 crore and before that much more. 

"Apparently, uncertainties freeze decisions at least initially. If the lockdown was not a good period to implement a project, it was also not a good time to take big decisions like abandoning a project," CMIE said.

In wake of coronavirus-led nationwide lockdown and labour disruption caused by this, Indian companies were refrained from completing capacity-expansion investment projects they had initiated in the past. Adding to it, lingering uncertainties about a revival in demand continue to inflict delays in project completion schedules.

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When the lockdown began initially, projects did get stalled in a big way, but most of them resumed work as the lockdown was eased. The net effect on stalling has been marginal, but, the impact on project completions has been far more severe.

"Projects worth Rs 32,600 crore were commissioned during the quarter ended September 2020. This is the second consecutive quarter when project completions have fallen to such precipitously low levels. In the June 2020 quarter, projects worth Rs 24,000 crore were completed. In comparison, project completions averaged at Rs 1.3 lakh crore per quarter in 2019-20 and Rs 1.6 lakh crore per quarter in 2018-19," CMIE said.

Many economic indicators that had fallen very sharply during the June quarter of the current fiscal showed a substantial albeit incomplete recovery in the September quarter. Project completions, however, showed no improvement, while rate of project completion dropped sharply during the lockdown.

This rate, which is the value of projects completed expressed as a per cent of value of projects under implementation, dropped to 0.2 per cent in the June quarter, while it recovered marginally to 0.28 per cent in the September quarter. These proportions compare poorly with the average rate of completion of well over 1 per cent in the recent past, the study showed.

Most projects completed in the September quarter were in the infrastructure sectors. Rail and road transport claimed the biggest share among all sectors with these two together accounting for 43 per cent of the total completion of projects. Thirty five per cent of the total value of commissioned projects was in the transport infrastructure services sectors, the CMIE study showed.

As per the CMIE study, government projects constituted 63 per cent of all commissioning of projects in the September quarter. In the last three quarters, government projects have accounted for over 60 per cent of all commissioning, while the private sector has made a smaller contribution to completion of ca