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‘Over 50% of projects sanctioned by lenders went to five states; AP gets highest investment’

George Mathew
Infrastructure projects, Infrastructure projects lending, Infrastructure projects banks, banks loans, indian express

As much as 52.3 per cent of the projects were taken up in five states — Andhra Pradesh, Tamil Nadu, Maharashtra, Gujarat, and Telangana. (File)

Andhra Pradesh accounted for the highest share (11.8 per cent) in total cost of projects sanctioned by banks and financial institutions followed by Tamil Nadu (11.5 per cent). Maharashtra was dethroned to the third spot in 2018-19. It topped the list in the previous year (2017-18), bagging 23.3 per cent of the projects but could get only 10.9 per cent share in 2018-19, according to a RBI study.

Altogether, investment plans of 988 projects were made during 2018-19 aggregating to Rs 253,705 crore as against 955 projects with investment intentions totalling Rs 207,673 crore in 2017-18, said the RBI study on private corporate investments. As much as 52.3 per cent of the projects were taken up in five states — Andhra Pradesh, Tamil Nadu, Maharashtra, Gujarat, and Telangana.

Gujarat (9.9 per cent), Telangana (8.2 per cent), Rajasthan (6.8 per cent) and Uttar Pradesh (6.2 per cent) were the other states that got the maximum project investments. Data for the last five years (2014-15 to 2018-19) revealed that 56 per cent of the projects were taken up in six states — Andhra Pradesh, Gujarat, Karnataka, Maharashtra, Rajasthan and Tamil Nadu — indicating their locational advantages over other states and the skewed nature of investments.

The total project cost sanctioned by banks and financial institutions increased markedly to Rs 1,25,305 crore in the first six months of 2019-20 from Rs 86,607 crore in the first six months of 2018-19. Total loan amount contracted for capex purpose through the ECB channel increased significantly from Rs 39,833 crore to Rs 61,833 crore in H1 of 2019-20. “The planned or envisaged capex from all sources based on the pipeline projects sanctioned in all preceding years points to a noticeable improvement in 2019-20. The investment cycle appears to be poised to gain momentum in the short to medium term, but its sustainability needs to be watched closely,” the RBI study said.

During 2018-19, banks and FIs sanctioned 414 project proposals of the private companies with a total cost of Rs 176,581 crore, the RBI study says. “There are 535 companies, which did not avail of any financing from the banks/FIs, but contracted loan amount of Rs 76,515 crore through ECBs/FCCBs. Similarly, 39 companies did not avail of any bank finance or ECBs/FCCBs but raised Rs 609 crore for their capex needs through domestic equity issues,” the central bank report said.

The average cost of projects sanctioned in a period tends to be driven by the nature and profile of this tail reflecting the relative presence of outliers (large values). The size-wise distribution of projects showed a marginal increase in the number of mega projects (Rs 5,000 crore & above) from three in 2017-18 to five in 2018-19 along with an increase in their combined share in the total project cost.

Industry-wise, the infrastructure sector, comprising power, telecom, ports and airports, storage and water management, special economic zone (SEZ), industrial, biotech and IT park, and roads and bridges, recorded a surge in its share to 58.5 per cent in 2018-19 from 51.8 per cent in 2017-18, despite significant fall in the share of its largest component — power sector. “Ports and airports have witnessed a remarkable surge in aggregate cost of projects sanctioned by banks/ FIs. Out of 5 projects sanctioned in 2018-19, four were new and one was for expansion and modernisation, the RBI said.

According to the RBI, the share of cement projects in the aggregate project cost, which rose sharply from a meagre 0.6 per cent in 2017-18 to 5.7 per cent in 2018-19, may facilitate the infrastructure sector to expand in the forthcoming years. Total project cost (and number of projects) in the cement industry rose markedly from Rs 1,068 crore in 2017-18 to Rs 10,138 crore in 2018-19 (from three to eleven projects respectively), it said.

Of these 11 projects sanctioned in 2018-19, eight were new and three were for expansion and modernisation. However, industry groups like metal and metal products, and construction demonstrated lacklustre momentum in activities in 2018-19 as revealed from their significant reduction in aggregate project cost as well as number of projects and this slippage is likely to impact the growth for some time.

A look at the purpose-wise pattern of projects indicates that investment in green field (new) projects occupied the largest share (76.9 per cent) in the total cost of projects sanctioned by banks and FIs during 2018-19, followed by expansion and modernisation of existing projects constituting 19.7 per cent of the total project cost, which is an increase in its share vis-à-vis 2017-18, the RBI said.