Morgan Stanley on the same day as the Prime Minister announced his moves downgraded GDP growth to 5.8 per cent from the earlier 6.3 per cent. It may even veer around 5.5 per cent by March 2013.
Shivaji Sarkar
“The government means business,” Prime Minister Manmohan Singh says in his retort to the Congress Working Committee (CWC) concerns on paralysis at decision-making and severe economic downslide.
Singh announces supposedly a number of “new” infra projects. Would that give a push to the economy? Would it propel it to 9 per cent growth as the Prime Minister avers? It is difficult. Besides, the projects or programmes have little new in it. Most of these projects have been announced during the past few years. Some partially rolled, many did not. It is a mere old wine and less said about the bottle is better.
The projects announced are of ports, roads, aviation, power, coal and railways. Nothing is new. In the critically hit aviation sector, work is on already for the four international airports at Lucknow, Varanasi and Gaya (part of the Buddhist pilgrim circuit), Coimbatore, and Trichur. These even without the Prime Minister’s announcement would have become operational by year end.
The green-field airport projects at Navi Mumbai, Goa and Coonoor have been conceived long ago. Neither the proposed airport at Itanagar is a new proposal. They were all discussed at various stages and some still needs proper clearance. The proposal for creating airline hub at Delhi and Chennai were also in the pipeline.
But he remained silent about why he sunk another Rs 1200 crore in Air India turned sick by the ilk of Raghu Menon. The Government should have announced its decision to lease out the airline to any bidder to save drain on the exchequer.
Similarly, in the port sector, the Prime Minister’s proposal for two new ports in West Bengal and Andhra Pradesh were at different stages of approval. The Ministry of Ports had announced months ago that it was reclaiming land at Sagar island to build a deep sea port. Shortly afterwards West Bengal Chief Minister Mamata Banerjee also took credit for the project.
There is nothing new about Andhra. In November 2010 the proposal for a new major port to be set up at Bhimili in Vishakhapatnam was discussed with the National Shipping Board. There are three more to be set up at Bhavanapadu and Kalingapatnam in Srikakulam and Narsapur in West Godavari district were discussed. Not much progress has been made.
These ports would require Rs 35,000 crore investments. A cash-starved government has little money to spare. Chances are that the announcements would remain as good media feed.
The Dankuni (West Bengal) and Mumbai rail freight corridor are almost 15 year old story. The advisers to Prime Minister should have known before trying to serve it as a new dish. Both the rail projects have funding problems. Japan has been dithering on investments. It is to be seen what magical touch is to be given to make them go beyond the drawing table.
In the highways sector too the announcements do not have any novelty. The promises galore are there in every budget. The reality is in the lagging development and slower pace in building of the roads during the last over five years. Apart, it has become a “green-field” area of huge private profits at the sufferings of the travelling people.
It is not known how the Prime Minister would add 18,000 mw capacity in the power sector this year. During the tenth, 11th and 12th plan, all new power projects have either been delayed or some quietly shut. Power sector requires huge investment. It has taken almost Rs 400 lakh crore loans from public sector banks. The power sector has not repaid it for over five years. The banks now have large non-performing assets primarily because of the failure of the power sector.
It is a critical area. The dream may not come true. The government does not have the money. The banks do not have any liquidity. But it puts international liability on the government. It has to recapitalise the banks, as per Basel III norms, to the tune of Rs 1.5 lakh crore immediately.
The RBI has laid down the road map to make banks safer and avoid a repeat of 2008 crisis. It also stipulates increase in minimum capital levels to 11.5 per cent from the present 9 per cent by 2019. It is a tall order for a government that is reeling under almost 6 per cent of fiscal deficit.
The power sector as of today is facing critical challenges. Prime Minister has asked Coal India to mine 47 crore tonnes of additional coal. Coal India almost simultaneously has announced its inability. It has even said that it could supply only 60 per cent of the requirement.
Coal India is unwilling to sign fuel supply agreement as it stipulates supplying at least 80 per cent of the requirement. It produces 431 million tonnes of coal. It needs to increase it 464 million tonnes if it has to supply 347 million tonnes to the power sector. It is tall order.
Power sector is facing too many uncertainties – procuring coal at higher prices from international market, liquidity crunch, little chance of getting additional funding and loss of generation. Even gas supplies are dwindling. It suffered generation loss of 11 billion units from gas-based units and nine billion units from coal-fired thermal plants in 2011-12.
The industry fears that the power sector could pull the growth chart further down. It is also apprehensive that increasing power tariff would push up cost and inflation. It is likely to turn job situation still more difficult. It is an unenviable situation.
Morgan Stanley on the same day as the Prime Minister announced his moves downgraded GDP growth to 5.8 per cent from the earlier 6.3 per cent. It may even veer around 5.5 per cent by March 2013.
There is little to cheer. The concern of Congress Working Committee appears to be a reality than the pep talks of the government. It should realise the criticality of the situation. Instead of window-dressing the government needs to confabulate with all stakeholders. It seems clueless.
Publicity blitz do not make up for loss of governance. Country has every reason to feel concerned. Nobody seems to be
listening.
