Mumbai, Sept. 23 (PTI): Companies have shelved projects worth Rs 1.8 trillion (Rs 1.8 lakh crore) during the April-August period, according to the Centre for Monitoring Indian Economy (CMIE).
This is not because of high interest rates, as is being claimed by every industry lobby, but mostly on account of delays in getting land and environmental clearances.
Project shelving, which has been on the rise for the past 18 months, had peaked at Rs 4.5 trillion last fiscal, the CMIE said.
The prime reason behind the shelving of projects was problems in land acquisition, securing environmental clearances, local unrest, lack of availability of fuel or raw materials, particularly the mined ones such as coal and iron ore.
A few promoters have cited inadequate availability of cheap funds and poor demand.
“We expect project shelving to remain high or rise further in the coming months. A huge pipeline of projects has got built up in the past few years because of the rush among companies to announce projects since the capex boom began in 2004-05,” CMIE said.
Outstanding investment rose six times since the beginning of 2005-06 and stood at Rs 141.8 trillion by the end of June 2012.
In a capex cycle, as more and more investments get announced, promoters of all projects in their initial stages re-assess their plans in the light of increased competition and the relatively weaker projects are dumped.
The CMIE data shows that the large and capital-intensive industries have seen huge capacity additions in the past few years. Their capacity utilisation has fallen as the demand has not grown at the same pace.
“A large number of projects are scheduled for completion in the next two years. Their completion will lead to a further decline in the capacity utilisation of these industries. Hence, we expect promoters to be selective in implementing fresh projects going forward,” the CMIE said.
According to the CMIE’s capex database, projects worth Rs 9.3 trillion are scheduled to get completed this fiscal and worth Rs 9.6 trillion next fiscal.
Cairn output push
Cairn India’s plan to enhance output from its Rajasthan block is likely to drive domestic crude oil production by 3.1 per cent in fiscal 2013, a CMIE survey said.
“The domestic crude oil production is likely to grow 3.1 per cent in 2012-13. (Even though) the oil output during the April-July period declined 0.6 per cent, the growth is likely to recover in the coming months mainly on account of Cairn India,” the CMIE said in its monthly report.
The growth in production will be marginally higher this fiscal compared with 1 per cent growth in 2011-12, it said.