Covid effect- Project Completion Rate Slowest, Uncertainty And Low-Demand Hinders Private Sector Projects

Ever since the pandemic ravaged Indian economy, shutting down all economic activities on such short notice, the project implementation and completion indicators have collapsed.

Although announcing several stages of unlocking has not yielded full-fledged opening of economic activities yet, disruption of migrant labours, decrease in demand and policy uncertainty have made overall environment volatile and more uncertain, delaying projects implementation and completion dates running over time.

Looking at CMIE CapEx data, that follows project’s initiation and completion of projects, including capacity expanding projects, data shows that 721 projects worth Rs. 9.8 trillion were halted due to lockdown in the first quarter that ended in March, another 22 projects worth Rs. 85 billion were halted in second quarter that ended in July, adding to that, more projects worth Rs. 32 billion were halted in 3 quarter that ended in September.

As multiple stages of unlocks were announced easing the economic activities, of total projects worth Rs. 9.9 trillion were stalled, in the same time-period, projects worth Rs. 9.2 trillion were resumed in multiple stages, working only in partial capacity, other projects ready to be implemented, worth mere Rs. 41 billion were abandoned, and projects worth Rs. 775 billion who were already under implementation were stalled or abandoned, in conclusion, the net effect on stalling projects to be implemented has been minimal, since work has been resumed consistently via multiple unlocks.

But the far worse impact has been on completion of projects, in third quarter from i.e. April to June 2020, projects worth mere Rs. 240 billion were completed, in comparison, projects worth Rs. 1.3 and Rs. 1.6 trillion were completed in previous two years for the same fiscal quarter, and projects only worth Rs. 326 billion are commissioned for the third quarter ending in September 2020.

The rate of project completion has been hit worse, i.e. percent values of values of project completion to project under implementation, has dropped to lowest of 0.2 per cent for quarter ending in June 2020, and slightly growing to 0.28 for quarter ending in Sep 2020, though there is small increase, it is well below usual average of 1 percent.

Source: CMIE Database

Of the projects that saw completion in quarter ending in September 2020, mainly Rail and Road constituting 43 percent of completed projects, 35 per cent of projects were from transport services related, major completed projects include,

  • Biggest of single project, Nation-wide broadband project by RailTel woth Rs. 25 billion
  • Highways include, NH-3, from Biaora to Dewas, four-lane highway from Jabalpur to Lakhnadon and another from Rhona to Jhajjar, worth Rs. 18 billion, Rs. 12 Billion and Rs. 12 billion respectively
  • Other notable projects were completion of Phase 1B of Jaipur Metro Rail at cost of 11 billion
  • Completed Private industrial projects include CEAT tyre plant at Nagpur and PCA Motors car plant in Thiruvallar at cost of Rs. 12.5 billion each.
  • Irrigation projects in Kerala and Telangana worth Rs. 22 billion and Rs. 10 billion respectively.

While few projects saw their scheduled completion dates, some of biggest projects commissioned for the same quarter ending in September 2020 missed deadlines, Sarayu Nahar irrigation project worth Rs. 107 billion is delayed.

Government accounted for majority of completed projects, private sector could only make little contributions, mainly in extending capacity projects, and due to current uncertain conditions and low demand private players can take much longer to resume to completion of projects and implementing new projects.